2008 in Review
2008 was the year that the entire world woke up to the fact that houses don't go up in value forever and the entire mess of a year that 2008 was can be summarized in that fact. Stock, bond, and commodity markets all reacted to the spectre of a long and protracted recession with no quick turnaround in sight. It is truly amazing to see how consumption and borrowing against the value of a home had an impact at inflating the US and Canadian economies.
Locally, house prices fell dramatically starting in May and benchmark prices are now down nearly 14% in the REBGV area and just over 9% in the FVREB area. The pundits are still calling for a spring turnaround and many real estate agents will likely be disappointed with their incomes during 2009. They had better learn how to get sellers to drop the price fast or no paycheques will be forthcoming in 2009. I fully expect that many real estate agents and mortgage brokers will try to find other work during 2009.
Prediction Time
Predictions make fools of us all unless we are lucky enough to guess correctly. Sometimes an educated guess is better than nothing however and it is kind of fun to toss around what we think is coming during the next year.
Here are my thoughts:
1) Real estate prices in the Metro Vancouver area will fall by 20% or more during 2009 from current levels. The fall in prices will be worst for apartments and will be best for moderately priced suburban detached homes.
2) BC will enter recession sometime in 2009. Canada and the US will continue in their recessions throughout most, if not all of 2009.
3) The Vancouver construction industry will be decimated during 2009 with many more projects hitting the completion phase and the need for labour dries up. See historical employement statistics here. The Metro Vancouver area will probably see a loss of 50,000+ jobs in 2009 from the construction, retail, finance, and real estate professions.
12 comments:
I think you might be underestimating the impact that a severe recession can have on the housing market.
While none of the fundamentals like inventory, demographics, unaffordability, and immigration have changed significantly in the last year, the real catalyst now, is the RECESSION which will scare away the last few remaing buyers.
Based on monthly price drops of over 4% over the last while, the news can only get worse with balooning invetory this spring.
These are unprecedented times, and we could easily get another 40% drop in 2009.
I don't disagree with you macho slob. It is very probable that the drops will exceed 20%.
Job loss is what I am going to keep my eye on. Desperate sellers are what is going to bring on the negative price pressure really fast. Nothing makes someone as desperate as losing a job and not being able to make the mortgage payments.
"Decimated" is a good term and probably about right: 1 in 10 in RE/construction will be beaten to death with stones and clubs. The rest will live in fear they're next. All figuratively speaking of course.
The best New Year Mohican! I agree with your predictions except I really believe Vancouver West Condos will be decimated. The current 40 % vacancy rate on units in the $1500.00/month plus range will rise close to 60% by September. This will cause 100's of forced liquidations! 35% drop by October 09 for downtown condos! :-)
Here is what I posted awhile ago over at RET. The 2009 prediction thread there degraded into postings of bodily fluids. Good blogs/forums require good moderators, otherwise the bad crowds out the good. 'nuff said.
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1) Chinese economy does worse than most people think it will.
2) US doesn't show much sign of recovery in 2009.
3) Van RE down 25% Dec 08 to Dec 09.
4) Total REBGV inventory exceeds 31000 by July 1st.
5) (going out on a limb) BC unemployment rate hits 9.0%.
VHB "The 2009 prediction thread there degraded into postings of bodily fluids. Good blogs/forums require good moderators, otherwise the bad crowds out the good. 'nuff said." Couldn't agree with you more crappy site in more than one thread! Seems to be dominated by personal grudges and insecurity about their relative masculinity. Not worth reading any more.
Agree with Stataman about the gongshow on RET.
Unfortunately, it only takes a couple of idiots to ruin an entire forum....the questin is, where the heck are the moderators?
"Unfortunately, it only takes a couple of idiots to ruin an entire forum"
There are some decent posters over there, some who are active RE investors and have some decent insight into the workings of the industry. It was also the birthplace of the "doctors diagnosing cancer" analogy about predicting market crashes. Agree that the quality yield is low but nevertheless entertaining.
Don't think we have enough excess inventory right now? Gordo wants money from the Feds to build even more:
"Two weeks from now, Premier Gordon Campbell will meet in Ottawa with the rest of the nation's first ministers; one of the top items on his agenda is to squeeze money out of Ottawa for housing projects like this one as a means to stimulate the economy."
‘Wood is good' campaign could leave Campbell out in the rain
Of course just a few months later, Gordo will be campaigning against letting the "socialists" run BC.
I can't think of anything to prop up the local real estate market. Prices will keep falling. I would agree with a 20+% drop this year. I would be surprised if we saw a dead cat bounce.
I can't think of anything to prop up the local real estate market. Prices will keep falling. I would agree with a 20+% drop this year. I would be surprised if we saw a dead cat bounce.
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