Short numbers tonight. I’ll try to post the in depth ones tomorrow afternoon. 274 new listings and 165 sales for a sell/list of 60.22%. There were 100 price changes. Inventory hit 11,354 and over 90s hit 2063 (18.17%)
Filed under Daily Numbers
Good one for the bears, but trend is still bullish…month over month prices declined (yesterday’s report in the Sun), inventories up 35%in the valley and around 8% in Vancouver, but sales still roaring along. I think we’ll need to see the impact in the fall of the expected BoC interest rate hike, and the fall off of pre-approved buyers ‘rushing’ into the market ‘before its too late’ before we see if there is a sea change taking place.
A very large US home lender is shutting down, and down with it go 7,000 jobs. I’m sure other lenders will follow, and what of the banks and their lending machines – will they pare jobs as well? Bank stocks here getting hit again – are we going to see weakness spill over the border? NO – we have mountains, and an ocean, after all – we can ski and sunbath on the same day (so they say) and that commands a premium, plus great recession-proof jobs, and limited land supply, which makes our situation unique and unparalled.
That said, sales remain brisk, and inventory is not ramping up as I predicted, so the market continues to defy my outlook – thus far.
I think higher interest rates will hit the higher priced properties first. A lot of people think a rate hike is no big deal in the monthly payment amount, but it certainly makes a difference in the total amount you can qualify for, especially if you need a larger mortgage.
Food inflation next?
Deb, if your out there is for you.
“Rates started edging up in May and again in June, with the posted rate for a five-year closed mortgage sitting at 7.24 per cent. Pastrick added that “there is a time lag involved” in the effect of interest rates. Many of July’s buyers locked in pre-approved mortgages obtained before rates rose in May, which could mean a drop in sales is in the offing for August or September.”
WoW: how is a trend bullish if prices are dropping m-o-m and inventories are up (especially that number in the Valley!)?
Also, I had another person tell me last night that RE never goes down…which I didn’t bother to respond to…because lately I’m starting to wonder if things really ARE different this time.
But they’re not – bearish signs abound!
Take my wife, for example – please! – she just got offered a job with a prominent realtor – and though I’m very happy for her I believe this move is the RE equivalent of [insert name of stock here] in the weeks after it appears on the cover of Barron’s.
At least she’ll have lots of inventory to deal with…and maybe a little intel to help negotiate the coming 20% correction.
(Please…? I’ll take 15…)
Haha – we are on the same page. I was commenting on the general trend (ie. year over year still up just above 10%), but again I don’t see how it will be sustained given cash flow to price (rentals) are generally negative (cash flow to full carry) and I always remind myself that leverage is a double edged instrument, it works well on the way up (boy, does it!), but what about the other direction, if and when that occurs – what then?hmmmm
It seems us bears keep saying, wait until….. (enter month here), but it is slow in coming.
So if I took a pre-approved in May it could be running out now?
I think the Sept rate increase will kill the last of the first time buyer demand. I would not expect us to recover from this winters slowdown. IMO
Food inflation is already here. Its probably worse than a lot of other sectors, only we don’t notice it so much because the increments are so small. Cadbury, for example, has seen profits erode due to higher dairy costs. Ethanol demand is raising the price of corn, apparently (and making ethanol producers and Mexican tortilla producers compete for the same raw materiel).
I think a big challenge is how inflation gets measured.
i’m travelling in Florida at the moment and other than the now US wide worry on “structurally deficient” bridges, Florida is expecting a 1.5 billion shortfall in tax revenue directly related to the drop in real estate transactions. If and when the market slows/crashes in BC, hope our finance minister is considering this posibility, after all the olympics ….
i’m an admitted bear, who has been more than suprised by the ongoing bull market, but have maintained commercial holdings as a hedge, (so maybe 75% bear!), Rob thanks for the #’s i watch and read comments with interest.,
You’re talking about taxes generated from real estate transactions, not property taxes per se, which don’t drop or rise with property values.
I found a bit more meat:
“In the 20 years of the PTT’s existence as a surtax on the sale of property in BC, it has raised $7.5 billion in revenue. Over $4 billion of that revenue was taken in just in the last six years”.
I think overall 2007 revenue is projected to be about $35 billion. I’m sure they’re underestimating so that we get the good news surplus story (the surplus is forecast to be almost $3 billion now).
I didn’t find too much on Forida, but it has a different tax structure that seems to be much more suceptible to real estate value fluctuations (not to mention the resident vs. non-resident taxation issues).
I find the drop to 11,300 quite interesting. Remember when we hit 12,000 and me along with a few others predicted our dates for 13,000? not only did we never go past 12,500 but we’ve now dropped down significantly in inventory.
any realtors post here? are the sales prices falling and are people taking their houses of the market permanently? do you expect a huge spike in listings with re-listings?
Thanks for the numbers, more of the same it seems.
Check out the Cramer clip. Wierd thing going on down south.
After watching the link you provided, I would like to say ” the era cash is king is coming.”
Cash is king? When the FED opens the tap and flood the market with helicopter-full of cash, you’re sure you want to hoard cash? Gold is money, not cash.
I think the FED have flooded the market with helicopter-full of debt or inflated assets.
Sure,to hoard cash avoids bankruptcy or foreclosure.
Glad to hear everything is still going to hell. I was worried that everything might be okay.
Many people are calling for a correction, some brave souls even claimed to have sold property and taken a cash position. I would be very interested in knowing how people will handle the potential opportunity a correction could bring. What will be their trigger to buy?
Are some newer listings for houses more competively priced than older listings lately? It seems some of the new listings are jockeying for position with a more attractive asking price in the Fraser Valley at least. I guess it depends how desperate you are to sell.
some claimed that the july 07 is peak due to the july stats just released. i still remember last june/july when they also claimed a peak. well, it just cost extra 11%.
Forget bear vs. bull arguments for a second.
Sales are searing hot, but price growth (comparatively at least) is barely there. In other words, despite an almost inexplicable level of demand, the price is barely budging. Think about what that means for a second. Doesn’t the word “affordability” enter your mind?
Seriously, 11% growth sounds like a lot, but when did most of that action happen? I’ll give you a hint — we were looking at 20%+ growth year-over-year in November 2006.
As noted in the Sun, first-time buyers just ain’t getting into the game at the rate they used to. This is a bad sign for the prospect of price growth, particular in those segments of the market relying on first-time buyers. It’s already happening — prices in some segments of FVREB’s area are actually falling while sales records are being set!
The area I live doesn’t show 11% appreciation from last June.
On the contrary, the asking prices of similar suites are already down early this year.
May other areas go up?
“Sales are searing hot, but price growth (comparatively at least) is barely there. ”
11% year over years is barely?
“In other words, despite an almost inexplicable level of demand, the price is barely budging. Think about what that means for a second. ”
It means inventory has been depleted and for those who have attractive properties they can likely sell for more in August. Lets see what happens to prices. My bet is a spike up due to all the properties getting sold in July.
“Seriously, 11% growth sounds like a lot, but when did most of that action happen?”
It almost all in the Spring of 2007.
” I’ll give you a hint — we were looking at 20%+ growth year-over-year in November 2006.”
Nice hint but you either don’t know the facts or you are trying to be misleading. The 20% in Nov 2006 was mainly from increases in Jan to Jun 2006 not Aug to Nov 2006 as you are hinting at.
“As noted in the Sun, first-time buyers just ain’t getting into the game at the rate they used to.”
So the record July volume was whom buying? I bet a lot of first time buyers.
” This is a bad sign for the prospect of price growth, particular in those segments of the market relying on first-time buyers. It’s already happening — prices in some segments of FVREB’s area are actually falling while sales records are being set!”
Where did I hear that before? Did you cut and paste it from the VHB blog Aug 2006 or was it Aug 2005?
“The area I live doesn’t show 11% appreciation from last June.
On the contrary, the asking prices of similar suites are already down early this year.”
Just out of curiosity what area do you live in?
Fraser Valley July stats
July prices are down compared to June prices, but still up compared to 2006.
“despite an almost inexplicable level of demand, the price is barely budging.”
Indeed, the three month average benchmark for GV is $521,507 while the June benchmark was $526,711. It appears that prices were flat (increasing at about the rate of inflation) this Spring.
Nice, I hope the media and government takes responsibility for promoting this overheated mess.
Of course it’s the peoples fault because they sign on the dotted line, but still I’d like to see some reality published in the paper.
What a royal farce.
Strong sales across the board, prices going no further – isn’t this the way it should be ? Usually prices keep shooting up to pace demand.
Oh, how could I have been so blind, News Flash — clearly nothing has changed since 2006 or 2005…
A red hot sales market should lead to red hot price growth, and it is very interesting when it doesn’t. Reading between the lines of your post, I see you do recognize that there was not major price growth M-o-M in June or July despite the amazing sales. That kinda thing didn’t happen in 2002, 2003, 2004, 2005, 0r 2006. So what’s different? It’s a legitimate question, and has ramifications for both bears and bulls.
…and read to the end of the Vancouver Sun article, you’ll see where I got the remark about first-time buyers bowing out of the market due to affordability. There are stats to back it up.
Low interest rates = qualify for higher mortgage amount, prices go up
Rising interest rates = qualify for lower mortgage amount, prices go ????
Will 2007’s 11% gain reverse itself because of higher interest rates and affordability walls or will we continue to defy gravity? Stay tuned for the next five months as the bulls and bears battle it out on this station. Rob, our referee will declare the winner in January 2008.
Rob is expecting a trough.
Rob must be busy. Here is an example of why the numbers don’t wrk anymore. From Craigslist:
265000 1 BEDROOM FOR SALE BY OWNER
1 BEDROOM FOR SALE BY THE OWNER. TENANTED AT $1000 WITH LONG TERM TENANTS. 4TH FLOOR. GREAT FOR AN INVESTMENT. MAINTENANCE FEES ARE $179. CALL 604 787 XXXX
Tax and Strata and Wear and Tear will probably consume $250/month, leaving $750. I am assuming always occupied and no agents/insurance/no bad tenants with skipped rents/on speciall assessments for elevators or a new roof.
$750 is a 3.3% return on asking price. So unless you think there will on-going capital appreciation, then you are subsiding the renter.
If a special assessment comes along, then your whole year’s return disppears.
The numbers for single family homes are even worse.
The numbers for more expensive units are the worst…since a property that sells for 5 times this much cannot command a rent 5 times as much, so the returns drop to less than 3%.
So you’re expecting positive cashflow from day one? Difficult and rare especially these days. The best rental returns are from properties owned for some time – this is a long term business.
hsbc bank now offering 5% return
Concerto, the best rental returns are from properties owned for some time?
I disagree, it’s not a long term business for positive cash flow. You are hoping for price appreciation since you cant create positive cashflow these days. If you bought 6 years ago then you most likely would have positive cashflow today!
If I had $700k wrapped up in a home as equity and am only collecting 3% ..goodness gracious. As mentioned above I can get 5% guaranteed. No headaches and I can watch the market as homes fluctuate to sustainable prices. What, you think 5% isn’t good enough? I am sure there some good mutual funds with approx YoY returns of 8%. And with mutual funds you only get taxed on half the gain.
Concerto, do you think rents will increase faster than inflation over the coming years? Are we at max affordability for rentals already?
ryan; “Are we at max affordability for rentals already?”
I think so a new 1 bedroom condo in Yaletown IS worth $1400.00 a two bedroom is worth $1600.00. Anybody who pays more is a very short term rental maybe 6 months which usually means the owner will have anempty suite for a month between changes. From what I see although some are getting higher rents then above the unit usually sits empty for a couple of months each year. Work this into the average and you have less then the figures above. I find it extremely easy to rent full time for the prices above, which when you subtract commuting costs and the amenities (spa’s rec centers etc), you pay exactly the same as a Condo in Coquitlam with equal fixtures. So if you value your time and work downtown, you are losing; that is to rent more then 15 minutes walking distance from down town. A lot of people consider there time worthless yet I would say you should at least apply your straight time rate to your commuting time. That said people that bought and rent out in the last two years will never see a 5 % INCREASE ON THEIR INVESTMENT. the subsidy they give to their renter in my case about $1800.00/month will and has not provided any return in the last 2 years to the owner, I have however invested my potential down payment ($125,000,00) which has subsidized my rent to the tune of $300.00+ a month. I can afford to rent here but would never consider buying (currently priced at $459,000). No stress, very liquid investments, very diversified. I’m a small potatoe in investment circles but I sleep at night could care less if (and it will) there is a crash.
Nice reasoning strata man.
The unthinkable”Renter” – price appreciation does not enter into it, for me at least. I should have said the following – the % of positive cash flow should increase the longer you own a property. I would expect lean returns upon renting a property I have just bought, but growing over time – a long term business.
ryan – I think rents have a way to go yet – I’m talking downtown only.
Concerto, way to go buddy. You got to have balls to buy into this market at this point and with rates that have gone up and will again in Sept who know whats on the horizon.
We’ll if your ammortized over 25 years and rates go up, you still can change your ammortization up to 40 years. Remember when rates come up, 40 years ammort will be the end of the rope ferya.
Would you rather have 5% on your money, than buy in at peak times?
It seams the risk is allot higher now for little return upfront. This market seams only worth it for zero downers that have nothing to lose.
Be carefull 🙂
Concerto- I expect any investment to make sense.
Do I expect positive cash flow from my investments from day one…no. If it is raw land it is no cash flow, if it a gold stock with exploration only it is negative cash flow.
If it is a downtown apartment and I am putting 100% cash into it, I expect a better return than 3.3%.
That may be just me, but these numbers don’t make sense to me. Great city or no great city. San Diego is a great city too
This is what has happened to Median ASKING prices and inventory.
The unthinkable”Renter” – I agree – do not buy if the numbers do not stack up.
If sales are still brisk without further increases in prices, isn’t that by definition a soft landing and therefore reduces the likelihood of any crash.
Many peopel on this blog talk about renting and keeping the cash to buy after correction….
I am wondering aren’t you afraid that inflation will eat your money while you are waiting? If you park your cash at 4-5% GIC, it doesn’t look very profitable. What is your alternative to RE?
But according to the gov’t, inflation is only about 2%! LOL
That housingtracker.net is an interesting site. Almost every US city is now down on year.
And if you’re going to compare San Diego housing to Vancouver you should also compare income. SD has household income of about USD64,000 whereas Vancouver is around CAD58,000. But the kicker is that of that income US earners take about a third more home after taxes.
By no variable does the local real estate market make sense.
You’re right, vanreal, if sales stay brisk without increases in prices, that is pretty much a “soft landing” — if it stays that way — although I think a real “soft landing” really becomes evident if sales actually slow a little and prices stay up.
What’s next? Don’t know, but by any of the most likely scenarios I’m pretty sure buying a home would be a bonehead move for me at this time!
“By no variable does the local real estate market make sense.”
Well, not only are people buying at theses prices they are also making the mortgage payments. So, the current market is making sense to someone.
I think we need to see some large increases in either: foreclosures, job losses, or high interest rates for a prolonged period of time before a correction will happen. The current market is managing well and could just slowly trend back to a balanced market place with normal growth.
People make many comparisons between the Canadian and U.S. real estate markets and assume this will be our fate as well, and that may be true. If you do look into the U.S. market it shocking to see how many people were leveraging flips. A friend of mine just bought an ex-flip from a bank in Blaine last week. Original price 255k U.S., purchase price was just under 200k U.S. The speculator who owned this home tried to complete this flip in under 90 days. After six months he just walked away.
Real estate speculation prior to the U.S. correction had just gotten way out of control. I don’t think our level of speculation is even comparable.
The question I always ask people who believe our real estate market will track with the U.S. is, why the time delay? Something must be different
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