All eyes on the HPI..

OK folks we know that sales are down big time compared with last year. We know that listings are also down and so list/sales are robust.

MOI is still around 6 months +/- though and higher in some areas (see Larry's site).

The average pice and median in these circumstances mean very little. If wealthier buyers are still in the market or the homes sold are the cream of the crop, then both these numbers will be up.

What we will have to look for is the HPI to see which way we are trending.

Whistler Sales up. 9 sales in the week to Oct 17th

But with some hefty price reductions. One sales was 20% off the list price and was the lowest sale for the complex going back to 2003!

I follow THIS site for Whistler info.

I have never met or spoken to Dave, but he seems like an up-front guy on his blog. Here is a snippet of his last post:

'Next was also renovated 2bed/2bath townhouse in Glacier’s Reach. 16- 4388 Northlands Boulevard sold for $405,000. It was viewed as an real bargain by many Whistler Realtors. It had been listed as high as $669,000 at one time.'

That's a slice of nearly 40% off list price!

Note to OK, Victoria and Vancouver listing agents - if you want to get sales going again- cut the prices. BTW if you are looking to buy in Whistler- get the red pencil out and don't be shy about haggling!

Be careful what you wish for in case it comes true....

So goes the saying, and it may be very true about our RE.

There was a real eye-opening article in the Globe and Mail (hat tip to Paul B who posted the link at Vancouver Condo)

It illustrates just how dependant we have become on the RE circus in Canada, thanks to the relentless pumping of the last decade..

That has dramatic implications for employment and consumer spending levels – and for an economy that has grown accustomed to relying on housing-related spending for about 20 per cent of its gross domestic product.

20% is no joke. According to the article we are already contracting with sales down 45% from last year and prices at last year's levels and housing starts are down 20% too. So what would a contraction mean? Well it would mean major job losses, especially amongst construction workers, and Real estate agents and renovators. the problem is these fields do not have skills which are easily transferable to other areas.

Luckily Canada is not a one trick pony. We have wheat and oil and gas and gold and commodities galore. Hopefully the housing contraction will not happen at the same time as a commodity slow down or we could get into trouble pretty fast.

Lucifer's children

What is it with these banks? One by one their economics departments are coming out with reports on how over-leveraged Canadians are and how much trouble they could be in with either a small rise in interest rates or a drop in the economy. They put the blame squarely on the shoulders of the over-priced housing market, with Vancouver coming in for special mention again and again.

And yet..these same banks are coming up with ever more creative ways to squeeze Canadians into debt. Remember 'You are richer than you think', remember the Bank of Montreal ads where the guy uses home equity for holidays.. how about TD!! and the cash-back mortgage! That is exactly what they were doing in the US before the bust.

Don't the idiots in the marketing department talk to the economics department? Maybe they don't - maybe they have different mandates. How about the old guys pulling down the multimillion dollar salaries at the top. Shouldn't they be looking at the reports and call their mortgage departments and say..."hey Frank go easy on the home equity-porn ads'.

Maybe they don't spend enough time off the golf courses and off the boards of directors of other companies to actually run their businesses properly.

Or maybe they think the tax-payer will just pick up the losses via the CMHC.

Grrrrrr....

Very big list/sales today

I guess Larry was right when he said he saw some more buyers coming in.

So what do we make of this all?

Maybe the bulls are right. Maybe the combination of low rates for ever, Mainland Chinese investors, limited land, Retirees from out East, Booming penny stocks (I know some local mining guys who have made several $Mill this year), lots of highly-paid professionals will keep a bid under our property for ever.

Hey it is possible. I had always expected a 30-40% correction and in Spring 2009, I said that we may have just got that with the combination of lower rates shaving 20-25% off mortgage payments and prices dropping 15%.

Was that it?

Now we just go onward and up-ward.

What about Fraser Valley and the OK and Victoria and Whistler? Do they play catch up or does the buying move back out to them instead of the slump moving toward the centre?

I wish I could answer that question. I frankly expected buyers to go on strike here as they have elsewhere in the Province, but that wasn't the case. I expected prices to start a quick downhill slide, and that has not happened- though our local celebrity Realtor, Bob Rennie is already complaining that the HST and Campbell are ruining the housing market!

Ruining! We haven't even had a proper correction yet!!

Must RE only ever go up?! Are we so precariously balanced that even when it stops going up, we have to gnash our teeth and wring our hands? Apparently yes!! Today it was the TD's turn to weigh in with warnings. 10% of us are on the verge of catastrophe and it is all because of mortgage debt and the blame is 100% at the feet of the B of Canada and Government. They are the pushers who enabled this to happen.

What about the poor folk who are waiting to buy? Are they lesser Canadians? The politicians keep talking about helping young and poor Canadians buy a home. The BEST way to help them is let prices drop to affordable levels. Stop meddling! Stop dropping rates and insuring mortgages for a start.

OK so is this a capitulation post. No it isn't. But once again I am baffled by the market and once again I am willing to quit or at the least go on a hiatus from blogging IF (Chad get you pencil ready):

October shows up with:

Lower sales
Higher MOI

..and higher HPI.

because they do not add up and there is no point blogging about Alice in Vanderland.

Ok folks what did you see this week-end?

I went round some of the open houses d/t and saw condos in grade A buildings , with views and nicely up-dated asking $550/foot or less.

That is lower than I have seen for most of this year.

I would be very surprised if we don't see a lower HPI for condos this month.

I also suspect we are due to get an up-tick in interest rates. I don't mean the B of C decision coming up on the 19th October - I doubt if even Mark Carney knows what he is going to do. Maybe he will just open the paper that morning and see what the head-lines say and decide on that. After all- we were double dipping a few weeks ago, now we are all systems go!

I am talking about 10 and 30 year rates which have been trending down with the US rates and look to me like they want to start a little rebound.

Chad..Chad..Chad...

Was going to put up a tax post- but gotta answer Chad's points-Chad's comments and mine below in green. I will put up the tax post in the next few days.

ChadMPNP said...
Fish,

The last post is full of a ton of incorrect hyperbole's.

We are at 10% unemployment in the US. That isn't hyperbole it is real especially in a country with limited social safety nets and the number one cause of bankruptcy is medical bills. Losing your job (and hence your medical coverage) is a disaster.

I can list many individuals and firms that predicted and profited from the US crash.

Please list them. Not hedge funds please. We know some of those scum-bags made money, most of it by forcing the tax-payer to pay AIG's bad debts.

I know many people that bought into the correction of 2008 in Vancouver and have sold for a handsome profit during the snapback to new highs in 2010.

They did in indeed. No argument there.

I have an issue with Canadian bears always saying the Govt and BoC came in and artificially pumped up the markets to new highs.

Some simple internet searching would have made you think twice about that statement. The CMHC borrowing ability was tripled between 2007 and the end of 2009. Some of that may come to bite us in the future. In total the CMHC has over $500 Billion in liabilities. The CHMC has insured 90% of all insured (and therefore high risk) mortgages. So the tax-payer is holding the crappiest paper of all, and lost of it.

Then the Bank of Canada cuts rates so that mortgage payments drop by 25% or more.

You dont think these actions saved the market from a well-deserved correction??

The market goes where it's going to go, stimulus is very short term in nature, you can't whine about a market that has gone up for 2 years and blame the govt because even more stimulus was given in the US and their markets are still making new lows. Why when they've done pretty much everything Canada has done and then some in the US is their housing market still at lows?

The reason for this is obvious. The US RE industry is BK. We were just over-priced. The US hits the fan and our dumb politicians - who, BTW hated the Socialist CMHC and Wheat Board and EDC and WEDC when they were in opposition- do the simplest most brain-dead thing they can to stimulate the economy. They lower rates and let people who-really-cannot-afford-to-buy into the market, insured by you and I.

Result: we go where the US WAS before their debacle.

They should have sat back and thought about the right move, but instead like deer in head-lights they jumped on trusty old RE to pull them out of the hole. Yup it did that all right. Instead Canadians put themselves into the hole with debt, but the pols could say they staved off a recession and BTW they get to boast that our banks are so solid..

duh..yes

The banks are lending it out at 4% and paying savers ZERO. That's a good scam. Meanwhile the riskiest stuff is being insured by us..so they just get to clip coupons. Take away the risk. Have a steady Eddy 4% spread - which is historically very high- NICE!

But even they are getting worried about this madness and every week another bank is coming out with reports warning that RE is grossly over-priced especially in this fine town.

I should throw some numbers up.

But there isn't much to report. About 50% list sales through-out.

North Shore

21 New
1 Back
20 changes
11 sales

Some Fraser Valley 14 day Numbers- which are showing some weakness.

Mission

63
8
56
23

Langley

185
15
140
62

Abbotsford

132
14
130
72

North Delta, Surrey, North Surrey, Whiterock and Coverdale

595
39
451
289

BTW- I always have considered more price reductions than sales a sign of weakness coming into the market. It may lead to more weakness, or the new, lower prices may bring in buyers and stabilise the price. In 2008 it led up to the flash crash in RE. Lets see what it brings this time.

I should throw some numbers up.

Numbers and some advice..

North Shore

29 New

2 Back

21 Changed

14 Sales

Van West

52 New

3 Back

31 Changed

20 Sold

Surrey

13 new

1 Back

16 Changed

12 sales

Maple Ridge

11 New

15 Changed

6 Sold

Ok folks, I guess a lot of you are renting. Who is managing the rental? I have come across the four entities..

1) The owner

2) The owner's uncle Al

3) A Real estate Agent managing a few properties on the side.

4) A property management company or Real Estate Agent who does full-time rentals.

My advice, from having come across all four- Try and get hooked up with a property that is managed by the last one.

The owner, uncle Al and some real estate agents who dabble in renting- often do not seems to even know a Residential Tenancy Act exists! Uncle Al drank my deposit as soon as he got it, considering it as extra commission, and it was like pulling teeth to get it back, and of course he had no idea that he was supposed to return it WITH interest.

I found owners to be penny-pinching as they are often very tight on covering the expenses with rent and even the smallest repair is a fiscal disaster. The on-the-side Real estate agent are too busy, often don't return calls on time, don't have good contacts and have not been a good experience.

While the property management company and full-time renting agents are working for the landlord and not you (never forget that) they have a reputation to protect, they know the laws (generally) and they have contacts to get repairs done quickly. If you can chose between any of the above four, pick the last one.

Some end of the week numbers

Last 7 days..only going to look at list and sales...

North Shore:

139 New
12 back from the dead
62 sold

Whistler:

22 New
11 back
8 sales

Burnaby:

131 New
9 returning
69 in new hands

Squamish:

13 New
3 Old friends
6 in debtor's hands

Van West:

314 Virgins
20 Old hands
146 Bought for an arm and a leg

Coquitlam:

93 Freshly ground
8 stale but trying again
32 off to the chapel

Sunshine Coast:

28 pulled on
14 pulled back on
9 gone for now

Langley:

103 fresh as fallen snow
12 trampled a bit
38 shovlled up

Have a great week-end. May put a post up on Sunday, if not - enjoy the turkey or tofurkey or sweet and sour turkey or curried turkey or shish turkey or whatever tickles your fancy.

OK Vicky

OK first (sales/total listing/ MOI)

Central

221/ 5059 = 23

Northern

134/ 1663 = 19

Shuswap

143/ 1663= 29

All areas

413/ 9305 = 23
............................

Victoria

395/4300 = 11

From the Victoria RE Board

'A total of 395 homes and other properties sold in September through the Victoria Real Estate Board’s Multiple Listing Service® (MLS®), down from the 425 sales in August. There were 776 sales in September of last year. '


Like we saw in Vancouver the average SFH price bounced a little , even as sales were down- half last years.

ie more expensive properties are selling. Though they are still down 10% from the peak and condos look like they are sliding down a very slippery slope.


All well into bear territory. Lets just go over that again. At CURRENT sales it will take two years to sell all the properties listed in the OK. That would mean the over-priced or crappy stuff never gets sold.

Detached HPI is Down!- Just added Fraser Valley numbers

What did uncle Fish tell you? I told you in several posts and comments that I expected HPI to be down, as the buying has moved to higher priced properties.

Well the REBGV numbers are out:

HPI - August $795,076 Detached

HPI- September $790,992 Detached

Attached is flat and apartments are up a tad, but detached is down nicely.

I would say prices are flat at best and that many areas have MOI which are in the double digits and are waiting for more seller anxiety to bring on price reductions.

MOI= 7

Lets see what Fraser Valley, OK and Victoria bring.

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

Fraser Valley Numbers Benchmark prices

Detached- down 0.5% fom August 2010. 3.3% higher than Septmeber 2009

Attached- down 0.8% from August 2010. 3.2% higher than September 2009.

Apartment- unchanged from August 2010. Down 0.3% from September 2009.

MOI = 9.5

Victoria is really not Amused

September 2010 .....

Victoria hits 20 year low sales.

Less than half the sales of September 2009.

Same New listings as September 2009.

20% higher total listings than September 2009.

Watch This

Does this sound like a strong market?

MOI 11

This is all happening with extreme low interest rates, and with a fairly robust economy. SO what's up? Basically things are just too expensive.

The wealthy can and do still buy. They aren't adding up the mortgage and the taxes and wondering whether they are paying 60 or 75% of their income to buy- which is why the average and median prices are moving up, even as sales collapse.

That doesn't mean that sales cannot come back, some RE agents expect them to, but if they don't and sales keep heading down - prices will follow.

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

This mortgage broker's blog is the one mentioned in the news report and worth reading. The 21st September entry is the one to read:

http://www.victoria-mortgages.com/blog

While we wait for September's numbers to come in From around the Province

We can cogitate a bit on what is happening with the City and Millennium. The story posted on other blogs is here.

Here is my thoughts, for the very little it is worth:

1) Millennium bit off too much. Not only the enormous Olympic Village, but developments on Vancouver Island, a tower downtown and a large development in West Van (Evelyn - designed by Arthur Erickson). All this was being done simultaneously. These guys were coming off some nice developments, Water's Edge in West Van and L'Hermitage Downtown so I guess they just carried away with their own hubris and ego and over-stretched.

2) Who is responsible? No one apparrently. It was just the financial crisis of 2008 , which by the way seems to have passed and we are at new highs in RE prices and yet this project is still a bust.

The Mayor and Councillors came out fighting today. They must percieve that there is going to be a big red hole and the quicker they are seen to be fighting hard to get back tax-payer's money the better for their political future. Until now everyone had been talking in very diplomatic and conciliatory tones, but the gloves are suddenly off.

So who is responsible? Well a developer in these agreements is responsible only to make the best deal for themselves. It is the responsibility of the City staff, councillors and advisors to make sure the sharks don't eat us...good luck with that!

The truth is the City of Vancouver was on the hook for this project as far back as 2002 when it was signed. Do you remember all the fanfare at the time about how this was a partnership with a private company and wouldn't cost the tax-payer anything except the land and they would be making money on that too! Wow. Amazing. Most other cities were driven to near bankruptcy by building Olympic Venues. But some of ours would be built for free, even a hefty a profit. Nice...lets have two.

Most of the senior staff who were there when the contract was signed are now out. Most of the Councillors are gone. Even those who apparently voted against it, did not speak up about the problems with the deal until it hit the fan (see the article).

BTW- why were so many of the meetings held in camera regarding this deal. I think it gives local politicians a sense of importance to have these oh-so-secret-the-national-security-is-at-risk meetings. In my experience the decisions that come out of these meetings are invariably BAD!

What is still a mystery to me, is what legal and financial advice the CoV got. Hopefully they did get some and did not just depend on staff and their own hunch on the matter.

If they did, What is the liability of these advisors Anyone have the energy to contact the city and get this information, or have we have all sank into whining apathy.

3) Ok so what now? Struggling developer with many diverse assets + dropping sales + unsold OV + complex agreement + $500 M or more on the line = Bonanza for lawyers.

What if the City takes a really big bath on this? Cut services, borrow money, raise taxes? What will they do.

My vote is to make Jacques Rogge and his merry band of Olympic glad-handers take them off the books. In fact Gregor Robertson should fly to Switzerland (now that he is back from China) and ask Jacques to buy an apartment each for all his Olympic committee members for all their hard work. They don't have to actually take possession, they can just rent them out like most of the other specuvestors in this town, and Voila the problem is fixed.

It should just be chump change for the Olympic Committee.

Next post- how should we tax homes.