Wednesday Numbers

There were 245 new listings today, and 179 sales, for a sell/list of 73.06%.  There were 22 sales over list price (12.29%).  4 were in Van West, 7 in Van East, 2 in Richmond, 3 in New West, 1 in North Van, 2 in Maple Ridge, 1 in Coquitlam, and 2 in Burnaby.  Average list price of sales was $525,962, while average sales price was $511,706, a difference of $14,256, or 2.15%.  Average days on market was 45.

There were 111 price changes, of which 9, or 8.1%, were increases.  Average old price was $585,868, while the average new price was $571,817, a difference of 14,051 or 2.57%. Average DOM to price change was 52.

Inventory reached 11,274, while over 90s reached 2,531, or 22.45%. This number continues to climb. 0.90% of all active listings in my area had their prices reduced today.

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44 Comments

Filed under Daily Numbers

44 responses to “Wednesday Numbers

  1. Considering

    Home sales are still strong for this time of year. However, I think this may well change within weeks due to the recent unprecedented contraction in the credit markets that will tighten mortgage requirements. Just as important, buyers and sellers will have all heard about these credit changes and understood that they could have a major impact.

    Here is a nice simple explanation of how property prices moved far away from fundamentals in the US (and these arguments apply even much more powerfully to Vancouver):
    http://efinancedirectory.com/articles/The_Dangerous_Disconnect_Between_Home_Prices_and_Fundamentals.html

    And, don’t forget Robert Shiller’s graph of real home prices, again for the US, but as he has pointed out even more true for Vancouver:
    http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html

    Vancouver inventory shows no signs of a correction yet, but that in itself says little about the future. Personally, I am renting until the market falls to sane levels, whenever that happens to be.

  2. fish

    Thanks for the expanded numbers Rob…much appreciated.

  3. coco

    Interesting that the majority of overlists are Van West and Van East. I guess the people that live in the valley that have to commute need gas money and can’t afford to pay extra now a days.

  4. Domus

    Question for Rob:

    do you think the storm down south will have only marginal effects on Van RE? If so, why?

    If you had to make a guess on Van RE appreciation for the next 2 years (24 months) what would it be?

  5. robchipman

    Domus:

    A guess, (and its nothing more than a guess), is that the credit crunch is going to be less of a problem than imagined, simply because the potential for a problem is so great (I think I heard BoA invested 2 billion in Countrywide today or yesterday. Wonder why?). In other words, CB and banks will try their best to backstop any run, simply because its in their interest. Result, less effect on Vancouver real estate than some imagine. Again, that’s a guess. Don’t take it too seriously.

    Lower Mainland appreciation? Again, a guess, but I think we’ll plateau, and possibly retrench a little, but not see significant price drops. Just a guess. There are too may variables to make a serious prediction. For example, pretend everything here goes along just fine. We get inflation under control, as well as liquidity. But, there is some sort of political upheaval in China, similar to what we saw in the transition of the USSR to Russia. The fallout from that could be huge, and could concievably go either way. We’re so global now that any sort of thing can help or hurt us. Again, guess only, and I’m only making the guess because its you who asked 🙂

  6. Snick

    “I think I heard BoA invested 2 billion in Countrywide today or yesterday. Wonder why?” – Rob

    So they can short sell it into oblivion. Similar to the M&A “asset strippers” of the late 80’s.

  7. foo

    Well, BofA gets to borrow $2b from the Fed at 5.75% for 30 days, renewable at their option, then they take a $2b stake in Countrywide that pays a 7.25% dividend, and lets them convert to 10-20% stake in Countrywide if things recover, at the current price. Talk about win-win. As I saw in a comment somewhere, the current situation in north america is “capitalism for the masses, socialism for the rich”.

  8. Domus

    Cheers. Guesses are fun, as long as they are qualified as guesses.

    Vancouver is definitely surprising me. I was convinced an adjustment would be under way by now. I wonder what makes it different from similar cities down south.

    I take your arguments as interesting: as for me, I really am struggling to figure out what makes Van different at the moment. Maybe the buyers’ pool is different? Less leveraged? Maybe immigration of rich people from Asia or elsewhere?

  9. fish

    Foo- BOA was also one of the banks that rpivided the $11B Line of credit to CFC so they may have been protecting their investment.

    It looks like a good deal now, but we will have to see how it works out.

    This is stop-gap confidence building measure, rather than solving CFC’s on-going funding requirements. that will have to depend on the market and investors buying their MBS.

    I am sure that BOA cannot short the stock – hedge funds in a similar deal could – look at AHR today but I doubt a big bank like BOA could get away with it.

  10. robchipman

    foo:

    I like your read, but I tend to agree with Fish. I think BoA, like the banks here, think they need to look out for themselves by stepping up to the plate.

  11. jay

    B0A is going to cover on the short side, no question. It is a win-win for them. Take a good look at the terms and you’ll see that this is an easy play for BoA (little risk, up or down) and Countrywide has very little choice in the matter(they drew down their entire credit line to stay liquid. Why? Most likely because they feared losing it.)

  12. New Investor Rob

    Why is Vancouver and Canada different?

    I’m an RE investment owner. I’m not really bullish but I don’t think that we are going to see a US style bubble.

    In my opinion we are different because:
    1. I’m unaware of sub-prime mortgages in Canada where the price jumps after a couple of years. If there are sub-primes in Canada they are not used significantly. Remember, sub-prime is different than 0% or 5% down.
    2. People are working and making money. They knew how much their payments would be when they signed up for them. Employment is at an all time high in the Vancouver area and most people can afford their homes. Try buying a home at a city tax sale. Most smaller municipalities haven’t seen properties at tax sales for years
    3. In Vancouver the only way we are going to see a crash is in one of two ways:
    a) Interest rates go up and a massive amount of people can’t renew their 5 year mortgages. With the recent scare with sub-primes I can’t see interest rates going up much in the short term. When people were purchasing 5 year mortgages they only had 25 year amort available. When they go to renew they will have the option of a 40 year if they need it.
    b) The economy goes into recession and unemployment goes up, making it impossible to pay their mortgages. This could and probably will happen but I wouldn’t count on it in the short term. A lot of people are scared in the states but the whole thing hasn’t really effected the general economy yet. It probably will soon but hasn’t yet. People are still working. It will take time for that to trickle down to Vancouver.

  13. foo

    fish, Rob,

    Of course BofA is looking out for themselves. My point was simply that the deal is such a good one for them that they couldn’t refuse it. They earn 1.5% on money given to them by the tax-payer, they get the right to buy a massive chunk of Countrywide at fire-sale prices if things go well for Countrywide, and they can short the stock to protect their investment. Pity such cosy terms aren’t available for us ordinary people. I’d love to borrow the taxes you paid, at 4%, give you a mortgage on some property at 5.5%, and have an option to purchase the property from you at 2005 prices if I choose.

  14. robchipman

    To be honest, foo, an ordinary person couldn’t pull it off on their own. You need multiple people, which translates into a corporation. I guess the best you can do is buy BoA stock, right?

    That said, aren’t cosy terms for ordinary people the very thing that got this ball rolling in the first place? Buy today, no money down, no income verification, teaser rates, and get the appreciation. Plus, write off your interest, which some would say is a tax payer subsidy. And let’s face it: some of those ordinary people may well have sold before they went underwater. In fact, they may be substantially further ahead.

  15. MyraAndrews

    Here is a table that shows the amount of adjustable rate mortgages (ARM’s) that have or will reset each month in the US. (in billions of dollars). It looks like the worst is yet to come.

    Month Billions
    January-07 22
    February-07 25
    March-07 35
    April-07 37
    May-07 36
    June-07 42
    July-07 43
    August-07 52
    Sept-07 58
    October-07 55
    Nov-07 52
    Dec-07 58

    January-08 80
    February-08 88
    March-08 110
    April-08 92
    May-08 76
    June-08 75
    July-08 50
    August-08 35
    Sept-08 26
    October-08 20
    Nov-08 15
    Dec -08 17

  16. Growyourmoney

    All this information is good,

    But

    I would rather buy realestate and wait, then wait to buy.
    Thank you Rob for providing a this blog.

  17. helen

    I understand we are so rich in Canada that we can afford to buy $$$$$$$ homes without any issue.Still we are not the richest country in the world.

    And see what’s happening here..

    Coventree, and other finance companies – as well as banks – have sold billions of dollars in ABCP to money market and other mutual funds, individual investors and corporate customers large and small as a secure temporary home for cash that pays a little more interest than more traditional vehicles.

    In all, non-bank paper accounts for about $35-billion of the $107-billion in ABCP currently outstanding in Canada, and Coventree’s share of this amounts to about $16-billion.

  18. Snick

    “I was convinced an adjustment would be under way by now.” – Domus

    Domus, do you remember Summer ’04? No relief in sight, and then September rolled around.

    Then “The Pause” began in earnest.

    The fall decline of ’07 will not be the head-fake that that one was…this time it will stick.

  19. little voice

    Thanks for the numbers Rob.

  20. fish

    Vancouver is different. This is the US…hard to see how the US will go through this sort of disaster and we will just plateau, but anything is possible.

    One estimate of “How Low Will Housing Go?” comes from Jan Hatzius, Chief Economist of Goldman Sachs:

    “Our working assumption has been that US home prices are about 15% overvalued. This relies on a simple “affordability” measure which essentially adjusts the home price/income ratio by the level of (nominal) mortgage rates. Depending on one’s assumption about income growth, the likelihood of overshooting on the downside, and the length of the adjustment process, this suggests cumulative nominal home price declines of 5-15% in the next few years.

    However, affordability is becoming an increasingly problematic concept because it ignores changes in credit availability and changes in nonconforming mortgage rates. Hence, it may be better to look at simpler price/income or price/rent ratios to get a sense of house price valuation. These paint a more dire picture.

    Even if we assume that the long-term trend for price/income and price/rent is higher now than the average of the 1975-2000 period (because interest rates are likely to stay lower), cumulative nominal price declines of 15%-30% are possible.”

  21. coco

    Subprime estimated to be 1.4 trillion. No one knows what the losses will actually be as the bulk of these teaser loans are just about to begin resetting in the months to come.

    If foreclosures continue to rise you will end up with more credit tightening and a consumer lead recession. You can’t expect people than have gone through foreclosure to still spend at the levels they have been in the past.

    The future doesn’t look pretty for a lot of these subprime folks interviewed on tv. Paying $400.00 a month, resetting to $1400.00 next month, etc. A lot of people can expect a $1000.00 to $1600.00 increase per month in their mortgage payments.

    Since these people put 0% to 5% down, it is predicted most people will just walk away from their homes. With prices down in a lot of areas this just adds fuel to the fire.

  22. coco

    Even if the fed lowers interest rates it will be equalivent to putting a bandaid on a gun shot wound.

  23. Strataman

    coco; you sound intellligent so read Empire of Debt a book by William Bonner and Addison Wiggin. I don’t usually promote any book but what I like is they wrote it in 2005 and they forecast the US housing crash BEFORE it happened. It’s about $14.00 at Chapters. If you don’t think its worth it after you read it, I’ll reimburse you over coffee!

  24. Strataman

    PS It’s aquick read 3 nights at 1 hour!

  25. Snick

    “One estimate of “How Low Will Housing Go?” comes from Jan Hatzius, Chief Economist of Goldman Sachs”

    Ah yes. They are all so good at predicting outcomes AFTER the fact.

    Shysters. They should all be in jail.

  26. Snick

    “…but what I like is they wrote it in 2005 and they forecast the US housing crash BEFORE it happened.” – Strataman

    Uh, sorry to ruin it for you, but it ain’t rocket science.

  27. Snick

    PS It’s aquick read 3 nights at 1 hour! – Strataman

    No doubt. I’ll bet most people get the gist of it after the first paragraph.

  28. Strataman

    Snick “Uh, sorry to ruin it for you, but it ain’t rocket science.”
    True, so forecast a top? I’ll give you one year leeway. Same as they got (they were six month out). And the top is… Date +- six month by Snick

  29. Strataman

    So Snicky old boy? I give it the top October of 2007 so giving myself the same leeway as I challenged you what’s the call? Nuther words if it hasn’t topped by March 2008 I am out to lunch so to speak. Hey Rob maybe you should track our calls, worst case is you will get rid of us. (Thats the penalty! ) 🙂

  30. DeeDub

    hey wrote it in 2005 and they forecast the US housing crash BEFORE it happened…

    Hate to burst your bubble, bud, but Bonner has been singing the same song since the dot.com years. He was WAY WAY WAY wrong. This is a guy who was telling people the equity crash was only “half” done – in Oct ’02 – right before one of the speediest bull rallies in history.

    The guy has a worse record than our beloved Canucks in the playoffs, LOL.

  31. coco

    Total number of U.S. foreclosures.

    2005 846,982

    2006 1,259,118

    2007 (Jan-June) 925,985
    (predicted to go over 2 million by year end)

  32. Anonymous

    “Total number of U.S. foreclosures.”

    Who cares? In a nutshell: They don’t have “The Best Real Estate Anywhere!”

  33. coco

    Strataman/Snick,

    Prices in the valley are already decreasing from the top. (million and up range)

    As the lower priced end rises and the upper priced gets reduced to attract a buyer, homes will collide in price and force a correction eventually.

    Although, other factors, psychology of fear, spill over of a possible U.S. recession, major stock market correction, flight to cash/t-bills, companies having financial problems due to subprime investments like Air Transat, etc. etc. can all come into play long before price collisions.

  34. coco

    Anonymous,

    Hopefully, you work for a company who didn’t invest the company profits or pension plan in commercial backed paper with subprime exposure. Then you would care.

  35. coco

    Air Transat exposed to subprime

    http://tinyurl.com/2k79yf

  36. Anonymous

    Aren’t they based in Montreal?

  37. News Flash

    “Home sales are still strong for this time of year. However, I think this may well change within weeks due to the recent unprecedented contraction in the credit markets that will tighten mortgage requirements.”

    Mortgage requirements have not tightened in Canada. CMHC sets the standards and they have not changed anything. Any who claims CMHC will tighten the standards is delusional.

  38. jpick

    I’m not particularly knowledgeable about the US mortgage scene, but it seems to me that ARMs were designed as a financial vehicle for property flippers to leverage into a rising market. Since the market is starting to tick down, it’s hardly any surprise that there would be little demand for them anymore.

    So you have some people that put 0% down in the situation where they might default, and will have to sell their homes in a declining market. I can’t feel too sorry for these people though – they were just gambling, and the vast majority of them already made a few hundred thousand during the property price run-up on other properties.

    I have friends in California that had been trying to buy a house for years, but essentially had to give up, because every time they made an offer, they’d be competing with 5-10 other offers, sometimes $150k over asking. A price decline there would just be a return to sanity. In Northern California, there’s a lot of pent-up demand though, so I’d be surprised if it dropped back more than a year or two in pricing. I don’t think I’d even call that a crash.

    How does this affect Canada? I suspect that the Fed will cushion the landing by continuing with a loose monetary policy – so there will be a bit more inflation (which they’ll try to hide, as usual), and the US dollar will drop. Canada’s economy is tied to the US, but it is resource based, and we’re in a slightly better fiscal position. So I think that we will have slightly less inflation, and lower interest rates. That’s a good thing for real estate ownership.

    A recession could be looming, but it’s hard to predict that. Unemployment is so low now, it would have to be a really deep or long recession to have much effect on most people. For now, the economy will probably just tread water. I would argue that it’s already been doing that for the past few years.

  39. DeeDub

    …it’s hardly any surprise that there would be little demand for them anymore…

    There is HUGE demand for option-ARMs. What’s missing is a corresponding willingness to actually lend money out on those terms.

    …the vast majority of them already made a few hundred thousand…

    The vast bulk of existing option-ARMs – those whose resets are most likely to be a problem – were originated after the US real estate market peaked. Contrary to your statement, a significant chunk of those people, perhaps even a strong majority, are in fact upside-down on their mortgage.

  40. Anonymous

    “So Snicky old boy? I give it the top October of 2007 so giving myself the same leeway as I challenged you what’s the call? Nuther words if it hasn’t topped by March 2008 I am out to lunch so to speak. Hey Rob maybe you should track our calls, worst case is you will get rid of us. (Thats the penalty! )”

    Snick’s call for the market top was years ago.

  41. coco

    Air Transat is based in Montreal. Air Canada also has some exposure 37 million, although details how risky the exposure is not mentioned.

    Canadian based Ivanhoe Mines 66.5 million.

    RBC (reporting earnings today) mentioned they may have a little exposure and BMO too.

    As time goes by you will hear of other Canadian companies who have invested in commercial paper with subprime exposure.

    Some people may think subprime exposure for Canadian companies is no big deal, but if foreclosure rates start increasing and Canadian companies start losing millions of dollars in these investments, what do they do to preserve capital?
    Downsize/cut staff? Try to borrow the millions back? (that might be kind of hard to do as there is already signs of the commercial credit market tightening in Canada)

  42. coco

    I forgot to mention, if the Canadian company is wealthy enough they maybe able to take a loss. Of course, a loss is not pleasing to shareholders, so the company will look for new ways to boost earnings.

  43. Snick

    The “TOP”? That was quite some time ago.

  44. jpick

    Oops. I made in error by saying “ARM”, which is a bit broader of term than I thought. That’s just the same as a variable rate mortgage. I didn’t mean that. Even I have a variable rate mortgage. 🙂

    I was really referring to the mortgages with the “teaser rates” (the option ARMs, I guess). Like I said, I’m not too familiar about the US mortgage scene. All I know is that they had some pretty exotic stuff available. I used the wrong terminology. When I said ARM, I really meant the mortgages with the teaser rates.

    There probably are idiots out there that would still want to sign up for a mortgage based on a teaser rate, and not have a plan for paying off the larger payments later on. There are always people who buy more house than they can afford.

    In the end, I think my point was basically that the people being burnt were just gambling. And they know they were gambling, and they can take the losses (maybe with some discomfort).

    Everybody is going to call a 20% hit a crash, but look at how much these houses have increased in value over the past decade. If the housing prices return from “insane” territory, to “sane” territory, that’s just a healthy correction.

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