Wednesday, May 8, 2013

Take your lumps, or buy useless insurance: the state of the real estate market in BC

The Vancouver Island Real Estate Board (VIREB) is out with their stats for the month of April.  And as with all the real estate boards, they try to pretty-up the ugly stats.

Nanaimo home sales are up by 12 per cent screams the news headline.
Real estate sales were up 12 per cent in Nanaimo last month and seven per cent on the Island north of the Malahat, compared to a year ago, according to new sales figures from the Vancouver Island Real Estate Board.
Happy days are here again? Not quite.
Prices fell six per cent, on average in the VIREB region, and nine per cent in Nanaimo during the same period.

Those are averages only; sales fell by as much as 24 per cent in the Comox Valley and grew by as much as 46 per cent in Campbell River, while prices dipped as much as 14 per cent in Port Aberni-West and rose two-per cent increase in Campbell River.

But on average, "prices are down compared to last year," said Cathy Koch, Nanaimo VIREB spokeswoman.
And that's the dig... prices are down on the Island.

It's final act as a bubble starts to unravel in a negative feedback loop and the condition the Industry pumpers fear the most.

So what do they recommend on the Island? Well... realtors don't make money unless there's a transaction happening.  And sales won't happen unless sellers accept reality and cut prices.

Ergo Ms Koch comes out with this tidbit for sellers...
Sellers need to price accordingly, and be ready to make less on the sale, which they'll likely make up on their next purchase.
Acceptance of what's coming on the Island?

Over in the Lower Mainland, were not quite there yet. But the fear of falling real estate prices is palpable.

Hence this little promotion: Buyers’ insurance policy protects homeowners from price drops. Garth Turner chimed into today with his take on this little marketing ploy:
You know the market’s in trouble when houses get the same treatment as flat screen TVs. But this is exactly what desperate realtors are reduced to these days. The so-called Buyer Protection Plan is sweeping through the Vancouver real estate biz, with about a hundred agents so far signed up.

You buy a sexed-up, web-smart TV at Best Buy and then find it cheaper at Costco? No probs, says BB. We’ll refund the difference.

You’re scared to buy a million-dollar fixer-upper in a Van hood because houses are falling? No worries, say the realtors. We’ll protect you. Sort of.

The bold idea: if the house you buy today is worth less in a year (almost a 100% certainty in most of the Lower Mainland) then up to 5% of the purchase price is refunded. For this to happen you need (a) a realtor offering the plan, (b) a seller willing to put 5% of the purchase price into a trust account for a full year and pay a lawyer to do so, (d) a premium payment of $299 and (c) statistical evidence of a price drop – not in the value of that house, but in average prices as determined by the real estate board.

So, it’s useless. Every house is unique. A buyer might only benefit if the home were appraised independently in a year, but that could easily (and legally) be challenged by the seller before funds were handed over. And a limit of five per cent? Pshaw. If I were buying in Van these days I’d want something closer to 20% – and no buyer alive is going to put $300,000 into a non-performing trust account upon unloading a $1.5 million house.
Clearly the Spring market has failed to respond as hoped.  So the advice today on one side of the Georgia Straight is take you lumps and take less for your house.  On the other, go ahead and buy at the higher prices and "buy protection."

Alrighty then.  What gimmick comes next?  Getting Vince to promote real estate?


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  1. Comox Valley: VIREB summary: Building Lots: 4 sold; price this year $130k, price last year $249k. VIREB reports 113 active listings for building lots but I know from searching MLS, Craig's List, Kijiji, Property Guys etc. that there are at least that many more lots for sale by realtors, or about 56 MOI! Needless to say building has ground to a halt and trades people have reportedly been leaving in droves for, where else, Fort McMurray.

    So take heart in Lower Mainland - the Comox Valley is coming soon to your town.

  2. Thank you for following up on my comment from the article from the island. If this is the type of logic that is being used by spokespeople than I can hardly wait until the real melt down comes.....We may realize our dream of living on the ocean yet...patience I tell my wife, patience...

    Keep up your great work,


  3. "Teranet said Victoria's index fell 3.2 per cent in March, the biggest one-month drop for the city in nearly 23 years of data recording."
    - Winnipeg Free Press, April 17, 2013.

    That gives you a good idea of what is happening in Victoria. No matter which area of Greater Victoria you look at, the 3-month median is down about 10% from peak. Assessments were down. We have seen list prices as low as -34% below assessment. Sales are dismal. There is only one direction in which prices can go from here - down. We have only seen a glimpse of what is yet to come in terms of total correction.

  4. Buyer's insurance- what a joke. The industry stoops to new lows almost every day.