Sunday, September 13, 2009

Where are all these bears coming from?

As a reader once stated, Fish..'you write an obscure blog that no-body reads'. He/She was right.

It was therapy for me, a way of thinking aloud.

In any case I would have about 130 readers on a busy day and 100 on a quiet one. The same folks.

The numbers have recently been moving up. Last Friday they reached

Who are these new readers? They could only be coming from 4 groups:

1) Those that own but don't want to sell
2) Those that own but want to sell
3) Those that don't own but want to buy
4) Those that don't own and don't want to buy

Groups 1 and 4 aren't going to waste their time reading a RE blog, so it is the potential buyers and sellers who have flocked here.

I wonder which group is more? I could run a poll if I thought it would be truthfully answered.

Ok whither the market.

That was a VERY strong bounce from March. It caught a lot of us by surprise. It mirrored the US and Canadian stock-markets. As soon as it was apparent that the world (actually the banks of the world) would not be coming to an end, the buyers rushed out to buy, benefiting from lower mortgage rates and lower prices. For a short time the rent/buy comparison got pretty close.

The mortgage rates have inched up a tiny bit recently, the prices have firmed and so the 'great deals' are not so great. Once again the numbers support renting rather than owning.

Now we are starting to see some early signs of weakness. Two things to remember if we have moved into a bear market:

1) The bubble graph suggests that we should start seeing the drop starting soon or all bets are off.
2) The initial drop is precipitous, the subsequent one long and drawn out.

That would support what a RE-savvy friend said last night at dinner. Now retired, I asked him what to do. You missed the big drop last year when the blood was running in the streets, now you have to wait for the slow drop.


  1. Fish,

    Your blog may have been referenced in BC Business's article on Bears vs. Bulls.

    Credit to WhyBuy for spotting this, not me:

  2. Fingers crossed for the return of a softening market amid low interest rates.

    (That was me above as well)

  3. You forgot another group of readers.

    1) Those that own and want to buy. (looking for additional investment properties)

  4. 10-15% is not the "big drop" that most bears expected. Interest rates are near the lower bound and the CHMC is shoveling hot money out the door. However, unsustainable is unsustainable. Are more direct taxpayer subsidies like deductible mortgage interest and $8000 tax credits yet to come?

  5. V-Dog

    I looked at that BC Business article but didn't see a link to this blog. Wahtever the reason the numbers are up.

    Anon 11.41..right, missed that group.

    Anon was much more than 10-15%. Late 2008, when inventory was 20 months, I saw properties sell for 30% under list. Add in the mortgage savings and it was another 20%!

    So we did get the 50% sale, just not the way bears thought it would go. Some was on the price and some was on the financing.

    If the bubble graph is right we should go down a lot more on price. Lets see.

  6. Don't own, want to buy.

    It's a nice antidote to the shameless marketing hype, but I think the hardcore bears are too entrenched the other way.

  7. Anon - lol. Sometimes I think we bears NEED to be right more than we NEED to buy.

  8. "Late 2008, when inventory was 20 months, I saw properties sell for 30% under list. Add in the mortgage savings and it was another 20%!"

    Real estate prices were still insanely high. When you have a run-up of, say, 200% in 5 or so years, a 30% discount does not represent a buying opportunity. And mortgage rates didn't start falling off the cliff until the beginning of this year. Last year's scenario was hardly 'blood in the streets'. Not compared to what's coming.

  9. I guess technically I dont own and dont want to buy. I would like to own some day but not at these prices and not at this point in my life. In a couple years if prices have fallen and it makes sense for me to buy then I will, but I am in no rush today.

    And anon sept 14:

    A 30% rise and a 30% drop are not the same thing.

    If prices rise 100% (double) and then drop 50% (halve), they are at the same place they started.

  10. fish10,

    From the numbers on other websites, it looks like the sales are finally cooling off. I certainly hope so.

    I recall how late last year everybody on the blogs threw in the towel and declared a 50% price drop (not affordability drop) in Vancouver RE.

    We were all wrong! Certainly made me regret listening to the bloggers. In January, I lost a very nice condo in Point Grey (asking $575k, sold $425k!) because I hesitated making an offer assuming it'll go even lower. That'll teach me to believe what I read on the interweb.

    Defeated, I'm tired of arguing with family and friends over Vancouver RE. I NEED to buy now. With a pre-approval ready (I'm putting 20% down and I'm completely debt free), I'm ready to jump in. SCREW THE CHUTE.

    With that disclaimer, I have a feeling this slowdown is temporary. Here are my speculations:

    - August/Sep was likely busy from the rush of ppl with pre-approvals buying to lock in their low rates

    - But, mortgage rates are going down again:
    (my broker called me and reduced my pre-approval rate that I got in July from 4.32% to 4.18% and said there is lots of room for negotiation)

    - On other sites, some say that Asian investors are coming here in early October (when its their holiday) to buy. It is possible that they're just waiting for their holiday.

    - On that note, the Asian stock market crashed about 6% on a single day last month. This slow down could be the ripple effects of that crash and since stocks have recovered now, we'll see a busy October due to the Asian investors.

    - The Olympics (ya, I have no freakin' clue what it has to do with anything, but let's throw that in there)

    - Rizo

  11. Fish referring to an earlier post of yours, it isn't just rich Asians who are buying the big ticket properties.

    There are lots of Medical specialists and Dentists, Lawyers and Stockbrokers in this city making $600K and above.

    Some of the Heart and Eye Specialists are making over a Million. The numbers are on the net.

    They are buying too.

  12. Anon- 12.02. I hope you are right.

    Rizo- that correction came on pretty fast and was over almost just as quickly.

    I did a post about how the drop in mortgage rates was like shaving another 20% off prices. If I had the time, I would dredge it up.

    That 20% discount is still there, but the prices have bounced back significantly. Lets see what the next few months bring.

    Not Just Asians.

    You are right. The outside buyers make up a fraction at most. We have a lot of very wealthy folk here in Vancouver, some legitimate money like you mentioned, some barely (like stock promoters) and some not (like drug money).

  13. West Van- 10 new listings, 1 price change, 6 sales.

    Lets see What Gavin's numbers are tonight.

    Definately a change in Rob's numbers

    However let us not get too excited. ALL assets are now tied togther. Gold stocks and RE. When one breaks, they all break IMHVHO

  14. "Defeated, I'm tired of arguing with family and friends over Vancouver RE. I NEED to buy now"

    I refuse to buy due to social pressure. If people can't accept me for who I am, screw em. I know I'm an odd duck, but I will not buy based on emotion.

  15. There are tens of thousands of great houses for all the doctors, lawyers, and stockbrokers in the city. It's as simple as summing anyone earning over $200K/year and comparing that to the available housing. Instead the high income earners are forced into lower quality housing along with everyone else.

    People with high incomes are buying because they are the only ones who can hope to afford the high prices. They will likely be able to afford much better in a few years.

  16. West Van 7 new listings. 2 reductions. 2 sales.

  17. Gavins numbers show a dropping inventory despite daily list/sales of 50% -70%.

    It must mean that people are pulling listings...?waiting for next Spring or for the Great Grand Olympics?

  18. Actually more like stable inventory

  19. From bubbilicious West Van

    12 listings
    5 sales
    1 price reduction

    I see some are now offering the buyer's agent bonuses for a quick sale. hmmm.

  20. MarKoz here: I had really thought that the stagnation in sales and surge in listings last year was the beginning of the end. I was wrong. I had always considered government intervention in the RE market to be somewhat random, and that ultimately market forces would bring prices down. I now believe that no provincial or federal government will let prices down as long as their members have a pulse (even municipal governments are getting in on the act as with infill housing and suites within suites). I know that nearly 70% of Canadians are homeowners. Virtually all politicians are certain to be homeowners. Garth says that 85% of Canadians' net worth is in RE and that virtually no one has adequate retirement savings. His stats are always a bit suspect, but are relatively consistent with what I have read elsewhere. There are still tricks left to boost RE prices further (i.e. tax deductible interest on mortgages). I believe prices will not come down anytime soon as a result. At some point, people with all their net wealth in RE and no retirement savings will have to either sell or take reverse mortgages to survive. That is likely 10 to 15 years away. It won't help me buy reasonably priced RE today, or even a few years from now. Maybe now is the time to invest in companies offering reverse mortgages...

  21. FISH
    With the market not making much sense I can see many are trying to find answers.
    They aren't getting any from newspapers and TV so they come to the internet.
    All the poor chaps who aren't real estate savvy must be wondering WTF is going on.
    Prices are rising yet we're losing jobs, people getting hours cut, businesses going bankrupt etc.
    Hopefully a few of them will come to the conclusion that we're on very shaky ground right now and that the slightest rise in rates or drop in property prices could leave thousands in a precarious situation.

  22. Markoz- good points, I will make the reply my next post...not that I am desperate for material :)

    Anon- I also think we have more downside ahead for the world economy, however the bounce back has been a lot stronger than I would have guessed. It even shocked famed economists like Nouriel Roubini and David Rosenberg.

    Is it temporary...I think so.

  23. West Van 6 listings 2 price reductions 0 sales. Nada, zip, zero.

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