The Housing Bubble

A report from the Edmonton Journal in Canada. “My name is Julia Lipscombe and I’m a renter. Not only that, I’m happy with our current situation. That said, my husband and I are in our mid-30s. Among our friends, we’re in the minority. I thought about this while reading a recent Globe and Mail article which featured parents who are buying property for their children, worried for their futures. The article features a single mom in Ajax (a town east of Toronto in the Greater Toronto Area), who bought each of her kids houses there. She rents them out, but carries the debt burden, and pays an extra $1,000 out of pocket each month. I certainly respect her concern for her children and she can do what she wants with her hard-earned money. But I sometimes wonder what all the panic is about.”

From Bloomberg. “Toronto’s housing market continues to cool as prices fell last month and the supply of homes for sale spiked ahead of new stress-test rules that went into effect this week. The benchmark home price index fell in December for the seventh consecutive month, according to data released Thursday by the Toronto Real Estate Board. The index has fallen 8.9 percent since May — the largest seven-month decline in the history of data going back to 2000.”

“Active listings in Toronto were up 172 percent from a year earlier, suggesting sellers were trying to sell before new mortgage lending regulations went into effect on Jan. 1. Toronto’s housing market decline has mainly been in the detached home segment.”

From CBC News. “With 2017 behind us, for the first time in a decade, so may be some of the highest housing prices. Real estate agent Steve Saretsky says the average price of detached homes in Vancouver fell 6.5 per cent last year. Most of the price movement was at the higher end of the market, he said. Saretsky says single family home sales have been soft for about 18 months. ‘I think with those weak sales, it has allowed inventory to creep up and that’s put a damper on prices,’ said Saretsky.”

“Overseas money coming into the Vancouver real estate market has dropped off significantly, he said. As well, there has been the implementation of a foreign buyers tax and new mortgage rules. ‘I think the impact is obviously pretty noticeable,’ said Saretsky.”

“In 2017, there were 2,434 single family home sales in Vancouver. That’s the lowest since 2,281 sales in 2008 and well off the peak of 3,946 sales in 2015. Saretsky, however, expects Vancouver home prices will continue to drop but stops short of saying the bubble has burst. ‘I don’t want to be the guy to call it, but it’s definitely a change in direction.’”

The Vancouver Sun. “The CEO of a Chinese company moved $750,000 from China to Metro Vancouver for a real estate deal with the help of nine strangers who each brought $50,000 into Canada for ‘tourist purposes,’ according to a B.C. Supreme Court judgment. The judgment sets out the method through which Hong Jie ‘Anita’ Wang, an executive in Shandong, China, transferred money for the purpose of buying a five-acre Port Coquitlam property with a B.C.-based partner.”

“The B.C. realtor who acted as the buying agent on the 2011 deal, Ravi Panwar, told Postmedia that such land deals — where offshore investors partner with B.C.-based counterparts — are ‘quite common,’ though he didn’t know how often they involve money shipments like those outlined in this case. Panwar said such domestic-foreign joint partnerships are as common in Metro Vancouver real estate today as they were in 2011 when he was the buying agent for the two Wangs, but he didn’t know how many used Anita Wang’s method of transferring money into Canada.”

“‘Until the court case came out and revealed how she transferred the money, I had no idea how the money got into this country, honestly,’ Panwar said, reached by phone while on holiday in Hawaii. A 2014 Real Estate Council of B.C. bulletin announced recent changes to Canada’s anti-money-laundering regulations meant ‘brokerages are now required to perform increased customer due diligence, in order to better evaluate their clients’ risk of money laundering.’”

From CBC News. “In 2017, the lowest number of homes in a decade were sold in Regina and the average price of a home dropped, according to the Association of Regina Realtors. ‘2017 was the slowest year we’ve had in the last 10 years,’ said Gord Archibald, CEO of the Association of Regina Realtors. ‘We had lower sales, higher inventory and we had some price loss taking place as well.’”

“At the end of the year, there was a decades-high number of unsold listings on the MLS system, according to the report. But Archibald said that it’s not all bad news, especially if you were looking to buy a home last year. Considering the glut of real estate and the dropping prices — on average down four per cent to $282,900 in 2017 from $294,600 in 2016 — it was a good year to buy.”

“Justus Smith, a realtor with Remax Crown Real Estate in Regina, said Regina’s oversupply of housing and especially new construction made the rental market more attractive while driving down prices. Smith said for those who bought a home during the last four to five years, if they were to have sold it in 2017 chances are it would have been at a loss. Smith said that in 2017 it was not uncommon for some homes or condos to be listed for six to nine months. When possible, Smith said patience was important, but that can be pricey.”

“‘It gets expensive to be patient. Especially if it’s vacant and you’re paying those condo fees every month, and the mortgage and insurance — it all adds up,’ said Smith.”

The Alaska Highway News. “Unemployment has been quite a rollercoaster ride over the past 12 months. There have definitely been a lot of fluctuations in Northeast B.C. We have definitely had higher unemployment rates than the rest of the province for most of the year. This is a trend that we have not experienced over the past 10 years. While CMHC statistics report the rental supply is expanding in southern B.C. and vacancy rates remain low, Fort St. John statistics do not make the front page as they truly are dismal. Vacancy rates for apartments have improved to 19.2% compared with the 30.7% vacancy reported last December. There was a very large inventory of units constructed in 2015/2016 that had to be absorbed into the market.”

“Housing starts were very low in the city this past year. There were 53 units constructed as of October compared with 72 during the same period in 2016, and 213 during the same period in 2015. It does not make economic sense to build a house when there is an oversupply of inventory. Developers and speculators have quickly realized that it is not feasible to continue to build on the 2014/2015 building mode.”

From Energetic City. “The number of property sales in Fort St. John jumped in 2017 compared to the previous year, though selling prices continued to trend downward, according to numbers published by the BC Northern Real Estate Board. In Fort Nelson, things were not quite as rosy. The Northern Rockies Regional Municipality saw a 30 percent reduction in the average price of a single-family detached home.”

“‘Most communities in our Board region have seen an increase in sales when compared to last year,’ said BCNREB President John Evans. ‘Overall, most markets have been steady in the face of the weak commodity prices of the last few years and the boom and bust cycles since the 1970s have not been repeating themselves.’”