The first week of the new year – in fact, just the second day – brought some interesting juxtapositions. Stock markets erupted, showering capital gains on investors as the fiscal cliff turned out to be the political theatre I told you it would be. Now, get set for the next act in February – the debt ceiling faux crisis, part deux – and another opportunity to make money.
Meanwhile over in the bond market, prices came down, yields rose and billions went coursing out of fixed income into equities. Say, didn’t I also forecast that? You bet, and this is just the start – which means long-term mortgage rates will be rising this year. So, I hope you locked up when I told you last autumn, or have started negotiations for a blend-and-extend.
Of course, this also means the value of your bond funds will be taking a tumble – which was completely obvious. Makes you wonder how so many people could believe ‘bonds are safe’ and shove record amounts of cash into assets destined to lose value, simply because they bought at the peak.
Which bring us to Vancouver, of course, and another asset class where folks listened to their hormones and bought into a market more topped-out than Lindsay Lohan. Was there any doubt a droop would follow? Hardly.
The Westside is to Van what Rosedale/Bridle Path is to 416. Both are currently in trouble, but the BC richies are really finding out what illiquidity means. There are currently 700 listings for sale (all over $1 million) in the area, and last month a paltry 49 sales – which means there are enough houses now on the market to last 14 months. And just wait for the spring.
This, bad boy realtor Sam Wyatt reminds us, “is the highest it has been since the credit crisis! The detached homes months-of-inventory figure can only be seen as a worrying confirmation of the state of Vancouver’s real estate market.”
As you know, sales in the Mouldy City collapsed by 29% late in 2012 and we should find out this week how the disaster ended, as the local real estate cartel releases December stats. With declining year-over-year volumes since way back last April, momentum has most decidedly turned negative. And in the last few weeks the number of active listings has plunged showing (a) sellers are giving up and (b) there’ll be a torrent of new listings within the next month, overwhelming demand and leading to falling values.
The result seems obvious, suggests Wyatt. “Months of inventory will continue its upward trend and prices will continue to fall.” My prediction: the average SFH in Van will drop back to 2010 prices by March or April. And lots more to come after that.
BTW, just noticed someone posted this listing in the comment section. A North Van house originally listed at $1.3 million, now ‘on sale’ for just $899,000 – a 47% reduction. The fact it’s hideously ugly inside, 56 years old, with ‘peek-a-boo view potential’ and the listing agent is too embarrassed to post a full frontal shot tells you all you need to know about that market. Down, down.
But how are things across the water on the Island, you ask? Let’s ask Dan:
For several years now we have been getting the listings for houses in Oak Bay asking between $500,000 and $800,000. Since we sold our house in oak Bay we have seen prices drop around $100,000 for these homes. As an example a house just sold that a few years ago at its peak could have fetched about $740,000. It just sold for $596,000.
No wonder there are starving realtors knowing there are MANY realtors serving this area. Obviously most of these houses will still be for sale a month from now. Anyone who does not see the writing on the wall is in big trouble if they want to sell in 2013.
We’ll see how many of these drop their prices over time to get in the market of what buyers are prepared to pay. I for one think that there is another $15 -20%, or $100,000 yet to fall before it even begins to stabilize. In all of these senses your blog continues to hit the nail on the head. Good work, keep it up.
And how interesting that the recent CMHC meeting here in Victoria said that prices have bottomed and should begin to recover in 2013. Who in the hell believes this pap?
Not us doggy contrarians, Dan. We just sit back here, watch the human delusion all around, and yap on.
Say, did you see the latest bank survey out this week? Paying off debt – especially historically cheap mortgage debt – is now the main financial goal of people. Investing and retirement planning (although 72% of people have no pension) isn’t even among the top three priorities for Canadians.