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Tuesday, July 31, 2012

Tues Post #2: How crazy is real estate speculation in Vancouver?


You gotta love the chutzpah of a bubble market.

The video above is for 1490 Balfour Avenue, a mansion in the toney Shaughnessy neighbourhood of Vancouver.

It's 8 bedrooms, 5 bathrooms and 3 half bathrooms. A massive 9,414 square foot house on a 17,827 square foot lot.

The current assessed value of the property is $3.05 million.

So how crazy is the speculation in our market?

Well...  in May of 2011 this house was acquired for $2.98 million.

In January 2012 it was listed for $5.98 million!

(Really? You're trying to flip a home for a $3 million profit?)

In March 2012 the asking price was 'reduced' to $4.88 million.

Recently the asking price was 'reduced' again and the current asking price is $3.988 million. Here is a screenshot of the current listing (click to enlarge):


If it sells for that price, it still amounts to a $1million gross profit in one year. Clearly the buyer was hoping to take advantage of HAM (Hot Asian Money) and the evaporation of that market has cut the bottom out of this buyer's wild expectations.

You have to wonder if the property is marketed as '40% off'?

Such a deal, eh?

Hat tip: gse36

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Tues Post #1: Motivated! Must Sell! Craigslist as a gauge for real estate desperation?


For kicks and giggles I did a craigslist search for the term 'must sell' in ads listed on July 29th and 30th.

It's hard to imagine craigslist as the pawn shop of the real estate industry, but there was a curious number of listings found.

Search with the term 'motivated' and another plethora of listings emerges.

Personally I find the whole practice of selling a home on Craigslist somewhat bizarre. I can understand looking for renters on Craigslist, but a buyer?

Some say that the advantage of Craigslist is its “ubiquitous nature” in that, like Google and Facebook, the site is well known and is still the place on the internet for online classifieds.

And it's not just lower priced homes. There are listings for multi-million dollar homes on the site as well.

Really? A 3 million dollar home hawked in the same manner as used camping gear?

It seems to me sellers are likely to find that Craigslist may not drive the kind of traffic and interest to their home that traditional marketing methods do. But in a down market, surely many realtors are viewing the use of one of the internet’s premier local bulletin boards option as one where they have nothing to lose.

I'm curious to keep tabs on this in the coming months.

Will the number of CL ads from the 'desperate' ballon exponentially? Can the CL factor become a gauge for desperation end of the market?

I guess we will see. Click on the images below for a selection of today's search.








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Monday, July 30, 2012

Debt Bomb: The Global Financial Crisis explained in song - updated


A creative explanation of the Global Debt Crisis through the medium of burlesque striptease as Austrian economics is set to a catchy pop tune - with beautiful babes and everything!

Ultimately there's quite of few pearls of wisdom in the lyrics. Original song was Sex Bomb by Tom Jones.


Oh! 
Oh, baby! 
Yeah! 
Oooh, yeah! 

Listen to this. 
Mortgage is cause of consumer shite, 
Government spending all through the night. 
Pensions and healthcare and welfare rights, 
education, wars to fight. 

Run up the deficit, ignore the facts. 
Blame someone else, put up tax. 
I can't deny, we had a crack,
but now we gotta pay it back. 

Debt Bomb, Debt Bomb, You're a Debt Bomb. 
The addiction to credit just goes on and on.
Debt Bomb, Debt Bomb, You're a Debt Bomb, 
A bailout... oooh, you turn me on. 

You know what you're doing to me, don't you? 
ah, ha, ha... I know you do. 

If you can't afford it, don't be ill at ease, 
No?
Spend it anyways you've got voters to appease. 
Take the prudent savers and just give them a squeeze (Ow!) 
That's the economics of Keynes. 

One more time now! 

Quantitative Easing, zero interest rates, 
Steal from the future, hide the bad mistakes. 
We've gotta keep those asset prices high, 
No matter if the credit's dry. 

Debt Bomb, Debt Bomb, You're a Debt Bomb, uh-huh. 
Try to pay the debt off with inflation. 
Debt Bomb, Debt Bomb, You're a Debt Bomb, 
Malinvestment, Ooooh you turn me on. 

A boom caused by excess credit will always bust, Yeah!
You've then got two choices, decide you must. 
Abandon the addiction of credit lust, 
or the currency collapses... it just turns to worthless dust. 

Debt Bomb, Debt Bomb, You're a Debt Bomb, 
Destroy the country's money, anything to carry on. 
Debt Bomb, Debt Bomb, 
You're a Debt Bomb, Bubbles oooh, you turn me on.


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Sunday, July 29, 2012

Another Vancouver West Side Realtor with an honest assessment of conditions


Meet Andrew Hasman. 

He's another realtor from the west side of Vancouver who has been calling the market for what it is... a bubble.

A year ago, when prices were going crazy on the west side, he wasn't one of the cheerleaders for what was going on. Quite the contrary, he was calling the market 'unhealthy' and warning about the consequences:
"The local person is completely out of this market," he said. While skyrocketing prices have made business good, Hasman said that the current market, with housing prices rising 10-15 per cent each year, is unhealthy.

"Anytime you have extremes in markets, it's never healthy," he said. "You end up with a bubble. If the local economic base can't support these levels, then at some point you're going to have a lot of people burned big time. It's not sustainable."
A realtor telling you that a bubble is forming and that if you get caught up in it you could get burned?

Wow! And... he was saying that in May 2011!

So as July 2012 unfolds into what is possibly becoming one of the worst months for sales since he became a realtor in 1993, let's take a look at his observations for last month on Vancouver's West Side:
This feels like the first Normal Real Estate market in many years. That is if you can even define or remember what 'Normal' really feels like.

Gone are the bidding wars and gone (for now) are the days when homes were selling in mere days. For buyers there is now good selection and no pressure to make that big commitment. For home owners trying to sell, patience is required and making sure you list your home at 2012 price levels which may be 5 to 10% below where they were a year ago. This all being said, when you price your home correctly we are seeing buyers show up with offers.

Sales of home across the Greater area of Vancouver are at levels not seen since 2000!

Overall, prices still seem to be holding with some price softening in specific markets only. Vancouver’s Westside looks to be one of those markets.

Fewer buyers from China, tougher mortgage regulations and concerns over the global economy are all weighing on consumer confidence. I predict these market conditions will continue through the balance of 2012 with further price softening.
  • During the month of June there were 102 single family homes sold ( slowest sales since Jan 2012) versus 213 one year ago. A decline of 52%. Year to dates house sales are off 41%.
  • Average selling price of a house was $ 2,401,547 which represents a 2% decline from June 2011 and an increase of 2% year to date.
  • There were 1078 homes listed for sale at June 30th versus 603 last year. An increase of 78%
  • There were 10.5 month’s supply at June 30th versus 2.8 month’s last year. This is considered a buyer’s market.
In the past three years the houses saw most of the run up in prices with huge demand from Immigrant buyers. It’s now this market that seems to be experiencing the most price softening.
It seems Hasman is another of those rare realtors giving us an accurate snapshot of what is going on out there.

It will be interesting to see how he summarizes the month of July, 2012.

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Saturday, July 28, 2012

BMO says Vancouver market now down 15% - 20%. So much for the HPI as an educated measure of the market.


Faithful readers will recall that last Wednesday we were discussing 'average' prices vs the 'jury-rigged' MLS Home Price Index (HPI).

The Real Estate industry has launched their campaign against the negative news that house prices were declining.  They tell us that if you were to follow the 'misleading' average home price than you are...
"... left the impression that prices in the Canadian housing market had dropped compared to the previous year."
Silly us.

And why are 'averages'  bad?
"Averages are a horrible place to go," says Tsur Somerville, who heads up the Centre for Urban Economics and Real Estate at the University of British Columbia.

Gregory Klump, the chief economist at CREA, agrees. Using average prices is "like looking in a funhouse mirror," he warns.
So we are what supposed to use the Home Price Index (HPI). And what is that?
More than 15 years ago, the MLS developed its own home price index to get a clearer picture of price trends. It uses a complex statistical model to measure the rate at which housing prices change over time by tracking price changes in "typical" homes in each market. Each neighbourhood has a typical benchmark home.

"If you really want an accurate measure of what's going on with home prices, you've got to keep the quality of the homes constant," says CREA's Klump. "That's what the [MLS home price index] does. It compares apples with apples over time. It's not subject to a change in the sales mix the way average and median prices are."

What difference do the different approaches make? In Vancouver, for instance, the average selling price in June was $701,141, down 13.3% from last year. But using the MLS home price index methodology, Greater Vancouver prices actually rose year-over-year by 1.7%.
Ahh yes.

You see, all the 'educated' folks aren't mislead by silly things like the 'appearance' of price drops. The complex statistical model will tell you the truth. And the truth is prices haven't dropped the past year at all. They're rising.

The moral?... Don't believe that malarky that the market has dropped 13.7% Listen to seasoned, educated economists who will tell you what the numbers really mean.

So let's do that, shall we.

Meet Sherry Cooper.

Cooper is the Bank of Montreal's (BMO) Chief Economist. What does Cooper have to say about the Vancouver market?

On July 16th, on BNN's Market Sense, Cooper noted:
"There is already about a 15% to 20% correction in Vancouver, thanks to the overbuilding during the Olympics.
(hat tip VREAA)

Err?

15%-20% down so far?

So much for the jury-rigged HPI... at least as far as 'educated' economists go.

I mean... when even a real estate pumper like the Bank of Montreal's Chief Economist refuses to drink you Kool-Aid, what chance do you have that the rest of us will?

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Friday, July 27, 2012

Fri Post #2: Post July 9th Real Estate Sales are falling off a cliff.


So yesterday was another intriguing day for real estate sales statistics.

The entire Lower Mainland only produced 94 sales. In Greater Vancouver that number was a stunningly low 59 sales.

Incredibly 19 of those 59 sales were executed pre-July 9th, part of the glut of activity in the rush to meet the new mortgage rule deadline (and thus caught up in a backlog of CMHC approval).

Only 40 of those sales were post-July 9th. (hat tip zrh2yvr).

The bottom line is that post-July 9th sales have been amazingly weak.

Year to date West Vancouver sales are trending to be down 48.7% from the first 7 months of last year. Richmond is trending to be down 46.2%. And the west side of Vancouver is trending to be down 41.1%

The weak daily numbers lately have us on track to have the worse July in over 11 years, even worse than July 2008.

Can you imagine what those numbers will be if the post-July 9th trend continues for the rest of the year?

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Fri Post #1: Meet the chief obstacle in the Senate to Ron Paul's effort to audit the Federal Reserve. What did he say in 1995?

Yesterday the above clip was posted regarding Ron Paul's success at seeing an 'Audit the US Federal Reserve' bill passed in the US House of Representatives.

It is a landmark achievement but only the first step in the process to see the action become reality.

The next hurdle is the US Senate. Leading the opposition to prevent the Bill from even being introduced in the chamber is Senator Harry Reid. Ron Paul describes this opposition in the above clip.

Paul is confident that if the Bill can be introduced in the Senate, public pressure will see it passed.

And that pressure is starting to ramp up with the circulation of the clip below. It shows Harry Reid from 1995 making a speech in the Senate calling for - of all things - an audit of the Federal Reserve!!!

Oh the hypocrisy!


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Thursday, July 26, 2012

Thurs Post #2: Canadian home prices to tumble 25% according to one economist. Buyers and sellers in a standoff.


As buyers and sellers in Vancouver remain locked in a standoff, Canadian Press tells us about an economic report by Capital Economics which counters suggestions by some Canadian Banks that the housing market is headed for a soft landing.
If the Canadian real estate market continues to cool, house prices could see substantial declines next year and could fall by as much as 25 per cent over the long term, according to an economics report released Wednesday.

Though some economists have suggested that a tepid slowdown so far in the market suggests it is headed for a "soft landing," Capital Economics economist David Madani said he continues to believe that a more drastic drop is on its way.

"We think a housing correction over the longer-term is inevitable and still stand by our earlier view of house prices declining by 25 per cent," he said in the report.
The flurry of opposing opinions has been triggered by the fact both national home sales and the average home price were down year-over-year last month.

The national average home price in June was $369,339, down 0.8 per cent from the same month last year.

This triggered some pro-real estate groups to claim that you shouldn't pay attention to the average price (as we noted yesterday).  These groups suggested you follow their 'formula' which cast the 13.3% decline in the average Vancouver price as a 1.7% increase.

Home sales have dropped four per cent in the past two months and Madani said the trend is likely to continue given Ottawa's recent move to further tighten mortgage rules, by capping the maximum amortization term at 25 years.

Capital Economics economist David Madani went so far as to assert that considering that there is usually a lag between a drop in home sales activity and prices, significant declines in home prices could come in five to nine months.
The Capital Economics report acknowledges that house prices haven't started to fall en masse, but dismisses theories that Canada's housing market is enjoying a soft landing.

"There is always a stand-off period at the end of a housing bubble, when prospective buyers refuse to meet the prices of sellers, who refuse to drop to the asking price," said Madani.

The report warns that any stagnation in prices can be misinterpreted as a successful soft landing.
Certainly there is no doubt that the local real estate market has entered that stand-off.

And with record low interest rates already in place, no sign the federal government is going to reverse direction on mortgage rules to flush the market with more easy money, and an world economy that is showing no immediate signs of significant improvement... the next move is clearly in the hands of the sellers to reduce prices.

The only question is... how long will they wait.

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Thurs Post #1: Audit the Federal Reserve Bill passes in US House of Representatives


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Wednesday, July 25, 2012

The 'seasons' of Real Estate are turned on their head. Time to boost buyer confidence by telling you a 13% decline is really a 1.7% increase!


It's been fascinating to watch the daily real estate numbers come out this month.

Normally the summer months of the year are a period of dormancy for Canadian Real Estate. And August can be downright boring.

It's all part of the yearly cycle of Real Estate. Recently I came across a great item on the blog Urbaneer. It was posted in June of 2011 and described the 'Seasons of Real Estate'.

Urbaneer claims to make it their business to understand the dynamics of real estate, including how different seasons can impact the value and demand for real estate. Here is what they had to say:
Much like in nature, there are seasons to Real Estate. While there are four distinct seasons in our Canadian climate, the real estate market has but three, each with its own unique characteristics that contribute to the cyclic nature of buying and selling real estate.
And what are the three seasons of Real Estate?

Autumn, Spring and Summer.
Autumn

The autumn market, which runs three and a half months from September to mid-December, is driven by our fundamental need for shelter. At this time of year, real estate acquisition is often fuelled by pragmatism, prudence, and protection from the elements. Rooted deep in the human condition for survival, buying real estate in autumn is most often about retreat.

Autumn begins by firmly grounding us with its 'Back to School' regimen. The changing leaves, brisk winds and darkening skies signal the arrival of harvest, and the transition to familiar routines - among them getting back to the “business” side of living.
In Autumn, the market is alive and it's a major time of listings and buying.

As the season runs it's course from September to mid-December, the market slows dramatically for the Christmas break.  Once Christmas ends, and the New Year dawns, the next season of Real Estate gets under way...
Spring

Often starting with a New Year's Resolution to move, spring takes root in our enthusiastic desire to embrace change and stimulates the housing market. In spring we believe anything is possible which, in my opinion, is why spring is hook, line, and sinker the best time of year to sell.

The spring market, in particular the months of March and April, is an ideal time for home owners to list their properties for sale. It is in these critical months where the momentum of demand will cycle to its highest while the supply of good housing stock will be at its lowest.

There are a couple of reasons for this. Among them there is the fact that all the buyers active since the autumn who, for whatever reasons, did not secure a purchase. Now they become fully keen house hunters at the beginning of the New Year. Already suffering from buyers’ fatigue from several months of searching, these buyers are highly motivated. The problem for them is not their lack of motivation, but the limited supply of property.

While this group of ‘Autumn Buyers’ is aggressively searching, there is always a wave of new buyers in January, who have resolved to move in the New Year. This group uses the months of January and February to qualify their purchasing power and dip their toes into the housing search. During this time the autumn buyers begin snatching up the new spring listings by out-bidding the newer, less educated buyers.

But as March unfolds, both groups of buyers have now been sufficiently exposed to the dynamics of the market, and to property value, and are now aware of how the purchase process works. Armed with this knowledge, buyers compete, head to head in hopes of securing their spot in a still limited supply of housing. It is during these months when supply is at its lowest relative to the double cohort of qualified buyers.

The short supply of listings through the spring market is both a function of weather and the psyche of sellers. Although the spring market begins in January, winter’s harsh and bitter presence will often linger through March and April, making it too cold for most sellers to prepare their property for sale.

I mean, who wants to clear out their garage, shed or basement when there’s still ice and snow on the ground? Furthermore, unless a prospective seller is extremely organized or highly motivated, it can often take two to four months to prepare a property to be ready for sale, especially if they’ve been occupying it for several years. If they are only just deciding to list in January, it can take time to come to market.

For property owners spring is a great time to sell; the season creates an environment and competition. But don’t underestimate the power of autumn when the cycle typically repeats itself.
The Spring Market runs from January to April and is supposed to be a time of low listings and lots of buyers competing with each other in bidding wars.  

As you know, that's not what happened this year. Spring buyers were AWOL and listings exploded.

As the Spring Market draws to a close, we move into season number 3...
Summer

Summer, with its high humidity, roasting temperatures and long hours of daylight; this sense of seasonal freedom translates into cottage escapes & playtime, reunions & weddings, and beers & barbecues.

And, when it is summer leisure versus business, leisure usually wins - with good reason: we spend all winter dreaming of those lazy days of summer. With this pleasant distraction present for buyers, the business of purchasing property diminishes dramatically. In fact, the demand during summer for real estate can be so limited, many realtors will dissuade their clients from listing or recommend they postpone coming to market until autumn. As a result, the only properties which do come to market tend to be either relocations or changes in household status (the arrival of a newborn, co-habitation or divorce).


However, there can be an opportunity here; if the supply is low, it means there is limited choice for any active buyers looking.

By Labour Day the carefree days of summer fold and dwindle and the market moves back to Autumn.
Of course Summer, so far, hasn't seen the massive withdrawal of listings. The dynamics of the Real Estate 'Season's' have been firmly turned on their head.

Spring was a bust. Sales tanked, listings exploded. Summer has seen sales continue to tank while listings continue to rack up instead of dropping off significantly. The increase has been slow, dramatically slow in comparison to January to April, but it has increased... during a time when listings historically plummet.

A wrinkle to it all has been a surge of sales in an attempt to beat the July 9th mortgage change deadline.  This surge has failed to overwhelm the listings and it is the only thing that has prevented total inventory climbing each and every day this month.

But don't interpret this as a change in the overall trend. We still have not had one single day in 2012 where total sales were higher than new listings for that day.

Mix into this panorama this disturbing fact...

Since July 9th there have been 1,101 recorded sales.  But only 267 of them were executed after July 9th.  All the rest have been pre-July 9th sales caught up in a holding pattern waiting for CMHC approval.

The prognosis for the rest of July and August is clear.

Sales totals are going to be ugly.  The only reason they aren't horrendous now is because of the rush to beat the suddenly announced mortgage rule changes.

The dearth of listings that normally help balance the annual slow sales pace of Summer is not going to materialize.  Sure... it won't grow by the leaps and bounds we have seen from January to April... but they aren't dramatically declining either.

As the dog days of August give way to September, and a flood of Autumn listings prepare to come onto the market, the stage is being set for an absolute disaster in the fall.

For the Real Estate Industry, it will be crucial to have buyers WANT to enter the market.

Buyer confidence MUST be in place. The Real Estate Industry knows this.

So what does the normally dull, boring month of August hold for us?

I think we saw the first salvo from the Industry yesterday.

In an attempt to massage that crucial 'buyer confidence', we saw the appearance of a campaign to tell buyers that "Average House Prices Don't Tell The Whole Story."

The 'average' house price is down all across the country, particularly in Vancouver. This has buyer's retreating, afraid to catch a falling knife.

So what does the Industry do?

They come out telling you that 'average' prices are misleading you. You are told;
"It left the impression that prices in the Canadian housing market had dropped compared to the previous year."
Umm? Impression?

And so the campaign begins.

'Averages', we are told, are bad.
"Averages are a horrible place to go," says Tsur Somerville, who heads up the Centre for Urban Economics and Real Estate at the University of British Columbia.

Gregory Klump, the chief economist at CREA, agrees. Using average prices is "like looking in a funhouse mirror," he warns.
Don't you love it?

And just what should you be using if 'averages' are a 'horrible place to go?'

Why... the Industry's jury-rigged Home Price Index (HPI), of course.
More than 15 years ago, the MLS developed its own home price index to get a clearer picture of price trends. It uses a complex statistical model to measure the rate at which housing prices change over time by tracking price changes in "typical" homes in each market. Each neighbourhood has a typical benchmark home.

CREA, in addition to providing average home price data, also releases MLS home price index data for five major markets: Greater Vancouver, the Fraser Valley, Calgary, the Greater Toronto Area and Montreal. Sixteen additional markets are slated to be added in the future.

"If you really want an accurate measure of what's going on with home prices, you've got to keep the quality of the homes constant," says CREA's Klump. "That's what the [MLS home price index] does. It compares apples with apples over time. It's not subject to a change in the sales mix the way average and median prices are."

What difference do the different approaches make? In Vancouver, for instance, the average selling price in June was $701,141, down 13.3% from last year. But using the MLS home price index methodology, Greater Vancouver prices actually rose year-over-year by 1.7%.
Ahh yes... presto! change-o!... a 13.3% drop becomes a 1.7% increase.

See?

Prices aren't going down. That decline is actually an increase. You're not going to catch a falling knife.

And so the machinery begins to kick into high gear to 'educate' the masses.

But something has changed. In a year when the seasons of Real Estate have been turned on their head, so too has the psche of the real estate buyer. Buyer's don't seem to be falling for the manipulation as readily anymore.

It could be fun watching this next phase play out.

Maybe August won't be so boring after all.

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Tuesday, July 24, 2012

Are plunging real estate sales about to bypass the lows of 2008/2009?


To those who watch real estate, the sales totals the part few days are setting off alarm bells.

Summer is normally a slow period, but the latest results are positively dismal. The last three sales days have all come in under 100 sales.

Last Thursday's total was 87, Friday was 61, and yesterday - normally a high day because of the weekend - yielded only 86 sales!

And these totals are still infused with some delayed pre-July 9th sales. In the rush to beat the new mortgage rule deadline, many sales from the deadline surge are only now being recorded as closed. Of the 86 reported sales today, at least 33 were pre-July 9th.

Comparing daily sales to last year, average sales per day in July 2012 was 132. This July we are at 109 and falling. Some are even speculating that when the pre-July 9th sales work their way through the system we may see some sales day totals under 50!

Single Family House (SFH) sales are falling off a cliff, down 25% over last year and down 10% from last month at least.

The dismal numbers have some industry members fearing sales may plunge below 2008 levels as summer becomes fall.

Realtor Larry Yatkowsky takes a look at the numbers and suspects the market may be on the verge of a significant plunge.

Yatkowsky notes:
Back in June of 2008 Vancouver’s housing market was in the middle of a steep dive as it recorded only 33,136 sales. The decreasing number of sales continued to twist and turn as it dropped to September 2008′s total of 28,475 sales. That particular dive straightened months later with a grand splash as April 2009 recorded total sales of 21,459.
After the looking at the current trending sales numbers, Yatkowsky ruminates circumstances may be about to get much worse than in 2008 and that another big dive in sales may be coming:
It appears that the dive graph called Vancouver house sales contains indicators that the market may surpass September 2008′s lackluster performance with June 2012 recording 28,617 sales – only a few hundred sales separate the two... and its indicators (suggest) Vancouver’s real estate market’s performance is not about to straighten.

Will the result in Fall 2012 be a plunge greater than in September 2008? Will the slide continue below the bottom hit in April 2009?

Emergency level interest rates pulled Vancouver out of the last slide.

That stimulus won't be available this time so you can understand Yatkowsky's concern.

Alarm bells are going off for industry insiders.

You have to wonder at what point those alarm bells will start to sound with the average joe on the street. Because when they do, then the sales crash will become a price crash.

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Monday, July 23, 2012

They say all advertising is good advertising... how about a little notoriety?


'There's no such thing as bad publicity.' 

It's a famous phrase often associated with Phineas T. Barnum, the 19th century American showman and circus owner. Barnum was a self-publicist of the first order and never missed an opportunity to present his wares to the public.

The idea that no publicity can do harm is clearly open to question.

For someone seeking notoriety and a somewhat scandalous reputation, like Mae West in days gone by, or Paris Hilton in our era, that may be true.

Realtors often crave notoriety though. How else do you explain the antics of Cam Good or Ian Watt?

And certainly Watt has leveraged the car cam and youtube to that end.

So what happens when you set out to utilize youtube for attention and exposure, and you suddenly achieve a sudden surge of exactly what you were looking for... wouldn't it be cause to celebrate?

On Saturday we introduced you to Mary Cleaver and told you about several videos she had posted.


It appears her folksy youtube chat about the merits of Real Estate vs the stock market is garnering lots of attention. Specifically her dismissal of the mainstream media's commentary on the housing bubble and a pending collapse.

But is it too much attention?

After being bombarded with comments, Cleaver first disabled her comments section on youtube... and then she deactivated her youtube account altogether.

For the record, the youtube video description in her post (May 2012) where she countered the 'housing crash' stories on CBC's National back by insisting Vancouver isn't in an overheated market stated:
Contrary to general statements made regarding the real estate market in Canada, the Vancouver housing market is far from over-heated. April stats tell a story of lots of inventory and fewer sales than in both March of this year and April of 2011. With the exception of parts of East Vancouver, much of the city is in a balanced market and trending toward a buyer's market. Buyers find themselves with plenty to choose from, time to make a good selection, prices in many areas stable or even lower than in the last year or two, and historically low interest rates. For Greater Vancouver statistics for April, go to www.dexterrealty.com. For more information and to contact Mary, go to www.marycleaver.com
And her post in January 2012 offered this advice:
Q: I’m renting right now and thinking about buying my first condo, but price is a big concern. Is this a good time to buy?

A: I’ve had several questions asking about affordability in Vancouver. When it comes to housing, those two words are rarely spoken in the same breath. We live in one of the most beautiful, temperate, culturally diverse, exciting cities in the world. It should come as no surprise that it is expensive to live here and that housing prices are high compared to most regions in Canada.

The easy answer is that it is a good time to buy property when it is a good time for YOU. Are you keen to begin building equity and pay yourself instead of your landlord. Do you have a down payment saved or can you borrow money from a family member? Is your employment relatively secure?
There are several programs available to first-time home buyers that can save you money. Details on these incentives would fill a whole other column, but your REALTOR® can go through them with you and help you take full advantage.

But you want to know whether now is a good time in comparison to sometime in the future, so let’s look at current market conditions first, and then at interest rates.

What is the market for condos like? Is there a lot of supply? How does that affect prices?

Over most of the last ten years, Vancouver has been a seller’s market. Anyone who’s been in the market to buy property during the hottest times knows all too well how that goes: seeing 19 pairs of shoes at the front door at an open house; dealing with the stress of multiple offers; bringing our home inspectors along with us to showings, and listings that are sold before we even get a chance to see them. I very clearly remember the frustration of searching for my home during one of those times in recent history.

But Vancouver is not a seller’s market right now. We determine what type of market we are operating in by dividing the number of homes available for sale by the number of properties that were sold last month. That calculation gives us the number of months’ supply.

A Seller’s Market = 0- to 5-month supply
A Balanced Market = 5- to 7-month supply
A Buyer’s Market = more than a 7-month supply

Vancouver is presently a balanced market, though we are leaning a bit toward a buyer’s market in many housing segments including apartment strata units. In the city of Vancouver, there are almost 20% more listings on the market than there were this time last year. If you’re shopping for a home in much of the city right now, you will find that you have choices, a lot less pressure, and a bit of time to make a good decision. Average prices for strata units are presently very close to what they sold for two years ago – they have come down a bit since the spring. This is obviously great news for buyers.

But there’s even more good news for buyers, this time in the area of interest rates which, somewhat surprisingly, remain at an all-time low.

First-time buyers will often borrow as much as they can afford and are most comfortable with a fixed-rate mortgage so they know that their payments will not increase over the length of the term. Today’s qualified buyers can lock in for as little as 3.39% on a five-year, fixed-term mortgage. Historically, this is about as good as it gets.

So, there is choice in the market, prices have come down from their highs of earlier this year, and interest rates are at all-time lows. Assuming that you’re in a position to buy, the only reason to wait would be if you believed that prices were going to come down even more. But trying to time the market precisely is simply not possible and prices could well increase while you’re waiting.

Real estate prices in Vancouver go up over time. Historically, if you bought a home that you lived in for several years; you made money when you sold. There is no reason to believe that will not be the case for you now. This would hold true even in a seller’s market with average interest rates. The fact that market conditions and interest rates are in your favour is a significant bonus, and those conditions won’t last forever.

I came across this quote yesterday that illustrates the point:

“Don’t wait to buy real estate. Buy real estate and wait.”
As you can see, Mary had strong views which she wanted to share. So why run and hide when her message starts getting attention?

In the blogosphere she has achieved her goal of publicity... and gained a little notoriety in the process.

But rather than revel in the spotlight and push her message, she has run away from the attention.

Barnum would be so disappointed.

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Sunday, July 22, 2012

Jon Stewart explains the LIBOR Scandal


Great segment from Jon Stewart of the Daily Show in giving a brief explanation of the LIBOR scandal.


If you are in the United States, the clip is available here.


As faithful readers will recall we originally raised this topic back on July 8th

Stewart offers a comical, but relevant examination of the topic and why it's important.

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Saturday, July 21, 2012

Wilfully blind, voluntarily ignorant?


Two days ago we told you about an article in BC Business Magazine that heralded "The Real Estate Mania is Over."

The article observed.:
History shows that Vancouver has always been a real estate boom-and-bust city. Now that the most recent mania appears to be over, with sales falling and prices threatening to follow, there's no reason to think that's going to change.
They told us...
Fear and worry are rampant in Vancouver these days: the mighty real estate market is struggling. Whether it is in a tailspin or due for a monstrous crash is the subject of endless dinner conversations, office cooler chats and online messages.
But ultimately BC Business Magazine dismisses the inevitable crash saying:
Was this a massive bubble? Slightly. When prices rise that much, we’re nudging bubble territory. But bubbles imply resulting crashes, and I don’t believe we’re going to have one. Of course, prices will drop a bit, but an American-style catastrophe isn’t going to happen.
All the evidence and the author concludes 'I don't believe we're going to have a crash'?

There's a moral here.

The doubters will only believe it's a bubble if we have a crushing crash.

Until the crash occurs, no manner of charts, theories, or tales of congruent circumstances (leading to this very outcome in other countries) will convince them until prices actually collapse. To them... real estate always goes up.  It may have 'little pull backs', but it always goes up.

Always.

Nothing personifies this wilful blindness like realtor Mary Cleaver. Introduced to us yesterday via Garth Turner's blog, Mary is one of those who have swallowed the Kool-aid in pitcher sized gulps.

For your enjoyment pleasure, two videos from Ms. Cleaver.

The first is from January 2012 and Mary explains why buying real estate is far better than the stock market:


Next, our pixacious airhead attempts to counter the 'housing crash' stories on CBC's National back in May by insisting Vancouver isn't in an overheated market. From the youtube video description:
Contrary to general statements made regarding the real estate market in Canada, the Vancouver housing market is far from over-heated. April stats tell a story of lots of inventory and fewer sales than in both March of this year and April of 2011. With the exception of parts of East Vancouver, much of the city is in a balanced market and trending toward a buyer's market. Buyers find themselves with plenty to choose from, time to make a good selection, prices in many areas stable or even lower than in the last year or two, and historically low interest rates. For Greater Vancouver statistics for April, go to www.dexterrealty.com. For more information and to contact Mary, go to www.marycleaver.com
And now the video...


As I said, until the crash occurs no manner of charts, theories, or tales of congruent circumstances will convince people like Mary of what is coming until they see, with their own eyes, prices actually collapse.

And when they do, you can bet all Mary will be able to muster is: Who could have known?

Maybe we need to do our own youtube or car cam video to explain it to her?

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Friday, July 20, 2012

They say rats are the first to abandon a sinking ship: mortgage brokers diversifying out of mortgage business as sales plummet


The big news for those that follow daily real estate sales data is that it appears that not one single sale was recorded on either the East Side of Vancouver or in the toney confines of West Vancouver yesterday for single family houses.

Zero!

More interestingly large numbers of pre-July 9th sales still seem to be filtering through the system, presumably due to delays with CMHC approval.

On Wednesday we had 98 listings sold. But strip away the sales that took place before July 9th and the abysmal 98 sold listings plunges dramatically to only 35 post July 9th sales!

Yesterday of the 87 sales, only 27 were post July 9th!

What is that old saying?  That rats are the first to abandon a sinking ship?

If you're looking for a harbinger of what lies ahead as real estate stagnates, glance your eye at the mortgage brokerage industry.

In a recent industry news article we are told that some brokers are in the process of extending their reach beyond mortgages." 

It seems the brokerage industry has been anticipating these abysmal numbers quoted above and are preparing for a huge slowdown in the mortgage market...
Some mortgage brokers are now moving to diversify their product offerings as signs of a market slowdown begin to appear.

“Many operators are beginning to add commercial and personal insurance to their product mix,” said Gord McCallum, president and CEO of First Foundation Residential Mortgages in Edmonton. “For some it’s a strategic move; for others it may be a hedge in anticipation of the eventual cooling of the market.”

Six months ago, McCallum’s firm began offering clients home, business and auto insurance as well.

“It is a value-added service we want to offer clients to differentiate our firm from the competition,” he said.

The product offering is additional ammo in the firm’s battle against banks, and relies on employment of a licenced insurance broker to operate the firm’s auto insurance business. Mortgage brokers occupy the top floor of the office while the auto insurance is handled at the ground floor, he said.

“We are fighting fire with fire,” said McCallum. ”Auto insurance is an advantage because banks by law can’t offer general and auto insurance in-branch.
The article makes no bones about the looming reality in the Canadian housing market... tough times are coming.

And by tough times they mean dramatically less sales as the year moves along.

Given how dismal the figures are as the pre-July 9th sales wind down... it's clear that even the brokers know what we are seeing today is nothing compared to what's coming.

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Thursday, July 19, 2012

BC Business Magazine says "Real Estate Mania Is Ending", but a long hot summer remains before it does.


BC Business Magazine is out this week with an article that headlines: "Real Estate Mania Is Ending"

Seems everywhere you turn these days the message is being hammered home via the mainstream media.

The article starts off with a succinct observation.
History shows that Vancouver has always been a real estate boom-and-bust city. Now that the most recent mania appears to be over, with sales falling and prices threatening to follow, there's no reason to think that's going to change.
Indeed.

But if there is one thing we know for sure, few in the Village on the Edge of the Rainforest are students of history.  If they were, we wouldn't be in this situation right now.

BC Business makes another observation...
Fear and worry are rampant in Vancouver these days: the mighty real estate market is struggling. Whether it is in a tailspin or due for a monstrous crash is the subject of endless dinner conversations, office cooler chats and online messages.
Ahh yes, that is certainly the topic of conversation these days in a City where real estate is almost sport.

But are 'fear and worry' rampant yet?

The answer, at least in this blog's opinion is 'no'.  Certainly not on a level that's possible come the Fall.

BC Business Magazine ultimately dismisses what we believe is coming:
Was this a massive bubble? Slightly. When prices rise that much, we’re nudging bubble territory. But bubbles imply resulting crashes, and I don’t believe we’re going to have one. Of course, prices will drop a bit, but an American-style catastrophe isn’t going to happen.
There's a moral here.

The doubters will only believe it's a bubble if we have a resulting crash. And no manner of charts, theories, or tales of congruent circumstances (leading to this very outcome in other countries) will convince doubters until they see prices fall here - significantly.

Summer will probably not provide either side any answers.

Typically we see listings pulled in the summer as vacations take priority.  Meanwhile current sales are boosted by the rush to beat the new mortgage rules deadline. A curiously large number of recent reported sales are still pre-July 9th.

New listings have fallen sharply in last 10 days. The 7-day MA on Juy 9th was 284. Today 225. No sign of panic among sellers.
Market observers are speculating that we are in a standoff between buyers and sellers.  A sentiment echoed by realtor Larry Yatkowsky who asked yesterday, "Are Vancouver home buyers and sellers stubborn?"

The answer is 'Yes'.

Buyers are having their beliefs about a collapsing market reinforced daily. Sellers are adamant that they will not accept less than what they believe their properties are 'worth'.

It's all shaping up to be a long summer for both sides.

Will there be an event that triggers panic for either sellers or buyers in the Fall?

Finance Minister Flaherty and Bank of Governor Carney came back from the G-20 concerned enough to reiterate their warnings to Canadians.

Should you put any worth in their admonishments?

We shall see.

Unlike BC Business Magazine, we believe a catastrophe will happen here.

And then it will be clear to all and sundry that not only are we in a bubble... but we will be ground zero for a collapse unlike anything any of us have ever seen.

That's when 'fear and worry' truly will be rampant.

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Wednesday, July 18, 2012

Richmond realtor's June market report: "price erosion evident as more sellers motivated to reduce prices"


Last month we introduced you to Richmond realtor James Wong.

Mr. Wong was the first of a growing legion of realtors we profiled in the Greater Vancouver area who have been telling you that if you want to sell "deep price cuts are needed."

About the middle of each month, Mr. Wong summarizes the sales data for the real estate market in Richmond and now Mr. Wong is out with his monthly report for June 2012.

And as you will see, the situation in Richmond has declined since May 2012:
Home sales in Richmond for June turned out to be just as lacklustre as in May.

The number of homes sold for the month was 248 which was 8% lower than the previous month sales of 271 homes.

Active listings for detached homes, townhomes and condos/apartments in Richmond at the end of June, 2012 totalled 2,730 units edged 2% higher than the previous month’s total of 2,680.

The month also registered a large number of homes expiring or taken off the market by home sellers.

There are current 9.93 months supply of homes in Richmond. The increase in the supply of homes and slower sales in Richmond continued to put pressure on home sellers to reduce their selling prices. They are hoping that lowering their prices will help in the sale of their homes. Many homes were selling at prices below their city assessment values for 2012.

Richmond real estate market outlook

Both the condo and detached homes markets are facing pricing pressure to go lower. There are more sellers trying to sell than buyers wanting to buy. Higher inventory and adverse media reports are causing buyer concerns and hesitation to buy now. Detached homes are having a much tougher time to attract home buyers.

Homes over $1,000,000 are not seeing much buying interest.

The worse affected by the market slow down are homes (over) $1,300,000. With current level of supply, price erosion is evident as more sellers are motivated to reduce their prices to sell their homes.

Home sellers are taking their homes off the market, or allowing them to go expired unsold.

Sellers who need to sell will have to cut their prices more deeply to attract buyers.
Isn't it funny how the press releases from the Real Estate Board of Greater Vancouver (REBGV) don't seem to paint quite the same picture as this frank assessment by a realtor on the front lines?

Go figure.

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Tuesday, July 17, 2012

Tues Post #2: June stats for Downtown Condo market - market down over 20%. Ian Watt says 'take advantage of market fear'



Everyone's most annoying realtor is out with some interesting tidbits again.

Ian Watt has fired up the car cam to tell us the stats are out for June 2012 for the downtown condo market.

The statistics for the month were down 27% and Ian says it was the worst month, as far as activity is concerned, in Greater Vancouver in 10 years.

Watt goes on to tell us that year to day, market sales are down 20%.

Watt even concedes we are slipping into a buyer's market, that prices may correct 5% and then gets giddy as he suggests you might want to get out into the market to look around because:
"someone might be desperate, someone might be motivated, someone might be fearful of all this news."
Ian Watt... the Darth Maul of Realtors?


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