Thursday Numbers

What a difference a day makes! 24 little hours 🙂

There were 319 new listings today and 170  sales, for a sell/list of 53.29%.  Of the sales 17,  or 10%, went over list.  5 of those were on the Westside. 4 were in East Van, 1 were in Richmond, 1 in North Van, 2 in Maple Ridge, 2 in Coquitlam, and 2 in Surrey. 

Average list price of the sales was $532,965, while the average sales price was $523,993, a difference of $8,972, meaning the average sale went for 1.60% under list price (take note those who feel sellers aren’t achieving asking price).  24 properties went for list price. One property went for 8%($138,000) under list while the highest over list was 17% ($61,000) over .   Average days on market to sale was 36. 

There were 11 million dollar plus properties sold with 3 over $2 million. 

There were 127 price changes, of which 10, or 7.87%, were increases. The average original list price of price changes was $550,484; the average new price was $535,694, a difference of $14,792, meaning the average price change was -2.57%.   Average days on market to price change was 44 days.  0.96% of all listings reduced their prices today. 

Inventory in my target area dropped to 12,133, while over 90s dropped to 1,921, or 15.83%.

Again, 0.96% of all active listings in my target area had their prices reduced today.  Average days on market for sales was 36.  Average sales price was within 2% of asking price.  (Comments in the last post made me think some people might be missing those points). The 14 day rolling sell/list was 69.28%.

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58 Comments

Filed under Daily Numbers

58 responses to “Thursday Numbers

  1. dignanmaplethorpe

    “Again, 0.96% of all active listings in my target area had their prices reduced today. Average days on market for sales was 36. Average sales price was within 2% of asking price. (Comments in the last post made me think some people might be missing those points). The 14 day rolling sell/list was 69.28%.”

    Rob, Don’t get defensive.

  2. first_time_buyer

    Ok, here is the comparison with May last year

    May 2006

    Sales: 4827
    Listings: 6240
    Sell/List ratio: 77.36%
    Active Listings: 9068
    No. of days: 22

    May 2007

    Sales: 4674 (-3.17%)
    Listings: 6829 (+9.44%)
    Sell/List ratio: 68.44% (-11.53%)
    Active Listings: 12133 (+33.8%)
    No. of days: 22

    Now, lets rip them apart till we get official numbers on Monday 😉

  3. robchipman

    Diggy:

    Reading Domus I got the impression he wasn’t getting this. It seems obvious that we’re still in a hot market, but he seemed to be saying that sellers weren’t getting their prices.

  4. Concerto

    first_time_buyer, do you already have, by any chance, sorry to ask……….May05 ? Many thanks for doing the numbers so quickly for us all to use

  5. first_time_buyer

    I have whatever Rob has posted since he increased his area to the current area (since Mar 28, 2006). I am not doing much. After Rob Excel is my friend ;-). Appreciate all the hard work you put in Rob.

  6. Concerto

    Indeed, thanks Rob, I know some comments are getting repetitve, and I think that sort of plateau was what contributed to VHB hanging up his keyboard.

    Rob, was 2006 a record year? if so, maybe comparing May 06 to May 07 does not give the full picture. Whats your take ?

  7. jim

    I shall not comment on these #’s. I will give careful thought to”Is a Hot Market the Friend of the Realtor?”

  8. millionpitfall

    Rob,

    You talk about sales and good sale days, but those high winter like inventories are not talked about. Why?

    Sales just seem to be barely eating up the additional inventory coming on stream. One would think in a hot sales market like May that inventory number would be coming down, not stagnating at the level it is.

    What’s your take on inventory levels? What level do you think it will take before we see some pricing relief?

  9. househunter

    Price relief. It seems like a mirage. Manufacturing in Canada is softening. Our economy is throttling because of natural resources (oil ect). If our economy softens a bit and rates begin to move … deals will come. Its the rates and the economy (jobs ect) thats making the buyers confident. Alter that formula and the average flipper will be gonezo and you will see increased listings. As long as this economy is bullish and rates are low … I fear real estate prices will stay strong.

  10. dignanmaplethorpe

    Rob said…. ” It seems obvious that we’re still in a hot market”

    Very obvious.

  11. Domus

    “It seems obvious that we’re still in a hot market, but he seemed to be saying that sellers weren’t getting their prices.”

    Hmmm, I must be misunderstanding the meaning of English.
    On average, people are getting within 2% of asking. They are not getting asking.
    Now: it is possible that the asking is so high that recorded prices are still going up.
    However, if I am not mistaken, the past few years so bidding wars which pushed recorded prices well above the asking. Not happening now.

    One qualification: one would not be mistaken to believe Van RE is going through a SUBSTANTIAL slowdown compared to past years. Just read the post of first_time_buyer above.

    But, after all, arguments are boring……as Deedub said in the previous thread: if something happens it must be rational……..

  12. awum

    May was a hot market, no doubt. Not a record setter, but barely down from May 2006, which as I mentioned before was the hottest sales month in a very hot year. May 2006 saw 219 sales per day. May 2007 saw 212 sales per day. Seems like a repeat.

    You are looking at about 2.5 months of inventory going into June compared to about 1.8 months of inventory last year. A little more balanced, sure, but still a seller’s market.

    Last year, MOI just about doubled from end of May to end of July. This year?

  13. rockandhardplace

    I don’t know anything about Real Estate. Obvious as I have been waiting to buy for two years 😦

    However, I do not about wind as I was a windsurfer. The stronger the wind, the more holes you will find (Pockets of weak wind). When I see Really high prices and strong sales days alternating with weak sales days, it reminds me of a very strong wind.

    If you are standing on shore, the wind seems consistent. However, if you are riding it, you find a lot of holes. The more holes that exist, the sooner the wind will end. It always does.

    Keep in mind that wind can only get so strong and last so long. I think that Vancouver needs this wind to slow down so we can catch our collective breath.

    Also, we need it to slow down to bring back my friends. I have a few that want to come back. However, they won’t until they can afford a place. They have great jobs in Toronto and London. Looks like they will be staying longer than expected as Vancouver does not have the jobs to offer them or the lifestyle which they want anymore.

    It is the way it is.

  14. doubter

    I’ve been following Vancouver housing blogs for two or three years. I see the same arguments over and over and over. I used to buy into them, completely. But it turns out they seem to have been dead wrong.

    I regret not buying 1 year ago.

    I regret not buying 2 years ago.

    I regret not buying 3 years ago.

    I regret not buying 4 years ago.

    There’s a pattern here. I don’t think prices are going to come down at all. They may plateau, but I am not even sure about that now.

  15. Domus

    Doubter:

    nobody questions that buying 4 years ago was a great deal. As you move closer to today in time, I start to doubt that the deal was sweet.

    When we get to 18 months ago, I positively wish i had not bought!
    Sounds crazy? Maybe it’s not. So, a 2-bed went for 450k in Kits around 18 months ago. Now it goes for 515k. That is a roughly 15% increase, or roughly 1% a month, give or take.

    Now: if I sold it today I could make some money….mind you, not that much after costs, realtors and taxes. Certainly less than buying RBC shares 18 months ago, for example.

    But, even more interestingly, if the market hits a plateau or goes down, I might be better off renting in the past 18 months and buying when invemtory is ample.

    The point here is: 4 years ago was a great deal in vancouver and I do not argue with that. 18 months ago was not, in my humble opinion. Prices are marginally higher than they were in January 2006. But nothing that will make you rich.

    I would stay put and see the all thing unfold, as history teaches us a great deal……..relax, man, it’s going to happen soon….

  16. jesse

    awum: agreed. This is still a bull market. That said, there are 3000 more sellers in ’07 compared to ’06 that haven’t sold yet. Does anyone know where to find 3000 more buyers?

  17. jesse

    Hey doubter: By your logic, I would recommend buying NOW. Are you going to make the same mistake you did 1, 2, 3, AND 4 years ago? I don’t want to hear you again in June 2008 complaining about the same thing.

  18. tqn

    Come back here in four years and this will appear again:

    “The point here is: 4 years ago was a great deal in vancouver and I do not argue with that. 18 months ago was not, in my humble opinion.”

    And this:
    “I’ve been following Vancouver housing blogs for two or three years. I see the same arguments over and over and over. I used to buy into them, completely. But it turns out they seem to have been dead wrong.
    I regret not buying 1 year ago.
    I regret not buying 2 years ago.
    I regret not buying 3 years ago.
    I regret not buying 4 years ago.”

  19. robchipman

    Domus:

    If you’re saying that 2007 is substantially slower than 2006, I guess I can let it pass (I might argue a little with “substantially”).

    If you’re under the impression that leaving 2% of the asking price on the table and only have 10%-15% of listings going over list price within 30-40 days is slow…guess again. That’s a hot market.

    It might boil down to me thinking you’re talking about a long term view when you’re talking about a two year time frame. If so I retract my comment. 2007 is slower than 2006. Still, 2006 was a record year.

  20. doubter

    Domus, I read exactly the same thing two years ago on VHB. “It’s going to happen soon.” I don’t believe it any more, because “soon” used to be two years ago and I can’t see that anything has changed.

    I don’t want to “get rich.” I want to own a home. And not half way to Alberta.

    jesse, I would buy now if I was wealthy. I wonder how many are in my position, of having waited based on all of these arguments only to find that they may be completely wrong or, at best, will mean a 3% price drop to levels seen only a few months before whenever (if ever) it finally happens.

    I wonder if VHB quit simply because he could finally see that he was wrong all along.

  21. Annon

    The bears, IMHO, help to improve the quality of the debate. Based on the numbers, it’s no doubt it’s still a hot market, a seller’s market. If what was once a bear and now has lost faith in bear’s arguments, it’s perfectly fine to convert and do what a bull should do. You want to buy and you can afford to buy, then you buy. It’s that simple.

  22. tqn

    I am just wondering how many prospective home buyers outhere like Doubter.

  23. jim

    VHB packed it in when he got his job as chief economist with the The British Columbia Real Estate Association (BCREA).
    doubter: Prices *may* fall by 20 or 30% over the next 3 years. But its not wise to speculate either up or down with your principle residence purchase or sales decision.
    Buy what you can afford if it suits your lifestyle, as soon as you can afford it, and then live in it for 10 years, and never read a freakin’ blog again.

  24. Gadwin

    >doubter wrote:
    >I’ve been following Vancouver housing blogs for
    >two or three years. I see the same arguments
    >over and over and over. I used to buy into them,
    >completely. But it turns out they seem to have
    >been dead wrong.
    >
    >I regret not buying 1 year ago.
    >
    >I regret not buying 2 years ago.
    >
    >I regret not buying 3 years ago.
    >
    >I regret not buying 4 years ago

    4 year ago, the U.S. real estate market was healthy

    3 year ago, the U.S. real estate market was healthy

    2 year ago, the U.S. real estate market was healthy

    1 year ago, the U.S. real estate market plateaued

    This year, the U.S. real estate market … …

  25. doubter

    jim: “Buy what you can afford if it suits your lifestyle, as soon as you can afford it, and then live in it for 10 years, and never read a freakin’ blog again.” Bingo.

    In the meantime, Gadwin, the U.S. real estate market argument was trotted out a couple of years back (along with supply/demand, speculation, credit issues, and on and on). We shall see. Me, I’m starting to think that the mountains and the Olympics are far more appealing than I’d previously assumed …

  26. Gadwin

    I think Vancouver is running a one year lag behind the U.S. We are trending like the U.S. in 2006. Prices continued to rise in the U.S. up to July in 2006, as inventory kept ballooning (notice our inventory is ballooning this year).

    I think prices can continue to rise until July as well. But with no sales growth and continuation of inventory piling, we will hit a peak this year.

    Already, some Vancouver investors are looking at purchasing properties in the U.S. because of the valuation there. On top of that, there are less U.S. investors from the U.S. looking at Vancouver because of the high valuation here – why invest in Vancouver when you can invest in the U.S. where everything is getting cheaper.

    As for international investors outside of North America, U.S. real estate is looking more and more attractive compared to Vancouver real estate.

    I’m sorry but Vancouver cannot escape a North American meltdown. We are an ant, and the U.S. is an elephant – when the U.S. sneezes, Canada gets a hurricane

  27. doubter

    Gadwin, it all makes perfect logical sense. However, the same sort of thing was posted on VHB ages ago. I sure hope you’re right. But I’m starting to think that the Vancouver real estate market does not know about logic.

  28. realitycheck

    Domus, I again reiterate that listing price and selling price are two different things. Maybe listing prices are dropping because sellers are being initially greedy. Here is an example: a house sold near me two years ago for 499,000 which seemed a lot at the time but was listed at 469,000. It was recently relisted at 879,000 and sold at 869,00. Yes it was a drop but I hardly consider it noteworthy. The seller was just being greedy. The price has still gone up 400,000 in two years. This is not a drop in my book.

  29. realitycheck

    Doubter, I feel really sorry for you. By listening to those stupid bear comments four years ago I fear that you have priced yourself out of Vancouver proper forever.

  30. doubter

    Yes, realitycheck, that’s what I fear. I wonder how many people may be in this situation, and what they might do. Move away? Rent indefinitely? Go back to school? Become real estate agents?

  31. Domus

    “Here is an example: a house sold near me two years ago for 499,000 which seemed a lot at the time but was listed at 469,000. It was recently relisted at 879,000 and sold at 869,00.”

    Interesting: an increase of 50% in 2 years. We are almost at the levels of the Chinese stock-market.

    Now, I am no theorist, but it seems to me that economics is more than a fairy tale: usually such spikes are observed in 2 situations when it comes to productive assets:
    1) when it is suddenly realized that ownership of the assets is going to generate a much larger stream of revenues than previously thought;
    2) when there is an irrational frenzy or herd behavior, disconnected from reality. This second scenario has occurred iinumerable times also in Vancouver and has been documented by several economists (Keynes, Kindleberger,Shiller, among others);

    Now, I have no preconception and am more than willing to accept any argument which supports scenario number (1): but can you tell me something different from the Olympics or immigration, which are both not immaterial reasons?

    Please do, I am all ears and willing to concede defeat to a rational argument, whatever that is.

  32. robchipman

    Jim’s right when he says: “Buy what you can afford if it suits your lifestyle, as soon as you can afford it, and then live in it for 10 years, and never read a freakin’ blog again”. That’s the great thing about RE. Since it doesn’t go anywhere, and since you can lock in a lot of the costs for a long time frame, you can reduce the exercise to a) do you have enough money and b) will you be happy living in it long term?

    If you answer yes to both then you only have one more question: do you want to buy now and have security, or will you tolerate the risk that the price may go up in order to perhaps collect on the price going down.

    The classic example is the young family looking for the house to raise the kids. Its usually the 2nd house, and the one close to the school the kids will attend. It’s ALWAYS a lot of money for people in this position, but generally, when I point out that the price can go up or down, and that they’re locking in a big price tag, someone says “You know what? We’ll be here for the next 25 years. From that perspective I won’t care if I paid a little too much now. But if I don’t buy now I won’t get this house in this neighbourhood before this toddler hits Grade 5. I’m not prepared to do that, but I am prepared to….take Jim’s advice”. (This is not me urging anyone to buy before they get priced out; its just an illustration of some people deal with that fear, provided they have the money that allows them the luxury of the decision).

    Gadwin:

    If we exclude no down payment ARM mortgagors being foreclosed on, and stick with people who sank some equity into the property, how much do you think has actually been lost (crystallized losses) by homeowners in the US? I don’t know the answer, but I think I recall seeing numbers that make it look sort of like three steps forward, 1 back. I’m not downplaying the ripples felt from the housing downturn, but still, how bad, exactly, is bad, especially in light of Jim’s advice (good advice even if you buy at a peak), and in light of rapid appreciation in past years?

    No offense, but a lot of bear arguments (your current one included) are based on opinion: “I think we trend 1 year behind the States” (BoC report contradicts this, btw). The opinion gets treated as fact, and then parallels with the US experience are drawn (forgetting that we started with an opinion that isn’t based on much more than feeling).

    You make it even more interesting by bringing up cheap US property. With a 94 cent dollar I know a lot of my US clients won’t buy here. Why would they? Wait, they’d buy because the Candian dollar is cheap compared to the US, but looks good for the future, therefore making Canadian RE a good hedge against US dollar devaluation…hey, that’s how they became my clients in the first place! They bought 4-5 years ago in Coal Harbour. Tax regime here sucks, but the returns are acceptable and the city is awesome.

    What’s best about your approach is that if Vancouver RE falls as investors return to the States, doesn’t that indicate that the market is responding rapidly to price drops in the States and that the worst may soon be over? If so, how bad a correction do we need here for investors to return?

    I guess you could say that you’ve got a bull argument in bear’s clothing. BTW, I don;t think bull arguments are good just because they’re bullish. We’ve had a long run. High prices are a great cure for high prices. And yes, I understand that the Canadian economy is very dependent on the US economy.

    Doubter:

    Vancouver real estate has tended to run counter to many other North American markets. Always has. The BoC report confirms the rule of thumb that long time Vancouver Realtors have always known.

  33. robchipman

    Anonymous:

    Interesting article about the dif between the US and Canadian economies. Here’s my take away (a little off topic, and with thanks to Don Drummond):

    We have a better chance of avoiding US sourced pain because we have a lot of great commodities to sell. We have a dual economy with one side doing great and the other side suffering (Cameco exports uranium and is golden; Standfields exports underwear and is challenged). The way we’re going doesn’t seem to bode well for a productive, competitive, green, knowledge based, value added economy.

    “Let us hew your wood, haul your water, and let you come and look at our mountains while you make clothing and computer chips. We won’t bother to invest in new technology, and if our forest industry suffers (mill closures in Port Alberni this week) we’ll just sell more oil or gas and takle the money and by a Toyata Hybrid”. A commodity based economy is treating us well (and has treated us well in the past), but I think we need to re-think this a little.

  34. jim

    “but it seems to me that economics is more than a fairy tale”

    I nominate Domus for post of the week. (I went as far as Economics 301 and 302 at UBC.)

    I would like to seperate wild guesses like 70% depreciation, or another 50% appreciation over 5 years ,from sound economic reasoning like mean reversion (bearish) and trend maintainance (bullish).

  35. jim

    Rob:”Vancouver real estate has tended to run counter to many other North American markets. Always has. The BoC report confirms the rule of thumb that long time Vancouver Realtors have always known.”
    Rob,I know several long time realtors that say Vancouver’s (and Washington State’s) real estate market tends to follow the US market with a 12 to 18 month lag time.
    Rob, are you a long time Realtor?

  36. awum

    Y’know, folks, “buy what you can afford if it suits your lifestyle, as soon as you can afford it” kinda misses the point. What kind of lifestyle can the average wage earner afford in the Lower Mainland? Imagine a first-time buyer with $20K in their bank account and a $45K/year job. What would you have them buy that they can live in for the next ten years?

    Run the numbers through a mortgage calculator. Maybe you would have this person suck it up do a long commute — but then don’t forget to throw in commuting expenses. Deny them kids, the odd vacation, or the odd movie now and again, just so they can keep their money available. Don’t let them have a car, a big-screen TV, cable, or any other luxuries.

    My calculation shows them, with a good mortgage rate, living in… uh… nothing.

    The idea that real estate (if one chooses to buy) is a good “choice” ignores the fact that for a growing majority of potential first-time buyers there is no longer any choice. Rob, you have your “metrics” and so do first-time buyers. This market doesn’t do a whole lot for either set of metrics, I’m afraid.

  37. confident

    Patience and saving…….. Those who have waited should not deviate from their plan now. That would be a bad move. Its frustrating and hard, but there are many smart and experienced people that believe this is not the time to buy. Your patience will pay off. Have faith and spend your time and energy with family, helping others or developing a new hobby!
    (Might sound sucky but it works)

  38. Domus

    Metrics are for dummies!
    Why ever put things in historical perspective. This is like the gold rush: hurry up, or be priced out forever.

    And, yes……I know that bears have been saying this thing forever, but unfortunately this the nature of the beast. It takes years for things to unwind (unless there are big external shocks that we don’t have). So, if you really think your life is incomplete without owning, maybe you really shoudl buy. But them don’t complain when your friends will afford better locations and premises, as it has always happened in the past……

  39. robchipman

    Jim:

    Yes, I’m long time, but I don’t buy the 12-18 month lag story. I know that my story always comes up when someone from Toronto says “Well, this is what’s happening there, so…” Its a rule of thumb, nothing more, but BoC seems to support it.

    awum:

    No! You’re missing the point! Its not me!

    Seriously, if you can afford to buy what suits your lifestyle, then you aren’t making sacrifices to your lifestyle. If you’ve got $20k in the bank, make $45,000 a year, want kids, want to live close to Vancouver, want a nice amount of sunny floorspace, vacations and the odd Canuck game, I’m sorry, I can’t help you. Have your luxuries. Put them in a house that I rent to you. And then explain to me how you’re going to solve the problem of owning your own home under ideal conditions if your landlord isn’t willing to go belly up (because, let’s face it, if your landlord isn’t an over-extended neg cash flow amateur specu-investor, he’ll probably weather an economic downturn better than someone with $45k a year and $20k in the bank). I didn’t make those rules, btw, and I’m currently working with two 1st time buyers. I won’t let them get over-extended and I factor in fast mortgage paydown so they can trade up in time and weather any downturns (yes, I fear the wrath of some mothers….:-) )

    Confident:

    You’re in the camp of people who say “I might be able to afford it, but I’m not afraid to wait it out in order to get more for my buck. I’m not afraid of being priced out”. Its a valid position, (unless you adopted it more than 2 years ago).

  40. doubter

    awum, right on. I wonder how many people this is true for. I have a good salary (certainly beyond $45K) but I can’t afford to live anywhere near where I work (well, maybe a closet in Burnaby). I’ve lived in “hot” real estate markets almost my entire adult life. My kid grew up in rentals, and is now renting. Maybe it’s just true that if you’re not in the market yet, it’s too late, at least in a place like Vancouver.

    Domus, what I’m saying here is that I know the arguments, but neither they nor the reality of the market are changing. There’s nothing tangible but high and rising prices that seem to defy argument and logic.

  41. ObserverX

    Rob said: “Let us hew your wood, haul your water, and let you come and look at our mountains while you make clothing and computer chips. We won’t bother to invest in new technology, and if our forest industry suffers (mill closures in Port Alberni this week) we’ll just sell more oil or gas and takle the money and by a Toyata Hybrid”. A commodity based economy is treating us well (and has treated us well in the past), but I think we need to re-think this a little.

    Nice idea Rob, but have you forgotten about the economic theory of comparative advantage? There’s a good reason why we (and the rest of the world) are better off by having us focus on commodity exports. Sure, we can all of a sudden decide to start designing our own microprocessors and building our own PCs but they’ll just cost that much more and be non-competitive. (I’m not talking about investment in new technology to increase efficiency which is necessary to stay competitive in *any* industry.) It’s globalization for the betterment of mankind until something nasty happens …

  42. Dr. Internet

    There has never in the history of industrialized society been any type of financial mania that has ended well.

    Perhaps this time it’s different?

  43. fish

    Rob- I make a good income. Several multiples of the $45K you talk about.

    But I would not even think of buying right now.

    I am renting a beuatiful apartment in Vancouver, with a stunning view, and have locked in a 2 year contract.

    After expenses the owner is getting 2% return on the current value of the apartment. (however he bought it cheaper- so likely 3.5% at the price he bought)

    There is no economic justification to buy, unless you think that the central banks are going to trash money even more. But they are all talking tough on inflation and a group of economists just called on the BOC to up interest rates. (long rates are drifting up in any case- and mortgage rates are moving up with them).

  44. Gadwin

    >rob wrote:
    > “I think we trend 1 year behind the States” (BoC
    >report contradicts this, btw).

    Hey Rob, do you have a link to this BoC report? The only BoC report that discusses the U.S. and Canadian real estate market I have read is this one:

    http://www.bankofcanada.ca/en/res/wp/2007/wp07-2.pdf

    I did not come across anything in that report though that discusses “lag time” between regional housing markets (unless I missed it).

  45. Domus

    “There’s nothing tangible but high and rising prices that seem to defy argument and logic.”

    It sounds like the reason many Germans gave for their surrender to the Nazi wave of the 30s. There is a wave and it is powerful. It is likely to go on for a long time. it defies logic and can be appalling to many. But I cannot afford not to be part of it.
    It took a long time, but they lost WW2…..

  46. Gadwin

    >realitycheck wrote
    >By listening to those stupid bear comments four
    >years ago I fear that you have priced yourself out
    >of Vancouver proper forever.

    See, this is the lame reasoning many U.S. bulls repeated over and over again prior to the U.S. meltdown this year.

    With the current U.S. meltdown, I wonder if the people that didn’t buy are priced out forever or whether they’re grinning in the background because they knew the meltdown was inevitable

    BTW, if many of us bears are priced out forever, I guess we’ll just have to move down to the U.S. where we can get a better bang for our buck when it comes to real estate 😉

  47. awum

    “If you’ve got $20k in the bank, make $45,000 a year, want kids, want to live close to Vancouver, want a nice amount of sunny floorspace, vacations and the odd Canuck game, I’m sorry, I can’t help you.”

    Geez, Rob, Straw Man much?

    I don’t think you are saying much different from what I said. Real estate in the Lower Mainland has already become something only the wealthy few can play at. Unless the market tanks, it will stay that way.

    I picked $45K, by the way, because that’s what a lot of local teachers make. Where will they live? Unless they get a huge kick in salary, the answer will either be “in my parent’s basement” or “not here.”

    Can a real estate market continue on with this level of (un)affordability? Maybe, but most of us won’t be here to see it!

  48. Domus

    Gadwin:

    let’s move to san Diego next year!
    I hear they don’t have the Olympics but I can still snap up a 20% discount on waterfront condos according to some CNN pieces I read a couple of weeks ago!
    I know, Vancouver is better than S.D., but I will have to make do…..

  49. Many Franks

    Rob, obviously $45,000 a year and $20k down won’t get a FTB anything, especially if they like to turn on the lights once in a while. That may be a straw man, but I’m curious where, roughly, you would draw that line. Most would say that a frugal single young person, making say $80k, is doing pretty well. Current options are 1) to live very comfortably in a rented apartment, storing away a significant amount of money for the future, with none of the risk or immobility associated with buying; or 2) go many years into debt for an apartment that will probably only be a suitable place to live for a small fraction of the amortization period.

    It makes me wonder who all these 1br condos, both in town and way out in the ‘burbs, are being built for. Much of the advertising I’ve seen appeals to young FTBs. If these condos were affordable for FTBs, I’d understand the business case — in fact, not merely barely affordable, but truly affordable, since I can’t imagine this demographic is going to stay there for a decade. Once young FTBs start having kids, a 1br doesn’t make sense — especially if they’ve only just managed to pay off the interest by the time it’s outgrown.

    I’m posting this in genuine confusion, as I’m squarely in the supposed target market for many of these new condos and I can’t understand why I would choose to buy one (no matter how granite the countertops). Throw a few other potential factors into the mix — the potential for a drop in prices or even just a moderation in appreciation, or possibly questionable construction practices resulting from the combination of a building frenzy and labour shortage — and I feel like I’m missing some key factor that’s supposed to be luring me in.

    If I’m not, it leads to a rhetorical question: are the record numbers of completions counting on speculators? The mathematically challenged? Rent-phobic status freaks? Downsizing boomers? It just doesn’t add up.

  50. vanreal

    Sorry Domus, I forgot to mention that the house was renovated. Not extensively but renoed just the same. Maybe around 100,000 to 150,000 dollars worth. Which doesn’t get you much anymore in the reno world. So it wasn’t a 400,000 gain but more like 250,000

  51. Reknab

    The topic in the las few posts is very much on my mind as well. As I would be an FTB. My gf and I have a combined income of about $80k and the only thing we could get would be a 1 bedroom condo. How would this allow for the “growing out of “argument…which must eventually occur….or how it would continue to be affordable on only one income. What if we ever want to start a family? The numbers just won’t work currently.

    I also work in this business as a credit analyst with a big bank’s Western Canadian mortgage broker approval centre. I see very few people at ALL with $20k in their accounts period. It is all either tied up in equity (current owners) or is a much smaller amount that this (for non owners). (of course there are exceptions but I don’t see them “that” often). I see a lot of deals going on where people only have “hundreds” in their accounts…

    All the deals I work on are for move up buyers with equity. One other thing I have noticed is that Alberta is responsible for more and more a percentage of the deal total, to and extent I would estimate wouyld be around 60% +. I think they have better salaries there at least to support their market.

  52. millionpitfall

    Reknab,

    Thanks for posting that information.

  53. Domus

    So is the price of oil keeping Van Re floating on water? Is that what you see?

  54. The Fonz

    Heyyyyyyy! You guys is making people feel like they ain’t never gonna own their own pad. And that ain’t cool. (Seriously though, my rent just went DOWN. ) Buying at these prices – well that’s just nuts. (IMHO)

  55. robchipman

    awum:

    Jim and I said that if you can afford to buy somethign that you’ll stay in for 10 years without compromising your lifestyle, then buy it and relax.

    You recognized the key ingredient – “buy what you can afford if it suits your lifestyle” – and turned that into me denying people their lifestyle. You also combined a person who can afford to buy and maintain lifestyle with someone who can’t, and then riffed on that person’s challenge. There’s a serious logic gap there. If you have $20k and make $45k a year its unlikely that you can buy without changing your lifestyle. Whether you want to do that or not is a personal decision. Neither Jim nor I made a recommendation on that either way.

    You might try to argue that the people Jim and I describe are a small amount of the population – the proverbial “wealthy”. If so they’re buying a lot of RE. In my experience they’re trade ups with inter-generational wealth transfers. Does that make them wealthy? Sure, I guess so, but they still go to work every morning, and many go to blue collar jobs.

    You might disagree with the approach, but I think you pretty much have to say “If you can afford what you want now, and it won’t cramp your current lifestyle, don’t buy, because the market must retreat and you’ll get more for your money very soon. Meanwhile stay in the smaller place that isn’t close to where your kids are going to go to school, don’t move forward with your lifeplan, and possibly get saddled with an inferior property to sell in a tough market so that you pay less for the better property in the down market, even though the difference will be reduced because we’re talking gap between two properties and factoring in a higher interest rate in the future, and I know this because…”

    In other words, Jims advice is still absolutley dynamite.

    Gadwin:

    That’s the right report. Look at table 5a. Vancouver correlation to the US market is 0.09.

    Fish:

    Its always cheaper to rent downtown. On the surface it does not make sense to buy now, but there are situations were it does.

    ObserverX:

    You’re right about comaprtive advantage. I guess I’d suggest developing a comparitive advantage that’s based on something other than a devalued dollar and commodity extraction. Ireland exported more people than anything else, for example, for hundreds of years. Its gone through a big change in the recent past. (No, I don’t support government subsidization of manufacturing).

  56. awum

    Man, where do I get me some of that intergenerational wealth transfer? Sounds like a pretty sweet deal!

    Rob, I still don’t see the logic gap. I never suggested you are denying people anything — the market maybe, but not you.

    The logic gap I do see is that you refer to people with intergenerational wealth transfers in the category of “buying what they can afford.”

    Much of that transfer is paid with real estate profits, too, I’d guess. Quite the pile of circumstances, all balanced on head of sky-high appreciation.

    Rob, even as hot as this market is, add up all the first-time buyers running into this burning market and it doesn’t add up to the big number I think you are imagining. Do the simple calculation — how much is the average young Vancouverite making, and how many of them can afford anything at all? Right now, it’s strictly a game for a wealthy few. Maybe that will change. I hope so.

  57. robchipman

    awum:

    You wrote:
    “I never suggested you are denying people anything — the market maybe, but not you”.

    Earlier you wrote:

    “Maybe you would have this person suck it up do a long commute — but then don’t forget to throw in commuting expenses. Deny them kids, the odd vacation, or the odd movie now and again, just so they can keep their money available. Don’t let them have a car, a big-screen TV, cable, or any other luxuries”.

    I’m not sure when the “you” refers to me and when the “you” doesn’t refer to me.

    Intergenerational wealth transfer really means parents giving kids the inheritance early so that they can use it. Some pays $1000/month rent now, gets a hefty down payment from mum and dad, gets a mortgage for $1000/month, and owns instead of rents. Yes, you can argue that they should hold off and buy next year. You can’t argue that they can’t afford the purchase or that their lifestyle is compromised.

    Yes, a lot of the wealth is paid for from real estate profits. Mum and dad sell, and trade down. The money is still real. Once the sales are made there is no circumstance that things depend on. If we run out of generational wealth transfer price appreciation will stop.

    I’m not imagining a number of FTBs who are going to keep price rates growing in double digit figures. I am selling to FTBs, and I’m telling you how it works. Your logic doesn’t correspond with my reality – I get that – but my reality is real. Sold a place recently to a FTB. She’s in position to pay the proeprty off in 15 years. Rent is comparable to mortgage costs. Go figure.

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