Monday, December 17, 2007

Survey of Buyers and Sellers

The Real Estate Board of Greater Vancouver has just released a report of a survey it commissioned of 2006 home buyers and home sellers in the Greater Vancouver region. 1,000 people were polled, and there are some interesting results.

Among the highlights:
• Just over half of respondents (54%) both bought and sold a property in 2006. 44% only bought and 2% only sold a property.
• Approximately one-third of buyers are first-time home owners.
• First-time home buyers are more inclined to be young (under 45 years of age), with children, and from Asian countries in comparison to repeat buyers.
• Approximately six-in-ten of buyers and sellers are female.
• The majority (over seven-in-ten) of buyers and sellers are married or living common-law.
• Buyers tend to be younger than sellers with just over half of buyers being less than 45 years of age whereas just over half of sellers are 35 to 54 years of age.
• The average household size of both groups is 2.7.
• Approximately one-in-ten work from home and an equal size group do so at least part of the time.
• A total of 7% of home buyers bought a new home. Among these, approximately six-in-ten purchased the home pre-completion.
• Just over one-quarter of homes were bought or sold in the City of Vancouver.
• The Tri-Cities, Richmond and Burnaby each accounted for approximately 10-16% of transactions.
• Approximately 20% of buyers and sellers, most between 45 to 64 years of age, own more than one home.
• An average of just over 50% of the purchase price was financed, this proportion being relatively consistent across the Greater Vancouver region.
• Proximity to such amenities as shops, grocery stores and medical facilities is the most common factor considered in selecting neighbourhoods, particularly among condo, townhouse or duplex buyers.
• Furthermore, approximately one-third of buyers report to have paid more for their home to be closer or within walking distance to such amenities as public transit, shops and schools.
• In terms of factors considered in the selection of their home, apart from price, the style of home, followed by the size (with the majority desiring a larger home) are the most common considerations. The location and condition of the home are other important considerations.
• A total of 94% of both buyers and sellers used a Realtor.
• MLS listings on the Internet were most commonly used to market homes for sale, followed at some distance by Realtor client lists, open-houses and print ads.
• The Internet, followed by a Realtor are the most useful sources of information about homes for sale. In fact, almost nine-in-ten rate the Internet as ‘very’ or ‘somewhat’ useful.
• Email at 61% is the most commonly preferred method of receiving information by buyers who used a Realtor. Telephone calls and in person are the next most preferred ways.

31 comments:

freako said...

Just over half of respondents (54%) both bought and sold a property in 2006. 44% only bought and 2% only sold a property.

That is totally nuts. It also explains a lot.

1. Basically, the only reason people sell is to buy another unit.

2. I presume that this excludes investors and builders, so the 2% are basically people selling because they are leaving town or renting.

3. Of the 44% who only bought, could it be that many are also trade up buyers who happened to straddle the 2005/2006 calendar year?

4. If the tradeup market stalls, sales will plummet.

An average of just over 50% of the purchase price was financed, this proportion being relatively consistent across the Greater Vancouver region.

Surprising. Also shows the importance of the trade-up market, and reveals that most buyers have significant equity to move along. It also explains the affordability situation. Those buying SFH likely make significant down payments.

Also, I am fairly sure that FTBs have very small downpayments, which means that the tradeup buyers have MORE than 50% down payment on average.

It would have been great if they had provided us with the FTB percent downpayment.

Also, the actual age of FTB and whether that is a decrease from historical levels. The ownership rate is up to 69% as of 2006 census, so clearly the FTB pool that is fuelling the trade up market is dwindling.

Given the huge downpayments that non-FTB buyers use, it seems that this bubble will unwind from the bottom up. Hence we are lookin for slowing appreciation and sales of condos and townhomes first. The affordability wall is a little further away for these, but I don't think we can be that far away. Even 1 bedroom apartments are becoming unaffordable, even with 40 year term.

Drachen said...

"Of the 44% who only bought, could it be that many are also trade up buyers who happened to straddle the 2005/2006 calendar year?"

I doubt it, wouldn't the same apply THIS year? You'd see more than 2% 'only sold' if the number was significant.

I'm still calling spring/summer 2008 for the first steady YOY declines. But I called fall 2007 a year and a half ago so what do I know!

jesse said...

"44% only bought and 2% only sold a property."

I agree this looks nuts on first glance but I wonder how estate sales are handled in this statistic; might explain the 2% number being a bit low. But the statement "Approximately one-third of buyers are first-time home owners." indicates there is a definite skew towards FTBs.

Easy credit has allowed more to enter the market, so no real surprise; just more evidence supporting the bubble theory. It will be interesting to see how the stats from this survey change over the next 4-5 years.

"Given the huge downpayments that non-FTB buyers use, it seems that this bubble will unwind from the bottom up."

Agreed. This is how it is unfolding in the US and has been the way past local declines have manifested themselves as well.

"An average of just over 50% of the purchase price was financed, this proportion being relatively consistent across the Greater Vancouver region."

The 50% equity with higher prices means a higher level of financing in absolute terms, compared to the same % with lower prices. Also LOCs can reduce equity so again this stat can be misleading depending upon what it is actually measuring.

johnnyrent said...

I'm surprised at the 2.7 person average household size. I had thought that number had been trending down in recent years.

A higher divider for starts and completions relative to population growth only amplifies the apparent level of over-building going on.

M- said...

Keep in mind for things like the 50% equity, this is a poll, so the numbers are self-reported.

Much like in surveys how people tend to under-report their weight, perhaps they're over-reporting their equity?

Patiently Waiting said...

A lot of equity is being passed on from babyboomers to their offspring. Mom and Dad peel $200K off their paid-for house, junior gets a $200K mortgage, and now junior buys a $400K condo. I believe thats called inter-generational leverage.

jesse said...

"Mom and Dad peel $200K off their paid-for house, junior gets a $200K mortgage, and now junior buys a $400K condo."

This does happen (I know people who have done this). I think a lot of the time parents do a straight cash injection and do not necessarily take on debt.

Remember this: parents are only as happy as their least happy child. And happiness is not being priced out of home ownership.

Patiently Waiting said...

"2% only sold a property"

This seems to show that almost none of the speculators have the sense to stop now and cash out. We will hear stories like those on HBB where the gamblers keep buying more and more real estate, and end up in bankruptcy and foreclosures.

Patiently Waiting said...

"straight cash injection"

How many boomers can really part with hundreds of thousands of dollars? They need to fund their retirement, don't they?

oh please said...

Another Canadian subprime lender bites the dust.

jesse said...

"How many boomers can really part with hundreds of thousands of dollars?"

I think % wise not a lot but not all gifts are as high as 200K. A HELOC gifted to a child is the gift that keeps on taking. Straight cash would seem preferable in this case.

There is a big variance between peoples' financial health so the ones that have over-provisioned and nearing retirement may want put the inheritance to tangible benefit in their lifetimes. But they too have effectively bought into the "RE goes up" mantra or perhaps are wise enough to realise it doesn't matter (or not so wisely infer their experience with real estate must translate to the next generation).

Also there may be tax advantages to gifting but IANATL.

HADENOUGH said...

"How many boomers can really part with hundreds of thousands of dollars?"

We all know boomers live through their children and can't say no.

But, if people have more than one child what they give to one they must give to another.

I said this before but my husband was talking to our banker in Toronto the other day and she said she was amazed how many baby boomers took out massive loans and second mortgages so close to retirement - at a time they should be downsizing. They just can't stop buying. She has been in the business for 25 years and had never seen this before. The Banks just kept on lending.

A friend's parents just took about a 2nd mortgage (they bought themselves a trophy house a few years ago) to help her and her husband buy a house. They are both 60 and my friend in her late 30s. They (the parents) are hoping that their house will be worth so much that in the next few years they can downsize and pay-off both mortgages. The mother had to quit her job because she has cancer. This is going to end up ugly.

I also met a guy here who said his pension is in his house. He is going to retire in a few years and yes he has a big mortgage (and a big house) but it will be worth millions in a couple of years that there should be no problems even though he and his wife have saved nothing. When I said "what will you do if property goes down?" he said "it will never go down in Victoria".

Clarke said...

"I also met a guy here who said his pension is in his house. He is going to retire in a few years and yes he has a big mortgage (and a big house) but it will be worth millions in a couple of years that there should be no problems even though he and his wife have saved nothing."

Hmmm. Sounds a lot like the stuff I heard people say during the dot com boom.....A lot of "freedom 45" plans turned into "freedom 95".....

patriotz said...

HBB is full of stories about seniors betting everything on RE and ending up penniless. My favourite was a couple who bought a house in Orange Country for < 100K in the 70's, and now owe 700K on it.

Equally disturbing, there is a big surge in IRA (~RRSP) early withdrawls, many of which are likely vain attempts to hold on to a house which will be lost anyway. What is really crazy about this is that IRA's are protected against creditors in bankruptcy. People are voluntarily handing over their retirement funding to their creditors.

I'm surprised at the 2.7 person average household size.

Can you say "monster house"?

Also there may be tax advantages to gifting but IANATL.

Canada has no estate taxes so they would just avoid probate fees which are pretty small in % terms.

Siobhan said...

Okay, my read on this survey.
20% of sales are for an investment property. This would give a base for the level of speculation in the market.

The move up housing market is around 65 percent. In this group will be people who are intending to resell in the next one, two or three years. A portion of these, I would consider to be speculators as well. So, the level of speculation would be 20% at the least and 85% at the extreme.

I'm guessing that the level of speculation of people buying a home to sell in the next two years is 40 percent.

vomitingdog said...

Can anyone comment on Mortgage Investment Corporations and whether they are a good investment in the times that are a coming?

vomitingdog said...

Any comments on mortgage investment accounts and whether they will weather the upcoming storm?

I am thinking specifically of a Canadian firm in the Okanagan that has done quite well lending second mortgages to small developers who develop residential buildings in specific markets. They charge a premium over the bank rate and are paid back first for this very reason. Their return for the last 10 years has been at least 8%.

Any thoughts?

vomitingdog said...

Can anyone comment on Mortgage Investment Corporations and whether they are a good investment in the times that are a coming?

HADENOUGH said...

Patriotz,

Canada has no estate taxes?

Are you sure? My parents died five years ago (suddenly) and there were plenty of estate taxes. Most people are shocked the amount you have to pay to the government. I can't remember the rate but it was pretty big.

However there were no taxes on their house. My lawyer explained that it is the only thing that is basically untaxable in this country.

Drachen said...

VomitingDog:

Perhaps if you wait more than 2 minutes for a reply someone will come along.

I know little of the sector you're talking about but it sounds risky to me.

patriotz said...

Are you sure? My parents died five years ago (suddenly) and there were plenty of estate taxes.

Yes I'm sure. Your parents' estates likely paid income taxes on realization of capital gains and/or deregistration of RRSP's. These are not estate taxes because these events are taxable whether they are the result of someone dying or not, and whether there is any net value in the estate to be bequeathed or not.

jesse said...

"The move up housing market is around 65 percent."

Put another way, the ladder is about three rungs long. For every person entering the market there are a bit less than two that depend on a FTB sale happening (taking into account a few % of FTBs buying new homes and therefore not impacting other sales). A change in FTBs buying existing stock will have a 2-3X lever in inventory.

HADENOUGH said...

Patriotz,

That was it. My husband dealt with all the financial stuff - it was a blur to me.

freako said...

A change in FTBs buying existing stock will have a 2-3X lever in inventory

Yes, I think FTBs (and access to financing) holds the key to the whole game.

On that topic, what will end FTBs fuelling this thing? Running out of fundamental demand? Home ownership rate increases are finite. Access to financing? Maybe the 0 down, but with the tax payer backed CMHC at the help, unlikely. Affordability? Perhaps. Even apartments are getting pricey. The median benchmark apartment in Greater Vancouver cost more than the median SFH in Seattle. And they are hurting. Or maybe so many completions will come on the market that prices flattens and psychology turns.

hadenough, sorry about your loss.

jesse said...

"On that topic, what will end FTBs fuelling this thing? Home ownership rate increases are finite. Access to financing? ... but with the tax payer backed CMHC at the help, unlikely. "

It may come down to a greater % of potential FTBs being out of work.

Food for thought, but CMHC/Genworth try to make money and they don't do this by insuring toxic waste when it comes right down to it, even with government underwriting. Also some lenders may find, like the rest of us, that collecting from insurers can be harder than it looks. This could force lenders to be more cautious after they try to claim and run into roadblocks. Avoiding due dilligence because something is "insured" is a lazy way of doing business and, in aggregate, such practices are punished.

Drachen said...

jesse:

CMHC is a branch of the government, their primary goal is NOT to make money because any shortfalls are made up by taxpayers.

jesse said...

"CMHC is a branch of the government, their primary goal is NOT to make money because any shortfalls are made up by taxpayers."

As much as I take your point, CMHC, like other pseudo government bodies, is accountable. The government in the past 15 years has moved closer to a corporate model for these entities. Their bosses will be fired if they take a loss and this is a powerful motivator. Not always, but don't assume CMHC is incompetent.

Drachen said...

A) They're giving insurance on 0 down for any residential property, first, third or fiftieth.

b) If they don't know that property is nearly 3x overvalued they should.

Given A and B I can conclude, they are either incompetent at risk management and about to lose a LOT of money or they are ignorant of B, which means that they're incompetent at data gathering and economic prediction.

How is the conclusion of incompetence avoidable?


- Note I don't ASSUME they're incompetent. I demonstrate how they are incompetent through logic.

patriotz said...

There is an alternate conclusion. What is CMHC's real mandate? To make housing affordable, or to make housing as expensive as possible, thus maximizing profits for the RE industry, and the consumers and taxpayers be damned.

If it's the latter, they're not incompetent at all, just as people like Cam Muir aren't incompetent (who used to work for CMHC BTW). Just corrupt.

jesse said...

"Given A and B I can conclude, they are either incompetent at risk management and about to lose a LOT of money..."

You may be right. You are probably right. While they may be incompetent at risk management they may be competent at nitpicking on contractual details to avoid payouts.

Drachen said...

It wouldn't take nitpicking, I can bet that 90% of the soon to be failed mortgages are fraudulent.

How many people do you know that have a mortgage which is twice the size of the theoretical 'maximum' allowed by the bank?