Entries from January 2009 ↓

Trendy Yaletown - balloons, yes, throngs not so much.

This churned-up, battered ground has been covered before, so I will make it brief.

Last month real estate sales in British Columbia were down by half.  From its high point on May Day, the average Vancouver home has lost 19% of its value, or $123,000. In the Fraser Valley, sales are a disaster. In Kelowna listings have ballooned and sales plopped. In Victoria the average price is down about $75,000 from six months ago, and sales for the year fell almost a third.

This is a housing market under stress for one overwhelming reason: Average families cannot afford average homes. And the situation, lower interest rates aside, is getting worse.

There reasons are obvious to us all.

* More people are out of work and unemployment will be the most momentous economic story of 2009.
* Forty-year mortgages and zero down payments are now gone, eliminating a bunch of moist young buyers who inflated sales in the past two years.
* Chastened and newly risk-averse banks are lending more cautiously and prudently, which means gone are the days of people being offered loans requiring 70% of their income to service.
* Everybody knows the economy is fragile, tentative and at the tipping point. With governments poised for a do-or-die dive into bottomless vats of new debt, this is hardly the time to be taking on chunky loans to buy an average Van house at $648,000 or a bung in Victoria at $550, let alone one of those $700,00 cliff-hanging jobs perched over Lake Okanagan.

Like I said, everybody knows this. But not the realtors of BC, who days ago held a fib-fest and invited the media, populated as it is by young things with new condos now threatening to eat them alive.

“If you don’t have to sell, wait until the market stabilizes,” said condo king Bob Rennie.

“This is no housing recession.” Said developer Michael Audain. “This is a loss of consumer confidence.”

“While the economy will be weaker in 2009, real estate sales will be higher than in 2008,” intoned BC Real Estate Association chief economist Cameron Muir.

And because these guys are either (a) industry spokespeople, (b) developers and business leaders or (c) high-profile economists, all the words they sputter are written down, edited and then spread to the masses. And this, I would say, makes them culpable. They’re in positions of public influence.

We’ll update this post in one year.

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Home sales, prices plunge in Q4

TORONTO (Globe) — The economic slump and a drop in consumer confidence caused house prices to dip during fourth quarter, according to the latest figures from Royal LePage. It says the real estate market in Canada posted an overall decline in both unit sales and in prices during the fourth quarter of 2008.

Royal LePage says the average price of detached bungalows dipped by 4.8 per cent during the quarter to $319,640. The average cost of a standard condo fell 5.2 per cent to $233,230 and the average for a standard two-storey home fell 6.3 per cent to $376,140.

Some cities with strong local economies, such as Regina and St. John’s, NL, posted double-digit year-over-year price appreciations, while larger cities such as Toronto, Edmonton, Calgary and Vancouver, recorded declining prices. Royal LePage says 2009 should bring gradual improvements as low mortgage rates and government efforts to revive the economy begin to take hold.

Realtors often get the crap kicked out of them on this site. Some deserve it. Some don’t.

As I’ve said, because real estate’s the biggest thing most people buy, consumers need and merit professional guidance. So when young couples are pushed into too much debt, sellers are seduced with an unrealistic asking price, buyers are spooked by phantom competing offers or a real estate board president fabricates market facts to manipulate the media, the beating’s richly deserved.

But many experienced and professional real estate agents and brokers know this hurts everyone. Especially now. We’re into the start of a multi-year decline in housing values and if buyers and sellers are herded into rash decisions by lies and misinformation, this market could be poisoned for a long, long time.

Two snapshots from my inbox. First this weekend note from a real estate broker. We need more guys like Kyle, who writes:

“For about the last 4-5 months I have spent the first 30-45 minutes of my listing presentation apologizing about the misleading press releases our real estate board/president of our board have been issuing. Although I feel that most people including myself should have a personal residence for their family needs, comfort & enjoyment, I do feel that owning second properties for investment reasons is a mistake.

“Personally, I have taken a big hit in the stock market but I feel that I will make my money back there a lot quicker than I would in the real estate market. In fact I doubt that real estate will come back during the rest of my career as an agent ( probably another 10- 15 years), given the present money crisis/recession and then when that is over the baby boomer effect should just start kicking in more every year for about 15 years. This will result in an over-supply of listings for the number of buyers available during that span. I find that other agents & the general public have their head buried in the sand saying ” IT WON’T HAPPEN HERE, WE HAVE TECH INDUSTRIES”. Unless I am wrong they are under estimating the effect that the mass number of boomers are going to have on the downward pressure on prices of the housing market in ALL  centers across Canada.

“I have an appointment to try to keep an existing listing. My vendors are happy with our relationship but are frustrated that their home has not sold in many months. They recently said to me that they are thinking of renting their home for a year or so in the hopes that the market will get better. I am taking 2 of your books with to read a few of highlighted paragraphs to show them that there is a good chance that their home if worth more today than it may be 5 or even 10 years from now.”

Now, let’s contrast that sentiment with what Gary encountered last week in one of our big cities. He’s 59, the father of three young kids and he and his wife both work, live in a paid-for house in midtown and have ambitions.

They’ve been eying a bigger, very expensive house in a nice hood, and put in an offer conditional on financing – without yet selling their existing home. Gary sent me an email asking for advice and said, “the financing is tight and if we need to bridge finance on the chance we don’t sell our house, we are screwed, to put it mildly. The question is, can we sell our place? We have two days before the offer expires and we need to waive the condition. The bank is nervous about approving the possible loan if the worst case scenario happens, which is not selling in three months. Any suggestions on what to do?”

My response: “Do you have a death wish? This is an insane idea. The last thing you want to do is gamble like this in a falling market. List your home first and only act when you have a firm offer. Things are about to get worse.”

Three days later, this report:

“Wow , that was close and yes completely insane idea to purchase a house at this time before selling ours.  We got out of the deal by not signing the waivers on financing. The seller’s agent and our agent were on us like a pack of wild dogs to get the deal to happen, but my wife and I held tight and didn’t even answer the phone or  email messages that kept coming the last day before the deal was null and void….we are now waiting for our $30,000 deposit back and needless to say they don’t seem to be in a big hurray to deliver!!! Thanks for tipping the scale and being blunt, I think your advise tipped the balance and wake me up to the potential disaster we could be headed for had we proceeded in this deal. My wife and myself are realizing we should be thankful for what we have now and not try to get more and bigger when we really don’t need it. Life is not about that at all as we know deep down.”

Some realtors are shepherds. Some are wolves.

But on this blog, we know what matters.