Saturday, November 20, 2010

A quick review...

Sorry about the sparsity of posts, but I have been very busy with work and there hasn't been much to say about the RE market.

In fact I have been making good money at work, enough in the last month for the down-payment on the median house! The only problem is the house is here.

Oh well. Rather be here than there.

So the time has come for some introspection. Have us bears been dead wrong? Well for a number of years we were - truth be told. Then we were VERY right late 2008 and early 2009, as the financial system in the US and Europe collapsed due to the RE bubble bursting.

However our drop was very short-lived. This was due to 'emergency' 0% rates and actions by our Federal Government to put in place the same things that collapsed the US:

1) Very long mortgages
2) Very lax lending
3) Pumping up the CMHC (read Freddie and Fannie)
4) Keeping rates too low for too long

Our local economy was also saved from the catastrophe going on the US, by a resurgent China which brought buyers for all things Canadian (thank goodness) from Lumber to Oil to Uranium to...well RE.

We have, as discussed on Larry's blog, many wealthy people in this city and a lot of them make their money right here. People for who $2.5 Million for a home makes perfect sense.

So we bounced back and our bounce has now faltered. Sales are way down, but then so are listings so that we are in a bit of a stalemate and sellers who can't get their price are pulling their stuff off the market and some buyers are giving up and offering good bids.

There has certainly been an up-swing in the market recently, though I would have to say that this up-swing is mostly in the sought after areas. The further you get from down-town Vancouver the more of a buyer's market it is. Take a look at the price reductions in the OK for an example.

In some areas things are sizzling and some speculators took advantage of the slow down in Summer to buy and are now trying to flip it immediately. One for a $200K profit in one month!

Of course we have no laws to restrict flipping or to penalize it.

So a speculator can buy, leave empty and then wait for a desperate buyer to come along or just leave it empty. After selling they will pay tax at capital gains levels - assuming they declare it and do in fact submit a tax return. This will be after deducting agents fees, any 'costs' , and interest and management fees etc. In comparison joe-blow working in a factory making something will be paying a higher rate of tax with very little deductions.

In Canada RE speculation which causes public harm is not a big deal. Our politicians couldn't care less. In fact they don't care about speculation at all! Eg....

1) Look at gas prices. How come all gas companies sell within a few cents of each other. Their oil comes from 100 different sources- some have cheap locked in contracts with producers- others are buying on the spot market. Yet they all sell at the same price..huh!

How is that possible? Wheat prices go up and down, yet bakers will sell similar bread for different prices, why don't oil companies. Why are they allowed to set such close prices.

2) Media. The government has allowed a few monsters like Global to gobble up all newspapers and lots of TV stations and that's OK. Would it be ok if Jim Pattison owned 80% of the supermarkets in town or Shopper's owned 80% of the pharmacies...of course not.

Canada is the speculators best friend and no where is this best demonstrated than the laissez faire attitude we have to RE speculation.


Back to the market. Is this a little breather before we head up again or are we about to change course. This one is hard to call.

The Bank of Canada stopped with the rate hikes at the first whiff of 'double dip' in the US and Carney went back into his bunker- though still whining about Canadian debt levels (but doing zero about it except whining) and the US Fed is back to buying it's own debt..huh!? Yup that's right buying it's debt, and the Chinese are caught between worrying about over-heating and worrying over the youth who may not be happy if their material aspirations are not met.

All these will play out into RE.

In 2007 I know we would get a big correction.
It came late 2008/early 2009.

In Spring 2009 I mentioned that with 15% drops and with 30% lower carrying costs we may have had the 40% drop I was anticipating and some people would probably start buying.
They did and the market went ramping up again.

We have now accounted completely for the drop in interest rates, so that RE is just as unaffordable as 2007.

Frankly speaking I have no idea what will happen next. Maybe we get a commodity superboom which drives prices. Maybe natural gas prices shoot up and eradicate our Provincial deficit, or maybe we just stagnate here until the rest of the world recovers and off we go again.

Or maybe we change course....

Thursday, November 11, 2010

Be careful what you wish for...

We are a Trillion in mortgage debt. We are at the lowest, ever, on record interest rates (except for five months ago) and everyone including the banks and THE bank (BoC) are telling us we are in dangerous waters which such nationally elevated house prices.

'So lets get started already' I hear the bears say. But I say may not be pretty. The US is in the 51st month of it's housing slump.

Tuesday, November 9, 2010

Parity and then some...

Well folks we are now worth more than a US peso.

Despite our hand-wringing and angst over our $ 1 Trillion mortgage debt and super-pumped housing, despite our own Central Banker telling us we are in for hard time, the world doesn't care.

We are oil and wheat and uranium and that's what the Chinese want - along with Westside houses :)

And so our Loonie gets bid up, and rates cannot rise anymore or it will blast up even more, and destroy what's left of our manufacturing out East. Well, as long as Alberta is happy - that's all that matters.

Meanwhile the US fed, which makes Carney look positively responsible, has decided to let the government issue bonds and then buy them up- otherwise known as a ponzi scheme- which is why gold is soaring. Greenspan and Bernanke have together managed to distort financial markets and the economy for 30 years.

How do these relate to housing- this is the 'and then some'. Everything relates to housing, from the price of commodities to a boom in a country of one billion souls the other side of the world.

Thursday, November 4, 2010

Ok numbers

Briefly in MOI, days to sell and List/sales since those are the only useful stats I can pull out of the package the Real Estate board puts out:

Central OK:

MOI 17.25
List/Sales 36%
Days to sell 110

North OK:

MOI 22.4
List/Sales 30%
Days to sell 122


MOI 36+
List/Sales 30%
days to sell 198

What's up in the Shuswap region?

Tuesday, November 2, 2010



October 2010 $579,349

September 2010 $577,174


October 2010 $796,883

September 2010 $790,992


October 2010 $390,074

September 2010 $388,373


October 2010 $487,530

September 2010 $490,385

Quick comments. Not much solace here for the bears. The rate of increase YOY has declined from over 6% to 4.6%. Attached down a tad, apartments up a tad (I had expected down, but there was a late October buying spurt despite a famous agent's whining) and SFH up nearly $6k.

Over-all HPI up 0.5%.

Sales down 39%.

I have to concede we are in a flat and balanced market. The good news is buyers should not feel stress to jump in and over-bid with sales down so much and lower interest rates here for a while (despite Carney's yacking- he cant raise rates much more) though I do expect long rates to drift up. If you have to buy, I would look at product that has been on the market for a while, where there has already been a price reduction and where the seller's have a good reason/need to sell.

The good news is there are robust lists tonight and much fewer sales. Lets hope the month continues like that.

Monday, November 1, 2010

We finally got....


We have reached the twilight zone for housing in our fair city with the average SFH hitting and surpassing a cool Million.

Even Sydney Australia comes no-where near us- they are in at over $600K.

Well what do we make of this? Nothing. Median and average depends on what is being sold. If a jeweller is only selling high end diamonds then his average sales are up, even if his total sales are down.

That's where we are at in Vancouver. Lower sales, but still lots of heavy hitters coming to the bid. However even the rich are bargaining. Two homes sold in West Van tonight. Both sold for $800-900K off original asking which is a 25% drop from list price.

Anyway lets wait for the HPI. My guess is stable SFH and lower Condo.

Stubborn prices in Vancouver, which is a good thing. Once again I do NOT want a crash. Remember what happened with the last crash in 2008:

1) People started losing their jobs quickly

2) Flaherty and Carney pissed their pants and threw everything at housing. Even though they are talking tough now- do not for one minute fool yourselves. If housing took a big dive, the screams to ..'Do something! Anything!' would be deafening.

Just look at how Bob Rennie complained that the HST hurting sales. He certainly didn't pull any punches talking about the Premier:

“He’s the sh*ttiest salesman in the country,” Rennie said bluntly to a roomful of Kelowna developers convened to get tips on how to reposition their projects in a topsy-turvy economy.

“He’s done a horrible job of selling the public on the HST. We’re in sh*t and he’s hurting the economy.”

Multiply that reaction by 1000!

So I am happy we don't have a redux of Summer 2008. However I would like to see some signs that our City's (and Canada's) bubbly house prices are coming off the steam so people can buy with-out risking Their financial future and Our financial future too (thanks to the CMHC and back-stops for the banks)