Saturday, November 28, 2009

Sorry there is nothing to write guys...

The market is slow but not weak yet. There are still folks running to buy.

Larry Yatter has shown that some market have started dropping.

However nothing much will happen until all assets start to drop..Gold, Stocks and RE. What will be the catalyst? Higher interest rates or a Dubai-like black swan event.

I am heading into hibernation and probably wont put up a post until something changes, which may not be until the New Year.

Wednesday, November 18, 2009

New record? Not quite- but close

Rob Chipman has pointed out on his blog how close we are to the record (average) prices of 2008.

Here is his chart:

http://www.robchipman.net/blog/images/AvgPriceGraphs/REBGVAveragePriceGraphOctober2009.pdf

Hard to believe that we would see record prices at a time when the US, our major trading partner, was in such difficulty- when our main exports- natural gas and lumbar are down significantly from a year ago, when major employers are cutting back or closing and even the City and Province are pulling in their horns.

I guess it is the very low rates, the pre-Olympic hype and building boom and.....a sense amongst buyers that they may have already missed the boat and have to dive in regardless of the price.

In any case the market is strong and if it goes much higher then we have to re-evaluate the 'bubble bursting graph' which we have been following so far.

It wold be unusual, compared with other bubbles, if the price bounces straight back higher. As I have said several times, if the prices exceed their previous highs then we have a different ball game.

http://2.bp.blogspot.com/_mJmwQtPmusk/R8qBvunTR1I/AAAAAAAABik/1xij0kBSJ30/s400/bubble-lifecycle.gif

However, I must admit the market 'feels' different from the record prices in late 2007 - early 2008. At that time houses were often selling over list, as buyers panicked to buy. There were less than 20 SFH under $1 Million in West Van, now there is 40.

Sellers are dropping their prices (albeit from high levels and by small increments) quickly. It is as if they think that this could be the sweet spot for sellers and may not last.

The Fraser Valley was nearly as hot as down-town, but after the crash of a year ago, the recovery has been much more muted outside of Vancouver.

Lets wait and see. I posted almost 8 months ago, that the huge drop in interest rates, coupled with the 15-20% drop in prices, had reduced the effective cost of ownership by 35% or more from the peak. Well we have given back most of the price drop.

If and when it does drop again, and the banks and CHMC struggle, unemployment rises...I doubt we will have much money left in the kitty to bail us out:

http://www.debtclock.ca/

Saturday, November 14, 2009

Get ready

I hope those who are feverishly buying right now are:

1) secure in their jobs

2) have taken into account possible increases in taxes.

Vancouver City council is looking at job cuts and increased taxes to try and deal with huge budget short-falls. These job cuts will be in full time City Hall positions and even police and fire-fighter positions. Not good.

http://www.theglobeandmail.com/news/national/british-columbia/job-cuts-likely-option-to-balance-vancouver-budget/article1363298/

http://www.vancouversun.com/news/City+Vancouver+looks+cutting+staff+close+budget+shortfall/2220380/story.html

What happens after the Big corporate party/ Nationalistic medal struggle AKA the Olympics? What sort of shape will the Provincial and City budgets be in then??

Don't expect to find out until well after the Olympics. You will remember how we had a projected balanced and then a small deficit from the Provincial Government until AFTER the election, when the truth about the deficit emerged.


..................................................

BTW if the answer to 1) and 2) above is no...or not sure, then at least make sure you have a CHMC insured mortgage so we can all be on the hook when you walk...






Monday, November 9, 2009

Nothing to see here...move along

We have Electronic Arts cutting 1500 jobs including a bunch here. We have Morgan Chase closing their Surrey call centre with the loss of 700 jobs, which followed close on the Ebay call centre closing last May which also saw 700 job losses... and here's what Kodak is doing http://tinyurl.com/yajcdhc
and yet RE is still strong!

That 1.5% Variable rate sure covers up a lot of outrageous pricing.

Who would have thought a couple of years ago, when we had our peak prices, that the US would be facing 10.2% unemployment and a real estate collapse, that BC's biggest resource..natural gas would be at multi-year lows, that BC and the Federal Government would be facing huge budget deficits and YET that our RE would be within spitting distance of those highs and in some other Canadian cities they would be at new highs??

Therein lies the power of devaluing money. Print it, pay nothing on it, lend it, spend it when you don't have it...ANYTHING to keep the worldwide bubble alive and well.

Maybe we are getting some $$ from HK. I just saw a BNN program on the price of RE in HK. If you think we are pricey here, you ain't seen nothing.

Meanwhile those pricey Olympic rentals aren't being absorbed. From the CBC:

Olympic rental market swamped with homes

Thousands of homeowners vying for Games tourists


Last Updated: Tuesday, November 3, 2009 3:49 PM PT Comments88Recommend33CBC News
Tanya Peters and Tyler Jones . (CBC)

The Olympic dream for many in B.C.'s Lower Mainland has little to do with sporting events or who makes it to the podium. They're hoping to rake in the gold by renting out their homes to tourists coming to the 2010 Games.

But it's not working out that way for everyone trying to take advantage of the opportunity. It appears the Olympic rental market has slowed to a crawl.

"There was that big buzz about people renting out their homes and making a killing on it," said Vancouver resident Tanya Peters.

Peters and Tyler Jones planned to get married in Costa Rica during the Games. Their vision was to rent out their house to Olympic visitors to help pay for the wedding. But so far, they have no takers, and now regret not hopping on the gravy train earlier.

"I know several people who rented out and did make a lot of money but they rented out a year ago," Peters said.

Corporations, teams and media outlets that needed to book homes in advance for big prices appear to have already made their bookings.

Jones and Peters have had their home listed on various websites since July. They have dropped their price to $3,000 for two weeks from $5,000.

A Vancouver couple hope to rent out this house during the Olympics, but find themselves in a market swamped with rentals. (CBC)
The explanation might be in the simple economics of the situation: There are more people who want to make big money than there are who want to spend it.

Thousands of homes for rent
"When the supply is larger than the demand, it's hard to maintain those price levels," said Bruce Fougner, president of Lloyds Travel Group in Vancouver.

Fougner estimated there were at least 6,000 homeowners in and around Metro Vancouver looking for Olympic renters right now. The majority of new rental listings were people wanting to get away, he said.

Jones and Peters say they are not giving up on their Olympic dream. And they plan to be on the beach in Costa Rica in February, no matter what.

But if they have to lower their price much further, it wouldn't cover the costs of additional insurance, fitting their home with extra beds and putting their valuables in storage, they said.

"We're not banking on it happening. But if it happens, that would be great," Peters said.

Wednesday, November 4, 2009

....getting us pumped up for the Olympics


It seems like we are not getting sufficiently excited about having an extremely expensive sports event and hundreds of thousands of people descend on our densely populated over-crowded strip of SE BC.

So we now have media ads featuring our Canadian athletes extolling us to support them, we have a news radio channel (official radio station of the Olympics) telling us how many great jobs are opening up in serving and bar tending. We also have the workers at Whistler being taught by some person from Disney University (yes it exists) and how to be a gracious host. Even Gregor Robertson was all excited about the Olympic Village today and one athlete was telling the media how great it was to be able to stay in luxury accommodation. Bob Rennie was reassuring them that the city wont be on the hook for the 1100 units. lets hope he is right.

Enough already!

There are some of us curmudgeons who really didn't want these games. We cant get around the city as it is. We think affordable housing is a better use of money than big ice rinks and Multimillion dollar ski runs. We don't want Hundreds of Millions spent on security. As for the athletes, we wish them well, very well, but the cost of hosting it here could have been better spent on them..help them train, buy them equipment AND have the whole event somewhere else.

Anyway we are stuck with it and all the inconveniences and it will bring. But please VANOC and major sponsors, spare us the..'we-are-doing-it-for-athlete's' BS. The developers and speculators have done VERY well out of this event. The politicians will feel important for a couple of weeks, and the Olympics have just become a contest of tallying who has the most medals which seems to me to defeat the purpose which is...what is it again
?

Sunday, November 1, 2009

October Numbers

As usual Larry Yatter is the first one out with the numbers for average prices:

http://www.yattermatters.com/real-estate/vancouver-average-price-october/#more-7284

They show that detached are within a hair of the highs and apartments and attached look to have surpassed their previous highs.

Well what can we say about the graph...as I said every 'bubble bursting graph' will look different. I gave some examples in this post:

http://fishyre.blogspot.com/2009_09_01_archive.html

It may be that we are following the more complex top set by places like Southern California :

http://www.doctorhousingbubble.com/wp-content/uploads/2009/01/socal-housing-prices.png

However I have to say, if we continue with these strong gains, then we may have to admit that a new up-trend has started...difficult though that is to believe...from these lofty levels, driven by all-time low interest rates.

I expect all Canadian cities to show gains.


Here is how it happened:

We are in the same position as places like Norway and Singapore. Norway is resource-rich, and Singapore is fiscally sound. We are probably both. When the crisis happened, interest rates world-wide crashed and many areas outside of the US and UK where banks had been completely irresponsible did not need this extra stimulus. The result was a new property boom.


The rates dropped to save banks and to help manufacturing, but what they did was reignite assets. Look at gold well over $1000 and property prices in many parts of the world started to take flight.

Some of these areas were Norway, Hong Kong, Singapore and South Korea and of course Canada.

Of course in the other jurisdictions they are doing something about it. In Norway they are raising interest rates specifically to cool RE. Regulators in South Korea, Hong Kong and Singapore told banks they needed to tighten lending, to nip the RE bubble in the bud.

Meanwhile what are we doing? We have a few words of caution from Mark Carney but no increase in interest rates, and the Government with one eye on the next election, is INCREASING the ability of the CHMC to lend at these over-priced levels.

We are truly setting ourselves up for a crisis. Both by feeding the fire of price speculation, and encouraging folks to get into the market with very little skin in the game AND at the lowest rates in history.

We should be doing the opposite. Waiting until rates are high and likely to go down, wait until prices have fallen and then help people buy..they would be getting in at the bottom of the prices an the top for rates not vice verse.

We are just setting these folks up for failure at the slightest rise in rates, drop in value or increase in job losses.

Enough said. Lets see what November brings. The October numbers were not heartening for those waiting for more reasonable prices
.