Thursday, May 01, 2008

Guesstimates

The local real estate boards will be out with the monthly numbers tomorrow and I am guessing we will have price declines across the board. The inventory level is reaching super-bearish levels in the outer areas and bearish levels closer in. These levels of inventory are so high that it is unavoidable to have price decreases as sellers compete for buyers.

What are your guesses at the numbers?

Mohican thinks:
REBGV - down -1.5% MOM
FVREB - down - 2.0% MOM

Oh - - - if only I could short Vancouver real estate.

34 comments:

Fencesitter said...

Judging by the number that have still sold over listing price, I think REBGV has some potential to be on the upside.

FVREB should be reporting sales picking up slightly from last month, with flat prices and rising inventory. I don't think we'll see enough sellers start dropping their prices yet to cause much negative for a couple more months, maybee 1-2%

Rantenki said...

REGBV 0%
FVREB down 2% (have you looked in CHWK on MLS)?

BobbyBear said...

Great stuff M.

The major tool for stimulating the U.S. R/E market,lower mortgage rates, that helped propel the market for 25 years, is essentially over.

The last time, a few years ago, when rates were this low the U.S. R/E market was going up. Now the R/E market is dropping as we all know.

HUGE difference.

Not much The Fed can do anymore.

BobbyBear

Fencesitter said...

Some interesting details for Langley (as per MLS definition of Langley township/City)

Comparing the start of April to the start of May:

61 more listings (~7% increase)

29 new listings in the $1M-$2M range (going from 128 to 157)

Total price distribution:
Up to $: Qty Listings : # Change from March
$200K: 25: -4
$300K: 4: +1
$400K: 42: +11
$500K: 137: +5
$600K: 190: +12
$700K: 161: -5
$800K: 72: +1
$900K: 43: +9
$1.0M: 38: +8
$1.5M: 109: +22
$2.0M: 48: +7
$5.5M: 50: -6

Total Listings: 919: +61

Care to bet on what the median price for Langley will be? My moneys on $515K for April, down 2% from $525K in March, and negative 1% YOY.

I think it's going to be June until we start seeing negative YOY numbers for the Fraser Valley. To hit negative YOY, the median would have to decrease by over 4% from last month to under $480K. Definitely possible, but unlikely to happen yet. To avoid a negative YOY in June however, the median would need to stay above $487K, and that’s not very likely.

You definitely need patience for the real estate market; things do not change overnight...

investah said...

fencesitter,

Things changed overnight in 81 and 90, and those were minibubbles compared to this giant baloon.

Patience has clearly run out after 4 years of this madness, and you'd be surprised how fast it can turn when potential sellers become aware of the inventory spike and start to panic.

Fundamentals have been so irrationally out of whack, that there will be no doubt whatsoever that once this thing starts to slide there will be no stopping it.

You're about to be blown off that fence in shock!

Robin said...

I dunno... I think prices might be stable... it's just inventory that's up right now... I think it might be the summer before prices start falling.

patriotz said...
This comment has been removed by the author.
oh please said...

As much as I want prices to drop like a stone, I'm with robin. Look at Calgary - inventory is way way up and prices are still stable.

Hopefully I'll be pleasantly surprised by the numbers.

patriotz said...

Which Calgary is that - the one in Scotland?

“Alberta home prices sliding”

In south Edmonton, a 1,263 square foot bungalow that would have gone for $390,000 last year now sells for $337,000 or a 14 per cent drop, according to a spring, national house-price survey released yesterday by Century 21 Canada.

In Calgary, a two-storey, 1,850 square foot home that might have gone for $480,000 last year now sells for $420,000, or a 13 per cent decrease.

Article

Tony Danza said...

I'm guessing:

REBGV: -1 or 2% (-1.5% is Robbie C's guess)

FVREB: -3%

I have no idea how the REB's calculate and report their stats so for all I know prices could be down yet "massaged" and reported as up or stable.

Coton said...

We are still getting head lines like this in the TC of Victoria.

Real Estate Market still Hot


http://www.canada.com/victoriatimescolonist/news/business/story.html?id=04636828-f098-40ae-a0bd-874227b2e376&k=79995

Van Real Estate Crash 2008 said...

I realize, as a bear, I am in the minority, but I do hope prices do not drop yet.

We don't want speculators out of the market this early, and we do want more new construction to go ahead.

If prices respond quickly to the increasing inventory it would mean that there is no bubble.

It would be a clear indication that supply and demand were at work.

Clearly the market has been driven by psychology, not fundamentals; therefore, I would have difficulty looking at fundamentals to determine the direction of the market.

I say let prices and inventory grow a little more, the fireworks will be much more spectacular.

oh please said...

patriotz,

YOY numbers are promising in Calgary, but over the last month or two there hasn't been much change, at least not according to Truman's numbers (which I have no reason to doubt). IOW after a decline last fall prices seem to have stabilized, at least momentarily.

I do expect prices to begin dropping again, but I think Calgary makes the point that just because you have stinking high inventory doesn't mean prices instantly fall off a cliff.

I'll certainly be doing a happy dance if FV numbers are way down, but I'm really not expecting it for a few months yet. Maybe not until the fall.

jesse said...

Jesse thinks:
REBGV - flat 0.0% MOM
FVREB - down 0.5% MOM

It's obvious, guys. We're still playing the game of chicken.

macho slob said...

Our market has been driven far beyond any level of sustainability. I can't imagine anyone (other than young twenty or thirty something FTBs, who have'nt been around long enough to know that this is not normal) dreaming that there is any upside left.

Inventory is spiking. We're heading into recession. The precedents of tanking markets have been set in the US, and our crash won't be hampered by similar uncertainties on the way down.

Sure, the market has been driven by psychology, but fear will grease the slide much more that greed helped it on the way up.

This is a perfect storm, and you'l be able to tell your grandchildren about the consequences.

VanTOVan said...

"This is a perfect storm, and you'll be able to tell your grandchildren about the consequences."

Hey, with 40-year mortgages, maybe your grandchildren will be paying for the consequences!
"Why do I need to get a paper route" "Because grampa wanted to be the Donald Trump of Morgan Creek"

Fencesitter said...

investah said...
"Things changed overnight in 81 and 90, and those were minibubbles compared to this giant baloon."

I agree that were going to see a large slide, however look at the previous post, many cities took 4-6 months to start really declining after the peak.

Unlike the stock market, real estate is a very slow market to change directions...

Van Real Estate Crash 2008 said...

Once in a while you come across a priceless one:

"Why do I need to get a paper route" "Because grampa wanted to be the Donald Trump of Morgan Creek"

And Grandma joined an investment club which had most of its money invested in condos in the Commercial Drive area.

Aleks said...

I can't imagine anyone (other than young twenty or thirty something FTBs, who have'nt been around long enough to know that this is not normal) dreaming that there is any upside left.

I don't think FTB have been much of a factor in the market for years. The people driving this are boomers selling houses to each other. Never underestimate the myopia of a baby boomer.

I don't think we'll see prices come down till summer. We're just entering the denial phase, I think it'll take a few more months of inventory piling up and prices staying flat before the median price drops. We'll probably see more hidden price drops from developers because they're less willing to sit on unsold product, but that won't show up in the median.

investah said...

aleks,

Man, have you ever got it backwards!

FTBs and upgraders create upward pressure on prices, while downsizers tend to have the opposite effect.

If there is one area with stats that is clearly beyond dispute, that would be DEMOGRAPHICS, and FYI, many boomers have become empty nesters and are starting to downsize in droves. The last thing in the world that they need would be more RE or upgrade to more space.

macho slob said...

I thought that the domographics contribution to declining RE markets was a no-brainer.
Not only will boomers be empty nesters, 100% of them will eventually be SINGLE.

BTW, check this out:
http://tinyurl.com/5yune7

Price of average detached in GV is down 4.21% from march.

Mathematical said...

How long before RE agents start turning against their clients by making them low-ball their property just so they can make a quick commission ;-).

Hard to say at this time how fast prices will fall. There is edvidence to support both sides (fast or slow). I think it really depends on the psychilogical mood people are in. If we can convince the general public prices will drop fast then there will be a greater chance it will.

DaMann said...

Can someone tell me if I am insane or not?
We just sold our place and will be renting for a couple a years until we hit total bottom in this insane market.
I was actually thiking I will just throw the money into a GIC for a couple of years and wait and collect interest. But then I had another idea. What about putting it into a US$ GIC and waiting. In my eyes there is no way we are going to stay at par for much longer. I noticed our dollar is or at least was tracking the price of oil. Soemthing has changed lately. When our dollar hit $1.10 I think oil was $100 ( could be wrong). Well the other day oil hit $119 and our dollar did nothing or actually dipped a tad. Could it be that the money markets are losing faith in the CAN$ and the only thing keeping it up is high oil?

So my thinking is buy US$ GIC, wait for 1.5 -2 years and I'm fairly confident I will do alright on this.

What are the tax implications for profit off of a currency exchange? I was told it was sorta grey, no taxes. Just taxes on the interest.

What say you all?

thanks

alexcanuck said...

Damann:
Before buying a $US GIC pull some charts of $CAN against other currencies. Euro, Yen, Swiss franc, throw in oil and gold, they're almost currencies. It's more that the $US went down than that we went up. With the troubles facing the States I would be terrified of holding greenbacks. With the way our economy is tied to the States I'm worried enough about holding our dollar. I still have not seen a good analyses of what a serious drop in the $US would do to the $CAN. If anyone knows let us in on it, would you?

But I'm just an anonymous person on the 'net! Do your homework.

patriotz said...

What about putting it into a US$ GIC and waiting. In my eyes there is no way we are going to stay at par for much longer.

USD GIC's are not CDIC insured!

In addition, gambling on exchange rate fluctuations is a very bad idea. For every George Soros, there are are thousands of people who have lost money.

e8005 said...
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DaMann said...

I had no idea they were not insured. That wouldn't sit well with me at all. Thanks for the info guys. Maybe it's not such a good idea.

Anyone have any other suggestions of where to park some cash?

e8005 said...

USD GICs are insured by credit unions through CUDIC though.

Q. What if I have foreign currency deposits?
A. Foreign currency deposits are eligible for deposit insurance and are aggregated with other deposits at their Canadian equivalent value.

Q. What is guaranteed?
A. CUDIC guarantees that if a credit union fails and is unable to pay money on deposit or money invested in non-equity shares, the amount in default will be repaid by CUDIC to a maximum of $100,000.00 for each separate deposit.

Tony Danza said...

damann, I think your thesis is sound, "sell into greed, buy into fear". Despite all the doom and gloom regarding the US I don't think they're going anywhere soon, if oil falls say goodnight to Russia, China and the EU and the US will be laughing.

The USD is a great hedge against plummeting commodities which are in a fairly large bubble heading into a possible global recession. Where do you think money will flow for safety in that scenario? Canada, Russia, EU, South America? I'd say the US is the favourite here.

I'm long the USD though so take that with a grain of salt.

With the troubles facing the States I would be terrified of holding greenbacks.

Aleks, why are the troubles facing the US any less than what's facing the rest of the world? The EU and GB, Russia, Oceana, India and China are all experiencing commodities, RE and credit bubbles at least if not more insidious than the US.

alexcanuck said...

Tony: Boy, is this ever good question!
One point on Europe, they are already adapted to high energy price. Not car dependent, compact cities, good transit, etc. They protect farmland, manufacturing ability has not been gutted like ours. They can adapt to $200 oil much better than North America.
The ECB has as it's only mandate, has re-iterated and backed up by action, that they will protect the Euro against inflation. The US Federal reserve, OTOH, is supposed to promote growth as well as protect the currency. They give lip service only to the protect the currency part, while printing money and bailing out all and any. Inflationary pressures are huge and growing, with real inflation being much higher than the massaged official numbers.In addition, there is the HUGE pile of derivatives of various flavours, 500-800 TRILLION, depending on who's counting, all denominated in $US. If these are allowed to collapse, the great depression will be renamed! If they are monetized the $US will look like the Mexican Peso circa early '80's or Argentina more recently.
According to Denninger, who may rant kinda strongly, but does have impeccable math skills and good sources, the total debt of the States is 280% of GDP with interest charges of 22.4%. By comparison, in 1929 it was "only" 150%. And back then they didn't need oil imports. There is no way this debt gets paid back like it's supposed to be.
http://market-ticker.denninger.net/2008/05/investable-capital-and-why-it-matters.html
Either it defaults, or hyper-inflation sets in until the debt can be paid in face value dollars, but by then oil is $2000 a barrel. At least homes will have stopped going down, but China and the Gulf States might not be so happy being paid with wheelbarrows of paper. I really believe we a at a historical turning point.
If you know of a third way out, that lets business as usual to continue, please tell me. I haven't been a perma-bear, but I'm genuinely scared here, and want to know. The rich will do fine, with homes in the south of France and money beyond the reach of any mere nation, but what of yours and my pension funds and small savings?

alexcanuck said...

To sum up why it will be different in Europe: The ECB will protect the small saver, the society already is largely sustainable, the bankers and globalists may all explode, but life will go on much as before (life is good in Europe, I've been there).

DaMann said...

e8005

Thanks for the info. I will do some checking with the credit unions and see if US$ GIC's are indeed insured. If they are I stll may consider that as on option.

Tony Danza,

That's my thought as well. I think it was Warren Buffet who said sell on greed buy on fear.It's certainly time to dump RE in Van and there is so much fear and uncertainty with the US. I know the US has some problems but I really believe that they will at least make a partial comback. May not be the world leader in years to come but they will be back.

As for Canada I think our only glimmering hope right now is Oil. I personally don't think it can keep our dollar up forever. I think Canada is heading for some tough times, the east is already hit hard and forestry is toast, and with a par dollar you can bet tourism from the US is toast as well.

To me it just seems like a good move to go to US $ right now. It may take 2 years or so but I think it may be worth looking into.

Alexcanuck,

Great points as well. I do realize that the US$ has been falling compared to us rather than the Can$ going up. What I need to do homework on is why hasn't the CAN$ fallen in relation to other currencies. My only answer so far is oil. However as soon as the west tanks, namely BC RE, then BC's economy will be finished. IF that happens then there really will be no more bright spots left for Canada.

As well the US is going to have to start raising rates at some point. Can they go much lower? Can they do a Japan? I just don't see it. If they have to start raising rates again to combat infaltion then we may see a flow back to US$.

Tony Danza said...

Tony: Boy, is this ever good question!

Alex, check out what happened to Canada during the great depression, any reason that won't happen again? Nothing has changed in NA since then.

The Europeans did relatively well during the great depression (besides Germany). The only problem is every EU country now has a bunch of potential lead weights tied to their feet with the new members of the EU, I mean Italy and Spain are bad enough but Bulgaria, Romania, Estonia, Greece...? How is the EU going to deal with the massive housing bubble in Spain, Poland, Estonia, the Netherlands and just about every other EU country? Think about it, do some wider reading and research, the EU's potential economic problems make ours and the US's look like a walk in the park IMHO.

alexcanuck said...

Tony:
I think I agree more than disagree with you.
My main points on Europe, however, is that;
(A) they are already adapted to high energy prices, and won't have the painful adjustment we will.
(B)They will protect the small saver, rather than bail try to bail out the speculators and leveraged hot money. Any money you invest there is risky, but jobs are more secure.

More like Japans slow motion deflation, which has left the vast majority just fine. There is still a healthy real economy in Europe and Japan, while North America is based on "trust us as we get obscenely rich, you will join us soon, meanwhile borrow more money and distract yourself with with these shiny toys. Easy credit terms on shiny toys!"

My big question is does this house of cards blow up in hyper-inflation, Argentina style, or deflate in the "Second Great Depression"
Right now I'm quite liquid and mobile, positioned for deflation but willing to change my mind! I'd rather not be worried, and be long term invested, but I am VERY worried and fascinated by this.