Prices are Down 0.8% in the Fraser Valley

Here are some statistics from the Fraser Valley Real Estate Board. My comments added in bold.

The average price of a single family home in the Fraser Valley reached $535,572 in September, the highest average price ever, according to statistics from Fraser Valley Real Estate Board’s Multiple Listing Service®. September’s MLS® numbers also revealed steady sales for sellers and increased inventory for Fraser Valley buyers. The benchmark house price index declined -0.8% from August and the trend is down, down, down with well over 6 months of inventory going into the fall. Lots of new supply is coming onto the market with even more on the way. Prices are out of reach for most people now and demand is decreasing while supply is increasing. Econ 101 tells me that we should expect a new price equilibrium to be established.

“September numbers show that Fraser Valley buyers and sellers took a bit of a breather after an unusually busy summer market, but we can see that the return to a lower sales level and an increase in inventory hasn’t affected the strength in average prices,” observes Kelvin Neufeld, president-elect of the Fraser Valley Board.

September’s average price for a single detached home at $535,572 reflects an increase of 8.5 per cent compared to the average price of $493,727 from the same month last year. Average townhouse prices increased by 2.8 per cent in one year going from $312,829 in September 2006 to $321,480 last month. Apartment prices averaged $230,280 last month, an increase of 12 per cent compared to $205,520 during September of last year.

“In September, the communities of Surrey, Langley and Mission reached their highest average prices on record for a single family home and in August that happened in North Delta and Abbotsford.”

There were 1,332 sales processed through the Multiple Listing Service® (MLS®) in September, on par with last year when 1,323 sales were processed in September 2006. This marks a decrease of 25 per cent compared to the previous month’s sales of 1,763 in August.

The number of total active listings increased by 22 per cent in one year, going from 6,918 active listings in September 2006 to 8,429 last month. The number of new listings in September at 2,614 was also six per cent higher than the 2,456 new listings received during the same month last year. At 6.3 months of inventory, we can expect further price decreases to continue through the winter.

Generous financing and plenty of choice keeps housing market moving

BY JOANNE LEE-YOUNG- Vancouver Sun -Tuesday, October 02, 2007

A wide range of housing and financing options are fueling home sales in the Vancouver area even as prices continue to rise. People are overpaying more than ever before with even more risky financing options that will enslave themselves and their family to the bank for the rest of their lives. Apparently lenders are being 'generous' now so they are just giving away money. No need to repay, just ask for the money and - poof - there you go - pick it off the money tree.

The sale price of a typical single-family home in Vancouver hit $726,268 in September, a 12-per-cent increase from the same month a year earlier (family not included - and who could afford to have a family at these prices).

At the same time, 2,776 sales were recorded on the Multiple Listing Service, a 10.2-per-cent increase from sales in September 2006. Un-freakin-believable - who is buying at these prices?

"There is still very strong consumer demand due to the economy. Rising wages mean that buyers are confident and this is underpinning the market," said Cameron Muir, chief economist at the B.C. Real Estate Association. "There is also a strong mix of housing stock. This variety is helping buyers at the lower end get into the market." If by "lower end" you mean households that make in excess of $100,000 per year then yes Cameron you are right. Cameron, could you please send me some data that clearly shows how BC residents have gotten 50% raises over the last 4 years? I'd really appreciate it, thanks.

"Six out of 10 sales are multiple-family dwellings [such as attached houses and apartments]. There are also more financing options. Down payments are down to five percent, which can be put on a credit card," said Muir. I can't believe I just read that. YES, CAMERON MUIR (cheif economist of the BC Real Estate Association) IS ADVOCATING PUTTING YOUR DOWNPAYMENT ON YOUR CREDIT CARD - Pay 22% Interest. Cameron, please stop by my office for a little lesson in financial math as you obviously missed some basic math instruction while you were getting your economics degree.



Attached house and apartment sales accounted for some of the brightest spots in the September figures.

Blah, blah, blah, . . . insert cherry-picked sunny data points here . . .

Across the region, benchmark prices for typical attached and detached properties increased at about the same rate this September compared to last, clocking 10 per cent and 12 per cent respectively. However, while the number of attached property sales jumped 27 per cent in September, the number of detached property sales rose a more modest six per cent. I'm calling the adverb police for the use of the word "clocking" when referencing price gains in anything. It isn't a NASCAR race folks.

"There is a great deal of choice in the market for a range of consumers today," president of the Real Estate Board of Greater Vancouver, Brian Naphtali, said in a statement.
Eighteen per cent of residential listings are above $1 million; and 37 per cent are between $500,000 and $1 million; and 45 per cent of residential units for sale remain priced below $500,000, he added. Is $500,000 to be viewed as 'inexpensive' Brian? My view of inexpensive and yours greatly differ. Since I'd have to make well in excess of $100,000 / year to stretch myself into the bottom quartile of homes in the area I don't really think that 1/2 A MILLION DOLLARS is a tiny bit of money - for a bloody townhouse mind you.

Prices of detached homes in Port Moody led all regions in the Real Estate Board of Greater Vancouver. The percentage increase in the benchmark price of a typical home there jumped 33 per cent to $778,423 in September compared to the same month last year. "This is no surprise. There is a larger proportion of houses in Port Moody that are newer. There are more recent additions to the housing stock there and many are fairly luxurious and well appointed. When these get sold back into the market, it can skew the numbers and be a bit of an anomaly," said Muir. Just like those anamolous credit card payments Cameron?

Meanwhile, in the Fraser Valley, the average price of a typical family home reached the highest level ever in September, even as buying and selling activity tapered off after a busy summer (typical family not included). September's record-setting average price for a detached home, at $535,572, was 8.5 per cent higher than the same month last year. Take your basic family income, add two suites, a foreign homestay student, and lots of overtime for the wife and VOILA, we can afford a house. Unsustainable anyone?

The number of Multiple Listing Service-recorded sales for the Fraser Valley in September decreased by 25 per cent from August. Meanwhile, the average townhouse price saw a more moderate increase of 2.8 per cent compared to last year. Hmmm. . . . that wasn't too rosy now was it?! The average apartment price increased by 12 per cent.

"In September, the communities of Surrey, Langley and Mission reached their highest average prices on record for a single family home and in August that happened in North Delta and Abbotsford," said president-elect of the Fraser Valley Real Estate Board Kelvin Neufeld in a statement.

Rant off. More to come later.

Another One Bites the Dust

Blogging on Vancouver Real Estate just gets lonelier and lonelier. RESteven, who provided us with accurate daily inventory numbers for the past couple months has packed it in and moved away from Vancouver to Los Angeles. But the weather is so good here in so called 'Lotus Land', why would you go to California!

Seriously, good for him, maybe I'll do the same.

How Do You Play the Inflation Game?

Check this article out for a case of why inflation will be a severe problem in the next few years. If inflation is going to be a problem in the next few years, what should one invest in?

1) Broadly speaking, stocks and real estate beat inflation over the long run. That said, adding undue risk by paying too much for stocks or real estate is not smart either and current market valuations are on the high end of the scale historically speaking. However, value stock picks can be found even in today's market (real estate is a different story altogether - I challenge anyone to find me a 'value' real estate pick - P/E <10). Passive investors could consider investing in a Value Exchange Traded Fund like the iShares XCV, IWW, or EFV depending on the market you want to invest in. Value mutual funds like ones managed by Cundill, Brandes, Brandywine, Sionna, or Chou can be a good fit as well.

2) More specifically, one could hedge exposure to increasing prices on the necessities of life - food, water, shelter and health care for example - by investing in companies that profit during times of rising prices or in the commodities themselves. This can be done quite easily by using Exchange Traded Funds that focus on these areas. Some examples of these ETFs are:
Food - MOO - Agribusiness
Food - DBA - Agricultural Commodities
Water - PIO and PHO - Water technology and resources
Food and other- PSL - Consumer Staples
Food - PBJ - Food and Beverage
Medicine - PJP - Pharmaceuticals
Shelter - XRE - Canadian Real Estate Investment Trusts

3) Real Return Bonds offer a guaranteed principal repayment and a yield that adjusts with the Consumer Price Index which should match inflation. If you believe the bond market does not reflect the risk of inflation going forward than RRBs can be a good way to put your money where your mind is. There are also a few RRB mutual funds available from TD, Altamira, Dynamic and Mackenzie. There is also a RRB index fund available from iShares - XRB.

4) Historically speaking, gold and silver have been traditional hedges against inflation as well. One can purchase physical gold and silver via several coin and bullion dealers. One can also invest in gold and silver via ETFs GLD and SLV or in mining companies that profit when gold and silver prices rise. Many precious metals mutual funds and ETFs are also available.

Bank of Canada Intervention

OTTAWA, Oct 1 (Reuters) - The Bank of Canada has now injected a total of C$890 million ($899 million) in overnight money into the markets on Monday to lower the overnight interest rate toward the central bank's target and improve liquidity.

Earlier on Monday, the bank injected C$530 million and has now increased that total. The bank intervened regularly in August during a credit crunch, but stayed out of the market from mid-August until late September.

It operates through Special Purchase and Resale Agreements, buying securities with the agreement to sell them back the next business day.

What are "Special purchase and resale agreements (SPRAs)"
Repo-type operations in which the Bank of Canada offers to purchase short-term Government of Canada securities from jobbers (investment dealers) with an agreement to sell them back the next business day. They are initiated by the Bank to prevent the overnight rate from moving above the upper limit of the operating band or to signal a change in the band.

For more information on how the Bank of Canada implements this policy check out these links:

http://www.bankofcanada.ca/en/review/1998/r981b.pdf
http://www.bankofcanada.ca/en/lvts/lvtsmp3.pdf
http://www.bankofcanada.ca/en/financial/lvts_neville.pdf

UPDATE: Reader /Dev/Null sent me a link to this article, which, upon reading made me want to go out and buy canned goods, gold, and ammo.