Vancouver Home Buyers Have a Twitch?

Down the Drain

Speculation is rife that Vancouver real estate is sliding down the drain.

Wondering, YatterMatters Tweeted this question: “With thousands of listings on the market why are Vancouver home sellers selling?

Response

In what seemed like the mere passing of seconds came a response that wasn’t from a Vancouver home seller.

“The rats are leaving the ship” followed by this adjunct saying, “I am fairly confident this is (partly) what is going on. Can’t wait to pick up the wreckage…

Bold Buyer Statement

These words are bold! So bold that you begin to question if these words are representative of a current mind set for Vancouver home buyers. If so, what does this foretell current Vancouver home sellers and does this mind set explain ‘in part’ the limited number of Vancouver home sales?

Surprise!

My surprise at reading these words rests in the fact that I am acquainted with the respondent in real life. The words “can’t wait to pick up the wreckage” seemed at odds with the person whom I respect as a thoughtful, well published local economist. What I didn’t anticipate was the fierceness of their words carrying a tone of carnage. It was something I had not anticipated!

Hello Kitty

The words generated a lingering visual image of a feline that exhibits immense patience as it waits, ready to pounce on its next meal. As a parallel, one asks if today’s home buyers are like that cat in the picture? Are they silently and patiently waiting – ready to pounce? These brutally honest words left me to wonder if this is the real reason for Vancouver’s real estate market malaise?

Is This Market as Bad as This?

Recorded history is wonderful. It lends perspective to the ‘how bad is it’ question. Using the month of May as the focal point for Vancouver, these market landmarks from the Greater Vancouver Real Estate Board revealed the following:

Month Units Listed Units Sold Active Listing Average Price
May 2012 3056 1184 7577 $1,073,311
May 2011 2575 1575 6129 $1,223,421
May 2010 2950 1243 7368 $955,348
May 2009 1964 1413 6060 $831,171

What’s the Fuss?

Looking at these historic market landmarks at first glance it doesn’t seem as bad as that which some portray. Units Listed in May 2012 (3056) are only slightly higher than May 2010 (2950) – mere weeks after all the feel good Winter Olympic hype and highs. The difference in number of Units Sold during these two periods also does not seem overt – 1,184 in May 2012 compared to 1,243 in May of 2010.

Active Listings in May 2010 – 7,368, were just under 10% of May 2012’s 7,577 whereas Active Listings in May of 2011 were 20% lower in the same period of 2012 – this at a time when prices rocketed to new highs.

Average Prices recorded show us a 10% difference between these two periods – May 2012 recorded $1,073,311 and May 2010 was $955,348.

An Aside

It wasn’t until September of 2010 that Vancouver average prices topped the $1,000,000 mark. It was in May of 2011 when the Average Price reached the second highest level ever recorded. To date the highest Average Price of $1,235,244 was recorded by the REBGV, and occurred in February 2012. Average Prices haven’t seen the underside of a million dollars since that day in September of 2010 but, it is getting close and it may soon be time for an updated notation.

Relative

Is today’s market really that bad? If you think so consider that in April and May of 1990 Active Listings exceeded 10,000. Sales during those two months were respectively 1,008 and 869 with interest rates hovering above 14%. That dear reader, was a market in which you had something to shout about. That market continued for a year and more with relief only appearing in the spring of 1991 as Average Prices bounced around the mid $260,000 range until 1992.

Twitchy

That was then so to gain perspective let’s start at the highest average price ever reached in Vancouver for a detached home – a mere $1,235,244. Now let’s also assume this market is on the skids sliding down the drain faster than we think to bottom out at something most of us would not imagine – a market that drops so much it hits May 2009’s Average Price of $831,171.

With a price drop of $404,073 that cat waiting for lunch probably has a tail that is twitching ever more rapidly as it begins to think supper is around the corner. As a Vancouver home buyer you too might be a little twitchy as you begin to think this 32% drop from the all time high is your opportunity to finally make the move to purchase a Vancouver home. You might even begin to think that acquiring a home is now a bargain and that it is time “to pick up the wreckage”.

The Problem

There are no ‘eureka’ moments that determine when a market has hit the bottom. That is only confirmed months later. Accordingly, there is also no particular moment that screams out to you saying it is time “to pick up the wreckage.” In contrast it is more likely that it will be a culmination of subtle factors that determine your home buying action.

Simple Influence

Except for a few folks the act of buying a Vancouver home is very unscientific. Rather, it might be as simple as reading the newspaper with a byline claiming that the market has turned. It might be a story at a cocktail party about somebody who was bold and got a good deal. It may be the doctor telling you to get ready for an addition to your family. It could be your acceptance of a new higher paying job. It might be a Vancouver Realtor® telling you that in a coffee talk with his Realtor® buddies it was concluded that based on the volume of phone calls, email/txt inquiries that the market has reversed. It could also just be a sunny day.

Although a drop of 32% in and of itself would be considered great motivation, what is unlikely is that the reason you decide to buy a Vancouver home is based solely on that number. In real life terms your decision to buy a home will be made because it is right thing for you to do now. Then again, as a Vancouver home buyer the determining factor in your decision to purchase may be rooted in nothing more than the desire to rid yourself of an annoying twitch acquired during your wait.

Image Credit

About Larry Yatkowsky

Larry is a recognized real estate expert. A veteran professional, his experienced counsel leads Vancouverites in his west side community to place their trust in a man passionate about his work. Uncompromising ethics bring a balanced approach to realizing your real estate dreams.

When Life Moves You - contact Larry:

*Disclaimer: Statistics Courtesy REBGV. While believed to be accurate they are not guaranteed.
**Numbers provided may vary as they are dynamically posted by the REBGV.

Reader Comments:

dan Says:
June 5th, 2012 at 8:32 am

I’ve been observing the real estate market for about 10 years. Every year it’s the same story at this time. Why? Because realtors all sing the same story… Best time to sell is may because people want to move during the summer in time for school. The repercussions too many listings, buyers thinking they’ll pick up the wreckage and nervous sellers. The result: listings go down, some sellers offer bargains, some buyers wait.

I too waited. My result was that I ended up buying a condo for 248 when it was 180 back when I thought it was going to pick up the wreckage.

My humble opinion, housing wont’ go down. It might slow down but when people stop listing it will go up. It always goes up and down always ending up.

So the best time to buy? I say now, when other buyers don’t want to compete and the sellers are nervous. Waiting a few months, IF this is not a bubble burst (which it never is) will only mean you’ll pay more and compete against others who will by then be the nervous ones.

After all we live in the nicest large city located in the ‘best place on earth’ and that will never change. my 2 cents. 🙂

vanpro Says:
June 5th, 2012 at 8:50 am

This is actually what happens when prices start falling substantially: In the rest of the world (i.e. US, Eurozone, Japan, Ireland, Iceland, etc…) big price drops of 30+% did not stir buyer interest: Instead they caused buyers to pause even more so as not to “catch a falling knife” and sellers panic even more causing even more supply to come on. All of which proves that when big price drops do happen, they lead to further price drops because both buyers and sellers change their expectations and start to think prices will never stabilize, so why buy now when you can buy later at lower prices…..

vanpro Says:
June 5th, 2012 at 9:12 am

BTW: a 30% drop from current approx. $1.1M SFH avg. price means the avg. price across ALL of Greater Vancouver would be close to $800k – still VERY expensive on a “worldwide” basis.

dan Says:
June 5th, 2012 at 9:25 am

@vanpro, you could be right but in a lot of places in the world prices are higher.

Like I said ever since I’ve been buying homes the market was suppose to be crashing. Every year. As a result I paid more for my home.

It also depends if you are buying a home to live in or to flip. People who paid 1 mil + for their house won’t sell at 900 cause where will they live?

I may be wrong but for at least 8 years in a row, your opinion has been proven wrong and why would it be right now when interest rates are at their lowest and the bank of canada just said this morning it’s not going up?

vanpro Says:
June 5th, 2012 at 9:29 am

The rest of the world has record low interest rates also yet house prices continue to fall causing a financial crisis never before seen: see Spain, rest of Eurozone, Ireland, UK (to some extent), Japan and the US….

dan Says:
June 5th, 2012 at 9:54 am

Depends where you are looking. Even in Toronto 800K is just a simple house. But if you look at a small town then yes 800K is a lot.

Like I said, you may be right, if it is a crash. If it isn’t prepare to pay more.

dan Says:
June 5th, 2012 at 11:12 am

🙂 Yes but the economy oversees is doing worst than ours. And the states are getting better.

But again you could be right, but only time will tell.

Anon Says:
June 5th, 2012 at 1:27 pm

Methinks Dan does not know how to do a rent vs buy calculation. Anyone with one iota of financial literacy (and knows not to use biased bank or realtor rent vs buy calculators) would know that it’s far more desirable to rent (at least in Vancouver) from a financial perspective.

So no, now is not the time to buy. My goodness it may be the worst advice I have ever heard given all the variables at play.

We rent a wonderful home. Our landlords are making a whopping 1% return, excluding property taxes and maintenance. This while we tuck all our extra away and make anywhere from 6-8% return. Now is the time to rent, and tuck the rest away for a rainy day. Sadly most don’t get this and have overpaid tremendously for property that is sure to go down. And Dan…just because you can’t remember seeing the market go down doesn’t mean that it won’t. Flawed logic right there. That’s what they said in the US in all the cities that also said “it’s different here.”

June 5th, 2012 at 2:14 pm

@dan

I can understand your views, given your rather short observation of the RE market in Vancouver. No question we have been in a “relentless bull market” in Vancouver for that period. The statistics do state that we have seen increasing prices for the past almost 12 years. So clearly, you have never experienced a recessionary market.

Give it a little more time and you too will see a severe downturn in pricing and yes, it may even resemble an outright “crash”. You may want to do some reading from some very credible sources such an The Economist, Demographia, Wall Street Journal, Macleans, Canadian Business or even listen carefully to what Carney and Flaherty have been saying to the Canadian public.

So yes RE always goes up, but usually at an annual rate of about 6-7%. The increases we have seen in the Lower Mainland recently have been parabolic and therefore unsustainable. The prices as Larry points out in his table are down 10% in the past year. Will they fall further or even accelerate their decline, as you say, only time will tell.

Do yourself a favour, don’t even think about buying right now and if you must, try low ball offers and walk away if they don’t get accepted.

Comprende ?

dan Says:
June 5th, 2012 at 2:26 pm

@Anon,

You may be right. But for 10 years you’ve been wrong, at least here in Vancouver.

I bought a home, when everyone was saying not too. If I had been renting all that time I wouldn’t have the amount of equity I have today.

No matter how you dice it, you can either give a landlord $1000 or give yourself $1000 (and some to the bank). But if you are not buying to sell you will be better off.

dan Says:
June 5th, 2012 at 2:49 pm

@lookoutbelow

You are right I have never seen a recessionary market and I hope I don’t.

But regardless, the same credible sources have said this before and if I had listened to them I wouldn’t be where I am today.

You are also right that if you are buying to sell in a year it might not be the right thing to do, but if you are buying to live in the house for a longer period of time it’s a different story.

I’m not saying you are wrong I’m just saying waiting has proven wrong for me. comprende lol.

Just last week Larry listed a house at 1.4 and it sold for 1.5 in 1 weekend. Has anything changed in 7 days?

anon Says:
June 5th, 2012 at 2:58 pm

Anon,

You may be right. But for 10 years you’ve been wrong, at least here in Vancouver.

^^^ so you are basing the fact that RE prices won’t go down on the fact that it has risen for the last 10 years lol. Okay, please name me one market in the history of the world that has gone up indefinitely :/ you can’t…. Additionally, please consider that while prices may have gone up – they are represented on graphs in nominal terms, not real ones. BTW, I haven’t said I have not bought in the last ten years. I am just choosing to rent now (I sold last year).

I bought a home, when everyone was saying not too. If I had been renting all that time I wouldn’t have the amount of equity I have today.]

^^ is it real equity or is it UNREALIZED equity. Sounds like you have equity on paper only. That could be wiped out tomorrow. People told me to buy in last year – looks like I probably saved 10-15% and on 1.5 – 2 M that is a s***load of savings.

No matter how you dice it, you can either give a landlord $1000 or give yourself $1000 (and some to the bank). But if you are not buying to sell you will be better off.

^^ again, this statement leads me to believe that you have no financial literacy whatsoever (don’t feel bad, most don’t). I cannot give you lessons on this via a blog that will change your position. Do some research and look at the reasons why in certain markets (Vancouver being one of them) it makes far more sense to rent from a financial perspective – even when (especially when) you have no intention of ever selling. Good luck to you and all other Vancouver homeowners who feel their unrealized gain in home equity somehow equates to wealth….

Vangrl Says:
June 5th, 2012 at 3:12 pm

@dan

“but for 10 years you’ve been wrong”

Make that 9, we are down 12% in Vancouver over the last year.
I hope you didn’t buy in the last few years, cuz you’re going to wish you listened to “everybody”

dan Says:
June 5th, 2012 at 3:14 pm

lol…. Ok I’m going to stop this but here goes.

Yes it is on paper. But even if my place goes down 30% I have paid in a lot more than that over time. More than a savings account could have gotten me.

So you sold last year. So you didn’t lose 10%. But you did probably pay 12000$ + in rent. Wait to buy another few years, you might get lucky, lol.

dan Says:
June 5th, 2012 at 3:15 pm

one last comment : How did I know you were a renter?

Gandalf Says:
June 5th, 2012 at 5:10 pm

If you haven’t lived through a real estate crash you wouldn’t understand the process!

I did. My dad amassed a real estate fortune back in the late 70’s-early 80’s. We owned apartment buildings, shopping malls, and industrial land.

From the peak in 1980 to 1984 our family lost it all and almost went bankrupt!

Buy at your own peril!

This bubble is built on a MASSIVE amount of DEBT, that which Canadians have never witnessed before in their lifetime and will eventually come unglued like Ireland, Spain, the U.S., Japan did. Open your eye and look around.

The Australian market is my “canary in the coal mine” for Canada and their decline is already well underway.

Enjoy the ride!

Read “Extraordinary Popular Delusions and the Madness of Crowds” written by Charles Mackay in the 1840’s. Not much has changed.

Dan Says:
June 5th, 2012 at 5:31 pm

I don’t disagree. But again buying for selling.

June 5th, 2012 at 7:56 pm

@dan

Here is the difference between your line of thinking and mine. And we could both be right.

I am looking a horizon of 5-10 years at which point I may be too old to climb stairs and tired (very tired) of cutting grass and other household maintenance activities. So, IMHO, buying now could be financial suicide given that I am about to start collecting CPP. There simply may not be enough time to recover from the impending downturn, so I would suffer a BIG loss. That is my outlook for the RE market and I haven’t read anything so far to change that. If new facts become available, my outlook may very well change, but that remains to be seen in the future.

Your assumption that RE always goes up is also correct because I sense that your time horizon may be much longer than mine. BUT just don’t assume that if house prices have always gone up in the recent past, that they will also go up in the future. The US prices still haven’t hit bottom from their housing bust after some 5 years. The reason for the BUST, too much debt due to lax lending standards.

Guess what, the Bank of Canada Governor has been repeatedly warning the average Joe NOT to get into too much debt and on top of that wages have essentially been flat over the past few years. Housing affordability is the absolute WORST in the Best Place on Earth. So, personally I have concluded that the current RISK is to the downside in house prices.

How low will they go, I suspect only time will tell. There is that future oulook problem again. To each his own.

Finally, I can pretty much guarantee that sometime in your life you will see that recessionary period for housing prices. I am sure that you will be able to navigate through it.

Solution for me is to rent the house I would like to live in and pay about 60% of what it woud cost to own. And no household maintenance!

Smoking Man Says:
June 5th, 2012 at 7:57 pm

O’Brilliant Dan,

Why are sales so low and listings so high?

Why are prices down 12%?

Why did Nortel go to $120 before crashing?

You must smoke some great herb, or inhale fumes from toxic waste. One of the two.

BubbleBoy Says:
June 5th, 2012 at 8:13 pm

Gandalf,

You are so right. Of course prices will revert to the mean. They always do!! The way bubbles work is that most of the population buys and then eventually the buyers are all gone. Then sales slow, some are lucky to get out, then the rest get screwed. Who’s left here to buy and keep prices high? Even in Toronto sales are slowing and listings starting to pile up. Prices here are off 12% in one frikkin year!! That tells ya something. There is no flat period!!!

BubbleBoy Says:
June 5th, 2012 at 9:44 pm

Smoking Man,

“You must smoke some great herb”

Don’t blame the herb. I hit the bong on a daily basis and I don’t think Dan. I see the real deal just like you my friend. My vision is clear and I will never get caught in this mess because I have eyes and a brain. Look at the US, Europe, Australia, and now China. It’s a world wide problem. There could be another global crisis that will send stocks and commodities down like we saw in 08. Since we are a commodiy producing country, it will take the dollar and RE just as quick. Boston Bruins Tim Thomas believe this and he’s walking away from the NHL because he believes the world is crumbling and the last thing on his mind is hockey!

thetamax Says:
June 5th, 2012 at 10:29 pm

Another sign of a bubble..people comparing the amount they pay down in their home against what they would have had in a SAVINGS account.

Savings accounts are CDIC insured (up to a max $) and state the % interest you will get.

You should compare a house against other risk-based investments AND applying a 3-1 leverage ratio (assuming you had ~25% down)….

anon Says:
June 6th, 2012 at 8:53 am

Yes it is on paper. But even if my place goes down 30% I have paid in a lot more than that over time. More than a savings account could have gotten me.

^^ I am flabbergasted by this statement. I agree with thetamax. I don’t have anything in my savings account but I have a lot in other investments 🙂

So you sold last year. So you didn’t lose 10%. But you did probably pay 12000$ + in rent. Wait to buy another few years, you might get lucky, lol.

^^ I paid much more than 12K in rent, but that’s okay, because you seem to miss the point of if you are not paying rent, you are paying interest to the bank unless you own free and clear (which most don’t). Again, find a good rent vs. buy calculator, you may be shocked by the numbers you see. My calculation tells me that at current levels I am still better off by about 200K after 4 years of renting vs. buying.

Larry – I agree that it’s all relative, but looking at 1990 and comparing it to now – I am not sure i would use that as rationale for jumping in at the moment. I actually remember 1990, as I had a relative lose a home during that time to foreclosure. Tough times for sure. Question for you – the 10K active listings…is that total listings or was that just new active listings for that month? If it’s total, it doesn’t seem to high and in fact, teh actual number of sales don’t see too far off compared to what they are now. Given that, I am wondering if I am confused re: what your comparisons are.

June 6th, 2012 at 9:38 am

@anon
“is that total listings or was that just new active listings for that month”
Total number of Active listings.

“actual number of sales don’t see too far off compared to what they are now”

In isolation that could be viewed as a reasonable assumption. A key difference however, is the 14% interest rate at that time.

Playing it loose –
at that time people were buying at about the same ratio as today but today they are not buying at 3.09%/5year rates versus 14% – WHY?
Is it job security, income/mortgage payment ratio, world economic balance, price difference, fear?
What am I missing?

stats don't lie Says:
June 6th, 2012 at 7:11 pm

@dan:

“Yes but the economy oversees is doing worst than ours.”

This is news to me… I didn’t realize that there was an economy in Vancouver outside of real estate?

Dan Says:
June 6th, 2012 at 7:47 pm

@stats don’t lie As far as I know everyone I know have pretty good paying jobs. I’m still spending money. And I still make more than I would for the same job back east.

Some real estate markets in Canada are booming right now. Even in Ottawa where people have been laid off.

This is just a conversation of renters vs Owner.

Vancouver markets might be low and they might get worst. But they might just bounce back when listings go down. Only time will tell. If they don’t I’ll be the first one back telling you I was wrong. But if they do I’ll also be back telling that this is was a good time to buy. No multiples and bargains.

Vangrl Says:
June 6th, 2012 at 8:29 pm

“Is it job security, income/mortgage payment ratio, world economic balance, price difference, fear?
What am I missing?”

All of the above, but I think it’s mostly because of the obvious change in sentiment that’s wafting through the air

June 6th, 2012 at 8:53 pm

@Vangrl

Ok you got me at sentiment.

If you have a moment could you elaborate

Dan Says:
June 6th, 2012 at 9:05 pm

The only thing that will stop this discussion is if I say it is a crash. But every year at this time this happens, not as bad but close, although I can’t say that yet.

So go ahead keep renting.

Yellow Helicopter Says:
June 6th, 2012 at 9:19 pm

Hi Larry,
I’ll tell you why- well, at least, for us. My spouse and I have a young child, (we would like one or two more in the next few years,) and we both have very good jobs by Vancouver standards. However, we don’t want to cross a bridge and spend hours commuting. We paid for education, masters degrees at 30k a pop, etc. As such, we never bought a condo, so we have no equity in which to move up. We rent and would now like to buy. We have high incomes. However, we still think half a million to a million dollars in a mortgage debt is a heck of a lot of money!! When did things become so skewed that it no longer seems so?
Also, with our family growing, we need 3 bedrooms. That’s not asking for a lot, but apparently, in Vancouver, it is. There are no 3 bdrm condos, just 2 beds. And to buy a house is 1.5 million. It’s just nuts. We were feeling anxious all the time, sick to our stomachs with the ‘buy now or be priced out forever’ mantra that is so pervasive.
Finally, we stepped off the hamster wheel. We made peace with renting. We save the difference. We have no debt. We have peace of mind. And you can’t put a price tag on that. Even a vancouver million dollar home one.

Yellow Helicopter Says:
June 6th, 2012 at 9:29 pm

I think the sentiment piece is twofold: first, the real estate market is so driven by emotion and psychology; (see the ‘buy now or be priced out forever,’ ‘we’re running out of land,’ ‘foreign investors,’ etc etc,) which has driven up prices, and this psychology can just as easily turn the other way. People get nervous and try and sell their homes in case the market drops further, and buyers get nervous, not wanting to buy at a 10% drop in case it drops more.
Secondly, sentiment such as ours: disgust. Disgust with real estate; the greed, the bidding wars, the inability to get your children their own room or a patch of grass to play on- things that are not a pipe dream in the rest of the world. Sick of the inability to own your own front door despite ‘working hard’ and ‘doing everything right.’ So you just get sick of it all. You get off the hamster wheel. And then you make peace with it all. And you start to understand why people reference ‘going for the wreckage.’

Thanks for your blog, insights and stats Larry. You are a class act.

would-be buyer Says:
June 6th, 2012 at 10:07 pm

I fully relate to Yellow Helicopter. My spouse and I have a young child and make a good family income (I am a lawyer, hubby is a carpenter), yet we are priced out of Vancouver. I work long hours, so a long commute is out of the question. I have finally come to the realization that, if I continue to live in Vancouver, I will always be a renter. if I can find a job on the Island, I am gone yesterday. I never thought having 2 degrees, family income north of $180K would translate into renting a “garden suite” in Vancouver with a toddler (don’t get me wrong, I live in the best neighbourhood in Vancouver…). My parents had a grade 8 and 10 education respectively, worked as a handyman and waitress, yet I was raised in a house in a great neighbourhood in Victoria and went to the best schools. Something is wrong that my daughter will be raised in a lower standard of living as I…

June 6th, 2012 at 10:15 pm

@Yellow Helicopter
I’m sorry for your dilemma. I hear you and many others and I do get it but at this point I have to put on my Realtor hat.

Just on the right side of this post is a fabulous south facing 3 bedroom 1/2 duplex across from a park 15 mins to the city core in a neighbourhood filled with kids. Do a mortgage calculation and compare. If it makes sense and works for you call me. If it doesn’t, no harm no foul.

As to the market dropping and picking up the wreckage or conversely going up. The problem is as I think I noted in the post is that you will not know when it has hit the bottom or the top. From what I can see the top was this past FEB – that is, at least so far. Accordingly the bottom may be in sight however, the month day and minute that point is reached is beyond my limited wisdom but my positive Karma tells me that it is not too far away.

“People get nervous and try and sell their homes in case the market drops further, and buyers get nervous, not wanting to buy at a 10% drop in case it drops more.”

WoW! This is an impossible call to make. Yes it could drop some more and 10% could be the number.

I’ve been watching the Dailies and my conservative guess is that we are averaging 150 price reductions per day. At some point with that alone we will hit a point in the market where Buyers no longer resist the price being asked and start to turn the market around. The sad part for those waiting for the carnage is that they may miss that moment and will be looking back cursing themselves saying we could have and should have but didn’t make that leap of faith to buy that patch of grass.

Here is my hint:
Watch the daily price reductions in comparison to the sales numbers. When the reductions begin to falter and sales begin to increase you will know the market has changed. For those of you who are waiting to buy and are familiar with the artist MC Hammer’s favorite phrase you will know that at that point it is ‘hammer time.’

Vangrl Says:
June 6th, 2012 at 10:18 pm

Just noticing with friends, family, neighbors and media that the overall feeling regarding real estate has changed.
You can’t turn on BNN or Global without hearing a team of analysts debating if we’re in a bubble…. no sign of Cam Good anywhere:)
My friends question who the hell is going to buy up those thousands of new condos next to the Olympic village that are about to be put on the market. None of my friends are looking to buy right now, at least in Canada.
My neighbours talk about the fact that the “for sale” signs in front of our building have been there for a very long time, and wonder if they’re priced too high.
My parents and their friends say that they’ve seen this before, and that in no way is Vancouver different.
There is much less talk about Chinese flying over and gobbling up my friends parents houses in van west, and I’m hearing a little “coulda shoulda woulda” from those same parents about not having sold last year.

It’s just an obvious change from a year ago, at least in my world:)

June 6th, 2012 at 10:20 pm

@would be

Welcome back. Your perspective has been missed.

Vangrl Says:
June 6th, 2012 at 10:23 pm

I’m not saying that sentiment can’t change again, weirder things have happened.

Thanks again for taking the time to give us the stats!

June 6th, 2012 at 10:28 pm

@Vangrl
No worries on the stats. U R welcome. Glad you participate.

I think @Yellow Helicopter, @Would-be and you have brought clarity and a better understanding facing all buyers sellers and renters. Simply stated it is not easy and if history in this business has taught me anything it’s not going to be for some time if ever. You are right on about the sentiment. I hear it every day from all sides.

Olga Says:
June 7th, 2012 at 12:30 am

This is simply a question re. chicken and eggs – what comes first. What drives the market – the fundamentals (and then there is a long, long way to go to catch up with the normal income/jome prices ratio) or emotions (buyers sentiments – and then they can turn around quickly at -10% as Larry said).
My bet is on fundamentals. The RE is very overpriced IMHO comp. to incomes and has to go down for the market to function normally with the good volume.

dan Says:
June 7th, 2012 at 8:45 am

Looking at your latest post Larry regarding the top 10 searched neighborhoods I think maybe one of the issue is that most people feel they are entitled to live in Canada’s top 10 neighborhoods.

A sad but true and understandable realization even for a lot of home owners is that even if the price drops 30% most of us won’t be able to afford living there but some choose to hope. I don’t cause the market for these neighborhoods is on a global scale and there I can’t compete.

I ended further east than I expected, still in Vancouver, and I will never regret it.

Thanks for your insight yesterday Larry much appreciated.

anon Says:
June 7th, 2012 at 9:44 am

Secondly, sentiment such as ours: disgust. Disgust with real estate; the greed, the bidding wars, the inability to get your children their own room or a patch of grass to play on- things that are not a pipe dream in the rest of the world. Sick of the inability to own your own front door despite ‘working hard’ and ‘doing everything right.’ So you just get sick of it all. You get off the hamster wheel. And then you make peace with it all. And you start to understand why people reference ‘going for the wreckage.’

^^^ this is our feeling though I suppose from a different angle. We have seen so many disgusting tactics by realtors – and they get away with it – to me, that is a signal that the market has gone way past crazy. People are too wrapped up in emotion to realize the insanity that is going on. We know many couples that are in the top 1% (according to canadian thresholds) that are unable to afford in nice neighborhoods. We can all fool ourselves into thinking this is reasonable. That it’s normal that the top 1% should not be able to afford something on the West side of Vancouver, that it’s normal that the average family needs to put 90% PRE-tax income towards there housing, that it’s normal that even if rates rise 2% from the historical lows that 40% of mortgage holders will be unable to afford their payments…etc etc. For some reason, people can’t see that this is not normal, nor is it healthy for the economy or future housing prices. Rather, we rely on tricking ourselves into thinking we are a world-class city (this one makes me laugh – it’s beautiful here but we are a far cry from world-class) and that since we have limited land available there is no where prices can go but up, indefinitely.

Will I be there to pick up the wreckage? I suppose if you want to put it that way, though I don’t revel in the fact that I know people will be financially harmed when the market does drop.

I agree you can’t always tell when a market has hit the bottom Larry but I wouldn’t be jumping in too soon. Have you seen the typical bubble graph? There are those that jump in right after a small sharp drop, increasing the market temporarily before it really crashes. There is no crystal ball, but at some point common sense has to prevail. Through all of this I constantly remind myself that no matter what (with these current conditions), renting enables me to build more wealth than buying a home. I don’t anticipate prices all of a sudden rising so sharply from a depressed stated that I will look back and say “oops, should have bought.” Even if that happens, as I say the rent vs buy is still in my favor so I would not have missed out too much.

June 7th, 2012 at 10:18 am

@anon

To be clear I’m not implying your life choice is wrong. It works for you and others and that is a good thing. By the same token you and others must allow that owning a home is also a viable alternative. That too is a choice!
To deny or disfavor the choice of either group is the error.

What needs doing is for the hyperbole to settle down. Simply, its just too much noise IMO.

vangrl Says:
June 7th, 2012 at 10:48 am

“I don’t anticipate prices all of a sudden rising so sharply from a depressed stated that I will look back and say “oops, should have bought.” Even if that happens, as I say the rent vs buy is still in my favor so I would not have missed out too much.”

exactly!

vangrl Says:
June 7th, 2012 at 10:58 am

on another note, a friend of mine is in Phoenix right now, she’s just bought another place there. In the last month she has accumulated 3 houses in Phoenix, two of them are 3 bedrooms and one is a 4 bedroom, all 3 have pools and are in supposedly great rental areas.
She accumulated all 3 of those houses for less than what her one bedroom 600 square foot condo in Kitsilano sold for.

She believes that In 10 years she’ll be much better off financially having acquired those properties rather than just buying another condo in Vancouver. I have a feeling she’s not the only one thinking that way.

she texted me last night at 8:30 saying how fantastic the warm nights are, she’s going to hate coming back to this crap weather.

anon Says:
June 7th, 2012 at 12:23 pm

Larry, I’ll be honest and say I think you are coming from a very biased perspective with your statements. Use of words like ‘hyperbole’ or phrases like ‘too much noise’ make me ask the question according to who? Too much noise for the RE industry?

I see it as simple debate from two sides. IMO, the
the most damaging noise has come from real estate pumpers. Up until a month ago the only perspective you would get from the main stream media is one from biased RE parties. The message was all is good in Vancouver, buy now or be locked out forever. We’ve had years of this noise but now that people are changing their tune a bit and it doesn’t promote buying… it’s too much noise? Trust me, there is NOTHING i would like more than to believe it is a great time to buy. How nice it would be to just do it and never think about this again ha!

Simply debating the merits of owning vs renting does not equate to NOT accepting that ownership
as a viable alternative. Of course I think it’s a viable alternative for some. I don’t have my head in the sand thinking that the only right decision is the one I have made. I just hope that those who choose to buy into what is possibly the top of a bubble are well informed about the premium they may be paying and the risks they may face. Our banks, CMHC, RE advisors etc do a terrible job of informing people appropriately. Sadly, if you ask around in Vancouver, most people have no clue that renting can financially be a much more attractive alternative and most believe RE is bound to increase indefinitely.

Right now, I could easily buy into this market. With the mortgage the bank would give me, I could buy a nice home on the west side and be done with it all. My reasoning for not doing so: I would be crazy to take the full mortgage the bank would give me. Why?
– I would be house poor
– I would have less time to spend with family bc I would need to always work at my current pace
– I would put myself at financial risk if rates rose substantially
– the bigger the mortgage the more money I face losing if and when the market goes down (even a 10% decrease would equate to 200K+)
– I would have far less money (if any) to put to retirement savings
– I don’t want to be paying off a mortgage until I am 65
– finally (and most importantly) I make more $$$ renting

Some may look at these factors and say ‘who cares’
and if that is the case – all the power to them. IF people consider all risks then home ownership is obviously an acceptable option. My fear is that MOST don’t actually consider any of this. Most people buying in are driven by fear and being locked out of the market forever. Sadly, those are the ones that will lose the most if the market drops substantially.

Ralph Cramdown Says:
June 7th, 2012 at 12:55 pm

If it starts in February and only lasts until May or June, it’s not a correction, it’s just a hiccup. The kind of correction that a lot of people are expecting is going to be a slow, painful, grinding, multiyear affair; they almost always are, once prices get so far removed from fundamentals. Is everyone oblivious to what’s been going on in the Okanagan, even if they don’t wish to look farther afield?

In market corrections like that, one doesn’t need to time the bottom exactly — generally being within a year either way is good enough to capture most of the move.

June 7th, 2012 at 2:56 pm

@anon

Re: biased – brother read your own words before you start throwing rocks.

Mr. D Says:
June 7th, 2012 at 4:11 pm

Anon,
I am a house owner, but I agree with you.
I don’t think you are biased, Anon.
I’ve seen so many people just blindly believe in RE, that’s unbelievable! Many are intelligent adults.
Also, many RE agents & RE investor’s recent crazy behavior, just getting worse and worse.
Dusgust is the word I feel as well.

As Larry said, I agree that to buy a RE property, there is right timing for every single individual, not only by its price. But I have to say it reached the point that risk is very high to get into the housing market in BC now. Factors such as interest rate changes, housing cost, etc etc. Simple way to look at : 1% change on average Vancouver house price is $10K! Big magnitude if any negatives on the way.

anon Says:
June 7th, 2012 at 5:30 pm

@mr D – thanks

Larry – re:
@anon

Re: biased – brother read your own words before you start throwing rocks.

^^ not throwing rocks, just asking you to rethink some of your own thoughts and motivations behind those thoughts.

Of course everyone is biased to some degree on every matter, but I think I have a heck of a lot less bias than you do in this situation. No disrespect intended – just my honest thoughts. As I said, I can afford to buy in now and I can afford to buy a dream home (well mine, maybe not anyone else’s). I wish I could believe the time to buy was now from a financial perspective – so in that respect, I wish I could buy into what the RE is preaching. My life would be easier in many respects and I would never again have to think about RE (well just much less than I do now). I can’t though. I simply wanted to highlight that you have made numerous comments about the ‘realists’ on here and how they make ‘too much noise.’ I am just asking you to consider that there has been a lot of noise (in fact FAR MORE) from the other side as well…

vreaa Says:
June 9th, 2012 at 7:53 am

Larry:

Thanks for the post, and for the discussion that it provoked.
I have headlined your initial tweet exchange at VREAA.

You ask:
“Playing it loose – at that time people were buying at about the same ratio as today but today they are not buying at 3.09%/5year rates versus 14% – WHY?
Is it job security, income/mortgage payment ratio, world economic balance, price difference, fear?
What am I missing?”

I would, respectfully submit that you have missed that prices have run up this high because we are in a speculative mania. People have been buying at stratospheric prices on the premise that we would see ongoing price strength. When the bubble runs out of momentum, and people get wind of the possibility that prices can go down (in earnest, not just 15%), the whole dynamic changes.
That may be what we’re seeing happen.
As I said at VREAA:
“..if you don’t really understand the dynamics of a bubble (fresh air between stratospheric prices and fundamental support far, far below), if a 15% pullback is the most you can imagine, you’re going to be a tad surprised with the effects of a deflating speculative mania.
Previously orderly demand/supply dynamics go ‘non-linear’.
Buyers sit on their hands (even those who thought they’d step in).
Sellers come to market (even those who didn’t previously think they’d be sellers!).
The crux is that the fantasy of ever-increasing home prices leaves the building, and that changes everything.”
– vreaa

Observer Says:
June 12th, 2012 at 8:47 am

Dan said: “I’ve been observing the real estate market for about 10 years. ”

Thats the problem. The past 10 years were very bullish.

Kind of like if you base all your stock market experience between 1990 and 1999. You’d think stocks always go up 🙂

If you’ve been observing through 2-3 cycles, you will know what I mean.

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