Vancouver Real Estate May Have Sunstroke
Posted August 25th, 2012 in Real Estate, Statistics | 
Maybe
It could be a result of sunstroke or it could be a glimmer on the horizon that the lower mainland and the Vancouver real estate market in particular is about to change!
General View
Total Active listings have been relentless in their accumulation becoming as plentiful as blades of grass on burnt summer lawns. While enjoying their summer BBQ, many home sellers watched their For Sale signs fade in the heat.
Flutters
According to the IDX data of the three real estate boards, we see that Total Active Listings during August have hovered between in the 27,000 to 27,200 range. Casual observation suggests that it is a pattern seen before where totals having reached the top, then begin to flutter for a month or two before beginning a decent.
Seasonally the timing appears to be a little ahead of itself and this indecisiveness could continue through to the more traditional fall period where Active listings slow.
Visions
Bothersome is the ‘cold beer commentary’ given by some visionary REALTORS® who have advised their potential sellers to wait until the fall market arrives in expectation that it will be a better time to sell. It may be the sunstroke that has affected my vision but their position remains questionable and seems unlikely as unofficial sales numbers dribbling in are casting shadows of a month that may set new lows. If this holds true Vancouver REALTOR® market evaluations will need adjusting!
Thought Pearls
- Current home sellers may view the dismal number of sales as a reason to withdraw from the market. In part this may explain the hesitation now seen at the top of this Active listing graph. Notable is that while prices have dropped in many areas those drops have not been sufficient rekindle the ‘standing room only’ of earlier markets.
- Expected is that in early September there will be the classic blip of listings falling off the market. The critical part will be whether that fall off will continue or if those visionary REALTOR’S® new September listings will be sufficient to prop up the Active Listing total.
- Interesting is the outlook of some Buyers who claim that they have not been able to find their ‘perfect home’. In a market where there is more product for sale than ever before one asks if that is the real reason they have not purchased. The answer is – ‘we are waiting for the bottom’!
- Problem with this outlook is that the bottom or top is only known after the fact – neither come with an alarm!
Bottoms the opposite of the top, we are only 6 months on the downside….another 36 months or so till bottom. I have seen numerous price reductions in the 5% range….why bother if you really want to sell now knock off at least 15% or wait and sell in a year or two for 30% less. Once we hit bottom you can bet there will surely be a couple-three years of flatline. Most are still in denial!
Its not different here…..
@tell me
spoken like a true pessimist!
no doubt in 36 months you will also predict that we will be eating squirrels for lunch
I’ve been watching a few properties in the Lower Mainland since January. Lets say, 2 dozen. In the ~500k range. A few have sold, some have been de-listed and some of these re-listed at lower prices. 5 of my top 6 have all decreased in price. Open houses every weekend or other weekend (except this particular weekend – realtors need vacations I guess!).
My question is, are people actually offering 25-30% less than asking and being rejected or are they too timid to low ball? What if my realtor refuses to put in a 30% low ball offer? I’m going to wait until the prices are 30% lower, and rent. The prices are ridiculous even if they fell 50%. Can’t wait.
@lebensaar
“are people actually offering 25-30% less than asking and being rejected or are they too timid to low ball?”
- yes I think some buyers are doing that. my suspicion is that they are rejected. last – if they submitted and offer they were not timid.
“What if my realtor refuses to put in a 30% low ball offer?”
-That’s their choice!
-Alternatively you might want to consider entering into a Buyer agency contract where you will pay them for their time in advance. If they succeed in putting a purchase together for you then you both agree to deduct the fees paid from the commission (if sufficient) a seller might offer. Keep in mind that if you haven’t been able to conclude a purchase within an agreed predefined period of time (usually before the deposit is used up) there will be little or no fee adjustment against the commission.
I find it is always a good thing to set out the business arrangement you have with someone providing you a service. You can make it as simple or as complicated as you want. Clarity means everything in these arrangements. As always these things are negotiable but you must play fair – not even you will work for free.
The above is only a suggestion but this may solve your waiting problem.
Larry, isn’t it the case that legally the realtor is obligated to present ALL offers regardless of the price being offered (i.e. lowball or highball)?
@vanpro
yes you are correct IF an offer is presented by an individual or another agent to the Listing agent. The listing agent is duty bound under the terms of the listing agreement to present all offers to the Seller.
It is a different story with a Buyer.
For the purpose here I presume you are referring to @lebensaar’s comment and response where he/she is talking about a Buyer representative who it is assumed has declined the opportunity to WRITE the offer in the first instance.
The Agent does retain the right to decline writing that offer. There is no obligation on the part of the agent to do so.
Extending this further to the Buyer Agency agreement – in the situation I described it would be prudent for the Buyer to stipulate a term in that agreement whereby the agent agrees (remember he is being paid a fee for his continued service) that he (the agent) will present all offers the Buyer wishes to proffer. Without that stipulation the agent still retains the right to decline however, it would be almost impossible for that agent to lay a claim for commission (one of the terms of the agreement) against another agent who did write the offer and reached a successful conclusion thereby leaving the buyer with no recourse from the first agent – the one being paid a service fee, for the reimbursement of any amounts paid.
Thanks for bringing this forward. It is an excellent example of why all buyers should have a Buyer Agency agreement and why clarity of intent (by both parties) in a Buyer agreement is required – particularly if you as the Buyer are paying that agent a service fee. My advice is that you as a Buyer get your expectations of service in writing.
Thanks Larry for the detailed response. Your comments are what I understood to be the case. They key from the buyer’s side: the buyer’s agency agreement needs to detail all of this AND as you say, if the buyer’s agent refuses to write and present a particular offer, the buyer’s agent would be precluded from sharing in the commission that would result from a sale based on that offer or any offer the agent refuses to write and the buyer chooses to write on their own or via another agent (including the seller’s agent).
“The Agent does retain the right to decline writing that offer. There is no obligation on the part of the agent to do so. ”
that would be the end of my relationship with that realtor..
Maybe this is a little harsh, but in the absence of a BRA, I would find myself another realtor if the current one refused to make a low-ball offer.
NO Squirrels for me…. renting gives me an abundance of excess cash to live life and to save for a cash purchase in a few years! Don’t worry i will be calling you when the time comes!
@vangrl and @reason
funny thing how the door swings both ways
Here’s a thought for you both – what incentive have you offered your agent to do the best job?
If you think about it you will see that the ‘refundable fee’ works to your advantage if you are serious about moving the buying process forward.
Lets not forget that you are wanting to buy the house not the agent. If you want that agent to do the best job for you think about what you are asking someone to do. I think you will concur that you are asking someone to take the flyer option along with you. Under that scenario it costs you nothing but it does cost that agent time, hard costs, family time etc., something that under that venue is being conveniently forgotten. With the refundable fee idea upon achieving success everyone wins.
As well it is possible that your premise for doing business could well have someone put in hours/days making low ball offers on your behalf and when you feel you no longer want to play you walk leaving the other person holding the unrecoverable bag of time and money. If you were in those shoes would you consider it fair? I know you are both reasonable people so I doubt you would find it fair.
@tell me
“Don’t worry i will be calling you when the time comes!”
Thanks for the vote of confidence however, the only person that actually did that was my wife when the kid was due.
72 months or 70% reduction from peak, whichever comes first. Lots of sucker rallies in between. Thats my guess. 1.2 M to 1.06 M is already 14ish %. Overcorrection is highly possible, or likely as there is so much downside potential and chances for bearish momentum to drive the fear of god into people. I truly believe one will be able to buy a SFH in van for under 400k before the bottom is in. Until then, i will continue to look south of the border for real estate. US is still looking for the bottom, but has extremely high positive cash flow properties. great to be a landlord when everyone hates to own.
just too many headwinds now for vancouver all at once. doesn’t help being targeted by Flaherty and friends.
Larry said:
“I think you will concur that you are asking someone to take the flyer option along with you. ”
I guess it depends on your respective views of where the market is and where it is heading. Other examples in all of the rest of the world show that at the height of the bubble or soon after, even low-ball offers that were rejected and laughed at were too high and should have been embraced and jumped on by agent and seller alike.
I would never expect my realtor to to put in hours/days writing crazy low-ball offers, but I certainly would expect them to put in at least one or two on my behalf without charging me if the offer wasn’t accepted (if I’m understanding refundable fees properly).
“what incentive have you offered your agent to do the best job?”
the incentive for my realtor to do the best job is the commission that he will receive if we can make a deal.
I would think that taking half an hour to write out a low-ball offer would be a no-brainer for realtors, knowing that their client could potentially put thousands of dollars in their pocket at some point in their career, and possibly tens of thousands if the client really likes you and decides to use you repeatedly.
To be expected to be paid without a sale being processed kinda defeats the whole idea of commission, you mine as well just pay a realtor by the hour…no?
Tell me is dead on. Vancouver has been on this ride before. I have seen 40 -50% drops when the fundamentals were much more favourable then now. Don’t be surprised to see up to a 60% drop in certain areas. That is why I sold my last of 6 properties in Feb/2012.
So, be patient folks. And when the time is right to buy, use the listing agent. I have found them to be much more motivated to make a deal happen. They all love the double enders.
Larry – shouldn’t realtors be paid by the hour then?
If a realtor refused to put in an offer because of “hard costs, family time, agent time” etc…. then on the flip side, shouldn’t the agent that listed a home and sold it to the first guy that saw the house for full ask be compensated less?
You can’t have your cake and eat it too… sometimes agents have dead time presenting offers that they know are dead on arrival, other times they cash a $30K cheque for a few hours of work. Two way street.
But I’ll keep your point in mind when hiring an agent.
@vanpro
“even low-ball offers that were rejected and laughed at were too high and should have been embraced and jumped on”
A possibility!
@vangrl
“the commission that he will receive if we can make a deal”
All true however, if after market research and discussion with you the agent says that in their opinion there “is a greater chance of getting run over by a bus” then they have to question the point of the exercise.
@been there
“use the listing agent”
there is a change going on in the industry and for those agents who under the legal implications to them and you they will decline your proposition.
“I know you are both reasonable people so I doubt you would find it fair.”
I agree that your approach would be fair and has some merit but I don’t agree that what you are implying as the other approach as being clearly unfair. This is what sales people do. They invest time and money to follow leads. Some pay off some don’t.
@timber
“compensated less”
Depends what the contractual obligations between the seller and the agent are.
“You can’t have your cake and eat it too”
True but its is very hard to find equity for everybody.
To that point you may want to have this discussion with those sellers or buyers who think it unfair to pay for that “dead time” and expect someone else to do it. As you said it’s a “Two way street.”
“All true however, if after market research and discussion with you the agent says that in their opinion there “is a greater chance of getting run over by a bus” then they have to question the point of the exercise.”
the customer is always right…think that’s the saying?
no disrespect to you or realtors in general, and I understand realtors being frustrated with offers being made that have a “greater chance of being run over by a bus” than accepted, but I think timber2012 got it right when they said “you can’t have your cake and eat it too”
It would be like walking around Future Shop looking at speakers and if you never ended up buying those speakers you had to pay the guy following you around $10 for his time.
@reason
Then following your premise we have gone full circle – the agent decides whether to proceed.
@vangrl
“the customer is always right…”
being glib – well they like to think so
@vangrl
“speaker guy
- using your example consider the time taken by the RE agent to discuss/advise/show you homes or support and write a blog. (had to put that last part in there)
Seems the same to me.
“using your example consider the time taken by the RE agent to discuss/advise/show you homes or support and write a blog.”
of course, I would appreciate it immensely and would continue to use that realtor every time I wanted to buy and sell a place, i would also refer my friends to that realtor…….still doesn’t mean I should give that realtor cash just for presenting a low-ball offer.
with commission based businesses you win some and you lose some, that’s the nature of the game.
“the agent decides whether to proceed” with the offer and I decide whether to proceed with the agent.
@reason
and around the circle we go
@vangrl
“you win some and you lose some”
all true – the trick is to not lose more than you gain.
@yattermatters comment “and around the circle we go”.
Well I think the circle stops when the realtor realizes that he is working for their client and not vice versa.
@timber
circles have no end. the discussion wasn’t about who is working for who. it was about understanding the limitation of reasonable expectation
Good discussion. Buyers agent with lowballs: It should either be piecemeal fee or commission. Not both, of course, that is just too silly to contemplate. Need to keep it simple and keep it clear for all parties.
Yes, Larry, there are the limitation of reasonable expectations but in the times of drastic changes (that we might as well is experiencing now, who knows) it might be realtor not the buyer being ignorant of tendencies where RE market is going. You said yourself that unfortunately some realtors advise their sellers not to lower the price and to weather the “temporary down”, to wait it out, and this is one of the reasons that market is almost dead – only when prices will come down to catch up with the local incomes, the market is going to return to life again. So the same applies to realtor representing the buyer – he might be resentful of the idea of the bigger correction in the prices and might be wrong as well as above mentioned sellers realtors. Only when the low ball offers are going to became a new norm, the sellers are going to realize that it is a new reality and will correct their expectations. Otherwise the market it dead. It does not matter that there are few people that are not buying because they are stubborn. Most of the people are not buying because they simply can’t and in a time of changes the RE agents should keep an open mind and table all offers realizing that they are not in the position to decide what is the right offer anymore.
@olga
“they are not in the position to decide what is the right offer anymore”
- my question to you is were we ever?
The discussion is about each Realtor’s personal calculation of their time commitment relative to achieving a reward. Some will see the low ball process equal to winning the lotto and won’t bother. Alternatively, some RE sales types will see it in the same light as some buyers who think that if you throw enough low ball offers against the wall something will stick eventually – maybe. The prevailing buyer attitude in this case might be rooted in the concept that since it costs nothing to follow the process ‘what have we got to lose’?
Doesn’t matter to me if they find a Realtor who will work with that understanding. Personally I place more value on my time which to my knowledge is something that can never be regained.
Further, this issue is not something for which I stand in judgement. Individuals and their Realtors are governed by their own view of this process. Some will play others won’t – it’s that simple.
As an aside – your comment does crack me up as I note that it wasn’t much different when involved in over ask multiple offers not so long ago. A refrain often heard when the buyer’s offer didn’t succeed was – “we would have gone higher if you had told us!”
In either case methinks it is simply a case of you are damned if you do and damned if you don’t.
A realtor (house sales person) is like a car sales man. Both are on commission, both will try to do whatever to get you to buy. That’s how they make money. Some car salesmen have been in the game a long time and value their time and know all the “tricks” to help close a sale. Some don’t. Even old dogs need to learn new tricks, sometimes.
@vanman11
somewhere in your comment is a message
Larry – you say:
“Personally I place more value on my time which to my knowledge is something that can never be regained.”
Don’t you think the buyer isn’t also committing time to the cause? Again – it’s a two way street.
Do you explain to your prospective clients that you won’t be wasting your time on making offers if you don’t feel they are worthwhile?
Again – this just cements my thought that all is fair when working with a realtor. If you are looking out for your best interests, then the buyer must do the same. Whether it’s the seller or their own realtor that suffers. As a result, I have zero reservations about forcing realtors to eat commissions to make a deal happen. A $10K can turn into a $7K or go find me some more buyers/show me some more houses.
I wonder then if you would still value your time? Bird in the hand….
@timber
“Do you explain to your prospective clients that you won’t be wasting your time on making offers if you don’t feel they are worthwhile?”
- yes I do if in my opinion the offer being discussed is overt and without market substance it often proves to be a waste of the buyers time and energy as well.
“cements my thought”
for buyers the rules of caveat emptor never left the building which brings me back to the Buyer Agency agreement in which the rules of engagement are set out in advance.
“forcing realtors” – really?
Bird in hand… suspect is that when you think you are in that position you often find yourself washing your hands carefully.
Why are you renters dumping on Larry.
Give it a break, you dip weeds.
That said, this market is now in a deep funk – Larry, would you agree?
Larry, I would consider Realtor going into making the some useless low bail offers today simply a paving the road for more paying jobs tomorrow, like a collaborative effort to reiterate the message from the perspective buyers to the sellers about the need for the market to come down.
@smoking man
I don’t think of they are dumping on me. We are just expressing opinions of how our worlds turn IRL.
“Deep Funk” – yup my coffee group is getting larger which translated means there isn’t much happening on the street.
My 50/50 guess is that August sales will make July look like a holiday camp.
Suspect is that in a short time the new kids on the block will be getting their visa bills and the fall out will begin leaving us old buzzards with deeper pockets to deal with the ‘low ball’ offers. Oh happy days
@Olga
Brilliant – that is a terrific idea.
Our governments can’t kick start the economy with better paying jobs so what the hell – let’s leave that load on the shoulders of all us humble peddlers of fine Vancouver homes. The world needs to know that it can count on Realtors to make the world turn and bring back the middle class.
Let’s rally the troups in their BMW’s and Benz’s and go kick some Seller butt! Oh wait – aren’t they the ones who pay the commission? Hmmmmmmm!!!
In regards to a change in the industry, as to using the listing agent. I was told that 5 years ago and it is still happening today. Its my opinion that it is the only way to go. Just watch how a vendor holding a stale listing, seems to wake up and adjust his price. I believe that this may have a lot to do with some pressure from the realtor to make the deal happen. I have also seen a lot of realtors make up the difference in price with a piece of their double ender.
A close relative of mine is a realtor and I can attest to her credibility of not making a quick sale in defense of her clients’ interests.
Did you see today’s announcement from the FED and the ECB? They will do everything they can to destroy the currency in an attempt to forestall any further drop in asset prices. Look at the stock market in the US as a testament to that. What is S&P doing at above 1400 while the economy is in a crapper? They will do everything to print it to infinity.
It’s true it’s a buyer’s market now but noboby has a crystal ball. It can just as easily switch back to a seller’s market if the government really turn up QE3, 4, 5. Not to mention China coming up with another 4T stimulus package.
The bears are really up on an up-hill battle with the central banks around the world.
All the bulls have left many online forums. The bears have flooded in. That’s a sign of what’s happening. I appreciate your honesty Larry.
The Fed and ECB (and BoE, etc…) have been totally incapable of preventing massive house price declines in their respective countries/continents despite massive money printing. House prices reached ridiculously over-valued levels relative to all of those currencies – that is is why their house prices continued to fall in the face of massive money printing – equilibrium is yet to be reached b/w money and house prices there. Same will happen here…
Young people are leaving this city In droves. The price of real estate in van is going one way.. Down
@ros
“The price of real estate in van is going one way.. Down”
In light of the stats it struck me that Tennyson might wonder at your conviction:
“Forward, the Light Brigade!”
Was there a man dismay’d?
Not tho’ the soldier knew
Someone had blunder’d:
Theirs not to make reply,
Theirs not to reason why,
Theirs but to do and die:
Into the valley of Death
Rode the six hundred.
Alfred Lord Tennyson: The Charge of the Light Brigade