Here is a synopsis of last night's "Olsen on Your Side" segment of the local CTV News. Highlights are mine. Look for another segment every night this week on the CTV News. Watch last night's segment here.
Will Vancouver's red hot real estate market cool?
Updated: Mon Jan. 28 2008 12:55:48 bc.ctv.ca
Real Estate Forecast
This week we're beginning a five part series on real estate and what's putting pressure on owners and buyers alike.
I think there is an assumption that real estate prices always go up. But that's not always the case. In the US, the sub prime mortgage crisis has slashed prices in many desirable communities as a flood of homes come onto the market.
In just the last three months in California, 32,000 ended up in foreclosure 82,000 more have gone into default on their mortgages; an early indicator of possible foreclosure. In Phoenix 56,000 homes are for sale, many of them foreclosures, 10 times as many as three years ago. And that can't help but effect prices. In Fort Myers Florida, foreclosures have climbed 500 percent in one year while house prices have fallen by 30 percent in two years.
I'm not saying that is our future -- but it was only two years ago when there were stories in the US of real estate booming, prices out of reach for many people, and today, if you hadn't bought then you have a lot to choose from.
While we don't have a sub prime risk here, if the US slips into recession that will effect our economy and there are a number of other factors that could come into play.
Like what if our investors start taking their money to the US to cash-in on the bargains there? We talk about that on Wednesday in our series. And what about affordability? With prices where they are now -it's a real issue in Vancouver and other communities. We'll show you how the market is trying to accommodate first time buyers. And how to get the best price you can whether you're getting in or moving up. That's tomorrow.
And later in the week we also have a reality check story on what sacrifices you need to be willing to make to own a home here.
Real Estate: Where now?
Can the lower mainland's red-hot real estate market keep heating up?
Some experts say the increases we've been seeing just aren't sustainable and they've got a warning for speculators.
Catherine Stofer wants to own her own condo in Vancouver. But it's been tough. "I earn a good living, that's the frustrating part. Here it is at the age I'm at if I amortize, I'll be in my grave before I pay it off," she complains.
As prices have been rising, units have been getting smaller, in an effort to keep first time buyers able to buy something.
At 670 square feet the unit Stofer is looking at is considered a larger unit "Some of the dens we've seen basically couldn't accommodate a computer," she notes.
"I'd say we are somewhere near the top of the cycle," predicts UBC real estate professor Tsur Somerville. He says the numbers tell the story. Real estate prices in Greater Vancouver have been rising 15 percent per year on average for the last four years.
Historically, you'd expect six percent annual increases and we are two and half times that.
"The risk you are facing now is that you have a market that is near a peak. You have employment in major construction projects that is going to tail off. You've got
negative news in terms of Canada's trading partner," calculates Somerville.
And since real estate prices have fallen in the US, will local or foreign investors pull their money out of this market to invest down south where our dollar buys more. What would happen if they did?
"If they sell and people notice prices are softening, are they going to race to sell: and is that going to cause a downturn particularly in the condo market? There are a lot of different ways this could play out and because we haven't had a lot of experience in that we really don't know the way this plays out," says Somerville.
Professor Somerville says if you are buying a place to live in long-term timing the market isn't critical. But speculators face a far riskier market today.
"The person who has over extended himself, is the person most at risk," he concludes.
Catherine just wants a place to call home. "Just keep trying, there has got to be something out there," she muses.
In all markets there is a psychological aspect. People believe that what happened last year will happen this year. If people believe prices will keep going up, then prices rise faster than the economy that supports them. But remember, expectations can also change quickly and that will affect the market too.
With a report from CTV British Columbia's Chris Olsen