Monday, December 6, 2010

Residential investors will find balance in 2011

Below is a recent report by FRANK O'BRIEN, Western Investor:

When the Onni Group unveiled its Ora condominium tower in Richmond September 29 for local realtors, the entire 68 homes sold out in less than a week at more than $510 per square foot.

It was a hopeful harbinger for a Metro Vancouver housing market that is moving cautiously into the second year since a global recession slapped sales down 40 per cent and put a stop to double-digit price increases.

As 2010 ended, multiple listing sales through the Real Estate Board of Greater Vancouver were still down 36 per cent from 2009 and average prices had not moved in nearly six months. Condominium sales, which now dominate the market, were off by 38 per cent and the average price was nearly unchanged from a year earlier.

Still, there is now a palatable buzz of optimism in the air, as developers and analysts figure that 2011 will begin the turnaround in B.C.'s housing market, despite the harmonized sales tax, stricter regulations on mortgage lending and buyers still spooked by a sluggish economy.

Read the full report here.

The influence of Asian buyers was quoted in the article:

"Asian buyers are active in Richmond, parts of Coquitlam and on the west side of Vancouver, where Canada Mortgage and Housing Corp.(CMHC) estimates that more than 60 per cent of the $1.5 million-plus homes are sold to Chinese buyers".
Sales activities for prime building lots are still very high as can be seen in a recent listing at #3556 W. 34th Avenue in the Dunbar area of Vancouver west. The listing agent mentioned that he was expecting 7 offers to be presented 4 days after it was posted on the mls system.

You can view homes for sale in Vancouver West using the link here.

Return to homepage.

Tuesday, October 26, 2010

The House Party Is Over?

Below are passages from The Globe and Mail reported by STEVE LADURANTAYE on Oct 22, 2010.

The long shadow over Canada's housing market

"A a period of stagnation or slowly falling prices, coupled with weak home sales and waning construction activity, would cut off one of the engines that drove impressive economic growth and job creation in the years before the 2008 financial crisis".
"Market forecasters are near-unanimous in the belief that prices will fall in the coming years, though few foresee the sort of rapid declines that savaged the American market. The stateside disaster was largely fuelled by loans made to people who weren't creditworthy. Canada's problem is different – easy credit is luring people into buying houses they may not be able to afford when rates rise to more historically normal levels. That's why economists and market watchers foresee a drawn-out retraction of the market that will gradually erode prices, rather than a crash".
"And while supply and demand are keeping prices firm, few expect that to last over the next two years. CIBC World Markets has suggested prices could fall as much as 10 per cent in the next two years, as has TD Bank".
Read the full story here.

Sunday, October 3, 2010

MLS real estate deal 'may force out agents'

Fears for real estate sector already hit by declining sales

The Canadian Real Estate Association (CREA) has reached an agreement in principle with the Commissioner of Competition regarding the application before the Competition Tribunal, subject to the approval of CREA’s member boards at a Special General Meeting in St. John’s, Newfoundland on October 24, 2010.

If passed, the 10-year agreement would allow sellers to hire agents to put for-sale properties on the Multiple Listing Service for a fee and if they wish, the sellers could carry out the remainder of the sales process themselves.

Tsur Somerville, associate professor with the University of B.C.'s Centre for Urban Economics and Real Estate, said the agreement would create a legally binding document between the Canadian Real Estate Association and the Competition Bureau.

Somerville expects competition to give consumers more choice and, to some extent, more control.

Discount commission agents already exist, long before the Competitive Bureau take up the case against the real estate board. The freedom of choice over the level of service and commission are already in place in B.C. for a number of years, the agreement would be unlikely to affect this province's real estate market.

Real estate commissions currently ranges from 1% to 4% for the service of a full service agent. There could be new entrants that simply provide the paperwork function of the listing service. Home sellers who opt to pay for the listing service only will not have any agent representation for selling the home.

This then means that home buyers will have to pay their own realtor's commission if they want to buy a property that only pays for the listing service only. As a result, most buyers would prefer to look at property being marketed under the traditional model with sellers paying the commission.

Mistakes in the real estate business could be "hugely costly". There are many issues when not handled properly, could result in expensive letigation and costs. Beside such services as open houses, websites, checking municipal permits, a full service agent provides professional guidance and representation on proper property disclosure, oil tanks, permits, title searches, negotiating contracts and more.

Views about the impact of the Competition Bureau agreement vary. Some industry observers maintain that, because B.C. already permits alternative sales models, it is not going to have as dramatic an impact as many consumer advocates would have liked.

Sunday, August 22, 2010

Vancouver High Prices: Too Many People On Too Little Land!

Below is a Vancouver Sun's article by Don Cayo, published on August 21, 2010:

What drives Vancouver’s house prices so relentlessly to levels four times higher than Winnipeg’s, and more than half again what Torontonians pay?

It’s simple, says Tsur Somerville of UBC Centre for Urban Economics and Real Estate.

“If you want Winnipeg-level house prices here, all you have to do is tear down the mountains and fill in the ocean.”

Well, that puts slow or stop to the steady influx of people — though the massive loss of amenities if our landscape were to be suddenly levelled might do that automatically.

Read more >

When homes can be purchased freely by those who have the money to spend, home prices are affected more by supply and demand, and less by affordability and average household income.

Below you can view "Canada's 6 Cities Housing Price Charts" by Brian Ripley. A market slow down will result in a correction* to current home prices, but a collapse in home prices is less likely to happen.

* A correction is a short term price decline of 5% to 20% or so.

Monday, June 7, 2010

Mainland Chinese buyers led luxury-home market recovery

Blog by James Wong

Mainland Chinese buyers led luxury-home market recovery

Canada seen as a safe storehouse for personal wealth

By Derrick Penner, Vancouver Sun February 6, 2010

It took a couple of months, but sales of luxury homes in 2009 caught up to the general real estate market driven largely by buyers from mainland China, one dealer in high-end homes has found.

The Real Estate Board of Greater Vancouver recorded 30 sales of homes more than $5 million through the Multiple Listing Service compared with 26 for 2008.

"But in 2009, all of those were after April," Dan Scarrow, an agent with Macdonald Realty in Vancouver said in an interview. "Nothing sold over $5 million between January and the end of April."

Scarrow said the pickup in sales lagged the recovery of sales in the general market, but once sellers at the lower end started moving up, luxury properties started to move as well.

"I think there was a delay of probably two or three months between the lowest and highest end starting to sell," Scarrow said.

Luxury properties took somewhat of a hit during the world financial crisis of 2008, a year in which high-end sales fell off their previous peak.

While 2008 saw Metro Vancouver set a record for top price for a home, at $28.2 million for 3330 Radcliffe Ave. in West Vancouver, overall MLS sales came in at 26 compared with 35 MLS sales in 2007.

At the time, agents viewed the situation as affluent buyers delaying decisions while uncertainty reigned in world financial markets.

Scarrow added that once Metro Vancouver's market thawed in the spring of 2009, "mainland Chinese buyers started getting on board as well."

Scarrow said foreign buyers are coming into Metro Vancouver from Australia, Europe and the United States, but they are being overshadowed by mainland Chinese purchasers who view Canada as a good country to provide a western education for their children and Canadian real estate as a safe storehouse for their wealth.

Scarrow added that the trend is similar to what Vancouver experienced with Taiwanese and Hong Kong immigration with the wealthiest business immigrants taking the vanguard and choosing Vancouver as a convenient location that offers them the attributes they are looking for while also being relatively close to their businesses back in Asia.

"So there was a wave of Taiwanese buyers that came in and buoyed the market," Scarrow said. "Then Hong Kong buyers came in and now mainland China buyers are coming, but there are 50 times as many of them, potentially, coming to the city."

Return to homepage.

Sunday, April 18, 2010

Making Sense Of Canadian Real Estate Prices

Is there are direct relationship between Canadian real estate prices and money supply?

Real estate is subject to supply and demand like any other goods that are in demand by people. The increase in Canadian home prices when compared to the increase in the prices of crude oil and gold, showed a close relationship with the supply of money (both in Canada and the global supply of money).

The table below clearly show the gain in prices for real estate, crude oil and gold are directly related to the supply of money over a 20 years period.

Time Period Jan/1990 Jan/2000 Inc. 1st 10 Yr Jan/2010 Inc. 2nd 10 Yr Inc. 20 Yr
Van SFH $300K $380K 27% $950K 150% 216%
Van Thse $190K $220K 16% $355K 61% 87%
Cdn $ Supply $18 Billion $33 Billion 83% $55 Billion 67% 205%
Global $ Supply US$17 Trillion US$26 Trillion 52% US$64 Trillion 146% 276%
Crude Oil/barrel US$20 US$27 35% US$68 152% 240%
Gold/oz US$380 US$280 -27% US$1100 293% 189%
Charts and data source: Real Estate Board of Greater Vancouver, and Kitco.


First 10 years - 1990 to 2000

The gain in home prices for single family homes and townhomes in Greater Vancouver were 27% and 16% respectively. The increase in crude oil price and the supply of money were 2 to 3 times more. During this period, there was a rapid gain in home prices from 1990 to 1994, followed by 5 years of price decline when capitals were moved back from Canada to China. Immigrants from Hongkong and Taiwan sold their homes and move money out of Canada after the hand over of Hongkong to China.


Second 10 years period - 2000 to 2010

The rise in Vancouver single family home prices, crude oil and gold followed closely with the global supply of money. Although the Canadian money supply was increasing at half the rate of global money supply, money from around the world and China could have been recycled and invested in Canadian real estates. The rapid expansion in liquidity around the world resulted in real estate prices all over the world, making double digit gains.

smallglobalmoneysupply.jpgNew money fueling home sales

The rapid rise in home prices, easy money policy from CMHC and low interest rates all helped to fuel the real estate boom in Canada. Canadian banks were very liberal in granting “home equity lines of credit” to home owners whose homes had doubled in values. Home owners and investors made very handsome gains in their real estate purchases over the past 10 years.

image002.jpgWill real estate prices collapse?

After a huge run-up in prices since 2001, many are wondering when they will be a correction in home prices. There were time periods when the market appeared to crack and roll over. But, this has not happened.

kitco.gifThe above data showed that real estate prices seemed to co-relate with the global supply of money. The Chinese economy over the past 10 years had grown at just over 10% a year, and the momentum appears to be able to be sustained for the foreseeable future.

Money from China has a direct and significant impact on Canadian real estate prices. Canada is a favoured country for immigration by mainland Chinese families and immigrants from around the world. British Columbia will continue to enjoy positive inflow of money and new immigrants. Rich Chinese immigrants are making an impact on home prices in Vancouver Westside. Overall, real estate in BC will benefit from the demand for housing by new immigrants.

Read other Metro Vancouver real estate news here.

Sunday, March 14, 2010

Foreclosures in US could grow much bigger over the coming year

Below is an article by Renae Merle, Washington Post Staff Writer - Friday, March 12, 2010

New round of foreclosures threatens housing market

The housing market is facing swelling ranks of homeowners who are seriously delinquent but have yet to lose their homes, and this is threatening a new wave of foreclosures that could hit just as the real estate market has begun to stabilize.

About 5 million to 7 million properties are potentially eligible for foreclosure but have not yet been repossessed and put up for sale. Some economists project it could take nearly three years before all these homes have been put on the market and purchased by new owners. And the number of pending foreclosures could grow much bigger over the coming year as more distressed borrowers become delinquent and then, if they can't obtain mortgage relief, wade through the foreclosure process, which often takes more than a year to complete.

Read the article here>

Friday, February 26, 2010

When It's OK to Walk Away From Your Home

below is an article by By BRETT ARENDS, published on February 26, 2010 in the

Millions of Americans are now deeply underwater on their mortgage. If you're among them, you need to stop living in a dream world and give serious thought to walking away from the debt.

No, you shouldn't feel bad about it, and you shouldn't feel guilty. The lenders would do the same to you—in a heartbeat. You need to put yourself and your family's finances first.

How widespread is this? More than 11 million families are in "negative equity"—that is, they owe more on their home than it is worth—according to a report out this week by FirstAmerican Core Logic, a real-estate data firm. That's a quarter of all families with mortgages. And for more than five million of those borrowers, the crisis is extreme: They are more than 25% underwater—the equivalent of having a $100,000 loan on a property now worth just $75,000 or less. That's true for a fifth of mortgage holders in California, nearly a third in Florida and an incredible 50% in Nevada.

Read the blog here.

Tuesday, February 2, 2010

No help in sight, more homeowners walk away

By David Streitfeld, The New York Times

About 5.1 million will own a home valued below 75 percent of what is owed

In 2006, Benjamin Koellmann bought a condominium in Miami Beach. By his calculation, it will be about the year 2025 before he can sell his modest home for what he paid. Or maybe 2040.

“People like me are beginning to feel like suckers,” Mr. Koellmann said. “Why not let it go in default and rent a better place for less?”

After three years of plunging real estate values, after the bailouts of the bankers and the revival of their million-dollar bonuses, after the Obama administration’s loan modification plan raised the expectations of many but satisfied only a few, a large group of distressed homeowners is wondering the same thing.

Read the full article here>.

Awash in a sea of debt

Below is a Jason Kirby article published by on February 2, 2010.

Oblivious to the risks, Canadians are piling on record debt loads

Room 32 of the B.C. Supreme Court in Vancouver is where dreams of owning a home go to die. It’s the main foreclosure court in the Lower Mainland, where banks and other lenders ultimately turn when homeowners can’t keep up with their mortgage payments. The homes get seized, then sold off. “There are many tears on that carpet,” says Andrew Bury, a partner at Gowlings and the top foreclosure lawyer in the city. But lately the cramped courtroom has come to represent something else entirely—the utter insanity of Canada’s red hot housing market.

Last week Bury was in court to seek approval for the sale of a one-storey foreclosed home in central Richmond for $670,000. That was already $40,000 more than the house had been valued at two months earlier. Then, as he always does, Bury asked whether any other bidders were interested in the 2,000-sq.-foot home. Ten hands shot up. What happened next left him stunned. After a secret auction, the winning couple offered a whopping $852,500. “That’s an extreme case, but it’s the kind of thing we’re seeing all the time now,” says Bury. “It’s a feeding frenzy out there.”

Read the full article here>.

Sunday, January 31, 2010

Real estate sales: the China factor

How important is the China factor in affecting sales of real estate in B.C?

"Being a small town with an abundance of modern amenities should make Kelowna a shoe-in for growth coming out of the recession, but not being an immigration hub could be slowing its progress".

During an Urban Development Institute meeting yesterday, Neil Chrystal, president of the UDI Pacific Region and CEO of Polygon Homes Ltd. gave his take on the local real estate market, noting he was surprised by some of the incongruencies between this city and Vancouver.

  • “Vancouver bounded back and Kelowna got nothing,” said Chrystal, adding he’s wondered what the difference could be and landed on the lack of appeal to the Asian consumer.
  • “Vancouver is a great destination for people from mainland China,” said Chrystal, to the roomful of developers and industry experts. “We had that and you didn’t and you couldn’t replace the second home buyer.”
Read the full article here>.

China housing market.

An article posted on Seeking Alpha "4 Reference Points on China Real Estate" raised the question whether there’s a housing bubble in China.

The influx of money from China is an important factor contributing to the strong run up in home prices in metro Vancouver the past 8 years. A fascinating interview in this month’s (January) issue of China International Business magazine with Zhang Xin, the CEO of SOHO China revealed her thoughts on the real estate market in China.

"She is unambiguous in her belief that her industry is in the midst of a bubble."

A downturn in the housing market in China could have a significant impact on the housing market in metro Vancouver.

View Vancouver homes for sale here.

Monday, January 18, 2010

Vancouver housing market: Vancouver is different?

Vancouver property still good buy for post-Olympic era

Following a Royal LePage's recent forecast that property in western Canada's largest city would rise 7.2 percent this year, Bob Rennie, principle of Rennie Marketing Systems, Canada and USA, told Xinhua in an exclusive interview that Vancouver properties would conservatively rise 4 to 4.5 percent in 2010, which would present an ideal opportunity for investors.

"Every market has people who want to jump in and jump out, but there is something unique about Vancouver that once people get their name on title they tend to hold and that's what maintained prices. And a very low vacancy rate has maintained prices on property price
s." With Chinese-Canadians about 300,000 of the city's 2.2 million population Rennie said Asian investors were increasingly an important factor to the market, accounting for about 25 percent of the overall sales.

"With the amount of money being made in China, and with the acceptance of China to Vancouver, we have to be in the top two places on the planet for China to look at, to move money to. We see it happening right now, it's happening a lot. It used to just happen in the luxury market, now it's happening in all the market."

Read the report here>.

Will the Vancouver housing market keep up with the steady price gain, or suffer a sudden collapse?

View Vancouver homes for sale.

Sunday, January 17, 2010

Greater Vancouver Real Estate - Supply & Demand

A few months ago, "Housing Analysis" posted some very interesting data on the supply and demand for homes in Greater Vancouver. The period covered was from January 2005 to October, 2009. View the link here>.

The average monthly sales for 2005, 2006 and 2007 was around 3,500 units, with seasonal higher sales from April to July and the lowest level of sales around December and January. The average listings was around 10,000 to 12,500 homes. The MOI chart showed that during the above 3-year period, the inventory was fluctuating around 4 to 5 months of suplly.

Months of inventory

A balance market is generally when there are around 6 months supply of homes. When the "months of inventory" (MOI) is above 6, home prices tend to fall. When the MOI is below 6, the market is bullish and home prices tend to go up. From May 2008 to March 2009, the MOI exceeded 6, and home prices fell. When the MOI fell below 6 in April 2009, home prices rebounded.

The Greater Vancouver real estate price chart below is seen to confirm the strength or weakness in the housing market.

View Vancouver homes for sale.

Friday, January 15, 2010

Historical listing data for Greater Vancouver

Home prices are affected greatly by the supply and demand for homes by home buyers and sellers. The chart above from the Real Estate Board of Greater Vancouver showed a steady drop in listings (reported for the month of December) of 1997 to 2003.

The supply & demand chart to the left showed that the housing market suffered an overload of supply when sales dropped sharply between April 2008 to March 2009 as a result of the credit crunch.

Home prices dropped by 15% or more in less than a year. However, by May 2009, home buyers returned in large drove, bidding up prices as there were more buyers than sellers.

Buyer vs Seller market

The balance of power between buyers and sellers can be tracked by following the list/sale ratio graph below:

The running 3-month list and sale ratios as shown on the chart to the left for 2008 and 2009 showed that there was more up-ward pricing pressure since July 2009 when the list to sale ratios was less than 3.

The market can only re-balance when more supply is coming into the market, or the sale pace slow down. It will appear that this may not happen until after the second half of 2010.

The housing market after the winter Olympics

While the public are inclined to speculate that the market will slow down after the winter Olympics, there are others who are cautiously optimistic that that housing market may be able to sustain at current level of activities. If a stable supply and demand for homes can be maintained, CMHC and others maintained that a moderate price gained for 2010 can be expected.

The next few months list sale ratios will be able to tell us more about the future direction for metro Vancouver's housing market.
View Vancouver homes for sale.

Thursday, January 14, 2010

BC November Residential Sales

November Home Sales Continue at Torrid Pace

Vancouver, BC – December 9, 2009. The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential sales in the province climbed 165 per cent to 7,182 units in November compared to the same month last year. Last month posted the highest number of MLS® residential sales for the month of November since 2005, when 7,721 units changed hands. Triple-digit gains in province-wide unit sales reflect a low number of unit sales in November 2008.

“BC home sales remained at an elevated level in November,” said Cameron Muir, BCREA Chief Economist. “Low mortgage interest rates, pent-up demand and strong consumer confidence continue to be key drivers in the market.”

The torrid pace of home sales in the Fraser Valley, Vancouver and Victoria has propelled the provincial total to near record levels. However, consumer demand in these markets is expected to moderate in the new year as pent-up demand is largely expended and higher home prices erode affordability.

Year-to-date, MLS® residential sales dollar volume increased 21 per cent to $36.8 billion over the same period last year. A total of 79,325 units were sold in the first eleven months of 2009, up 19 per cent from 2008, while the average MLS® price increased 2 per cent to $463,555.
View Vancouver homes for sale.

Tuesday, January 12, 2010

Metro Vancouver Housing Trend

Housing trend since 1977

From 1997 to 2001

Greater Vancouver's last bull market started towards the end of 1984. and lasted until the end of 1994. Home sales dropped yearly, along with home prices and reached a bottom around 1998. View the price chart here.

From 2001 to 2007

When buying interest returned to the market in 2001, you will notice that there was not enough supply of homes to keep pace with demand. New home construction was pushed to the limit, as strong demand for housing continued un-abetted until the end of 2007. From 2001 to 2007, home prices more than double in values.

The correction in 2008

The credit crunch in 2007 and early 2008 caused a major pull back in buying interest, resulting in home prices declining 15%. The panic of 2008 was quickly replaced by market optimism, when interest rates were slashed from 4.5% in Nov, 2007 all the way to 0.25% in Apr 2009.

Will home prices collapse?

There are great concerns in the market place that home prices are too high. There are major concerns on higher interest rates, pending HST which will affect the housing market and the weak Canadian economy in the midst of a world wide recession.

The metro Vancouver housing may be at the cross road. Market confidence is the key. Home prices are hinging on what happens after the winter Olympics, interest rates, HST implementation and the economy.
View Vancouver homes for sale.