What we will see this month

Ok folks despite the bump in sales in the last few days, I think we will see another drop in sales for September. If you look at Larry Yatter's community charts, you will see most of them show MOI above 10.

However average prices and median prices are steady to up.

This confirms what we have been seeing, that higher end buyers are still in the market. eg the $9 Million sale a few days ago.

If so, then Median and Average prices WILL NOT BE RELIABLE for September.

We will have to depend on the HPI for a true picture of the state of the market. We will also have to assume that the REBGV is doing a valid comparison to come up with the HPI.

So don't be shocked if average or median is up. If you have an inventory of 100 dresses and are selling very few, but mostly the expensive ones, of course both your average and median prices will be up.

The Upper Crust..

Take a look at Larry's post on West Van prices.

This confirms what we have all been thinking. the upper end is still buying. And only a small % is off-shore money. There are always folks in this town making serious money. It used to be the Dot com guys, until they were Dot Gone, then Developers cashing in on the Olympics, and now it is the resource guys (yes they are mostly men) who are making very big chunks of dough.

Here is the list of the 100 biggest earners in BC.

Here is the article that goes with it.

Then there are lots of people making high 6 figure to 7 figures- business owners and professionals and of course stock-brokers and yes some Real estate agents too.

So dropping a couple of Million or three on the family pile is not such a big deal. Whereas I suspect the entry level and lower priced properties are dealing with the rise in variable rates, the CMHC changes and economic uncertainty.

If this is true, we should see this reflected in the HPI numbers. HPI is supposed to account for more expensive houses selling.

Tonight's numbers...

All categories...

West and North Van

25 New Listings
26 price changes
7 sales

Van West

51 New
35+ price changes
12 sales

Whistler

4, 5, 1 - wonder what the MOI is for Whistler. Some of their inventory doesn't seem to end up on the MLS from what I can tell, but is for sale nevertheless.

Coquitlam

18, 17, 5

I know what you are thinking

Fish posts twice a week and now he is posting every five minutes.

Ok so I am a little hyper-active at the moment.

We are at a crucial point in the market. We could go up or down or sideways :)

Seriously though. Demand is down. Price reductions are routine. MOI is now 7 months in Vancouver and much higher 30 minutes drive or a short ferry ride away. Wages have run up YOY and this puts pressure on the BoC to raise rates. Flaherty WANTS home prices to come down. What does this all add up to>>>>lower prices.

However some agents I speak to, say there are lots of regretful Randolphs, upset at having missed the quick crash of 2008/9, who are waiting for the slightest sign of weakness to pounce on a 'perceived bargain'.

BTW in the spirit of fairness I will have to say that North Van must have got the sales that they didn't have time to put on the system yesterday. From 1 sales yesterday we are up to 10.

In fact the numbers are 15, 9, 10.

But for Van West they are bearish today at 57, 39, 17. Some really nice reductions in there from crazy prices to just insane.

Most other places have list/sales from 30-60% nothing too exciting.

Can't read too much into any one day's results.

Have a great week-end.

Yeah- i know i am putting up posts too soon

However- we have to keep one eye on the economic indicators, and one blew my mind away.

The rate of wage increases for Canadians YOY was...wait for it...3.9%.

That is HUGE!. It would be huge in an average year, but in a year with low inflation and low interest rates that is enormous and we can see now why the BoC was raising rates, even as others were singing the double dip recession song (like the guy in my previous post).

And this increase is despite the rise in unemployment. Much like the Vancouver Housing market really, where we have less demand but still high (or even higher) prices.

I suspect it the huge swings we are seeing in the economic landscape from the sudden fiscal and policy shifts that are being thrown at us ie..'pump up the CMHC- dang we have a housing bubble, reign it in, drop rates to zero- dang borrowing is exploding, raise rates'

In any case employment income is a lagging indicator, but we will have to keep an eye on it.

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

Look at the front page of the Vancouver Sun. I cannot bring myself to put a link. What us bears have been saying for some time, is finally being acknowledged by the what passes for media in this city and the Cof V. That incentives will be needed to unload that White Elephant - OKA as the Olympic Village.

Now the councillors are blaming the HST! First it was Ladner's council blaming the world financial chaos and now these guys say it is the HST.

Anybody but us seems to be the mantra at City Hall. How about this refreshing statement instead:

"We did NOT make a good deal here. We were badly advised and made some bad decisions and even now have no idea how much we are on the hook for. Oh, and BTW- we have already spent $XXXXX on legal advice and will probably spend a lot more. Sorry we know it is your tax money. At least you know that we weren't 'embarrassed' like they are in India now. And you can be happy that a lot of fun was had in the OV, remember they did run out of condoms."

Oh heck - here's the link

a must read...

Here are some snippets:

"Just to be clear, the Bank of Canada wasn't alone in spurring this huge – and unanticipated – housing boom. Canada Mortgage and Housing Corp. (CMHC) relaxed underwriting criteria in ways that made housing tremendously more affordable for marginal borrowers. Those home buyers could get a mortgage with almost no money down at near-zero short-term interest rates"

and

At the peak of our own mania last fall, home prices soared more than 20 per cent on a year-on-year basis and home sales skyrocketed 70 per cent. These data points all have a “U.S.A. circa 2005” feel to them

Here is the article

Now to be fair, Rosenberg has been calling for a drop in the stock market for almost a year now. I used to read his weekly up-dates, but found that there were soo gloomey, that it kept me from buying any stocks and I missed a good run-up.

However he make some very valid points in this article.

North by New West

North Van had astounding numbers today...

26 New listings....11 price changes..ONE sold. Wow. Oh yes and one price increase :)

I cannot explain this. Most places had a reasonable list/ sale ration. even Whistler!

But N. Van is a stinker. New West was a little thin too at 15, 10, 3 and Burnaby at 26, 10, 6.

Lots of places with 4/1 list sales or worse.

Van East is still hot nearly 100% list/sell today.

An odd picture. But we do seem to be drifting into a new pattern here...sales are still low. Listings were low, but are starting to pick up. Lets see if it becomes a trend.
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Victoria sits at 12 MOI.

Here is the graph

Here is the blog for Victoria- look at how September is shaping up.

Some numbers

West Van 12 New, 6 Changes, 1 Sale

North Vancouver 24 New, 8 changes, 12 Sales

Van West 71 New, 24 Changes, 18 Sales

Whistler 5 New, 1 Change, 0 Sales.

BTW- ear on the ground from some agent friends, off-shore owners may be net sellers. Lost of them have listed and sold. Maybe the high prices + high CAD were too tempting...or maybe the tax/strata- fix and repair daily was too much.

In any case this would seem to against the urban myth prevalent now.

It's not worth the effort!

Just got North Shore Numbers. Some bears must be coming down from the mountains for a few snacks before hibernation.

West Van (all types)

11 New Listings, 4 Price changes and 2 sales - one sale was for 30% above listings..huh!

North Van (all types)

17 New Listings, 18 Price changes and 3 sales.

Van West (all)

60 new listings, 2 back on the market, 22 price changes, 19 sales.

What's with the title? - well dear seller, if you have a Million $-plus house and it hasn't sold for many months, a $10K deduction won't have them breaking the doors down!

City of Vancouver and the Olympic village

So we are waiting to see how much the COV will be on the hook if they don't cover their costs on the Olympic Village.

Estimates go as high as $1 Billion. They apparently knew for years (2007) that the project would be in trouble and the City's investment would be at risk, but I didn't hear anything until the credit crisis conveniently came along in late 2008 to blame it on.

There was a secret deal (that's what in camera means) to lend $100 Million to the project in fall of 2008, and now we are in it up to $1 Billion.

That is unfortunately the down-side of PPP (Public Private Projects) the Private gets all the profits and the Public walks off with the losses. What else should we expect when we get Wall Street financiers and Developers signing contracts with council-folk who spend most of their time wondering how to increase hockey hours on the local ice-rinks. Lamb to be sheered.

The question is - who advised the CITY? Which law firms or financial institutions-anyone know. What is their liability in all this?

How much is $1 Billion? Well hopefully the city won't lose that much, but to put it in perspective, it is one year's total annual revenue +/- or it is double the current outstanding debt.

As for our debt rating, I checked and the city's short term debt seems to be holding up well - comparable to the banks but that could change

It is truly a scandal as Gary Mason says and if it bites the COV badly then we can look forward to reduced services.

Too late..

Front page article in the Globe and mail which is worth reading. In fact, IMVHO, the Globe is the only national paper worth reading- the other one is very good for putting under your muddy boots after a good hike.

OK, so the article tells us that debt levels are reaching such high levels that the government may need to intervene to keep 'marginal buyers' OUT of the housing market.

It also says that people are so deep in debt from getting into housing, that hundreds of thousands they are:

1) In a precarious debt position and any rise in rates would put them in peril

2) they are cutting back on other spending.

Isn't this what us bears have been saying for two years!! Where has the OECD and other great economist been when these policy decisions were being made?

Ok folks there is so much here, I don't know where to begin!

Lets go back to 2007, the US housing market implodes and through 2007 and 2008, banks collapse and all the casinos on Wall Street like Lehman and Bear Stern, Merrill followed.

The world hit the wall and capitalism (at least this ponzi form of it perfected in Wall Street) was about to end. We were fairly ok, because we had tighter lending standards and 'marginal buyers' were kept out.

So how did we deal with the problem?

Drop rates to zero, double the CMHC lending capacity - bring in the marginal buyers and become like the US!!

WTF! Of course it worked for a short time. It pushed up housing prices, and instead of punishing speculation, it rewarded it and taught people in a Pavlovian way that they were stupid to be cautious and careful and should have jumped on that little blip down in housing.

Our house prices went through the roof (sorry) everywhere- from SK to Ont to BC, and everyone felt rich again (at least the 60%+ of families that owned) and many borrowed on this new wealth.

Those that bought in the last year, have often mortgaged their molars to get into this market.

Housing is not a very productive way to stimulate the economy-it is quick and lazy and requires little planning - unlike good technological investments, or good infrastructure projects (not just the make-work stuff that we see happening too often). You cant export too much housing- some of it you can via off-shore buyers- but it does not generate long-term wealth if it is not anchored in rising rents and incomes.

The US experience should have made that blindingly obvious.

What about pulling in the marginal buyer now? Well like the horse that is running free outside of it's stable, the debt has already been piled on to the rafters. Any drop in housing will send the 'marginal buyers' into default.

Too late. Too late.

Bet you didn't know this...

Neither did I until recently.

If you pay or collect rent as agent for some one who is a non-resident, YOU are obliged to deduct 25% and send it to Revenue Canada!

At least that's what someone told me and that's what it seems to state HERE.

I am certainly no tax expert - but I do know of people collecting rent and managing apartments who may not know this. One is doing it for a buddy who has gone to Singapore for a few years.

If you file a special form, you can reduce the 25% deduction from Gross rent to Net rent (which I guess is after strata and expenses and property taxes), but you have to file a tax return for the year.

Like I said I am not a tax expert by any means, but if you know of someone either paying rent to someone who has moved or lives elsewhere or is managing their property, send them the link above, as they should get professional advice.

Ignorance of the law is not a defense.

Here it is in full:

International and Non-resident taxes > Common Topics > Rental income and non-resident tax


Filing and reporting requirements When you receive rental income from real property in Canada, the payer, such as the tenant or a property manager, has to withhold non-resident tax at the rate of 25% on the gross rental income paid or credited to you. The payer has to send the tax to the CRA on or before the 15th day of the month following the month the rental income is paid or credited to you.

The payer has to give you two copies of an NR4 slip showing the gross amount of rental income paid or credited to you during the year, and the amount of non-resident tax withheld. The payer also has to send us an NR4 return, as explained in Guide T4061, NR4 - Non Resident Tax Withholding, Remitting, and Reporting.

Generally, the non-resident tax withheld is considered your final tax obligation to Canada on the rental income. However, if you elect under section 216 of the Income Tax Act, you may pay less tax, and you may also receive a refund of some or all of the non-resident tax withheld. For more information, see Guide T4144, Income Tax Guide for Electing Under Section 216.

If you intend to elect under section 216, you may also want to consider having non-resident tax withheld on the net rental income instead of the gross amount. To do this, you and your agent (a resident of Canada who acts on your behalf regarding your Canadian rental income) have to complete Form NR6, Undertaking to File an Income Tax Return by a Non Resident Receiving Rent From Real Property or Receiving a Timber Royalty, and send it to us for approval.

If we approve your Form NR6, your agent has to withhold non resident tax at the rate of 25% on your net rental income (i.e., the amount of rental income available after the rental expenses have been paid). Your agent must send us the tax on or before the 15th day of the month following the month the rental income is paid or credited to you. If we approve your Form NR6, you must also file a section 216 income tax return for that year, even if you have no tax payable or you are not expecting a refund.

You should send us Form NR6 on or before January each year, or before the first rental payment is due. For more information, read the Important reminder about Form NR6, and see Guide T4144

Okanagan

Sorry Chad. I know it is outside of Vancouver.

Over-all for the whole OK- 455 sales and 9897 listings = 21 MOI

Actually a few more sales than July, but high MOI and the prices!

Here are the stats for the Central OK.

Look at page 9. Prices are flat compared to last year to down for all categories except apartments. As expected lots and bare land got hit hard as specumoney came off the bid.

It is a small sample and I always have trouble following all the stats in these packages, as the focus always seem to be total dollar volume of sales and not the HPI or prices. The North Okanagan and Shuswap look similar.

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.

Vivat Regina!

I had to put up another picture of this fine lady, she was such a happy, photogenic historical figure :)

Well Victoria now has RE price graphs that would make a bear growl with delight.

Cast your eyes over these babies

..and they have 10.5 MOI

Clearly sanity has returned to the Victoria market. Lets hope it crosses the Georgia Straights.

"We are not amused".

HPI is OUT- No change

GREATER VANCOUVER

For all Residential properties:

August 2010 HPI r - $576,597

July 2010 HPI - $ 577,076

All time high HPI April 2010: $593,419

For Detached:

August 2010 $795,076.

July 2010 $793,193

For Apartments:

August 2010 HPI $385,968

July 2010 HPI $387,879

For Attached:

August 2010 HPI $489,511.

July 2010 HPI $490,995.

All changes are +/- 1% ie well within the error of sampling and modelling. We can say with confidence that House Prices in Greater Vancouver were flat from July 2010 to August 2010. At least we have moved from option 3 in my previous post to option 2).

MOI is 7

Now lets see what higher MOI brings us.

Vancouver the Surreal City

Larry is out first with the Average Price again- kudos.

I usually put his chart on my blog (with his permission). However I cannot do it this time. My stomach wont let me. We suspected that prices were strong. Well answer this students of economy 101

Imagine you have something to sell and the inventory in the market place, from the previous month, is up over 20% and the sales are down nearly 40%, what should happen to the price:

1) Go down sharply

2) Stay flat

3) Go up!

Of course the right answer and the one which will give you the course credit is 1) but in fact what has happened is 3)!

We are now back up to our all time average price in detached (though condos fell). I am not going to try and explain it away for you, yes it could be higher end buyers are still buying while everyone else has dropped out of the market.

I will just suggest that state of affairs cannot continue. We will either have to have more buyers coming in to the market soon, or the price will take a sharp down-turn.

If I am wrong and September shows less sales, more inventory and higher prices...I will close the blog down because there is no point commenting on an irrational market.

After all our huffing and puffing above, we may actually see the HPI come down for August. For that we have to wait for the GVREB numbers.