What follows my comments here is a puff piece from the Chilliwack and Districk Real Estate Board president Trude Kafka. I gather she is in deep denial about the current real estate market or is trying to put on a brave face. Either way, it isn't helping.
The upper Fraser Valley real estate market is being crushed under the burden of 24 months of inventory with exceptionally low sales volumes coupled with sky high inventory. There are over 280 realtors in the board's area and there were only 67 property sales in the month of December which by my elementary math means that there were over 200 realtors going hungry during the month of December. Perhaps we should start a collection so they are able to make their Lexus payments.
Total MLS® sales activity increased in December 2008, while residential sales activity declined in the area served by the Chilliwack and District Real Estate Board, according to statistics released by the Board. The Board's MLS® system recorded $23,492,025 worth of sales this December. That's a nine per cent increase from the total posted this past November, and a 49 per cent drop from the total in December 2007.
A total of 67 properties traded hands through the Board's MLS® system in December 2008, which is 12 per cent lower than the total from November and 55 per cent less than in December 2007.
"It’s no surprise that sales slow down during the final quarter of the year," said Board President Trude Kafka. "This trend is not unique to our region. However, we did see an increase in total MLS® sales – despite a monthly decline in total MLS® property listings. Property values continue to increase in our region. Hopefully these trends will continue well into 2009."
The total value of home sales recorded through the Chilliwack and District Real Estate Board's MLS® system this December was $18,999,700 – which is nine per cent lower than the total from November 2008, and 52 per cent below the amount posted in December 2007.
In all, 63 homes were sold through the Board's MLS® system this December. That's 15 per cent lower than in November, and 49 per cent less than last December.
The average price of homes sold through the Board's MLS® system this December was $301,583, which is seven per cent above the average from November 2008 and five per cent lower than the average from December 2007. The Board cautions that the average residential price is a useful figure only for establishing trends and comparisons over a period of time. It does not indicate an actual price for a home due to the wide selection of housing available in the area.
The Chilliwack and District Real Estate Board handled a total of 2,224 MLS® sales in 2008, a sharp decline of 37.2 per cent compared to the total number of MLS® properties sold in 2007. All of the 12 real estate Boards and Association in British Columbia processed a total of 74,484 properties through their local MLS® systems, representing a 33.4 per cent decline from the total properties sold in 2007. The MLS® properties sold through the Chilliwack and District Real Estate Board had a total value of $699.4 million, representing a 35.4 per cent decrease compared to 2007. Provincially, the value of all MLS® properties sold in 2008 had a total value of $33 billion, a 30.9 per cent decline from 2007 levels.
2,036 of the MLS® properties sold locally in 2008 were residential, down 37.7 per cent from the number of residential MLS® properties sold in 2007. Provincially, the number of residential MLS® properties sold declined 33 per cent compared to 2007. Residential properties sold locally in 2008 had a total value of $643.8 million, sinking 34.2 per cent compared to 2007. On the provincial level, total residential MLS® sales in British Columbia in 2008 had a value of $33.1 billion, a 30.6 decrease from record-setting 2007 levels.
There were 5,482 new listings processed through the MLS® system of the Chilliwack and District Real Estate Board in 2008, an 11.4 per cent increase compared to the number of new listings processed in 2007. Provincially, the number of new residential listings in 2008 increased 12.1 per cent compared to 2007 to 176,762 properties.
A total of 181 new residential listings were added to the Board's MLS® system this December, an 18 cent increase from December 2007. As the month came to an end, there were 1,524 active residential listings on the Board's MLS® system.
The Chilliwack and District Real Estate Board is an association of 283 REALTORS® that provides services to and sets standards for members. The Chilliwack and District Real Estate Board serves Chilliwack, Agassiz, Hope, Boston Bar and Harrison.
Saturday, January 31, 2009
Thursday, January 29, 2009
Demographia (again)
Demographia has released their new "international" housing affordability survey (pdf), picked up locally here and here. Local readers will no doubt be attuned to the survey consistently showing that Vancouver is indeed unaffordable compared to most other North American cities. The thing to keep in mind about the Demographia survey is that they are openly advocating for less restrictive land use. This is done by showing how cities with "restrictive" land use guidelines are generally less "affordable" than those with "less restrictive" guidelines.
Oh really.
There are some obvious flaws in the study as it pertains to affordability on which I will now elaborate.
Owning != Living
The study shows how house prices and affordability are correlated to the degree of land restriction. Yet it is not just housing affordability that should be looked at for a city's overall affordability. While many choose to own property, there are alternatives, namely renting. For the survey to truly gauge a city's affordability in terms of its population's ability to afford to live (not necessarily own), we must also include the rental option. Property values are subject to swings due to speculation and in themselves are a poor measure if rents are not increasing as well.
The survey does argue that land restriction can more easily lead to speculation. Maybe. Though some cities were notably absent from their data set (more below).
Affordable in the Rust Belt
p. 20 of the report has the evil red "unaffordable" cities lined up on the same chart as the haloed green "affordable" cities. Let's look at the green cities a bit more closely. Notables are: Indianapolis, Detroit, Cleveland, Cincinnati, and Pittsburgh. Is it too obvious to say that these cities have flat to decreasing populations and high unemployment? No wonder their land restrictions are so loose. The local authorities need to pull out all the stops to PREVENT people from leaving!
Cart and Horse
A question to ask, again a pretty obvious one, is whether restrictive land use is causally linked to affordability. The survey certainly shows correlation but seems to gloss over causation.
English Only
As hinted above, the survey seems to leave out other first world cities and concentrates on only English speaking cities. Why not include Paris, Stockholm, and Frankfurt? Could it be that these cities have restrictive land use policies but more favourable affordability?
Restriction? What Restriction?
Check out mohican's last post on CMHC construction data. If Vancouver has "restrictive" land use policies, it seems there may be a few loopholes, given the MASSIVE housing supply coming online. How could a city with such tight reins on land use produce such oversupply? It blows the mind.
Overall I am surprised the survey is given so much press. Their exclusion of data is suspect, their conclusions not well backed by logic, and their basic premises around what "affordability" really is are not discussed in their analysis. Every year there is a debate on local blogs about this survey. Sure, Vancouver is severely unaffordable. We all know that and this survey confirms the obvious. (Another annoyance is the types of data used for certain markets vary so the affordability number for Vancouver is not apples-apples with other cities) But this survey is not really about displaying the data and I'll stick to a more holistic combination of Case-Shiller, rents, and incomes, without the suspect analysis, thanks very much.
Oh really.
There are some obvious flaws in the study as it pertains to affordability on which I will now elaborate.
Owning != Living
The study shows how house prices and affordability are correlated to the degree of land restriction. Yet it is not just housing affordability that should be looked at for a city's overall affordability. While many choose to own property, there are alternatives, namely renting. For the survey to truly gauge a city's affordability in terms of its population's ability to afford to live (not necessarily own), we must also include the rental option. Property values are subject to swings due to speculation and in themselves are a poor measure if rents are not increasing as well.
The survey does argue that land restriction can more easily lead to speculation. Maybe. Though some cities were notably absent from their data set (more below).
Affordable in the Rust Belt
p. 20 of the report has the evil red "unaffordable" cities lined up on the same chart as the haloed green "affordable" cities. Let's look at the green cities a bit more closely. Notables are: Indianapolis, Detroit, Cleveland, Cincinnati, and Pittsburgh. Is it too obvious to say that these cities have flat to decreasing populations and high unemployment? No wonder their land restrictions are so loose. The local authorities need to pull out all the stops to PREVENT people from leaving!
Cart and Horse
A question to ask, again a pretty obvious one, is whether restrictive land use is causally linked to affordability. The survey certainly shows correlation but seems to gloss over causation.
English Only
As hinted above, the survey seems to leave out other first world cities and concentrates on only English speaking cities. Why not include Paris, Stockholm, and Frankfurt? Could it be that these cities have restrictive land use policies but more favourable affordability?
Restriction? What Restriction?
Check out mohican's last post on CMHC construction data. If Vancouver has "restrictive" land use policies, it seems there may be a few loopholes, given the MASSIVE housing supply coming online. How could a city with such tight reins on land use produce such oversupply? It blows the mind.
Overall I am surprised the survey is given so much press. Their exclusion of data is suspect, their conclusions not well backed by logic, and their basic premises around what "affordability" really is are not discussed in their analysis. Every year there is a debate on local blogs about this survey. Sure, Vancouver is severely unaffordable. We all know that and this survey confirms the obvious. (Another annoyance is the types of data used for certain markets vary so the affordability number for Vancouver is not apples-apples with other cities) But this survey is not really about displaying the data and I'll stick to a more holistic combination of Case-Shiller, rents, and incomes, without the suspect analysis, thanks very much.
Monday, January 26, 2009
December 2008 CMHC Data - Vancouver CMA
The CMHC released the montly housing data for markets across Canada. Here is an updated chart tracking housing starts, completions and units under construction in the Vancouver market. I have included a forecast for 2009 which assumes a significant decline in starts during the year and an uptick in completions near the end of the year as many projects are scheduled to wrap up just before Vancouver hosts the Winter Olympics.
A truly amazing statistic contained in the December data is the number of completed but unsold units. The number of unabsorbed units has risen from 1292 in December 2007 to 2363 in December 2008. Obviously, developers are having trouble selling the units that are now vacant and available. This is why we are seeing these creative marketing tactics and price cuts.
A truly amazing statistic contained in the December data is the number of completed but unsold units. The number of unabsorbed units has risen from 1292 in December 2007 to 2363 in December 2008. Obviously, developers are having trouble selling the units that are now vacant and available. This is why we are seeing these creative marketing tactics and price cuts.
Friday, January 23, 2009
Developer Turns Condos into Rentals
I came across this interesting article -- from January 2007 -- about a developer named David Franco turning an unbuilt Washington DC development from luxury condos into rentals. To quote:
"In many cities, banks have significantly scaled back loans to condominium builders. Some have demanded that developers sell half or more of the units in a building before even beginning construction.
In hopes of salvaging something from their costly plans, hundreds of developers like Franco are looking to the strong market for apartments, planning to rent their units for at least a couple of years while waiting for today's condo surplus to shrink.
After six weeks of failing to lure more than a couple dozen buyers, Franco and his partner, Jeff Blum, joined the builders of nearly 6,000 condominium units in the Washington metropolitan area who have decided in the last three months to recast their projects as rental apartment buildings."
Read the whole thing. Like a book we've already read, today we hear this:
"In the face of sales that have ground to a halt, Wall Financial Corp. has decided to scrap its 414-unit Wall Centre False Creek condominium project in favour of building rental apartments on the site, company principal Peter Wall said in an interview.
In its last quarterly financial results, Wall Financial said it had sold almost 30 per cent of the Wall Centre Creek's units, 120 in all, but that sales had come “to almost a complete stop” during the quarter."
I see. What an innovative concept! Vancouver hasn't seen any substantive purpose-built rentals for years now so sounds like a winner; a real contrarian move. Surprised nobody else has thought of that. I would love to see how Mr. Wall pitches this idea to his financial backers, or is he using his own money?
"In many cities, banks have significantly scaled back loans to condominium builders. Some have demanded that developers sell half or more of the units in a building before even beginning construction.
In hopes of salvaging something from their costly plans, hundreds of developers like Franco are looking to the strong market for apartments, planning to rent their units for at least a couple of years while waiting for today's condo surplus to shrink.
After six weeks of failing to lure more than a couple dozen buyers, Franco and his partner, Jeff Blum, joined the builders of nearly 6,000 condominium units in the Washington metropolitan area who have decided in the last three months to recast their projects as rental apartment buildings."
Read the whole thing. Like a book we've already read, today we hear this:
"In the face of sales that have ground to a halt, Wall Financial Corp. has decided to scrap its 414-unit Wall Centre False Creek condominium project in favour of building rental apartments on the site, company principal Peter Wall said in an interview.
In its last quarterly financial results, Wall Financial said it had sold almost 30 per cent of the Wall Centre Creek's units, 120 in all, but that sales had come “to almost a complete stop” during the quarter."
I see. What an innovative concept! Vancouver hasn't seen any substantive purpose-built rentals for years now so sounds like a winner; a real contrarian move. Surprised nobody else has thought of that. I would love to see how Mr. Wall pitches this idea to his financial backers, or is he using his own money?
Thursday, January 22, 2009
Denial - It's Not a River in Egypt
The Nile River is a long river, in fact, it is generallly regarded as the longest in the world. It represents a very large drainage basin, covering much of North Africa.
Likewise, DE-NIAL can be the drainage basin of your finances if you aren't careful. According to Wikipedia, denial is a defense mechanism in which a person is faced with a fact that is too uncomfortable to accept and rejects it instead, insisting that it is not true despite what may be overwhelming evidence. The subject may deny the reality of the unpleasant fact altogether (simple denial), admit the fact but deny its seriousness (minimisation) or admit both the fact and seriousness but deny responsibility (transference).
So today, many of the people you see around you are in denial about the reality of the Canadian real estate market. They are so uncorfortable with the fact that prices have fallen and are falling further that they outright deny the fact. Sometimes they admit that prices have fallen but minimize the impact that it will have on Canadians or themselves. Sometimes they just admit that prices are falling and that it will have a big impact but walk away from their 3 spec condos.
Yes folks were are in the denial stage. Next stop 'fear' - - I'm scared.
Good luck!
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