Saturday, September 4, 2010

More bear fodder...

The Sunshine Coast has been weak for the last two years and prices have gone nowhere.

Here are the numbers and charts.

Detached prices are actually DOWN 9% over the last 3 years and UP 15.9% for the last five years - which is probably no more than inflation.

Fraser Valley is now sitting at 10 MOI too. The areas outside of Vancouver like the FVREB, Okanagan, Sunshine Coast and Vancouver Island, struggled to recover from the 2008 crash. They are now showing increasing weakness. If we think the price/income ratio is out of whack for Vancouver- then it was really out of whack for many of these areas.

Incomes are lower, they don't have the benefit of wealthy migrants (except for the OK and Albertans and retirees coming from the East)- so they were more vulnerable, where-as it is very possible that Vancouver will be buoyed by higher income and the influx of money for longer.

Of course any weakening in Vancouver will damage the periphery even more-since many used their new found RE wealth to borrow against and buy a second home/ cottage/condo (just like the US!) or sold and moved and put a nice chunk in the bank.


  1. BTw folks - for all of those who dont know how off-shore buyers pump money into BC. Here is one example:

    Old Henry and Harriet sell their home, bought in 1963 for $26,000 for $1.2 Million.

    The new mainland Chinese owners tear the house down= jobs

    They build a Mc Mansion = jobs

    They pay someone to manage it while they make dough back home = jobs

    Henry and Harriet buy a house in Victoria etc for $800K = jobs

    They put the rest in the bank for their retirement (less dependant on the rest of us)

    Just FWIW

  2. The H&H scenario may happen oocasionally, but not enough to drive the entire market and economy. For the most part, it is irrellevant.

  3. Or...

    Old couple sells their home for $1.2MM

    New owners work and live in Vancouver take out $800K mortgage.

    $800K debt is repaid to bank over the next 35 years WITH INTEREST = $2MM less that will be spent in the local economy.

    $800K put in bank to support retirees.

    = net $1.2MM drain on economy going forward.

    No matter how many rich immigrants buy with cash, the existing locals and non-rich immigrants need to compete head-on and the only way they can do that is with debt.

    The question to ask is how many of fish10's buyers there are, and how many other "normal" buyers there are.

  4. I thought this blog was called "VANCOUVER RE and then some", not "let's look for anywhere on earth that RE is weak and talk about that because we've been so dead wrong on Van RE" .. maybe it's time for a name change?

  5. 1) Anon- I think you underestimate that effect- 1000 of those buyers pump in $1.2 Billion into the local economy that would not have been there otherwise. Use the multiplier effect and you are probably looking at nearly $2 Billion of economic activity. BTW I just picked 1000 because it is a round number for illustration only. The real number maybe higher or lower.

    2) Jesse. True indeed. Debt v cash. Cash floods the market and produces an instant blip of activity as it moves around. Debt drains from one area of economic activity. Eg the couple who maxes out with a $800K mortgage are very unlikely to eat out as much or travel or get the picture. The cash buyer from out East or off-shore is dumping that money straight into the economy.

    3) Chad- ouch- you cut to the bone. Wait a month and the discussion of the name maybe unnecessary.

  6. BTW- Jesse, that is why the Feds and the Local government CANNOT do anything but encourage this type of outside buying. Whether it be from the East, from the USA, China, Korea, the Middle East where-ever.

    No more buyers = sudden drop in economic activity = lower tax revenue.

    And you have few choices when you are already spending more than you earn. $1.5 Billion this year alone.

  7. fish10, I guess the issue is that, based on sales even at current (relatively low) levels, most of the buyers are local and are financing their purchases. That a few scores of rich immigrants plop down a suitcase of cash to buy property is par for the course but the plain fact is most buyers are trying to keep up. The ratio of foreign buyers required to keep prices high is nowhere near what is currently taking place: it needs to be an order of magnitude higher.

  8. Want to go for coffee Chad? I like your face.

  9. West Vancouver is at 16 MOI

  10. His name is pronounced "Matt Fraunce" BTW. 16 MOI is high but not necessarily uber-bearish by conventional comparison, given how highly valued many of the properties are. Some of those bad boys can take years to sell even if "fairly priced."

    Not so much with the Yaletown jellybean condo. 16 MOI in that situation: human sacrifice, dogs and cats living together... you get the drift ;)

  11. Fish,

    "Chad- ouch- you cut to the bone. Wait a month and the discussion of the name maybe unnecessary."

    Heard that from the bears for well over a year now... wait a month, wait a month, wait a month...

  12. Chad- here I thought you were a loyal reader that memorized all my posts. Sheesh.

    Look at the last one, about me shuting down the blog, if the sales go down and the MOI and price both go up.

  13. I said in another post, why shut down the blog? Almost all Van RE blogs are slanted to the bearish side and have been wrong but you are refreshingly one of the civil and more objective bears.

  14. Well bears like bulls come in many forms.

    Some are logical folks who calculated, were responisble, saved, re-caluulated and waited patently and are now a bit bitter.


    It would be like leaving a party having only drunk one beer and being stopped and harrassed by the police nevertheless, while the party drunk drives by unmolested.

    These folks, like me, try to be prudent and are now losing out because of their prudence. It happened in the US, it happened over the dot-com boom, eventually reality kicks in. As the bubble has grown so big, we now know that when it bursts, it will take the prudent down with the irresponsible.

    However it is taking a long time and a lot of angst has been suffered on the bear side.

    There is a another population of bears who are just bitter. They just don't like seeing anyone but themselves making any money. Those damned (old people who bought cheap, young people who bought with dad's help, new-comers, old-comers, yellow/green/orange people/ realtors, mortgage brokers, rich, poor etc etc)

    Posts form the first group are analytical, intelligent but often frustrated.

    the posts form the second group is just mean drivel.

    We try and keep the second group off this obscure blog and populate it with first, along with any bulls who want to point out our errors.

  15. Then there are also two types of bulls.

    the worried bulls, who are way in over their heads. So they berate bears, cosntantly boast about their growing equity, when in reality they know a small correction would put them in the negative column.

    Their own insecurity makes them attack and suggestion that we are in a bubble, with virulence.

    Te second group is more secure, they concede the possibility that we may be over-priced, but explain logically why they don't see any significant correction.

    We will take the second group please:)

  16. West Van today 15 listings and price changes (SFH) and no sales. That cannot be good for the MOI.

  17. Vancouver West Detached (much more important market than West Van) had new listings go down in August, total listings go down in August, while prices went up in August and sales went up in August. That cannot be good for the bears.

  18. Well with so few sales, I think average becomes meaningless. 30 sales last month! Van't even do a proper HPI with so few sales.

    Lets see how it unwinds this month. I would expect significant price reductions if the MOI keeps going up.

    the problems is how do we measure the price change when the sales have almost stopped. One mining exec buying a $6 Million house (and they still are) will skew it completely.

  19. MOI in Vancouver topped out 6 weeks ago, is hitting it's lowest level in 10 weeks and is sitting around 5. Reference Sales were the highest they have been in 4 months and slightly below the average of late 2009. Reference

    Anything else I can help you with?

  20. I dont know what areas Agent Will includes.

    However based on REBGV August Listings / Total Sales = 7 MOI.

    Why would you look at weekly changes anyway? Look at his average price charts up $100k one week, down $80K the next. meaningless noise.

    Honestly Chad- you seem more like a jumpy anxious bear looking than a secure owner :)

  21. Just pointing out the facts. Will's average price charts with the 4 weeks trend are pretty accurate.

  22. Chad,

    Yeah, detached averages are up recently, but attached averages are down almost 8% in 8 weeks according to those charts you cite.

    I dont really put much weight on either because as last month showed us the averages can do very different things than the HPI.

    How likely is it that detached are shooting for new highs while attached are crashing?

    Like fish said, meaningless noise.

  23. Like I said, Dave, the 4 week average is where to look to eliminate the noise and that has attached at all-time highs.

  24. Sorry, I must be missing something...

    "Attached Sales Average Price" 4 week trend line is just above 460K and was previously almost at 500K about 8 weeks ago.

    Are we looking at the same graph?