Sunday, March 29, 2009

US housing at 1995 levels

Some of you may have seen the graphs floating around the Internet.

Inflation-adjusted US Median house prices have now reached the level they were in 1995!

And since there was a peak in 1979 -those who bought in that year - have seen inflation adjusted median prices drop 1.6%. So if you bought at the peak - housing did not even keep up with inflation after 30 years!

Meanwhile even with the huge drop in stock prices, the S and P 500 is still up 8 FOLD 1979-2009. (though that is not inflation adjusted)

This is to make the point how important it is to buy at the right time. How long do you think it will take for those who bought at the 2007/2008 peak to recoup their investments?


Late breaking news...

REBGV numbers out:


West Vancouver benchmark detached prices down 25% YOY. Down 9% over the last 3 years!

Vancouver West benchmark detached prices down 22.2% YOY. Up 6% over the last 3 years.

Port Moody benchmark detached prices down 34.8% YOY. Down 19.4% over the last 3 years.


Here they are, the best charts on the net.

Thanks Mohican

Saturday, March 28, 2009

Here are some West Vancouver list/sales prices

All this year, 2009. All SFH. Oiginal price in green, reduced price in black and sold price in red.

$1.098 List = $1.067 Sold

$1.168 List = $1.00 Sold

$1.549 - $1.298 - $1.198 Final List = $1.00 Sold

$1.375 -$1.250 List = $1.048 Sold

$1.379 List = $1.350 Sold

$1.980 - $1.588 - $1.498 = $1.395 Sold

$1.699 List = $1.510 Sold

$2.795 - $2.695 - $2.450 = $2.015 Sold

Some significant reductions in price and others probably wishing they had bought lower.

I stopped in at some open houses in West Van this week-end. Reasonable foot traffic, especially at the new listings which were priced sharply.

At one, older listing, the realtor was telling us there had been a reduction of several hundred thousand dollars from the original asking price. I asked him how he came by the original price since it was more than the assessed. "It was the fair market value at the time. Of course the landscape has changed a lot since then".

As I have said many times over the years (and I now see repeated on some sites), buyers rarely HAVE to buy- but sellers often HAVE to sell. A buyer could rent. But many sellers have to sell.. due to divorce, death, job loss, job transfer etc. It is this dynamic which will define prices in a falling market. How low do the 'have-to-sellers' have to lower the fruit to tempt the buyers into biting?

So I thought I would do a post soon on how I would value a house- if I was considering buying in this dropping market. Any interest in this?

In a rising market the strategy is simple buy as much as you can afford, bid strong and get on board asap.

In a falling market it is MUCH more complex. The asset is devaluing and while that may not upset long-term holders it is unpleasant to realise six months from now, that you could have bought a better/larger place for the same price or had a much smaller mortgage.

Friday, March 27, 2009

Spring Thaw

Vancouver housing has seen a Spring Thaw. You can see it in Paul/Gavin's numbers and in Kopyrightklepto's numbers here:

However the reasons for the up-tick is clear:

1) Nothing goes up/down in a straight line. There are folks who missed the run-up and have been kicking themselves. This is the first significant down-turn and a chance for some to get into housing.

2) Low mortgage rates buy you more home. 4.05% for a five year fixed is a pretty good rate (ING Direct). There is a concern that with all this debt being piled on by the governments, long rates and hence mortgage rates will eventually head up. I think we are still a long ways from that, but it is driving some buyers to lock in and buy.

3) We had very low sales in December and January. Months of Inventory had reached a catastrophic (and unsustainable level of 20). The sales were down due to many reasons including the heavy snow-fall, which realtors told me cut open house traffic, and of course the shock over the financial crisis, which people have become accustomed to. This demand ended up in Feb and March and added to the normal Seasonal increase in sales.

4) The financial crisis is still a TV event. We have been spared any major disasters so far. The US and Europe are getting hammered, but due to on-going projects, a better banking system and quick action by the Government (forced into acting to stay in power!) we have so far escaped the worst.

However we are not an Island and I can see increasing anxiety about job losses and reduced spending. None of this fills me with glee. Those of you who used to read the old blog know that I was saying a couple of years ago that this would be the final result of reckless unproductive speculation.

In any case we are still well above the previous few years in inventory:

We will have to see how far this Spring thaw goes. I suspect we get a slow struggle until summer when the 'must sell' folks drop their prices, and buyers bargain tough. Then we have a lull as sellers hold out for the hoped for post Olympic euphoria. By then I suspect we will have all come to realisation that this is no ordinary recession and there wont be a quick rebound.

Add in the post-Olympic price tag and you can decide where house prices are headed.

Good to see some old friends in the comments area. Thanks for the welcome back.

Saturday, March 21, 2009

I know I am deviating from RE but I will get back to that soon

In the meantime here's a great read on this current financial mess:

Wednesday, March 18, 2009

Deflation here we come (in fact we are already there)

Those of you who remember my old blog, (which I deleted) will remember my frequent references to Galbraith and his bubble theories. We have now burst the ultimate credit bubble.

Previous bubbles were symptoms of excess credit and their bursting (eg the Dotcom bust) were solved by making credit even more lax.

This one is the big kahuna, and the Central banks and policy makers have no idea how big or bad things will get. If you had any doubt about how bad it is, today's announcements that the Fed will buy US treasuries, which follows the Bank of England saying the same a couple of weeks ago...should give you some idea.

We are already at near zero interest rates everywhere, and that wasn't enough. Then they bought damaged assets from the Banks and AIG and paid off their bad debts, but that wasn't enough. Now they are buying their own debt. This is a way of printing money.

So everyone today played the inflation trade- the $US dropped, Gold rose. However I think we are a long way from inflation. I could explain why, but Matt Stiles has done that very eloquently at the link below. He also describe the changes that are taking place in society where conspicuous consumption..big houses and cars are no longer as acceptable as they were.

I think Range Rovers are going to have quite a few years of weak sales.

Tuesday, March 17, 2009

A Foreclosure Tale

A buddy of mine who is a fellow bear, has promised himself that he will only buy a foreclosure.

Now the truth is, foreclosures are often not the best deals. You have to present an offer with 'no subjects' to the court, who can refuse your offer, or you can do all the leg work, and someone else can bid higher on court day and you lose the property.

Usually foreclosures are not left in the best of conditions, as the disgruntled previous owners have neglected maintenance and take anything that isn't (and often is!) nailed down.

However there are bargains to be had, especially in this market.

Anyway back to my buddy. He has been looking over a very nice townhouse in foreclosure on Howe Street, near the water.

Now please note I take this information from what he has shown me, and what the realtor has told him, so if anyone knows of any errors, please tell me and I will correct them.

The unit is 2100 foot +/-
It is listed at $799 K
Built in the early 90's

Now here is some amazing stuff:

The original owners paid $432 K for it 11.5 years ago
The current mortgage on it is apparently over $1 m, due to equity withdrawals
A unit ( I think it was the last one to sell) sold in the complex for around $1.2 Million in December 2007.

Some fishy thoughts :

That is a lot of equity withdrawal the previous owners made! - did they still have any skin in the game when they went inot foreclosure? I doubt it.
This unit is getting close to a cash flow neutral price, for those interested in buying and renting.
Look at the loss of equity the other 20+/- owners of the complex have taken between the Dec 07 sale and this one. That is a lot of paper wealth that has just evaporated.

Monday, March 16, 2009

Fish is back!

Hi Friends.

Hope you are all well. After a health related hiatus from the blogging scene, I decided to drop in again with the occasional post.

I had been blogging on the imminent demise of RE, both here, in the US and world-wide for about two years and well what can I say...we made it! We are into the worst of it in the US, and well on the way here.

I suspect some of you old bears will be coming out of hibernation and wondering IF and WHEN you should be buying. That is going to be the new focus of my blog;

1) How much further down do we have to go.
2) What 'deals' are there out there - mortgages, property, etc
3) What is the buying/renting comparison now.
4) What is the BC economy going to look like in the next two years.

On a personal note, I want to thank Paul B for all the hard work he put into his numbers which led us from the lunacy of the bubble to the promised land of a buyer's market. He will be missed, but I wish him all success in PEI.

Mohican has been pounding out his usual high quality posts (I will get all the links up soon) and of course there are some must read blogs..Like Rob Chipman's and Solipsist's.

I want us to exchange some solid information on how things are likely too shape up.

It's good to be back.