February 4, 2014

Adjusting To The New Reality Of The Market

The Globe and Mail reports from Canada. “Last year marked a return of confidence to Vancouver’s real estate market, with a 14-per-cent increase in sales over the year before, according to the Real Estate Board of Greater Vancouver. Slower activity in the higher end of the market shows that buyers aren’t willing to throw money at just anything – as they seemed to be doing in the boom times of 2007 – but prices are also staying firm. In West Vancouver, a 10-year-old, five-bedroom house that had been on the market since February at $4.2-million, recently sold for $3.55-million.”

“‘For 2014 we feel good. We feel better than we did in 2013. The idea of a bubble and soft landing and all that is behind us,’ said Bosa Properties VP Daryl Simpson.”

The Leader Post. “Luxury house sales have nearly quadrupled in Regina since 2009 - up 288 per cent, according to the Re/Max Upper End Report. Rob Nisbett, an agent with Re/Max in Regina, noted the city lagged behind for years in real estate generally compared to other major cities. People were reluctant to buy upper-end homes for fear they wouldn’t get their money out of them. ‘Where is it going to end? Well, it’s not going to end for quite a while,’ he said. ‘We’re still behind the average price and what goes on in other major cities.’”

The Ottawa Citizen. “There’s light at the end of the tunnel for the housing market in Ottawa as new home sales begin to recover from a two-year slump and both new and resale prices see a modest increase over last year, according to Patrick Meeds of PMA Brethour Realty Group. Overall, new home sales last year were 20 per cent below the 10-year average. This may be due to first-time home buyers having a harder time breaking into the market, says Meeds. The tightening of the mortgage rules in the last couple years means up to 20 per cent of the people who would have qualified for a mortgage in 2010 would not today. ‘Right now we have to figure out a way to get them in (the market),’ he said.”

The Ottawa Business Journal. “Condominium prices dropped 1.2 per cent year-over-year in the capital in the fourth quarter of 2013, according to Royal LePage, providing further evidence of a slowdown in demand for the units in Ottawa. The drop in average condo prices – which fell to $260,500 – was largely the result of the influx of new condominium offerings coming onto the market, the report’s authors said.”

“‘We have a small supply overflow in the Ottawa condo market with an approximate 20 per cent increase in inventory this year, but there is sufficient demand for these new units,’ said John Rogan, a broker/manager with Royal LePage, in a statement.”

“‘Talk of a ’soft landing’ for Canada’s real estate market in the new year is misguided,’ said CEO Phil Soper. ‘We expect no landing, no slowdown, and no correction in the near-term. Conditions are ripe for as strong a market as we saw in the post-recessionary rebound of the last decade.’”

The Canadian Press. “Canadian home prices are likely about 10 per cent overvalued given the expectations for rising interest rates, TD Bank said in a report. However, the bank also noted that the overvaluation in markets such as Toronto, Vancouver, Montreal and Ottawa is likely more significant than in others across the country. TD economist Diana Petramala noted that Montreal, Quebec City and Ottawa have been flooded with an overhang of inventory of unsold condos. ‘Home prices have weakened in the second half of 2013 as a result and we expect that softness to persist in 2014,’ Petramala said. ‘Toronto is poised to follow their lead, as the number of new condos scheduled to be completed in 2014 and 2015 is elevated relative to history.’”

The Montreal Gazette. “I hate to speak ill of my own neighbourhood, but I think it’s pretty evident that the downtown condo market is going through a bit of a price correction. Last year, condo prices tumbled further in Montreal’s downtown Ville Marie district than anywhere else on the island, new data from the Quebec Federation of Real Estate Boards show. Last year, the price of a median condo declined six per cent on an annual basis to $305,000.”

“Federation economist Paul Cardinal doesn’t like to talk about corrections: ‘we’re adjusting to the new reality of the market.’”

“But real estate brokers tell me their clients are simply not getting the same prices that their homes might have fetched in 2011, or early 2012. What’s most worrisome for me is that active listings for downtown condos are up 41% in 2013, compared to a year earlier. Even the price of once hot plexes is down a bit. Royal LePage broker Raymond Singh has heard of one investor who is trying to sell a handful of plexes in Ville Marie. They are renovated and are listed at market value, but he has not yet attracted a buyer.”

In Greater Montreal, homeowners now trying to sell can console themselves if they bought a decade ago. Prices have more than doubled since 2001. But if you bought two years ago, prepare to wait, or take a hit.”

From CTV News. “According to seasonally adjusted data from the Canadian Real Estate Association, the average price of a home in Halifax is $273,792. That number jumps to $541,637 in Toronto and a whopping $825,635 in Vancouver. Kerry and Jordan Titchener are expecting their first child in April and are already pre-approved for a mortgage. But after three months of searching for a new home, they’re not convinced buying is the answer anymore.”

“‘We want to just rent again because seeing what we’re going to have to pay for management fees, strata fees, property taxes. We just feel why put that stress on our relationship,’ said Jordan Titchener.”

“A recent RBC affordability study found that if couples, like Kerry and Jordan, want to purchase a detached bungalow in Vancouver, they’d need to spend 91 per cent of their disposable income on housing.”

RSS feed


Comment by Muggy
2014-02-04 05:43:58

“…we have to figure out a way to get them in (the market), he said.”

Lower prices?
More cash?

Crazy talk.

Comment by Whac-A-Bubble™
2014-02-04 07:09:27

How about loser lending standards? Has that been tried?

Comment by Jingle Male
2014-02-04 07:18:04

LOL, you mean like fog a mirror, get a loan, NINJA financing. Been there, done that, got the T shirt.

Comment by Muggy
2014-02-04 09:57:07

“How about loser lending standards? Has that been tried?”

I hear ads for this on the radio:

HomeBuyers Choice Mortgage

With 100% financing for purchases, a HomeBuyers Choice Mortgage is ideal for first-time homebuyers.

No down payment required
Fixed-rate terms available
No Private Mortgage Insurance (PMI) required
Seller contribution up to 6% allowed
Jumbo loans amounts available up to $1,000,000
Refinance options also available (maximum loan-to-value 97%)


Comment by Jingle Male
2014-02-04 06:01:23

Regina, SK, Canada….”‘We’re still behind the average price and what goes on in other major cities.’”

I have news for you, Rob Nisbett, you will never catch up with other “major cities”. This is often a big fallacy in small markets.

That is part of what contributed to the big bubble in Sacramento….all the buyers from San Francisco thought Sacramento housing was “so cheap” and it was bound to catch up to the bay area prices (at least 2x’s the valley prices). They had their @sses handed to them on a silver platter and walked away when the bubble crashed.

Regina, 500 kilometers NE of Bismarck, North Dakota will never qualify as a “major city”.

Comment by In Colorado
2014-02-04 12:51:40

But Regina has a CFL team! It has to be a “major” city.

Comment by Housing Analyst
2014-02-04 06:21:05

The Daily Truth: Arlington VA Housing Prices Down 12% YoY; Inventory Skyrockets


Comment by Housing Analyst
2014-02-04 06:29:02
Comment by Whac-A-Bubble™
2014-02-05 00:57:12

“Realtor … Arrested on Suspicion of Fraud”


Comment by Housing Analyst
Comment by bink
2014-02-04 11:12:15

I used to eat at their Cafe! If I had only known I could’ve become a real estate mogul just by introducing myself to management.

Comment by Whac-A-Bubble™
2014-02-04 07:08:27

“A recent RBC affordability study found that if couples, like Kerry and Jordan, want to purchase a detached bungalow in Vancouver, they’d need to spend 91 per cent of their disposable income on housing.”

Sounds like ideal market conditions for trust fund babies starting out in life.

Comment by Jingle Male
2014-02-04 07:16:54

“We want to just rent again….”

That seems to be a trend in the Sacramento foothills. I track available rental inventory in specific markets where I invest and the availability of homes for rent is down 50% over late 2013. I am not sure why and curiously rental rates are quite flat after dropping about 3-5% in late 2013 (up 10% overall since 2011).

Perhaps Blackrock and Colony are actually filling up their portfolios. Neither web site shows any homes available within 20 miles of Sacramento.

Comment by Housing Analyst
Comment by Jingle Male
2014-02-04 15:55:37

Well HA, we agree on one thing. See my post above. HA, ha, ha, ho, ho, ho….whocuddanode we would ever agree on anything?

Comment by Housing Analyst
2014-02-04 16:16:51

Is that what you’re about? “Agreeing”? I couldn’t care less what or who you agree with.

Enjoy those losses because there’s more to come.

Comment by Ben Jones
2014-02-04 07:50:16

‘These are anxious days at Las Brisas, an aging condominium highrise on Bathgate Drive. Owners of the 275-unit building found out just before Christmas that a major overhaul of the highrise — which includes replacing the entire brick and cladding facade, from top to bottom, due to water penetration in many of the apartments — is planned over the next four years.’

‘Owner Rachelle Batamy, who is semi-retired, is an awkward spot. She purchased another condominium on Riverside Drive a few months ago, is renovating it and was in the process of selling her unit at Las Brisas when the special assessment landed. Should she, she wonders, sell the Riverside condo and hope she can recoup all her costs and maybe gain some equity so she can pay her share of the special assessment? Or does she offer a significant discount on the asking price for her present home?’

“Welcome to condominium living,” says Moti Flaster, founder of the Toronto-based Ontario Condominium Owners Association/’

Comment by redmondjp
2014-02-04 16:05:15

In the greater Seattle area, this exact same story appears to be the norm, rather than the exception, for large condo buildings. It’s not a matter of ‘if,’ but ‘when.’

Why anybody here thought that fake stucco is an acceptable siding choice for the PNW is one of life’s many mysteries . . .

Comment by Ben Jones
2014-02-04 07:57:14

‘Got a beater car worth at least $5,400? You can trade that in as a down payment on a brand-new Vancouver condo.’

‘That’s the pitch by InGastown, a new 61-unit condo development at 150 East Cordova, which launched an innovative program banking on condo buyers’ willingness to go car-free in exchange for home ownership in Vancouver’s sky-high real estate market.’

‘Car for a Condo is just one of many lures condo developers and marketers are dangling to attract buyers in today’s less-frenzied real estate market. Some developers offer credits or discounts off purchase prices. Others offer more imaginative lures. In North Vancouver, Seylynn Village is raffling off a new home. Last spring, east Vancouver project Boheme Living offered a free Fiat to buyers of selected units.’

“Cars are a terrible asset,” said Cam Good, president of real estate marketing firm Key Marketing. “For someone trying to get started in life and wanting to become a homeowner, taking a depreciating asset and literally turning it into an appreciating asset is a life-changing decision.”

Comment by Carl Morris
2014-02-04 09:35:20

Cars are a terrible asset

But what you’re saying is that you’d rather have my beater car than your “asset”?

Comment by oxide
2014-02-04 13:41:14

“For someone trying to get started in life and wanting to become a homeowner, taking a depreciating asset and literally turning it into an appreciating asset is a life-changing decision.”

[warning: "infinite pause" type ellipses follow :razz: ]

I want HA to reply! Oh HA yoo-hooooo… …

Comment by Jingle Male
2014-02-04 15:57:19

HA, HA, HA, ….good one Oxy! He’ll get a round to it…..

Comment by Ben Jones
2014-02-04 08:03:51

From the MG article above:

‘While Cardinal’s remark might appear understated, I agree that a six per cent drop is hardly post-crash Florida territory. Long term, values are still rising; since 2008, the median price of a downtown condo has grown 20%.’

‘And the 18% drop in the median price of a single family home is not quite so alarming when you consider that only a limited number houses are sold in Ville Marie, which can widely skew the results.’

Comment by Ben Jones
2014-02-04 08:30:53

‘If Canadians have a preoccupation these days, apart from the winter weather, it seems to be real estate. Specifically: the ever-rising prices in most of our big cities. But maybe those are now outdated notions. Many young Canadians are already looking at them with skepticism. And perhaps we should all rethink the dream for a number of reasons.’

‘David Chilton, perhaps best known as the author of the Wealthy Barber, a folksy how-to about financial planning, is worried about our real estate obsession. Chilton argues that too many of us have bought into the idea that bigger is better — what he calls the granite countertop phenomenon.

“How screwed up has society become,” he asks, “when people are literally embarrassed if they don’t have granite countertops?”

From the comments:

‘I find it really funny the article here is talking about Marble counter tops, when most can’t really afford even the most basic home. Bells and whistles like that, and “all matching appliances” are for when you are mortgage free, not before, unless you want to completely bury yourself, in debt.’

‘A condo is never really your own home, but an illusion. It is an apartment in someone else’s building. And if you have obnoxious neighbours? Ha! We’ve been suckered by developers.’

‘Mostly we have been suckered by THE BANKS and THE REALTORS who persist on selling homes way above fair market value, and suckering people into paying 600% or percent in total on their mortgages just to own a home. The absolute ridiculous and fanatical “home ownership at any cost” comments here, prove it.’

Comment by Carl Morris
2014-02-04 09:41:52

If Canadians have a preoccupation these days, apart from the winter weather, it seems to be real estate.

Actually I think people everywhere have a preoccupation with being able to retire from the dog-eat-dog capitalist system and finally relax. And they’ve been suckered into thinking that real estate is the way to do that. But what looks like escape is actually an angler fish luring them back into the system.

Comment by Ben Jones
2014-02-04 08:33:52

‘Neither the government nor the real estate industry has collected data on parental aid to homebuyers. But experts say they are seeing more moms and dads helping their children, especially in the priciest markets.’

“It is increasingly common in the city of Toronto, where prices are pressing the limits of affordability, for most buyers looking to get a foot into the market,” said Steven Fudge, a sales representative at Bosley Real Estate in Toronto. The 25-year industry veteran says at least 50 percent of his buyers are bolstered by parental money.’

‘That young adults need help with a first home should come as no surprise. Home prices in Canada hit record highs in late 2013, according to the Teranet-National Bank house price index. Industry data showed the average home price nearing C$400,000 ($358,800) in December. That’s up 10 percent from a year earlier and 84 percent from December 2003, when the average price was C$211,768.’

‘Benjamin Tal, a senior economist at CIBC World Markets, said that is the result of house prices rising far faster than incomes. The overall effect of parental aid on the economy is unclear, he said. While it has helped fuel demand for housing and kept upward pressure on prices, it could dampen consumption if it means the parents have to cut back on their own spending to help their kids.’

‘Most important, Tal said, the wealth of the baby boomers and their willingness to help their offspring likely provide a cushion in case of economic shock that might otherwise prompt a wave of mortgage defaults, and even a housing collapse.’

“The increased share of this kind of activity is giving the housing market some more room to maneuver in case of an economic shock,” he said. “What makes something bad is if it is unsustainable. Is this sustainable? Probably. In fact, it is more stable than anything else that I can think of. So I think it is a good thing.”

Comment by rosie from the north
Comment by Ben Jones
2014-02-04 09:03:53

“It was listed at $649,900.

It sold…

For $803,649.

NOTE: just noticed the listing said….

Please Leave The Kids At Home When Coming For A Visit - Not For The Faint Of Heart”

Comment by rosie from the north
2014-02-04 09:50:49

On the night that this bidding war occurred it was -20C (really cold F.) Cars were idling at the curb as bidders waited to see if they won. The speculation is that this is a tear down, so a 20 x 118 foot lot in Toronto is going for 800k plus. CMHC still insures mortgages up to 1 million with 5% down. Mortgage rates are still low. 3.5% for a 5 year. The government and the banks pretend to talk this down but to no avail.


Comment by Housing Analyst
2014-02-04 09:59:11

These observations and reports demonstrate just how large the magnitude of the correction will be.

All I can say is you better not be in debt when it begins.

(Comments wont nest below this level)
Comment by Shoeguy
2014-02-04 19:51:43

“…we have to figure out a way to get them in (the market), he said.”

Gotta hurry up and get the next generation of suckers in to buy those over inflated homes from the previous generation of suckers if we are to keep this Ponzi Scheme running!

Comment by Housing Analyst
2014-02-04 20:59:36

Nice work by the way.

Stay on’em.

Name (required)
E-mail (required - never shown publicly)
Your Comment (smaller size | larger size)
You may use <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong> in your comment.

Trackback responses to this post