The Smell Test

Think about house prices in Vancouver for long enough and the price tags we discuss in our fair city don't seem to shock us after a while. Go away for a bit and return and you find that our real estate market is like a bad smell that you didn't notice when you were in the room but when you come back it seems intolerable.

Thinking about houses in Vancouver, where average household incomes are in the $60,000 / year range, I like to imagine who might live in that $1,000,000 house, recognizing that with a 10% down payment it still takes a $175,000 / year income to qualify for the mortgage. It might be a 'rich' foreigner or a successful lawyer or doctor or business owner. When I see pictures from listings like this one, I think that I may not be so delusional after all to think that most of the people who buy homes in Vancouver may not be able to actually afford them. Shocking, I know.

Keep in mind that this house with a near $1,000,000 price tag neighbours a commercial building and is metres away from the insanely busy Oak Street. Not exactly where I picture a successful lawyer, doctor or business owner living. The other pictures shed some light on who may live there and what kind of lifestyle they can afford. I've got nothing against having some old furniture in the den but this stuff is hideous and hardly what I think of when I think of a $1,000,000 house. Yuck.

Anyway, things just seem to be a little smellier than normal lately.

Vancouver - July 2009 Housing Starts

The Canada Mortgage and Housing Corporation released housing starts yesterday for the month of July and it was in the news across the nation. Vancouver saw a measly 516 housing starts during the month of July.

This does not bode well for construction employment. Many of the nearly 20,000 units under construction currently will complete in the next 6 months and I expect the number of unemployed construction workers will skyrocket as there are very few projects to pick up the excess labour.

Chart Extravaganza!!

Case Shiller and Teranet both released data for May 2009 last week and I have compiled / updated some charts to display this data.

The first chart shows the monthly percent price change in selected cities. What I would note here is the clear seasonal effect on price movement. Prices are more likely to increase in the spring and summer and more likely to decline in the fall and winter.



I recalculated the Teranet and Case Shiller Indices to show the same base date in 2000 so we can view the results of the boom and bust in the US and Canada in a comparable way. It is amazing to me how high prices got and how far they have fallen in some places - almost back to pre-boom levels.



The last chart is the now well known price decline from peak chart. I added Calgary upon request from some regular readers from Calgary. The smoothing (3 month moving average) that takes place in the Case Shiller and Teranet data really makes a big difference in how peaks and price changes are displayed.

Greater Vancouver Real Estate - July 2009

The Real Estate Board of Greater Vancouver released the statistics package for the month ending July 31st this week and the statistics revealed several interesting facts.

Here is a synopsis:

Sales were really high. In fact it was a record July for sales in the REBGV area. It seems that the local 'belief' in owning real estate as a recipe for financial success and security is undying.

Active listings are dramatically lower than the same time last year.

Consequently, months of inventory is really low at 3 months. This means that there is really tight competition for properties.

Prices have been edging higher since March in a very strong seasonal run spurred on by lifetime low interest rates.

The correlation between months of inventory and prices changes is still relatively strong.

It will be interesting to see what happens in the local market over the next 6-8 months as the super-low rates are now unavailable and the normal seasonal weakness should kick in.

FVREB July 2009 Statistics

The Fraser Valley Real Estate Board has released the monthly statistics package for July 2009. Here is the scoop.

Sales were really, really strong in July. In fact it was the fifth highest monthly sales ever recorded in the FVREB. According the the FVREB, '37% of buyers were first time buyers' which, as they mention, creates a powerful 'ripple effect' of move up buyers. Sales beget more sales.


Active listings still rose modestly through the month of July.

Months of inventory fell slightly to 4.55 which puts the market in 'sellers' territory.

Prices have certainly come up from the lows witnessed in the late winter / early spring but are still below peak levels.

Not surprisingly, higher sales combined with stable inventory has created a market in which prices are rising. Time will tell how long it will last.

My hunch is that we have seen the last boom month this year in terms of sales and it will be downhill from here as the mortgage preapprovals at the 'ultra-low' rates of the late winter / early spring are expiring now. Don't read this to mean that I think prices are going to fall precipitously from here on out but I do think there will be significant weakness in the later part of this year.