There were 274 new listings Thursday and 227 sales, for a sell/list of 82.85%. Of the sales 26, or 11.45%, went over list.
Average list price of the sales was $536,409: average sales price was $523,127, a difference of $13,282, meaning the average sale went for 2.17% under list price. Average days on market to sale was 39.
There were 62 price changes, of which 4, or 6.45%, were increases. The average original list price of price changes was $597,399; the average new price was $571,000, a difference of $26,398, meaning the average price change was -3.05%.
The volatility we’ve seen in the stock market seems to have shown up in a higher than average price reduction and sale under list percentages (those are usually in the 2% and 1% range, respectively).
Inventory in my target area dropped 11,244, while over 90s also dropped, reaching 2,286, a percentage of 20.31%.
0.52% of all active listings in my target area had their prices reduced Thursday. The 14 day rolling sell/list dropped to 89.59%.
The real estate market and the stock market often get compared on this blog. One clear difference is that real estate is less volatile, or perhaps more accurately, less liquid. The two sectors are clearly related, however, as the US sub-prime challenge indicates. The European Central Bank, the BoC, and the US Fed all injected funds into the economy yesterday in an attempt to counter the credit crunch challenge.
I think the reaction of the central banks is very important. We’ve been awash in cheap money, globally, for several years now. Asset prices have risen, economies have caught fire, and inflation, by and large, has been kept under control. But change is the only constant, and the future is far from certain. As soon as there appears to be agreement that inflation (the result of easy credit) is the danger to be addressed, the pain of addressing it prompts an easing of credit. The reason is straightforward: taming inflation is a scenario where the cure can easily be worse than the disease. A great cure for inflation would be a depression, but who wants one of those? The goal, after all, is to stay between the ditches, not pick which side of the road to drive off of.
The fact is that stock market volatility and favourable credit are good indicators for real estate. Depending on how you finance it, a little inflation doesn’t hurt real estate either. I don’t think anyone can really deny that. But, we are living in interesting times. The dollar is flirting with parity (deflationary) but even a cursory at your wallet seems to indicate that inflation is higher than the regularly reported levels. Change is the constant. Can the central banks keep us on the road?
The Best Real Estate Anywhere! 
Thanks for the numbers and the comentary is very timely. I am of the opinion that the road we are on is getting very narrow and may not even be going where we want to go. The FED is now buying mortgages (35 billion) in the U.S. in an attempt to thaw the frozen secondary market and provide the banks with some liquidity. These are indeed intresting times.
“Can the central banks keep us on the road?”
That’s the 64 million dollar question, that’s for sure.
I agree with Dyugle. The road is getting pretty narrow/ curvy/ cliffy / scary.
Much different than that nice wide, straight highway we just got off of and were speeding along ever so much faster.
I just don’t see how Canada and Vancouver can escape the fate of the US. Why did the BoC intervene at all? Mercy to the US $?
I am still away and just reading occasionally: the only conclusion from the latest numbers is that Van is still going nuts on prices. Something will change soon, though. The wind is blowing from a different direction than in the past 6 years.
I would really not be surprised if real prices were substantially lower in the west side in 24 months from now. This time it is for real: can you wait? That is the question….
I think the central banks (not just BoC) intervened because of the downside. That might be simplistic, but it seems obvious to me that fixing the ills of the current over-abundance of credit can’t be done too quickly (the cure is worse than the disease). Saying otherwise sounds like my dad when he used to say what we need to cure the ills of the day are another war and another depression :-)!
Look at inventory explosion in Seattle – just exploded upwards – any comments? I thought this market was strong?
Rob
Interesting times indeed. The CB are all bluster. The lax credit and global over-liquidity is of their own making (0.5% rates in Japan eg) – but once they saw the whites of their eyes they blinked.
BTW for the poster above, the Fed did not buy mortgages…it privided liquidity. Th Fed is no a property manager which it would be if it started to buy non-performing mortgages.
Their is no easy fix to this. Bush knows that. Imagine if he offered relief for those behind on their mortgages (especially the BS ones- no doc, i/o, arm,sub-prime) everyone would just stop paying their mortgages and the US Gov would end up holding most loans!
Then what are mortgage backed securities?
http://www.abcmoney.co.uk/news/102007117249.htm
US or Canada looks the same as Japan in 90s.
Low interest rate inflates housing prices significantly. People take on more debt, refinance their mortgages and spend most of the proceeds.
FED or BOC can only keep healthy financial institutes alive not all financial,corporate or personal entities which play the game of big leverage as the bank of Japan did.
The investors or homeowners will be hungry for cash instead of assets.
Although monetary inflation and price inflation are closely linked, and one will eventually affect the other, the current global financial crisis is all about monetary inflation. After 5 years of unsustainable cheap credit, the imminent transition could leave a lot of pain in it’s wake.
As observed by Domus, the new wind direction could mark the end of an era, as lenders will be forced to return to long forgotten terms like “risk tolerance” “collateral” and yes, “higher rates”, and borrowers will also be motivated more by fear than greed.
to buy or not to buy that is the question.
Can anyone give me (and I know this will be hard for the bears, cause I’m one of them) but give me 5 rational reasons to buy in today’s market.
If the BoC and other central banks pour money into the economy, it will depress interest rates and could result in a continued bull run. This is exactly what happened post 9/11. This time there is some irony in the situation that sub prime loans could be responsible for maintaining the bull run.
Pouring money into the market that has a credit crunch (lack of liquidity) does not necessarily mean lower interest rates. It can mean higher interest rates, the tightening of loans, freezing mutual fund withdrawals (like the bank in France did), limiting the amount you can withdraw from your bank account, etc.
Banks are pouring money into the system because everyone is cashing out. Banks have not added money to the system since 9 11.
The question is will the fear continue causing more people to pull cash out or will there be stability. If too many people cash out all at once financial markets will become unstable. Banks will limit redemption of mutual funds, limit the amount you can withdraw, amount you can borrow, etc. otherwise they could go under if everyone panics and withdraws at once.
The five magical reasons why we should buy RE today.
1.)Vancouver is land locked and is running out of land.
2.)The banks are lending morgages to just about anybody (ZERO DOWN) and it’s creating more competition for purchasing a home.
3.)Voted best place to live in the world several years in a row.
4.)We have the 2010 Olympics ahead! you’ll be able to rent your place out for $20k while you go on a vaction for three weeks.
5.)Opera was here!!! Woohoo!
vanreal,
And where would you suggest the central banks get this money?
Your desire to solve the world’s financial woes are admirable, but I would not give up the day job just yet.
Ryan,
I’m neither a bear or a bull, as there could be buying opportunities in any market.
Owner is desperate to sell, multiple price reductions. You are aware another comparables sold for a lot more.
You have a good cash position and don’t depend on a large mortgage.
You plan to hold onto the property for a long time period, you can weather out any price corrections.
If the economy turned sour and you got laid off your job you would not lose your home or be in dire financial straights.
If your mortgage payment would be cheaper than paying out rent for a similiar type property.
“And where would you suggest the central banks get this money?’
They print it!
Just like they always do. Which causes more inflation and asset prices to rise.
Ryan,
Buy if:
1. You can afford it
2. You feel you are getting value for your money (as opposed to renting)
Rob said,
“The volatility we’ve seen in the stock market seems to have shown up in a higher than average price reduction and sale under list percentages.”
Maybe affordability walls caused by higher interest rates have shown up first, as these offers starting taking place before the stock market turned south.
Or are you just being cheeky?
And where would you suggest the central banks get this money?’
They print it!
And…one can only wonder what strings are attached to printing this extra cash, BOC doesn’t tell you that part. Usually the government pays it back with interest. And who pays the government? Shucks, I guess that is what they call taxes.
Cheeky.
“We’ve been awash in cheap money, globally, for several years now. ” – Rob
Hmm… Would THAT have anything to do with inflated housing prices?
I wonder.
“Look at inventory explosion in Seattle – just exploded upwards – any comments?” – WoW
Silly goose. Can’t happen here. We’re different.
The FED didn’t buy mortgages, it accepted a certain class of MBS as collateral for short-term (as in 3 day) loans at the stated discount rate. This is something the FED does quite regularly.
What is a little unusual is they went to the trouble of explicitly stating today’s repo was for MBS only. How worried the FED actually is remains unclear – but it does seem clear that the FED is worried about how worried everyone else is.
This should be an interesting fall. Even if all the intertwined positions can be unwound with relatively little damage, it will be difficult to replace with fresh positions. The net effect will be to reduce “typical” leverage across the financial sector, which is a roundabout way of reducing money supply.
Would seem to be a difficult environment in which to preserve a real estate bubble – but who the hell knows – stranger things have happened.
“sounds like my dad when he used to say what we need to cure the ills of the day are another war and another depression”
Sadly, your dad was right. We have the war – since 9-11 (or 1993). A war on terror. A perpetual war. Now it’s time for the Depression. Let’s just hope that it is not perpetual.
Your dad is not right. A big war reduces the unemployment rate. A dead soldier would rather be unemployed.
War is not good for the economy, ever. It’s a myth. It’s like saying breaking windows is good for the economy because it makes work for the glass maker.
“And…one can only wonder what strings are attached to printing this extra cash,”
It is called monetary inflation.
“BOC doesn’t tell you that part.”
It is taught in Econo 101
“Usually the government pays it back with interest. And who pays the government? Shucks, I guess that is what they call taxes.”
Please take Econ0 101 and we can continue the discussion.
“Since the mid-1970s, however, the Bank of Canada, with government consent, has been creating less and less of the new money, while letting the private banks create more and more. Today «our» bank creates a mere 2% of each year’s new money supply, while allowing the private banks to gouge the government — and of course you and me, as well — with outrageously high interest rates. And it is these extortionate interest charges that are the principal cause of the rapid escalation of the national debt. If the federal government were paying interest at the average levels that prevailed from the 1930s to the mid-1970s, it would now be running an operating surplus of about $13 billion!”
The YOY operating surplus is about 13 billion. Not for long, though. Harper and the cabinet are hard at work figuring out how to buy your vote in the next (within 1 year) election. Tax breaks for the rich and middle class are en-route, so don’t worry about pesky affordability issues or inflation…you’re about to get some of your green…back.
Sure…BOC prints very little money, then prints money to inject into money markets. No strings attached with the banks…..sure.
“If the BoC and other central banks pour money into the economy, it will depress interest rates and could result in a continued bull run.”
Vanreal,
This is for you. Of course, the bears might discredit it because it does not agree with their views; they know everything, dont they!
http://www.news1130.com/news/local/article.jsp?content=20070810_175016_5420
A credit crunch positive?
Friday, August 10 – 02:50:16 PM
Mike Lloyd
With stock markets swinging wildly from positive to negative, investors are getting seasick but here’s the silver-lining around the sub-prime storm. Some economists are predicting the Bank of Canada will keep interest rates low in such a volatile environment.
Of course that’s great news for anyone dealing with a new or renewed mortgage or other long term debt. Expectations were that we’d see an interest rate hike in September to help deal with inflation.
That may not happen unless markets return to some semblance of normalcy.
And…it would of been 26 billion if we didn’t have to pay such high interest rates on all that debt.
copy and paste from other blog (a fresh post):
“I expect to see 2003 prices in two or three years, perhaps lower. There have already been reports of declines of over 30% from the peak in some bubble markets in the US. And its just beginning. 30% off the peak is when I consider buying.”
why settle for 30% off the peak (don’t even know when the peak will be) while you know the price will be back to 2003 prices by 2010?
BOC may just hold rates if stock market remains choppy. #1 goal is to fight inflation and that is running too high for their liking.
Things would have to get really bad for them to lower. But who knows how the subprime jitters in the market will play out by Sept 5 (rate announcement date)
tqn,
July set record volumes, but the average price declined from June. Maybe the poster thinks that was the peak and the price declines will continue month over month from here on end?
Rob
Any chnace of getting the Friday numbers before Sunday evening.
Thanks
it would now be running an operating surplus of about $13 billion!”
This is an absurd claim. If their expense goes up, they either spend less or tax more, and both are drags on overall economic performance.
Crasher, Duh, They print it. This causes more inflation and assets increase in value. the same thing that happened post 9/11. Maybe you should keep you day job
Rates will rise regardless of the stock market. Weak US dollar affects Canadian eco. Canada’s BOC needs to take a conservative step.
Its almost like trying to stop your boat from sinking with 11 holes and all you got is 10 fingers. Resistance is futile.:P
For Ryan:
1. You find a house you’re madly in love with, and can afford it.
2. You are more concerned about the comfort of owning your own home, can afford the payments, *and* are in it for the long haul so if it drops in value it won’t cost you sleep or solvency.
3. You get a great deal on a house–i.e. priced 5-10% below apparent market value. And can afford it.
4. It’s what you want to do (only live once, ya know) and can afford it.
5. You have a preferred neighborhood–school district, commute-shed, proximal to preferred churches or recreational facilities, and it is difficult to rent in this neighborhood. Instead of selecting from a limited supply of less-desirable rental properties, you can choose from a larger supply of for-sale properties.
My $0.02
Ryan
5 reasons from the ‘bottle is half empty” pile:
1. You want to take control of your life back from heartless/faceless landlords
2. You want to decorate a room (in YOUR style) without signing legal documentation.
3. You want to avoid the invasion of privacy of regular home inspections.
4. You want to know that you have the only key to the property.
5. You don’t want to rent all your life.
Check out the rent vs buy calculator on mls.ca. I could not create a set of assumptions that produced a “rent”recommendation. Quelle suprise 🙂
The problem I think is an incorrect way of calculating gains from rental savings; looks way underdone. Maybe someone out there can take a look and confirm.
Cheers
If owners cannot weather this liquidity crisis storm, they will easily become the victims of foreclosures.
It is too early for laughing at bears or renters
ceejay: cannot find rent vs. buy calculator on mls.ca.
Ensure they include annual maintenance and the returns on the difference invested in other vehicles. Also beware that there is a risk mortgage rates could be higher and your returns are highly leveraged on your mortgage rate. Specifically on annual maintenance, when you calculate this you can hire someone to do it (costs more) or do it yourself. If you choose you can pay yourself 0 for doing the maintenance but remember you are effectively saying your hourly wage is nothing.
There are some reasonable rent-vs-buy calculators out there and to be fair it is often better to buy versus rent, with the caveats above of course.
vanreal,
Not sure if you have any grasp of the consequences of firing up the presses to print money.
Unfortunately, there are occasions when central banks have to pump instant liquidity into the market to avert panic induced chaos, eg: the 87 stock market crash, the 89 Russian currency crisis, and 9-11. These cash infusions are reserved for emergencies and should not be confused with strategic planning.
The recent need to open the flood gates only confirms the dire situation of the US housing market.
Your suggestion to keep on printing more money would be amusing if it was not so sad, as that is exactly what caused the global liqidity crisis.
You might want to check what such a recipy cooked up in Germany in 1923.
Sorry, should have said 98 Russian currency crisis.
NEW YORK (CNNMoney.com) — Futures markets began betting Friday that the Federal Reserve will institute an emergency interest rate cut this month in the wake of the credit worries that have roiled U.S. markets in recent weeks.
The latest reading suggested there is a 24 percent chance that the central bank will lower a key short-term interest rate in August. Markets were not betting on a rate cut in August immediately following the Federal Reserve’s policy meeting on Tuesday.
Futures markets suggest that in September there will be a 76 percent chance the central bank will cut rates at its meeting.
Stocks plummeted Thursday, with the Dow industrials falling 387 points, and were poised for another steep selloff Friday as credit concerns continued to trouble Wall Street.
NEW YORK (CNNMoney.com) — Futures markets began betting Friday that the Federal Reserve will institute an emergency interest rate cut this month in the wake of the credit worries that have roiled U.S. markets in recent weeks.
The latest reading suggested there is a 24 percent chance that the central bank will lower a key short-term interest rate in August. Markets were not betting on a rate cut in August immediately following the Federal Reserve’s policy meeting on Tuesday.
Vice Chairman of Goldman Sachs International Bob Hormats gives his analysis of the global credit crunch.
Futures markets suggest that in September there will be a 76 percent chance the central bank will cut rates at its meeting
How much would the rate cut have to be to help any of those US homeowners who are behind in those high mortgage payments?
A
Very little. The resets of the ARMS will still be 60% + higher, and the peak resets happen in October 2007.
Funds for non-prime mortgages have dried up completely.
Even if rates drop 1% (which is lot) who would buy the sub-prime paper? Banks and hedge funds and investors around the world have been so badly burnt, they just want to get rid of the stuff.
Fish:
I heard that most sub-prime mortgages will reset in 2008 (you’re saying ARMs, which is not exactly the same); point being, the re-set problem isn’t going to be short lived.
Rob, what do you mean by the re-set problem being short lived. Can you clarify.
Also if the banks move so quikly to stabalize the market, doesn’t this reveal that the banks are balancing on a thin line??? Are we looking at high stakes here?
For those of you with more in-depth economic knowledge, perhaps you can help answer a question for me? Is it possible that we are entering a deflationary cycle? Is the contraction of credit the same thing as reducing money supply, ie: is it the inverse of printing money? If the answer is yes to the above question, then is it still possible to enter a deflationary cycle when the central banks are printing money?
Rob,
Fish is correct about ARM’s reseting in October. Paragraph four in this article.
http://tinyurl.com/3crrrq
GM,
Market is has some jittery “fear” in it. Whether this fear causes the majority of people to pull out of the market and hoard cash that remains to be seen.
Fear can cause people to cut back on spending although the economy is good. Can this subprime fear end up causing a bear market? Recession? That is anyone’s guess right now, as we have not been in this situation before. Noone really knows the depth of the subprime problem, but eventually we will find out as this thing plays itself out.
GM – yes. Tightening credit ( by raising interest rates) is one factor that will reduce the supply of money and is deflationary. But what we are seeing in the financial markets is a “Liquidity crunch”.
If the risk adjusted return of assets (like stocks and houses) becomes negative, investors and buyers will hoard cash rather than invest it. This happened in Japan…prices of assets declined in the ’90’s. In an attempt to stimulate the economy, the Japanese central bank reduced interest rates to near zero. One major consequence of this was the creation of a “carry trade”…where investors in other countries obtained yen-denomentated loans to purchase assets elsewhere. You can imagine what happens when Japanese interest rates rise…the carry trade becomes unprofitable, foreign assets need to be sold to repay the loans, the selling produces pressures in those foreign markets (like the US) on prices, and speculative purchases (like many houses in the US) decline in value, which puts domestic loans made to acquire those speculative purchases at risk, which has the effect of tightening domestic credit. Its one big happy economic cluster-F*ck.
So are we entering a deflationary cycle…? Maybe, but only if consumption really declines. Houses are a big part of the debt market which is affected by the carry trade, but houses are a much smaller part of the overall market. Wages and employment are healthy and that is a huge offset to any deflationary pressure in the economy.
Wages and employment will delay to reflect the effect of credit crunch caused by Subprime.
Many subprime lenders start to lay off employee. It will happen in construction industry or real estate-related industries even retails ,too.
UTR:
I said “not” short lived.
Coco:
Not all sub-prime loans are ARMs and not all ARMS are sub-prime. Fish is talking ARMs and I’m talking sub-primes. Similar, but not the same, hence the difference in dates (both Fish and I are right, I believe).
I was looking for more comments on the effects of the longer term re-set issue. If central banks jump in once, will they jump intwice? Three times?
Crasher, At no time did I say it was a wise strategy to print more money. I just said that is potentially what will happen if there is a major confidence shake up in the money markets because the alternative will be a massive recession or depression.
Home ownership is priceless, for everything, there is mastercard and the central banks!
This is not only a sub-prime problem, and it is not only a US problem:
Coventree Inc. (TSX: COF) today announced that, as result of the current unfavourable conditions in the Canadian asset-backed commercial paper (“ABCP”) market, it has been unable to place new ABCP to fund the repayment of previously issued ABCP maturing today.
Click to access COF_20070813.pdf
please can we see friday’s numbers?
Sorry vanreal,
Did’nt realize you were just trying to warn us with great gobs of wisdom regarding the “ifs & buts” of credit manipulation, recessions and depressions….if you were’nt suggesting that the FED open the flood gates, it sure sounded like you were endorsing it.
Although I am not endorsing the world banks cash infusion, it sure beats the alternative. Unfortunately it doesn’t bode well for you bears, does it crasher.
Hmm…are we witnessing “the great unravelling”?
I think so, vanreal. So, get used to it.
vanreal,
By disclaimung any suggestions and endorsements, what the hell is your point???
…it sure beats the alternative…
How exactly is that different than an “endorsement”?
“how exactly is that different than an endorsement?”
Good question DeeDub.
As for the world banks cash infusion (which vanreal may or may not endorse) not boding well for us bears, I would be insulted to be called anything other than a bear.
“Although I am not endorsing the world banks cash infusion, it sure beats the alternative. Unfortunately it doesn’t bode well for you bears, does it crasher.”
It’s not free money though … any losses are still real and existing.
Unfortunately it doesn’t bode well for you bears, does it crasher…
That the economy is “needing” mass infusions of cash while interest rates bounce along a 40 year bottom is – or should be – a serious concern. What it suggests is that – for all the public-facing inflation fighting talk from the various central banks – the real danger is deflation.
Can deflation still happen when the central banks are printing money like crazy? I’m no expert in economics and I am trying to understand h0w money supply can contract (the definition of deflation) when the supply continues to be inflated. Can anyone explain?
GM, the CB’s don’t literally print money. What they do is make credit available to those who want it. You see, in the modern world of fiat currency, “money” is largely just credit, ie., loans in accounting books. When Joe Blows walks into the bank and takes out the $500K mortgage, essentially “money” has been created. At some point, Joe has to pay back $500K + interest. When the $500K principal is paid back, the loan is “extinguished” and that “money” ceases to exist. However, where does the interest “money” come from? Well, it was borrowed into existence by Jane Sucks and paid out to Joe for whatever goods/services Joe provided. Of course Jane too must ultimately pay back her loan + interest so somebody else needed to take out an even bigger loan. All of this works so long as ever increasing amounts of loans are taken out. Deflation occurs when the value of loans being extinguished exceeds the value of loans being created. In a “normal” economy this typically does not occur. This explanation is likely grossly oversimplified and there was a great video over at mohican’s blog (langley-financial-planning.blogspot.com or something like that) describing this in detail but the basic theme is that, roughly speaking, money = existing credit and for the financial system to keep functioning, it needs to continually create ever more money (credit).
The problem though is that loans can get extinguished not just from being paid off but from not being paid off because the borrower goes bankrupt — again the money ceases to exist because the lender must write off the loan so too many bad loans = deflation. The aim of the CB’s is to provide access to money (more credit) to prevent all of the loans being written off, but it is up to the world at large to decide whether or not to access that credit and it is that decision that will decide the resolution of the current predicament.
PS. I’m not an economist/finance guy so if I’ve missed something, please just explain things properly rather than cr*pping on me.
“Can deflation still happen when the central banks are printing money like crazy? I’m no expert in economics and I am trying to understand h0w money supply can contract (the definition of deflation) when the supply continues to be inflated. Can anyone explain?”
I don’t know about deflation. But I what do know is that past “crashes” correspond with the Fed’s money supply “drying up”.
Certainly not from cash being pumped in to the markets.
with the Fed’s money supply “drying up”.
what are the possibilities that for a brief period of time there would be NO mortgage money available?
where liquidity would completely dry up while the players sort out this mess.
after seeing how quickly things turned down south literally overnight, i’m thinking one morning we will wake up to “new” rules for borrowing massive amounts of money
The Fed does not control money supply. It controls the discount rate and reserve requirements. The money supply is much more complicated – and larger – than the Fed can control.
So it is quite possible to have a situation where overall money supply is actually shrinking even though the Fed is loosening. Arguably, that is what we are seeing today, with the financial behemoths de-leveraging at a faster rate than the Fed is “liquifying”.
A lesser of two evils statement is not an endorsement and most people can tell the difference
“When the bus crashes even the pretty girls get hurt” (The Gartman Letter”)
We do not live in a vacuum and there will be tremendous value in Vancouver real estate and perhaps sooner than you think.
done barred What does you statement even mean?
What that means is that when the prices in the market drop (the bus crashes) even the Westside real estate (the pretty girls) will suffer.
When there is a credit crunch it’s usually not a matter of unloading what you’d like to sell but rather selling what you can. Quality assets are the most liquid and often the first to get a bid and the first to go.
I suspect that you understand the vacuum comment. We operate in a global economy and how can people say on the one hand we are an International destination and this is driving up real estate values but on the otherhand we are insulated from what happens in the global economy.