Vancouver Condo market is collapsing!

[BrokeBastard]

http://finance.sympatico.msn.ca/SavingsDebt/KerryGold/Article.aspx?cp-documentid=17985631

I thought I would post it and beat Cosmo who loves to rub it in.

 

[Sit_on_my_face]

What stikes me about this, is that when you go onto MLS or look at the real estate papers here in vancouver, Condo, townhouse and housing prices still seem to be way up there in prices!

At least to me they do anyway and I don't see prices drops as the charts Indicate.

Here take a look here.

http://www.canadian-housing-price-charts.235.ca/vancouver_housing_price_chart.htm


http://www.canadian-housing-price-charts.235.ca/canadian_housing_price_chart.htm

 

[klamkracker]

You will never see cheap houseing prices agin.The price of a nice city home was @ $239 000 just 6 years ago.It has came down but will go back up through out time.So get in the market now and do not worrie about the big fake crash.

 

[InTheBum]

You will never see cheap houseing prices agin.The price of a nice city home was @ $239 000 just 6 years ago.It has came down but will go back up through out time.So get in the market now and do not worrie about the big fake crash.

What the hell you been smoking...the market is just starting to collapse here...

 

[klamkracker]

Time will tell,we will have to wait and see who is right.

 

[Krustee]

You will never see cheap houseing prices agin.The price of a nice city home was @ $239 000 just 6 years ago.It has came down but will go back up through out time.
So get in the market now and do not worrie about the big fake crash.

Big fake crash?

I wish it was cuz it`s costing me big time.

What the hell you been smoking...the market is just starting to collapse here...

Seriously, I wanna smoke some too!

Time will tell,we will have to wait and see who is right.

As I have stated before we are just beginning to see the effects of this economy that the US has been suffering through for a year now.

https://perb.cc/vbulletin/showthread.php?p=855654#post855654

No use sticking your head in the sand over the issue.

We will see the same here if trade with the US takes a plunge - and all indicators so far are that it will.

Remember the "Buy American" clause in the Obama stimulus plan that got our trade minister Stockwell Day all hot & bothered?
The issue was obviously a big enough concern to get a strong reaction from Harper.
http://www.nationalpost.com/news/story.html?id=1231096

So if you are waiting to see what will happen here & when, I think by the end of this summer you will have your answer.

Read this:
https://perb.cc/vbulletin/showthread.php?t=100198&highlight=house+prices
And this:
https://perb.cc/vbulletin/showthread.php?p=842852#post842852

I am sure you will see the light...
... and who is right.

 

[klamkracker]

Yes very good points of views,but my place is home not a invesment,so i will wait it out.When you take in the bum it will get krusty Just a thought and wait it out,one less person running to the hills screaming!

Anything that history tells us,that everything goes up and come down then go back up,So jump when you want to...

 

[klamkracker]

I think this is just a plug in the pipe, and the fundamental pressures that drive the market are sound. All of a sudden the flow will start again and when it does, all those buyers who have been waiting will start to panic and the pendulum will swing back the other way again.

Financial disasters aside, unless the population actually starts shrinking the demand for housing will be there, the cost to build it will not drop significantly, and ultimately the cost for re-sale houses will remain stable.

 

[hapkido]

I think this is just a plug in the pipe, and the fundamental pressures that drive the market are sound. All of a sudden the flow will start again and when it does, all those buyers who have been waiting will start to panic and the pendulum will swing back the other way again.QUOTE]

Sure like any market there are cycles of ups and downs. Aside from the spin from CREA, Agents, Condo Developers and the Vancouver Sun or any party which has a self interest, this one will be a severe down cycle and prices will not recover in 5-10 years. I had one so called PROFESSIONAL 15 year Agent telling me to buy in Q4/08 because "prices will never be so low again". Fast forward today at that same condo loss $80K in value. I laughed and toss her biz card away.

No one can time the bottom but it doesn't take a rocket scientist to look at the facts. Currently 20 months of inventory and rising as more completed condos flood the market versus 2 months during boon times combined with the weak demand spells a minimum 30% drop in 2009 on top of the current 15%.

You may see a spike in Spring from the Greater Fools purchasing due to low interest rates and marketing spin by CREA/Agents that it's a great time to buy but after it's ALL down hill from there.

If you are planning to buy now make sure you pay significant chunk of cash because when that mortgage resets in 5 years we will be in an inflationary environment which can bring us back to norms of 6-8% rates.

Stop listening to the uninformed and get the facts. (blah blah no more land. blah blah Olympics...blah blah Ocean/Mountains, blah blah low interest rates...blah blah rich foreigners). The last thing you want is to be in a negative equity situation and cant make the payments due to job loss.

http://4.bp.blogspot.com/_hYipV07cr...AAhU/IOSsAPwwWlE/s1600-h/u-r-here-q3-2008.JPG

You see that hockey stick rise? Fueled by cheap credit, greed and stupidity by all the players. The one who loses? The over leveraged Joe Smo caught holding the bag at the peak who thought it would go on forever.

Where are the fundamentals to support the current prices? I don't see it. Far from it ....Fundamentals are 2003 level of pricing. The average family income in Vancouver is $50-60K and average price of a residence is $650 K. Your fundamentals are whacked.

 

[brown25]

How we got here

http://www.pbs.org/wgbh/pages/frontline/meltdown/themes/howwegothere.html

 

[hapkido]

Reading that article in the first post what struck me most was that some of the people that have been hammered by falling prices already are still dreaming of a turnaround in 6 months or so. Yikes!
QUOTE]

It's called living in Denial. Also the quotes were from those whos livelihood depends on an active housing market.

http://2.bp.blogspot.com/_rt16FZ_z1...Bzg/KtNUwVcI_Iw/s1600-h/cycle_emotions_en.jpg

Think of all the "Riaz Kassams" who are going to foreclose adding to the 20 months of inventory with no margin of safety...thinking the continual rise of paper equity would bankroll his Penthouse for KINGs. He went "All IN" and lossed tragically. Computer programmer with average salary of maybe max 100K buying his McDaddy Penthouse at $1.4 million. 14x his income. Rule of thumb - 3x income. I know of many who are in this situation following the "JONES" and living the HIP URBAN LIFE. Time to trade down Riaz from Starbucks to Instant Coffee.


"Computer programmer Riaz Kassam is facing threat of a lawsuit by the developer of the trendy Yaletown penthouse he can no longer afford. He purchased the two-level, 2,400 sq. ft. condo for $1.5 million in June, 2008. At the time, it was priced $100,000 below market value. A few months later the bottom fell out of the market, and by the time the bank appraised the property, it was worth $1.2 million -- to Kassam's shock. Kassam can no longer get financing for the property and he can't raise funds from the sale of his old condo because it's dropped in price by $170,000. He took it off the market in December after failing to sell it.

"I never imagined it would be so drastic, so fast," he says, seated in a downtown Starbucks. "People are coming through to see our apartment... but everyone is just waiting, waiting, waiting. Now you have developers blowing away properties at 40 per cent. No one is wanting to buy because they are waiting for these deals to come out. They are devaluing the whole Vancouver market, actually."

 

[klamkracker]

This what I have learned today,Everyone should sell and take the money and run and wait for the prices to drop to $200 000 for a house in Vancouver.

The truth is that there really are tens of thousands of potential homebuyers sitting on the sidelines, hoping for home prices to fall within their grasp. The myth is that home prices can fall far enough to close the gap for ordinary families.

Metro Vancouver home prices declined 10.9 per cent in 2009, according to the Real Estate Board of Greater Vancouver.

And British Columbia home prices are forecast to drop another 13 per cent this year, according to the B.C. Real Estate Association. That would lower the average price of a B.C. home to about $396,600.

But that's still roughly $138,500 more than an ordinary family can afford.


Metro Vancouver home prices would have to plunge 55 per cent from the May 2008 benchmark peak of $568,411 in order for a typical family to buy one.

Not even the hardest hit regions of the United States have suffered an across-the-board drop in housing prices of 55 per cent. In California, for example, home prices appear to be bottoming out at about 40 per cent below the peak.

 

[Sir Jim]

Las Vegas

I just interviewed a realtor this AM here in LV. I had approached him this time
last year and he said it's a good thing I waited.

Fall 2007 sold at 1,2 M
Winter 2009 listed for months at 379 K

Listed Summer 2007 for 799K
Sold fall 2008 for 399K

Listed summer 2007 for 249K
Sold last week for 59 K (needed 10 K reno after owner damaged unit stripping it.

There are plenty of 200K houses now available for in the 60's now.

Virtually all sales are short sales and not foreclosures.

There was 26000 new hotel rooms canceled in 2008 and as a result there
is no one needed now to buy these entry level homes.

I haven't looked into new construction yet but I may.

Building lots are now in the 25K range down from 90K

This is just the stats as I remember them as we went over a lot of information

 

[Lady Companion]

We are definatley seeing the drops in price from developers...

but the secondarry market (which is where most of the property and condos are) is much less affected.

I do believe that prices will continue to fall for the next 6 months to two years, but I'm not entirely certain it's going to be the winfall or tragedy (depending on whether you are buying or selling) that we are thinking.

Developers are dumping places at cost right now, and many plans are being shelfed if the ground hasn't already been broken. However, those who own houses or condos aren't as prepared to sell for a massive loss (or take the hit of declaring bankrupsy if they walk). Interest rates are incredibly low right now, and if it is a principal residence, I don't see people selling at a major loss unless they can't afford their mortgage. With these rates, that is very unlikely.

I am seeing a lot of brand new, never sold places going for 25% less than a comparable 15-year-old place is on the market for. If people aren't desperate, they won't sell. Investors may to take advantage of the capitol loss, but principal owners won't.

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[hapkido]

"This what I have learned today,Everyone should sell and take the money and run and wait for the prices to drop to $200 000 for a house in Vancouver."

So you agree now that the market is tanking. Try giving your advice to Riaz in the OP article.

"The truth is that there really are tens of thousands of potential homebuyers sitting on the sidelines, hoping for home prices to fall within their grasp. The myth is that home prices can fall far enough to close the gap for ordinary families."

The truth has not been realized yet. There is a time lag on the full economic impact. Even a 30-40% haircut is alot of money saved.

"Metro Vancouver home prices declined 10.9 per cent in 2009, according to the Real Estate Board of Greater Vancouver. And British Columbia home prices are forecast to drop another 13 per cent this year, according to the B.C. Real Estate Association. That would lower the average price of a B.C. home to about $396,600."

These are the very same Snakes who in Q4/08 who CONVENIENTLY didn't foresee this bubble coming when it was staring them in the face and encouraging people to BUY still!

"But that's still roughly $138,500 more than an ordinary family can afford.
Metro Vancouver home prices would have to plunge 55 per cent from the May 2008 benchmark peak of $568,411 in order for a typical family to buy one. Not even the hardest hit regions of the United States have suffered an across-the-board drop in housing prices of 55 per cent. In California, for example, home prices appear to be bottoming out at about 40 per cent below the peak."

Again if you think the worst is over. You are sadly mistaken.

But at least you acknowledge now that it's not a head fake crash.

 

[hapkido]

Thank you for saving me typing!

The general public is ill informed unfortunately and conduct superficial research and listen to the crap from interest groups in this business. The irresponsible spin and lies is incredible as the greater society ultimately pays a heavy price. The reason why sale prices havent dropped in the same % as the DECLINE transaction volume of 60% is because people who listed in Q3/08 held firm on their ridiculous bubble price and delisted in Q4 in anticipation of a turn around in Q1/Q2. You will see unprecedented supply and the question is how much demand absorption will soak up this supply for those who think it's a great time to buy and prices will rebound.


Let's not forget those who took home equity loans to finance their luxury life style or purchased property investments. With the decrease in value of their principle homes the banks are clamping down on credit limits and maybe requesting a capital injection to bring their equity:loan ratios in line. So where are the home owners gettign this cash?

But an oversupply in product and drops in pricing in new pushes prices down in the resale market, and there is a huge oversupply of product out there right now.

People tend to always look at the list prices as the market indicator and always note that list prices haven't dropped as much as what people expect - but we need to remember that realtors do not want to give the impression that the market is dropping so in a lot of cases prices being advertised are holding.

What is dropping is actual sale prices. Furthermore, absorption rates are dropping while length of time listed on the market is increasing dramatically.

Lenders are tightening up and this will also put downward pressure on prices as less people are even allowed in the market, or the amount being lent is lower.

Vancouver is no different than all the other markets in the states that have been taking a shit kicking. I find it baffling to hear people who think that this market is for some reason insulated to all the issues facing the other markets. Its not.

If prices drop 50% like its done in so many markets down south it will be a tragedy for so many of those that bought at the high end of the cycle. It affects everybody...even people who hold onto their property as unrealized capital gains are lost - particularly if they remortgaged against the higher market value.

Just because someone is well-capitalized in their home and aren't forced to sell because their financing dictates it doesn't mean that they don't lose. Its not likely that prices are going to magically turnaround and skyrocket back up within two or three years back to peak levels.

 

[slowjazz]

Vancouver Condo market goes soft before collapsing

I sold my 2 bath 2 bedroom condo back in June 2008 at $330K. I wanted $345 but I could see that was not going to happen. The longer I would sit on it, the lower the condo market seemed to be dropping.

I just checked out the MLS to see other condos for sale in my building. The nicest ones are now selling for $310K when they were asking $340 back in June 2008. Yes, the condo market is softening, on the verge of collapsing.

My advice...if you don't have to sell, try to sit on it for a couple of years to build up more equity. It probably will go up in time but it's a huge gamble.

If you do have to sell, get on it now because prices will continue to drop. Don't be hookwinked by the 2-week frenzy of the 2010 Olympics. Realtors have been trying to pacify nervous clients by talking up the Olympic winfall...it's all a pile of BS.

The fact of the matter is condos are not nearly as popular as they were a few years ago. Today, people of all ages crave space more than the box-like lifestyle condos offer.

 

[FunSugarDaddy]

Vancouver is no different than all the other markets in the states that have been taking a shit kicking. I find it baffling to hear people who think that this market is for some reason insulated to all the issues facing the other markets. Its not.

If prices drop 50% like its done in so many markets down south it will be a tragedy for so many of those that bought at the high end of the cycle. It affects everybody...even people who hold onto their property as unrealized capital gains are lost - particularly if they remortgaged against the higher market value..

I'm not sure you actually understand the underlying banking system or dynamics to actually make this type of statement and believe it.

For starts let's look at the differences, they're very significant.


1. The US had loans called NIJA (No Income, Job or Asset) verification. WE NEVER HAD THESE TYPE OF LOANS. (these were called sub-prime mortgages)

2. The next step up to sub-prime were Alt loans. These were in the middle between sub-prime and conventional loans and had features such paying only a portion of your interest and the difference going onto the principal actually pushing the loan value in excess of 110%. WE NEVER HAD THESE TYPE OF LOANS.

3. Included in both these type of loans where rate teasers, whereby they would offer you a below market rate (say 2%) which after a couple of years would revert to market rate plus something extra for allowing this initial "deal" It's these type of loans that are resetting and causing all kinds of havoc as payments jump from say 800/mo to $1500/mo. WE NEVER HAD THESE TYPE OF LOANS.

4. In the US they often have no recourse mortgages. Meaning if you brought a rental property and you ended up upside down in terms of the value of the mortgage exceeding the value of the property you could walk away from the loan and they couldn't go after your other property. (I don't believe this to be the case in Canada)

5. These loans were packaged and resold on the market and given a triple AAA rating to boot. This is why the banks in Europe and even Canada suffered huge losses around these type of loans. To my knowledge the Canadian mortgages weren't collateralized.

All these provisions added together allowed many more buyers then would normally be the case to enter the market and allowed the banks to believe they were off loading their risks when they make these mortgages, thereby granting these type of loans with what they believe at the time to be impunity.

Here we have a completely different issue whereby we have a generation of 20-30 year olds trying to get in the market but they can't afford to.

These differences aren't going to shield the Vancouver market completely, but it's certainly a different environment than what's happening in the states. And most of the truly huge corrections had gains over the last 4-5 years far in excess of what transpired here.

 

[FunSugarDaddy]

If the mortgaged property is underwater due to market prices dropping, then it doesn't matter what kind of mortgage it is when it was taken out. We were in a market where buyers had to mortgage to the hilt in order to afford to get in. And you are fooling yourself if you don't think Canadian lenders weren't aggressive in their lending. Of course they had different products...but they were still lending with zero down and up to 40 year amms on product that was fundamentally way overvalued.

Most people don't sell unless they have cash flow issues, or are involved in divorces or things of that nature. They usually don't sell the day they find out their mortgages exceed the market value of their homes.

The vast majority of owns have mortgages far less than the market value even with the recent correction.

Think about it. My guess is that about 40-50% of the owners probably don't even have mortgages. Certainly most people in their 50's or older don't.

Many others, likely bought over 3-4 years ago, so their property increased in the area of 50-100%, less what's transpired over the year, so they too are fine and if they had adequate income to pay their mortgages then, they probably do now. These are the people watching much of their unrealized gains disappear.

But like Lady Companion said, most people don't sell based on this, unless perhaps it's a rental property and they are still trying to lock in some gains while they feel they still can.

So that leaves those who bought over the last 2-3 years, and for some reason can't continue to make the payments. I would suggest we're talking about a relatively small % of the real estate market.

Like they were saying on CNN today. Yes, 10% of mortgages are facing forclosure and yes the norm is about 1% but that still means 90% of the people are still getting by. Albeit, times are tough and these ratios could change.

 

[CJ Tylers]

They are devaluing the whole Vancouver market, actually."

It's not a devaluing if the market is vastly overpriced in the first place. It's a reset to a sustainable level. It's a serious problem when housing is unaffordable or almost unaffordable to the average consumer, aside from taking out ridiculously massive loans.

Perhaps I may sound like a jerk, but I have no sympathy for people that purchased beyond their means in a time where they knew the market was severely inflated due to artificial reasons.