Vancouver Real Estate 'Bubble' at 30-year Peak

[easy as pie]

i hope we see a major bounce and sustained growth over the next two years, basically only because of the ritz carlton and granville gate projects would add so much to the city. after that, let the market build lower cost, smaller non-luxury units. burrard gateway would be fine like that, as would any of the westend projects, and certainly anything going up in and around chinatown or kingsway.

[mrjauk]

Originally Posted by easy as pie

i hope we see a major bounce and sustained growth over the next two years, basically only because of the ritz carlton and granville gate projects would add so much to the city. after that, let the market build lower cost, smaller non-luxury units. burrard gateway would be fine like that, as would any of the westend projects, and certainly anything going up in and around chinatown or kingsway.

I'd prefer that our largest, and most well-known, buildings were neither hotels nor condos. The late anthropologist Joseph Campbell once said that the largest built structures in any civilization/society said a lot about the nature of that society.

Compare the largest buildings in Vancouver to other cities around the world. Is there any other city on the planet where the tallest and most significant buildings are condos and hotels? Toronto is starting to catch up to us, though.

Think of NYC, or Paris, or Tokyo, or even Charlotte, NC.

[Pinion]

Originally Posted by mrjauk

I'd prefer that our largest, and most well-known, buildings were neither hotels nor condos. The late anthropologist Joseph Campbell once said that the largest built structures in any civilization/society said a lot about the nature of that society.

Compare the largest buildings in Vancouver to other cities around the world. Is there any other city on the planet where the tallest and most significant buildings are condos and hotels? Toronto is starting to catch up to us, though.

Think of NYC, or Paris, or Tokyo, or even Charlotte, NC.

We live in a tourist resort, not a business hub. This is not likely to change.

[Porfiry]

Originally Posted by mrjauk

Compare the largest buildings in Vancouver to other cities around the world. Is there any other city on the planet where the tallest and most significant buildings are condos and hotels?

Yup.

[cabotp]

Originally Posted by go_leafs_go02

That's me to a tee. Of course, I am looking to buy in Cloverdale/Langley, but still, house prices are too high for me to look into buying without pretty much putting my life on hold as I won't have any additional $$$ for anything besides the bare necessities. And I'm talking about a townhouse/strata/condo unit, not an actual house.

If home prices go down 25-35% compared to now (about 100-150K here in Surrey) I'm going to buy as soon as possible. Saving $500 a month on a mortgage is HUGE

Problem is you may always be playing that waiting game. Sure the price of real estate might drop down to a level that you would be willing to buy. However what if it comes at a time when your income level drops as well.

Buying real estate even if it is only your principal residence and you have no desire to flip it. Is never going to be easy and always requires you to sacrifice another part of your life.

[mrjauk]

Originally Posted by cabotp

...Sure the price of real estate might drop down to a level that you would be willing to buy. However what if it comes at a time when your income level drops as well.

So, you're saying that you should catch a falling knife in the real estate market, especially if there is a chance your income might decrease?!? I hope you're not a financial advisor.

I'm not a financial advisor, but I have enough common sense to know that the last think one should do is to make the biggest purchase of one's life if there's a chance one's income will decrease.

[WarrenC12]

Originally Posted by cabotp

Problem is you may always be playing that waiting game. Sure the price of real estate might drop down to a level that you would be willing to buy. However what if it comes at a time when your income level drops as well.

Buying real estate even if it is only your principal residence and you have no desire to flip it. Is never going to be easy and always requires you to sacrifice another part of your life.

I bought at a time where mortgage payments were equal to rent on the same property, at higher interest rates. We are so far away from that today that it's laughable.

Real estate moves relatively slowly compared to other markets, but it is very cyclical and history does repeat itself.

[cabotp]

Originally Posted by mrjauk

So, you're saying that you should catch a falling knife in the real estate market, especially if there is a chance your income might decrease?!? I hope you're not a financial advisor.

I'm not a financial advisor, but I have enough common sense to know that the last think one should do is to make the biggest purchase of one's life if there's a chance one's income will decrease.

Maybe my wording was wrong. I'm not saying that someone should buy a house if there is a chance their income will decrease.

However I do think that if the average price of real estate were to drop. It will come at a time when the average wage of people either stagnates or drops a bit as well. So even though the price of a home is less. The percentage of income to pay off that home may still be the same.

Of course this is assuming that interests rates don't change as well which would put another variable in the outcome.

Real estate over the long term has always held steady with the rate of inflation. And the difference between the two over a period of time is probably a bigger indicator of how over valued or under valued real estate is.

There never is a perfect time to buy some real estate to live in. And the longer one waits in their life. The less chance they have of ever seeing a positive outcome to that investment.

[cabotp]

Originally Posted by WarrenC12

I bought at a time where mortgage payments were equal to rent on the same property, at higher interest rates. We are so far away from that today that it's laughable.

Real estate moves relatively slowly compared to other markets, but it is very cyclical and history does repeat itself.

True it is very cyclical and will repeat itself.

Real Estate has always held steady with the rate of inflation over the long term. And this will be a biggest factor in knowing how much of a correction we can expect.

What will be a big factor in how fast this correction happens. Is how many homes are owned buy those who use it as their principal residence compared to how many homes are owned buy those purely for investment reasons.

The first group really has no reason panic if their is a drop in the value of their home. So long has the drop doesn't put them in a position where they are unable to refinance their mortgage.

However the second group is the ones that will probably panic and try selling off what they have. Thus creating a surge in the supply and a race to the bottom.

So if the first group is more prevalent I expect a slow correction over the next 5 years or maybe longer.

But if the second group is more prevalent then I expect a major fast correction to happen.

[jsbertram]

Originally Posted by cabotp

Maybe my wording was wrong. I'm not saying that someone should buy a house if there is a chance their income will decrease.

However I do think that if the average price of real estate were to drop. It will come at a time when the average wage of people either stagnates or drops a bit as well. So even though the price of a home is less. The percentage of income to pay off that home may still be the same.

Of course this is assuming that interests rates don't change as well which would put another variable in the outcome.

Real estate over the long term has always held steady with the rate of inflation. And the difference between the two over a period of time is probably a bigger indicator of how over valued or under valued real estate is.

There never is a perfect time to buy some real estate to live in. And the longer one waits in their life. The less chance they have of ever seeing a positive outcome to that investment.

Like Death and Taxes, changes in interest rates are going to happen. With once in a generation record-low prime rates, they can only be going up in the future.

How soon? Few people know (possibly not even the Finance Ministers around the world), but over the course of a typical mortgage you would be smart to be prepared for higher rates each time your 5-year variable-rate gets renewed.

In 2005, if someone were to predict that the Prime Rate would hover around 1% for several years, and that you could get a 40-year zero-down variable-rate mortgage, their friends would have told staged an intervention to get them off 'those wakky drugs'.

Before we realise what is happening, today's 'economic problem' will be replaced with a 'once in a generation' resurgence back to normal economic activity - and normal Prime Rates.

[vanman]

Originally Posted by Pinion

We live in a tourist resort, not a business hub. This is not likely to change.

Yes because all the condos downtown are timeshares right? Gimme a break. The ignorance of Vancouver's economy on this forum astounds me sometimes.

[whatnext]

Originally Posted by vanman

Yes because all the condos downtown are timeshares right? Gimme a break. The ignorance of Vancouver's economy on this forum astounds me sometimes.

He's not far off. Yes, yes, we know we have some mining companies and a dwindling amount of video gaming co's, but if you look at average income its clear that's not what is driving the market.

I found this stat, startling if it is indeed true:

... There are currently over 5,000 homes in Vancouver metro area for sale for over $1 million according to MLS.ca. In comparison, the NAR reports that in April, just over 7,000 homes sold in the entire US were sold for over $1 million. And this despite the fact that the US population is 135X greater than the metro Vancouver market, the average personal disposable income in the US is 20% higher than the Vancouver average ($37,100 vs. $30,800) while US per capita GDP is higher than the average for all of BC.... (bold mine)

http://www.theeconomicanalyst.com/co...canadian-banks

I recommend reading the entire article, some ominous graphs.

[whatnext]

No autumn bounce in this market:

That hiss you hear may be the sound of Vancouver's housing market.

Residential property sales in the city plunged 32.5 per cent in September from a year earlier, to 1,516 transactions, the Real Estate Board of Greater Vancouver said today...

..Among the various types of homes sold, sales of detached houses plunged almost 38 per cent from a year earlier and the benchmark price fell 0.5 per cent to $935,600.

Apartment sales fell 26.7 per cent, while sales of attached homes slipped 33 per cent, with the benchmark price of the latter sinking 2.7 per cent...
http://www.theglobeandmail.com/repor...rticle4582491/

It will be interesting to see if projects start getting put on hold.

[osirisboy]

ctober 2, 2012
Conditions continue to favour buyers in the Greater Vancouver housing market

The summer of 2012 drew to a close in September with home sale activity well below historical averages in the Greater Vancouver housing market.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales of detached, attached and apartment properties reached 1,516 in September, a 32.5 per cent decline compared to the 2,246 sales in September 2011 and an 8.1 per cent decline compared to the 1,649 sales in August 2012.

September sales were 41.6 per cent below the 10-year September sales average of 2,597.

“There’s been a clear reduction in buyer demand in the three months since the federal government eliminated the availability of a 30-year amortization on government-insured mortgages,” Eugen Klein, REBGV president said. “This makes homes less affordable for the people of the region.”

New listings for detached, attached and apartment properties in Greater Vancouver totalled 5,321 in September. This represents a 6.3 per cent decline compared to September 2011 when 5,680 properties were listed for sale on the MLS® and a 31.6 per cent increase compared to the 4,044 new listings in August 2012.

At 18,350, the total number of residential property listings on the MLS® increased 14.1 per cent from this time last year and increased 4.5 per cent compared to August 2012.

“Today, our sales-to-active-listings ratio sits at 8 per cent, which puts us in a buyer’s market. This ratio has been declining in our market since March when it was 19 per cent,” Klein said.

The MLS HPI® composite benchmark price for all residential properties in Greater Vancouver is $606,100. This represents a decline of 0.8 per cent compared to this time last year and a decline of 2.3 per cent over last three months.

“Prices in the region remain relatively stable overall, although we do see some reductions in the areas that have had some of the largest price increases over the last year or two,” Klein said.

Sales of detached properties on the MLS® in September 2012 reached 594, a decrease of 37.9 per cent from the 957 detached sales recorded in September 2011, and a 31.4 per cent decrease from the 866 units sold in September 2010. The benchmark price for detached properties decreased 0.5 per cent from September 2011 to $935,600.

Sales of apartment properties reached 676 in September 2012, a 26.7 per cent decrease compared to the 922 sales in September 2011, and a decrease of 30.4 per cent compared to the 971 sales in September 2010. The benchmark price of an apartment property decreased 0.7 per cent from September 2011 to $368,600.

Attached property sales in September 2012 totalled 246, a 33 per cent decrease compared to the 367 sales in September 2011, and a 35.8 per cent decrease from the 383 attached properties sold in September 2010. The benchmark price of an attached unit decreased 2.7 per cent between September 2011 and 2012 to $458,600

[logan5]

From The Province:

Sagging home sales and flat ­prices have prompted speculation that the “housing bubble” might be about to burst — a prospect that immediately catches the attention of British Columbians.

But there is no housing bubble, according to Tsur Somerville, director of the University of B.C.’s Centre for Urban Economics in the Sauder School of Business. “You can’t burst a bubble that wasn’t there,” said Somerville. “But you can have prices above where they should be and it not be a ­bubble. If there was a large number of unsold units coming onto the market or a huge change in the economic environment, Somerville said, “that would really cause prices to tank.”

For prices to go down ­significantly, contended Somerville, “You need people who have to sell, either because the economy has collapsed and they don’t have any income or developers have built a whole bunch of units that are unsold and the bank is screaming at them or foreclosing or something like that.”

None of those conditions appears imminent.

Somerville said it would take “some negative shock,” such as an ­economic meltdown or mortgage interest rates jumping from four per cent to nine or 10 per cent, to trigger lower prices.

Read more: http://www.theprovince.com/business/...#ixzz28AsqMKxH

[osirisboy]

Thank you for posting that, couldnt agree more... people confuse a softening market with a "bubble" bursting. I swear theres certain people that have a bubble fetish.. everything is this big bubble thats going to burst, ugh

[WarrenC12]

I wouldn't trust Tsur as far as I could throw him. He's always bullish on the market no matter what is happening.

Bottom line is that SFHs sold the lowest amount in the last 15 years. That has to mean something.

[whatnext]

Originally Posted by osirisboy

Thank you for posting that, couldnt agree more... people confuse a softening market with a "bubble" bursting. I swear theres certain people that have a bubble fetish.. everything is this big bubble thats going to burst, ugh

“A bubble occurs when exaggerated expectations of future prices increase unusual demand either by people who fear being priced out of a market or by investors hoping to make a lot of money fast. A bubble is a self-fulfilling prophecy for a while, as successive rounds of buyers push prices higher and higher. But the willingness to pay higher and higher prices is fragile: It will end whenever buyers perceive that prices are no longer going up. Hence bubbles carry the seeds of their own destruction. Only time is needed for bubbles to end.”

- Robert Schiller
http://www.astudentoftherealestatega...ousing-bubble/

What part doesn't fit?

[whatnext]

Bubble:



from yattermatters.com

[Millennium2002]

If we can adjust these figures to inflation, that might show a better picture...