May 20, 2015

A Lot Of People Bought Houses When Prices Were High

The Vancouver Sun reports from Canada. “The hot real estate market is generating a frenzy of interest in property flipping in affluent West Vancouver as speculators turn big profits in only a few months. A review of 23 real estate listings by The Vancouver Sun reveals an average turnaround time of about 6½ months between purchase and relisting, with property asking prices inflated an average of 40 per cent, or $1.1 million per property, during that time. Kim Taylor, a realtor with Royal LePage, said that increased home flipping is linked to the fact there are more buyers than real estate available, adding that foreign buyers — especially from China and the Middle East — have contributed to the hot market in areas like the British Properties, Ambleside and Dundarave.”

“Some new owners are trying to flip their properties immediately for as much as $500,000, or almost 25-per-cent profit. ‘It’s a little out of control,’ Taylor said. ‘The prices even shock the sellers — what they can get. You see the diminishing sense of community there because a lot of people don’t live in the homes and they sit empty,’ she said. ‘It’s more of an investment.’”

The Vancity Buzz. “B.C. Housing Minister Rich Coleman has said neither his ministry or the province has any plans to collect data on foreign ownership, stating that housing costs in B.C. are ‘pretty reasonable.’ ‘If you look at the mean cost of housing across British Columbia and you compare it to other major cities worldwide, the reason it is attractive internationally is because it’s actually pretty reasonable compared to other cities like London, Singapore, Tokyo,’ Coleman answered.”

“After Coleman’s comments, it is clear the government is opposed to even researching the effects of foreign ownership on B.C. housing prices and its economy, let alone impose taxes. Meanwhile, the British Columbia Real Estate Association reported a 45.5 per cent increase from April 2014 in the total sales dollar volume for B.C. real estate and a 28.7 per cent increase in number of home sales, totaling $6.3 billion worth of real estate sold in April, making the month the hottest April for home sales in a decade.”

From MetroNews. “The number of Canadians who can’t pay their debts and are being forced into insolvency is on the rise for the first time since the recession, according to a report by CIBC. The bank says the cumulative number of insolvencies rose by 1.2 per cent in the six-month period ended in February. The overall increase came as personal bankruptcies fell by 4.7 per cent. However the number of proposals, where consumers negotiate to repay only a portion of their debt, rose by no less than nine per cent.”

“A prolonged period of low interest rates has helped boost household debt to record levels. However, data also suggests that while Canadian families are borrowing more, that increase has come against a backdrop of rising asset values, notably real estate worth. The CIBC report noted that delinquency rates continue to trend downward in all major types of borrowing, with the exception of lines of credit, where the delinquency rate has been on the rise in recent years. ‘This trajectory largely reflects transfer of risk from credit cards to lines of credit,’ Tal wrote.”

The Calgary Herald. “A prolonged oil price slump is beginning to adversely affect the Alberta housing market, where prices are currently 17 per cent overvalued, according to a Fitch Ratings report. Robin Wiebe, senior economist with the Conference Board of Canada, said Calgary homebuilders and sellers of existing homes are experiencing ‘collapsing demand.’ ‘In the resale market, although existing housing sales are on track to fall by a third this year, listings are currently on pace to decline by only five per cent,’ he said. ‘Potential home sellers have yet to react to the slowing market, although we expect that reaction to come. Price declines in Calgary are likely to accelerate through the balance of the year, if the past downturn is any guide.’”

From News Talk 770. “A new think-tank report is comparing Calgary’s housing sector to Wile E. Coyote’s pursuit of the roadrunner on Saturday morning cartoons. Robin Wiebe, senior economist with the Conference Board of Canada says like the coyote chasing the roadrunner, the sudden plunge in oil prices has left a housing industry chasing demand seeing it disappear. ‘Like Wile E. Coyote, the industry participants are hanging in thin air. Under construction volumes are relatively high. Listings, in the resale side, have started to come down, but they were relatively high. So the demand has evaporated and the supply remains.’”

“Based on recent oil price increases, Wiebe says the worst might be over. ‘I would suspect that the market has probably bottomed out now. We won’t see big future declines in prices and in starts. There will be some projects shelved. There will be some listings left unsold. At some point, the market will pick itself up, dust itself off and move forward as it always has. There are quite a number of projects that remain under construction. So, I would expect some job losses in construction, but not a dramatic downturn.’”

The Cold Lake Sun. “The local real estate market has slowed down due to uncertainty in the economy. According to Patti Ouellette of Remax Cold Lake, sales are down 45 per cent and prices have decreased by seven per cent. Rental housing prices have also dropped, and there is more supply than demand - a stark contrast to a year ago where renting a space was difficult. ‘The market is a little slow,’ Oullette said. ‘It’s flooded with houses.’”

“According to Oullette, a lot of people bought houses when prices were high, thinking the trend would continue, but then when prices dropped, people started losing their jobs. Jerry Soroschuk of Royal Lepage gave a similar assessment. ‘There’s a lot of product in the market that has been on sale for a long time,’ he said.”

“The uncertainty of oil prices has had an impact on the entire Northeast Alberta region. ‘It’s affecting all of us,’ Storoschuk said. He went on to say that bigger municipalities like Edmonton and Calgary aren’t immune to it either. ‘It will eventually trickle down,’ he said. Those effects are already being felt in Calgary. The situation is much worse in Fort McMurray and Lloydminster, where year-over-year prices have fallen by 48 per cent and 44 per cent respectively.”

The Financial Post. “Canadian snowbirds have been cashing out of their property in the United States in increasing numbers, according to new data from one of North America’s leading currency exchange groups. David Nicholls, head of partnerships for the North American division of Canadian Forex, said the dollar amounts coming back into Canada from the sale of U.S. homes are up almost 100 per cent in the past year compared to 12 months earlier.”

“‘The amount of money coming back from Canadians who have been selling property has pretty much doubled whereas as investment down into the U.S. (from Canadians) has stalled considerably and is almost down 50 per cent,’ Nicholls said, adding that reasons for the change are rising home prices south of the border and the sliding loonie.”

“The change in Canadian attitudes comes after what some had called a perfect storm for sunshine belt investment — with domestic housing values being used for financing U.S. purchases that were rock bottom because of the strong loonie and the housing crash in America. Nicholls said the peak of Canadian real-estate investment in the U.S. was in late 2012 and early 2013. ‘What we are seeing now is some of the early money that went in, is starting to come back after a really long run in the U.S. market,’ he said.”

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