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Vancouver real estate market crash? Not so much...

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For quite some time, many in the media have been predicting doom and gloom for Vancouver’s real estate market. The predictions are for a flood of new listings and falling demand; the reality, though, is it’s just not that bad.

The November 2012 REBGV statistics confirm that supply is contracting and Sellers are actually pulling out of the market, as illustrated by the large drop in the amount of properties listed for sale across the region.

A common assumption among more alarmist and less informed commentators is that recent softness in the Vancouver market is the beginning of a huge drop in prices. They contend that deeply indebted sellers will be forced to sell and buyers will not be able to buy. Many predict or allude to Canada experiencing a housing crash, not unlike what happened in the United States.

Thankfully the data is proving these theories wrong. Sellers in Vancouver are sitting on a significant amount of equity (value in the home after subtracting the mortgage balance). Many property owners who have been trying to sell have decided to take their properties off the market to wait for better market conditions. They are doing this because they can. This suggests we are not seeing panic in our current market.

Unemployment remains relatively low in Vancouver, interest rates are at all time lows, mortgages are easy to get, and the economy in BC is performing quite well.

This all means that buyers can and are able to buy property. Many are waiting to buy, but Vancouver is not in a situation where buyers cannot buy.

What all this means for buyers and sellers is that the Vancouver real estate market is softening gradually. Buyers are able to negotiate a far better deal than they could have 6-18 months ago. Sellers are able to get their property sold, though it may take longer and they may have to concede a bit more in negotiations than in previous markets.

Sorry doom and gloomers, the market is just not crashing.

Mike Stewart is a Vancouver realtor

(48) Comments

VO_BO December 7th 2012 | 7:07 AM

"The November 2012 REBGV statistics confirm that supply is contracting and Sellers are actually pulling out of the market, as illustrated by the large drop in the amount of properties listed for sale across the region."

That happens every November. They relist in the new year, and given the market they will probably relist for less. Since this happens every year we can't conclude that the market is strong because of it. Maybe you should think for yourself instead of simply reprinting what the Real Estate Board ( association of home salesman ) say. You know, a sales man might have his own agenda.

"The Real Estate Board of Greater Vancouver now says consumers have begun pulling their homes off the market rather than settle for a lower prices in what is still the country’s most expensive market to buy a home."

Read more: http://www.ottawacitizen.com/business/fp/Vancouver+homeowners+pulling+properties+market+rather+than+settle+lower/7654205/story.html#ixzz2ENWMMXt1"

Scott December 7th 2012 | 9:09 AM

I've been watching real-estate prices in Downtown and ~Kits for the better part of 10 years.. a simple MLS search of the current inventory paints a dimmer picture then the November numbers reflect.

Condo's downtown are listed down significantly, and you can find properties in Vancouver listed closer to $1m that would have been listed in the $1.3m range 9-12 months ago.

Data December 7th 2012 | 9:09 AM

"A common assumption among more alarmist and less informed commentators is that recent softness in the Vancouver market is the beginning of a huge drop in prices... Thankfully the data is proving these theories wrong."

Where exactly are these data? Why didn't you mention them?

Here's some data for you. The benchmark price of a single family home in Vancouver west dropped by more than $30,000 last month alone.

http://www.rebgv.org/sites/default/files/201211-REBGV-Stats-Package.pdf

So. Q- Is the word "crashing" appropriate?

A - Who cares?

Better Q - Will buyers get a better deal by waiting?

A - Almost certainly.

 

Rob December 7th 2012 | 10:10 AM

It's not the highly leveraged that will lead the market down, it's the longtime owners with a lot of equity--- see Richmond single family homes. They want to sell, and can sell, unfortunatly, it is the highly leveraged owners who bought within the last four years that CAN'T sell because there are no buyers that are willing (or able) to pay the prices they did. 

 

soiuthseacompany December 7th 2012 | 10:10 AM

Mr. Stewart has it wrong. It is not "doom and gloom' for home prices to come down making them more affordable for average Vancouver families. That is a good thing. 

It's "doom and gloom" to believe (or hope, as it seems to be the case for Mr. Stewart), that they won't. 

Prices will do what they will do; the future will reveal the truth. But, to think that prices coming down is a bad thing is perverse.

Mr. Stewart is the "doom and gloomer"

gokou3 December 7th 2012 | 12:12 PM

Predicting a price drop != predicting doom and gloom.  It's all a matter of perspectives.  From the perspective who wants to own but can't due to the high prices, your bullish stance is just as well be predicting doom and gloom for them.  Of course, you bulls will then put out some lame excuses saying the non-owners are losers / slackers, etc.

Btw, what didn't you at least put out some the REBGV stats in your article?  If you annualize the monthly drop, the price drop isn't that trivial.


BBtw, BC unemployment has increased 1% since April 2012 while the rest of Canada number remains stable.  Why is that?

gokou3 December 7th 2012 | 12:12 PM

At what price does low interest rate no longer support a bullish sentiment?  I say there's a limit of how high prices can go due to low interest rate, and we are passed that.

MarcAur December 7th 2012 | 12:12 PM

Sellers pulling their listings in November?  Oh the humanity!

Gaza December 7th 2012 | 2:14 PM

The fox assured the farmer that although there were fewer chickens in the henhouse, there was nothing to worry about as he was watching them closely.

How would we expect a Realtor to comment on his market?  Of course it's all rosy even though sales have plummeted month after month for the past 6 months and are well below the 10 year average.  Listings are up, sales are down.  I have personally seen some listings go down in price over 30% and still are not selling.

Obviously there are some who don't have to sell and are just testing the market and have the luxury of pulling them off the market.  They will undoubtably relist and when they do it will be for LESS.  

There are many who HAVE to sell like those that lose their jobs, get divorced have to relocate, etc.  They are the ones that will have to sell and take the lower prices which will affect the market VALUE of all properties because they create a new benchmark for the area / size of home et

There are always people that HAVE to sell and the realtor should be happy for that because that's why he has a job in the first place.

The reality is Vancouver does not have a lot of high paying jobs compared to other markets with much lower RE prices.  BC's median household income is lower than AB or ON and RE prices are not in line.  That is a reality that will eventualy bring RE prices back in line and has been proven throughout history the world over.

Oh yeah, but Vancouver is different righ? 

VancouverObserver December 7th 2012 | 8:20 PM

Thanks for this article Mike.

Now it will be on record for all to see in the coming years.

PS. thanks for explaining the word equity.

 

Lee L December 8th 2012 | 12:00 AM

All I can say is that my next door neighbour sold his house for $780,000. He had lived in the basement after his divorce and rented the upstairs which certainly covered his mortgage.  The family that bought the house had tradesmen working on it for 4 months and I am guessing they threw another 120,000 at the property. It looks good now.

Another house on my block was sold 6 months ago for less than that, and was raized.  A brand new home was built and was on the market 2 months at 1.5 million. It sold last week.

2 other people on my block have approached me about selling ( unsolicited interest ).  One was the guy next door who has a 'friend' interested in my house and the other works for a builder /renovator.  

It depends what your property is and who might want to live in your neighbourhood, but at these interest rates, there are people coming to Vancouver who have money and need to buy a place to live.

A LOT of people are hoping that things collapse rather than have to work to pay off a mortgage.  They better have cash because if things collapse, there will be a reason. ie.. UNEMPLOYMENT.

 

 

mm_van December 8th 2012 | 7:07 AM

I expected better from Vancouver Observer. This is just another advertorial. How about some of that "investigative reporting" you claim to be publishing?

Louise December 8th 2012 | 9:09 AM

More shameless pumping of the real estate market !!!

Roo December 8th 2012 | 11:11 AM

Those who expect Vancouver (and surrounding areas) to fall back over time to 'average' Canadian multiples of income etc are forgetting one key thing.  The environments of the other areas of Canada.  Vancouver is the most liveable city in Canada and that attracts a premuim.  Unemployment or not, high paying jobs or not, those who think that they have as big an impact on house prices as they would in Winnipeg or even Toronto are ignoring two words; Global & Immigration.  We don't exist in a vacuum and you will find that house prices here will fall to a level that is fair in a global market not in a local or even national market.  Heads up everyone, stop knocking the Yanks for not thinking outside of their borders when so many Canadians think that the world ends at the oceans.  High house prices are here to stay. They may fall a little but no major crash is going to happen (unless everyone gets divorced at once).

mikestewartrealtor's picture
mikestewartrealtor December 8th 2012 | 2:14 PM

Hi All,

Wow! Looks as though the article touched a nerve...

Like I said in the article, the Vancouver real estate market is not crashing.

We have seen a softening of demand after an extended period of high demand.

We are not seeing a credit crunch, we are not seeing rapidly rising unemployment, we are not seeing interest rates rising in the near term. (if you disagree with the above paragraph, I look forward to your evidence)

Buyers have the ability to buy, but many feel that if they wait they can get a better deal.

Sellers who don't want to sell in today's softer market are pulling their properties off the market.

These sellers are doing this because they can.

These sellers are not losing their jobs and interest rates are not rapidly increasing put cash flow pressure on them to sell.

Sellers in Vancouver are not panicked or pressurized.

In a crash situation like in the US, Sellers were forced to continue to market their properties due to losing their jobs and their ARM's (Adjustable Rate Mortgages - Illegal in Canada) were re-adjusting at exhorbitant rates increasing cash flow pressure.

If these Sellers didn't sell their properties, their lenders would do so for them once foreclosure had occured.

Sellers in the US during the crash were pressurized and clearly had no choice.

This is not happening in Vancouver.

In the US crash, buyers could not buy because they could not get financing and unemployment was rising.

In today's Vancouver real estate market interest rates are at all time lows and Vancouver's economy is performing well.

Where is the panic, Where are the job losses, Where are the foreclosures? Where are are the stories of developers and other real estate businesses failing?

 

Stephen Rees December 8th 2012 | 2:14 PM

I have been trying to unload a three bedroom townhouse in Richmond for six months. I have no mortgage. While we had a steady stream of people looking - not one offer. There are aboiut half a dozen simialr houses in the same complex of around 100 - and none of those have sold either. The strata rules forbid rentals - which might solve my problem. And the price was always negotiable - just no-one wanted to start negotiating. Of course I took it off the market! 

VancouverObserver December 8th 2012 | 4:16 PM
mikestewartrealtor wrote:

 

We are not seeing a credit crunch, we are not seeing rapidly rising unemployment, we are not seeing interest rates rising in the near term. (if you disagree with the above paragraph, I look forward to your evidence)...

...Where is the panic, Where are the job losses, Where are the foreclosures? Where are are the stories of developers and other real estate businesses failing?

 

 

All those things happened in the USA AFTER the bubble popped.  They were not the cause, but rather the outcome, the cause was easy money and greed.


Also, why do you have to look at the US as the perfect model and match that exactly for a crash to happen?

There are differences in each countries crash scenario, but there are far more similarities.  Debt, easy money, psychology, fear, greed, etc

north December 9th 2012 | 2:02 AM

...50% of Canada's $1 Trillion in mortgages is considered high risk.  Whether CMHC is healthy or not, the loans are guaranteed by the govt., and ultimately the taxpayers will pay for it.  The ripples will be felt in education, healthcare, R&D, etc. as the govt switches to austerity after losing its shirt.  Let's leave the rest of this scenario to your imagination, or please refer to those bears at the FP.  In any case, if you are so sure that Vancouver defies gravity and are confident in contradicting the Bank of Canada, the Financial Post, Paul Krugman and Robert Shiller, then you deserve to suffer with the other delusionals, but please stop embarassing yourself, it is distracting.

Mick December 9th 2012 | 12:12 PM

Mike's straw man is too obvious, goes like this:

"If the market doesn't crash within a year, it's a 'soft" spot."

 

A crash can take 5 years, and it will. When prices are down 40%, we can all look back and laugh heartily at this piece of propaganda by a realtor.

north December 9th 2012 | 3:15 PM
Mick wrote:

Mike's straw man is too obvious, goes like this:

"If the market doesn't crash within a year, it's a 'soft" spot."

 

A crash can take 5 years, and it will. When prices are down 40%, we can all look back and laugh heartily at this piece of propaganda by a realtor.

Actually, prices down by 40% would only take us back to prices of 5 years ago that were already considered inflated.  If compared to the spectacular RE crashes of the US, Ireland, Spain, or Japan, 40% would still be frighteningly conservative.

sharleen December 10th 2012 | 8:08 AM

thanks for updating about the downtown vancouver real estate ..

for more queries "http://www.thevancouverrealestate.ca/"

Educated December 10th 2012 | 9:09 AM

Thanks for thei information Mike. Nothing like a uneducated high school dropout discussing economics.

 

Nice equity equation by the way. I bet you felt smart letting us know how to calcuate equity!

 

 

mikestewartrealtor's picture
mikestewartrealtor December 10th 2012 | 12:12 PM

Hi All,

Maybe you have missed my point.

To reiterate - The market is not crashing right now.

Do any of you disagree?

If so, on what basis?

I would love to see your data that shows a crash is occuring.

Some nice charts or other data from a reputable source would be great.


To set the record straight - I have a bachelors degree in Political Science from SFU.

 

 

VancouverObservor December 10th 2012 | 3:15 PM

Actually your point was

 

mikestewartrealtor wrote:

A common assumption among more alarmist and less informed commentators is that recent softness in the Vancouver market is the beginning of a huge drop in prices.....

 

 

Not

 

mikestewartrealtor wrote:

 

To reiterate - The market is not crashing right now.

 

north December 10th 2012 | 7:19 PM
mikestewartrealtor wrote:

 

These sellers are not losing their jobs and interest rates are not rapidly increasing put cash flow pressure on them to sell.

 

Mike, A trick question: which is it you are hoping for?

A) a strengthening US economy that supports Canadian employment

B) a weakening US economy with subsequent rising unemployment in Canada but continuing low interest rates

C) strong US economy and continuing low interest rates because Canada is different

Jason Lee December 10th 2012 | 8:20 PM

Detached

November 12 – $1,053,902

November 11 – $1,134,936

November 10 – $1,043,348

 

Attached

November 12 – $545,658

November 11 – $565,168

November 10 – $539,429


Apartment

November 12 – $428,825

November 11 – $431,808

November 10 – $416,702

So all three categories are showing year over year declines, approaching 2010 numbers.

The numbers are more dire if you consider that they have fallen a higher percent since the peak earlier this year, and the decreases are trending higher not lower.

A 1-3% monthly decline may not be much, but annualize that and it can be a big number. 

Mike, what would you qualify as a crash?  Even the american bubble took years to play out, I do not expect the crash to play out in a couple months.  It will take years but there is no avoiding it, no soft landing.


ian mackenzie December 10th 2012 | 11:23 PM

Sorry Mike, I disagree with you its not a softening of the market its a "crash' I don't have the charts and data readily available but I know where you can obtain it, check out the website vancouverpricedrop.wordpress.com/. There is enough information on that website to convince even the hardiest skeptic that the big one has arrived, it means some really challenging times ahead for the real estate market. I'm glad that I don't have too much equity at risk here. On the positive side, it will give a chance to people priced out of the market to buy in at lower prices.

Educated December 11th 2012 | 9:09 AM

No wonder you became a realtor. A Political Science Degree and you are making comments about economics? Talk about a waste of four years.

 

Prices are dropping, all you uneducated agents know it, that is why you are trying  your best to convince the publlic otherwise.

 

We do not need to show you stats. You see the empty open houses. Wait till the spring market hits when all the houses that were "pulled off the marker" return. Then you will see a major crash.

 

It is is simple ecomics. 70% of people are now homeowners, There are very few buyers left. The feds have murdered 30 year mortgages as they should have, and no more CMHC on houses over a million.

 

IMy parents own a home on the westide they bought for $100,000. They could care less if they sold it for 1.2 million or 1.1 million. But for that moron that bought that same house for 1.5 million and is trying to unload on our street for 1.6 million. Guess what, my parents selling at 1.2 just caused a $400,000 to that seller, while realizing over a million dollar profit themselves.

 

Stick that in your pipe and smoke it!

Educated December 11th 2012 | 9:09 AM

As for you asking for stats,

 

The real estate board controls ther stats. Why would  you provide that information to us showing a housing bust. 

 Instead what you slezzeballs did was create the home price index to smooth over price drops. It may trick the uneductated, but for those of us understand stats, we all know that the home price index is load of crap. Nice smoothed out graph by the way!

 

Educated December 11th 2012 | 9:09 AM

http://www.mymultiplesclerosis.co.uk/history/plunder-tulips.html

 

Just replace tulips with housing and there is your answer...