This week more than 80 houses were listed in the once-hot Vancouver city-suburb of Richmond. I hear sixty-three of them are still for sale. A year ago, of course, they’d all be smoked by now. So does this portend what comes next?
Beats me. But perhaps there’s a more ominous sign of changing times. A number of properties bought by horny HAM less than a year ago (when Richmond was the Paris of YVR) are back on the market. Seems more than a few Mainland Chinese are having sober second thoughts about whether this is in fact paradise.
Like 3560 Barmond Avenue, a crappy 43-year-old, three-bedoorm, one-bathroom suburban nightmare which an idiot bought in April for $1,168,000. Of course, there was never any intention to live there, but rather to raze it and raise a McMansion. Or flip for big bucks. Crafty Guangdong logic. Except that Richmond’s now tanking, and the tidal wave back across the Pacific may have commenced. The property’s back on, for $1,260,000, as the new owner tries to get out fast.
But good luck to him. The cracks are everywhere.
Listings are up 25% in Vancouver while sales are down 23%. Yikes.
That’s not all. Sales for December were down almost 12% from the same month last year with deals for single family homes leading the way – off a spanking 18%. The average SFH price has fallen 13% since peaking in June (just like I reported yesterday in Toronto), and is now back to levels not seen since the end of 2010.
Of course, it’s still a city on crack. The average SFH is $887,000 while a normal detached house on the west side is $1.9 million (down from $2,068,857 in June).
Family income is stuck at $83,130. That puts the average detached home across the region at a multiple of 10.6. Let’s all remember the US real estate market collapsed when that number hit 4.6.
But horny Vancouverites will tell you in Starbucks (there’s one on every corner downtown) that it’s different in the city because everybody wants to move there – hot, rich Asians along with all those snow-whacked Boomers from Mississauga and Sherwood Park. Local real estate values have nothing to do with affordability, they say (looking under cafe cushions for quarters to pay for their drinks), because there’s a whole new paradigm. Like when we had the dot-com boom, and companies with profits were so, so analogue.
This is why the Asian reversion is revulsion to greedy sellers yet thrilling to young families priced out of their own city. Ditto for the dwindling inflow of the wrinkly people from southern Ontario and Cowtown. Migration into BC has come to a screeching halt commensurate with the bloating of real estate values in the Lower Mainland. There just aren’t enough wealthy fools from elsewhere in the country – where houses cost about half – to keep feeding the left coast habit.
I mean, why would someone selling a palace in Etobicoke for $1.4 million pay $2 million for a handyman’s special in West Van when they can simply stay home and add in a luxury villa in Florida costing four hundred? Then they can actually enjoy the winter sun instead of watching mould grow on their driveway, and possibly the dog.
In short, as listings grow, HAM fades and the rest of us giggle, VanCity’s market is entering what will probably be a pivotal year. As this regrettable site has pointed out in the past, there are no longer economics supporting area real estate values, just delusion, emotion and lust. As the Amazons prove to me with shocking regularity, this is hard to keep up. Especially at my age.
But what will happen?
Mainstream economists are still vastly underestimating what’s brewing. Jacques Mercil says his definition of a ‘significant correction’ in Van will be a price decline of 3.5% in 2012, followed by another 4.4% in 2013.
Dans vos rêves, Jacques.
And BMO Nesbitt Burns’ Sal Guatieri adds: “If you listen closely you can hear the sound of air seeping out of Canada’s housing balloon.” But he’s still forecasting “modest gains” this year. Hard to understand, when even the Vancouver Real Estate Board reports sales are now running more than 9% below 2009 levels.
In fact, the longer places like Vancouver (and Mississauga) see swelling prices and falling affordability, the more difficult will be the correction. Already seven in ten Canadians say they think the country’s in a recession – about the same proportion who have no pension, yet own houses. The disconnect in people’s lives is stunning. We’ve made real estate into a religion, a passion and a cult. Just as we believed Nortel or Bre-X could rise without end, and piled in at the top, so housing has become a surrogate for thinking.
What we all need is not a house, of course. It’s liquidity.
Yesterday’s post from the young engineers gave you a window into clear thinking. In response, this blog clogged with haters.
Did I ever mention we’re screwed?