In downtown Vancouver, in a premium building with the best view, he’s delighted to have finally received an offer for his condo. That’s the good news. The bad news? It’s conditional on the buyer selling his own unit in the same building. “And nothing’s moving,” he says. “The market just cooled.”
Across the ditch in Victoria, where the average house prices is still $600,000 and the average family income’s barely $76,000, an immaculate, updated mansion in the prestige Uplands area was just reduced in price. Again. It’s the fourth chop, from $1.8 million down to $1.3. “The vendor is quite flexible,” the listing agent says. “Just offer something within reason.”
In Calgary a 39-unit condo development, nearing completion, was announced as sold out weeks ago. Err, not exactly. This mass email just went out:
ANNOUNCEMENT OF A SPECIAL OFFER
For You, Your Family and Friends!
We only have a few units left at Varsity Landing and we want to present you with a special offer.
We will give you $2000 if a friend or family member purchases a home at Varsity Landing. In addition, we will give your friend or family member six months free condo fees!
Simply register your friend or family member with our Sales Centre, and if they buy a home by October 31, 2011, our lawyers will send you a cheque for $2000 when they close. It’s that simple!
Back in Vancouver’s hottest hood this year, the west side, a listing which hit the market two months ago at $2.6 million, with the vendor expecting freshly-arrived horny Asians to turn his front lawn into a bidding-war battleground, sits. No offers. No war. New price. The owner sighs and says it all looked promising, until a flood of properties hit the market – and the buyers left.
Anecdotal evidence of a tectonic shift? Absolutely. Nothin’ scientific about this stuff. But then, that’s the thing about real estate markets. They’re 90% emotional and 10% economic. People buy when everyone else is, and the perception exists of a rising market. Then, just as emotionally, they stop when sure-thing price gains look illusory and everybody worries about all that debt. More than with any other asset (the possible exception is gold, down again Wednesday), buyers create their own market. This is why you can have dumbass prices in Surrey or Oakville, and yet crickets down the road in Abbotsford or London.
This week the establishment spit out new numbers to disprove any real estate slowdown. Here’s the Teranet-National Bank index, for example, trumpeting a 1.2% price hike across the country in July, from June. Annualized, that’s a blistering 14% increase, at the same time most other assets on the planet are being sold off.
In five of our six biggest cities, this report says, housing prices are at record highs. But at the same time, US real estate continues to crash. That country’s leading measure of house prices, the S&P/Case-Shiller index, is a morass. Says founder Robert Shiller, prices have 10-25% yet to go and will not bottom “for years.”
If this contrast does not make you question things, you’re not paying attention. Canada’s very economic health depends on two things – US demand for our stuff, and commodity prices. Last time I looked (a few minutes ago), both were about as robust as Michael Jackson. Not hard to understand why couples would now be reluctant to borrow hundreds of thousands to buy houses at record high prices. But it is hard to fathom how Teranet-National Bank, or CREA, or Scotiabank (a new report says housing is a ‘notable outperformer’) can ignore their professional responsibilities to put these numbers in context.
I don’t worry for the people who come to this pathetic blog. They’re already over the top. But I do fret for the young couples who believe the house-pumping puff pieces in the local rag, the misleading social media campaigns spread by developers or the push-up anchorettes on Global.
Stop worrying about equity markets, precious metals or forex. Real estate is now the most dangerous asset class in the nation.
In the real world, anecdotes are leading indicators. Indices lead astray.