Real Estate

Vancouver housing bubble?

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  • Apr 3rd, 2020 4:38 pm
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Deal Addict
Apr 10, 2011
1440 posts
861 upvotes
Vancouver
choclover wrote: Is this a canary in the coal mine?
Metro Vancouver developers slash condo presale launches as demand drops
https://vancouversun.com/news/local-new ... ulled-back
Although the news article is updated to Feb-24-2020, the data used seems to be mostly from 2019. I'm curious how things will be now and for the spring. Markets appear to be up in Toronto and Vancouver. Trudeau's new help to new buyers may be a small factor, while providing no new incentives for increasing the supply side of the equation. The federal Liberals (and NDP) may work together to provide even more incentives to buyers to increase their buying power.

I personally believe that the market at this precise moment won't be the same as the market conditions in the late summer and fall. This is the beginning of a local/global recession year. On the one hand, that'll mean lower interest rates which actual help real estate markets. On the other hand, personal and business incomes will be falling in the future. That's going to put a segment of buyers/owners on a very shaky ground.

Real estate agents in Vancouver and Toronto are all telling buyers that they better compete aggressively on pricing at this moment as there are multiple buyers/offers. However, most of the multiple offer situations have been occurring in properties that were priced below the market price. This activity may give a false impression of the actual current state of the greater market. Here's just one example that I know of. A nice property sold a few days ago was clearly priced 10-15% below it's current value. It had 6-8 offers in a bidding war. It still sold moderately below it's current estimated value. That's two very different headlines, and both are correct.

There so many new projects that are coming up in Vancouver. I'm seeing so many NEW DEVELOPMENT signs that are suddenly appearing, where they weren't before. There's a WHOLE LOT of supply coming up. People should take a trip down Kingsway, Cambie, King Edward, 41st, Main, etc. Every week they appear to post a few more new development signs. If I were a SELLER, I'd ride this early spring wave as soon as possible before negative economic headlines start becoming regular. Investors who have bought into projects that are about to get occupancy permits are quick to post for-sale signs.

If new buyers can wait until the fall, winter and next spring/summer, they will get a lot more "home" for their money. But instead, most will listen to their real estate again and "buy now while you can get in". 2020 is going to be a very bumpy year. Predictions are extremely difficult these days. Who could have seen the economic and political impact from the Coronavirus, just 3 months ago? Are prices going up or down during the year? The answer is "Yes".
Last edited by RxMills on Feb 24th, 2020 2:46 pm, edited 14 times in total.
Deal Guru
Jan 27, 2006
12581 posts
5745 upvotes
Vancouver, BC
I suspect that the RE industry saw this coming as they have started their PR compaign a month or two ago in order to create 'better' news for sellers that the market is in better shape than the numbers will show. I would not be surprised if the lack of supply was an adverse reaction by the sellers to the RE agents telling them to lower their prices in order to compete aggressively on pricing as some sellers were listening to the PR machine's message of the market stabilizing and we are heading to an upward year. After all, why sell now if the market is going upwards?
Member
Mar 20, 2011
263 posts
171 upvotes
Langley, BC
Very curious to see if the stress test reduction in April will have an impact on sales. My feeling is that if the trend is still downward, people will likely still hold off from buying, even with higher qualification limits and lower rates.
Deal Guru
Jan 27, 2006
12581 posts
5745 upvotes
Vancouver, BC
CanadaJimmy wrote: Very curious to see if the stress test reduction in April will have an impact on sales. My feeling is that if the trend is still downward, people will likely still hold off from buying, even with higher qualification limits and lower rates.
Unless you listen to the early media reports where they seem to be saying 'happy days are here again...' Over the weekend I saw an interview with a representative from the REBGV and they were actually pretty muted on the effects of the change! I'm guessing that they came to the realization that in an overpriced market, a few tens of thousand dollars here or there on a mortgage isn't going to mean much when the mortgage maybe a million or more for the average buyer.
Deal Fanatic
Oct 7, 2007
6289 posts
2558 upvotes
craftsman wrote: Unless you listen to the early media reports where they seem to be saying 'happy days are here again...' Over the weekend I saw an interview with a representative from the REBGV and they were actually pretty muted on the effects of the change! I'm guessing that they came to the realization that in an overpriced market, a few tens of thousand dollars here or there on a mortgage isn't going to mean much when the mortgage maybe a million or more for the average buyer.
I heard that the impact of relaxing the stress test was adding something in the order of $30k to what someone could buy. In Vancouver, this would be considered negligible.

Personally, I don't see how the real estate market can keep trending up from a very high place already unless we have a new wave of outside money coming in because prices are still astronomical compared to what locals earn. Even though I am not looking to buy or sell, I used to think it would be nice to see some relief in pricing so that those who want to get in can finally pull it off. Now, I am not sure what I think given that we live in an upside-down world and there are too many nonsensical things happening all around us.
Member
Mar 20, 2011
263 posts
171 upvotes
Langley, BC
Still trying to make sense of this sale. $918,000 for a 2246 sqft house in Langley.
Image

Sold for $60k over asking, $138k over 2020 assessment. Congrats to the seller, but wow, that is a LOT of money for a small house on a small (2300sqft) lot in the suburbs.

Houses in this area typically sell for around the $850k mark, here is a 12 month history from Zealty of the area, with this last sale in the bottom right. Whats more is that some of these houses were larger and had larger yards!
Image

Floored someone would pay this much.
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Deal Guru
Jan 27, 2006
12581 posts
5745 upvotes
Vancouver, BC
CanadaJimmy wrote: Still trying to make sense of this sale. $918,000 for a 2246 sqft house in Langley.
Image

Sold for $60k over asking, $138k over 2020 assessment. Congrats to the seller, but wow, that is a LOT of money for a small house on a small (2300sqft) lot in the suburbs.

Houses in this area typically sell for around the $850k mark, here is a 12 month history from Zealty of the area, with this last sale in the bottom right. Whats more is that some of these houses were larger and had larger yards!
Image

Floored someone would pay this much.
There might be a backstory to the sale that we aren't aware of.
Deal Fanatic
Oct 7, 2007
6289 posts
2558 upvotes
craftsman wrote: There might be a backstory to the sale that we aren't aware of.
That is possible. There are also some people out there who are constantly in hysteria are making big decisions based on emotion and not on rational thought. Perhaps mom and dad were helping out so the person didn't care if they were overpaying. Or maybe the person was being told by the realtor that there are multiple offers and they got carried away. IMO, no one should be losing their mind in this market. There is plenty of stock on the market even if you were to sell one home to every person (not necessarily per family) based on some of the statistical calculations done out there by one guy in this area several years back.
Deal Guru
Jan 27, 2006
12581 posts
5745 upvotes
Vancouver, BC
choclover wrote: That is possible. There are also some people out there who are constantly in hysteria are making big decisions based on emotion and not on rational thought. Perhaps mom and dad were helping out so the person didn't care if they were overpaying. Or maybe the person was being told by the realtor that there are multiple offers and they got carried away. IMO, no one should be losing their mind in this market. There is plenty of stock on the market even if you were to sell one home to every person (not necessarily per family) based on some of the statistical calculations done out there by one guy in this area several years back.
Of this could be some sort of alternative form of payment - ie a tax free way since I'm assuming it's the principle residence of the seller.
Member
Mar 20, 2011
263 posts
171 upvotes
Langley, BC
Demon_Twinz wrote: isn't the inside of the house 2245 sq ft? That's not bad, it should be enough space for a family of 4. I am comparing to Toronto.
Yeah definitely big enough, but the problem is the comparables. You can get a newer and larger house for just a bit more money in the same area of North Langley. A developer very close by is selling brand new 2700 Sq ft houses with larger yards for around $1mil after taxes.
choclover wrote:
That is possible. There are also some people out there who are constantly in hysteria are making big decisions based on emotion and not on rational thought. Perhaps mom and dad were helping out so the person didn't care if they were overpaying. Or maybe the person was being told by the realtor that there are multiple offers and they got carried away. IMO, no one should be losing their mind in this market. There is plenty of stock on the market even if you were to sell one home to every person (not necessarily per family) based on some of the statistical calculations done out there by one guy in this area several years back.
Yeah all I can think of is maybe a bidding war. I really wish more people and buyers knew about Zealty! Had the buyers looked at the 12 month sale history for the area that they would have known they were overpaying for this property. Their Realtor should have also advised them of this, but of course they get a slice of the commission so they have less incentive to keep the buyers from spending too much.
craftsman wrote: Of this could be some sort of alternative form of payment - ie a tax free way since I'm assuming it's the principle residence of the seller.
Curious what this could be?
Deal Guru
Jan 27, 2006
12581 posts
5745 upvotes
Vancouver, BC
CanadaJimmy wrote: Curious what this could be?
Party A did some under the table work for Party B and as payment, Party B agrees to pay Party A by buying Party A's house for more than asking. I believe there was a case in the US where this type of thing was used as a bribe to get their kid into a college.
Deal Addict
Apr 10, 2011
1440 posts
861 upvotes
Vancouver
Bloomberg Canada has had economists reporting on their assessment of the Canadian economy all day.

The US will cut interest rates, probably a total of one full point by the end of the year. The US economy is doing very well and this will make a difference in the US.

About Canada, he said Canada will do the same but Canada is being very careful about how much it cuts interest rates. He said the Canadian economy hasn't been doing as well. It was basically FLAT in the last 1/4 of 2019. Now, with the huge drop in oil prices and oil stocks, the energy sector isn't going to have good results this year. He said Canada is more like Europe and Japan when it comes to interest rate cuts. In Europe and Japan, interest rates are near zero or negative, yet it hasn't made much of a difference in their economy. The Canadian financial leaders know the main result of more and more lowering if interest rates in Canada will be to inflate housing prices further, which they see as already getting too hot again and fear the dreaded bubble risk.

He further said the Canada's number one industry at the moment is real estate related. The second one is energy. If real estate development takes a significant hit this year, along with the energy industry drops that are taking place right now, Canada is going to have some significant challenges later in the year. Once Canada's quarterly numbers come in later in the year (March, June, September), Canada may find itself in a recession.

The US federal reserve, in an unprecedented move, is expected to cut rates by 50 points on Sunday night, before the stock market opening. This made the US stock market bounce off it's lows of the day.

(Of course, it's just one economist's opinion.)

Another economist said, aside from the natural reaction to lower interest rates, he didn't believe they would achieve the longer-term corporate economic stimulus that it's achieved historically. He said, "how is cheap investment funding going to help corporations in dealing with issues related to the Coronavirus?". He said we're in unchartered territory right now and dealing with issues that we haven't seen in a very long time.

So, with interest rates rapidly dropping, Canadian real estate prices should see a healthy spring. That will be great news for sellers.
Last edited by RxMills on Feb 28th, 2020 4:17 pm, edited 1 time in total.
Member
Mar 20, 2011
263 posts
171 upvotes
Langley, BC
RxMills wrote: Bloomberg Canada has had economists reporting on their assessment of the Canadian economy all day.

The US will cut interest rates, probably a total of one full point by the end of the year. The US economy is doing very well and this will make a difference in the US.

About Canada, he said Canada will do the same but Canada is being very careful about how much it cuts interest rates. He said the Canadian economy hasn't been doing as well. It was basically FLAT in the last 1/4 of 2019. Now, with the huge drop in oil prices and oil stocks, the energy sector isn't going to have good results this year. He said Canada is more like Europe and Japan when it comes to interest rate cuts. In Europe and Japan, interest rates are near zero or negative, yet it hasn't made much of a difference in their economy. The Canadian financial leaders know the main result of more and more lowering if interest rates in Canada will be to inflate housing prices further, which they see as already getting too hot again and fear the dreaded bubble risk.

He further said the Canada's number one industry at the moment is real estate related. The second one is energy. If real estate development takes a significant hit this year, along with the energy industry drops that are taking place right now, Canada is going to have some significant challenges later in the year. Once Canada's quarterly numbers come in later in the year (March, June, September), Canada may find itself in a recession.

The US federal reserve, in an unprecedented move, is expected to cut rates by 50 points on Sunday night, before the stock market opening. This made the US stock market bounce off it's lows of the day.

(Of course, it's just one economist's opinion.)

So, with interest rates rapidly dropping, Canadian real estate prices should see a healthy spring. That will be great news for sellers.
Interesting, did you catch the name of the economist? I would really like to hear what they had to say.

Also if interest rates drop plus the stress test easing in April, the bubble could start to grow again. Based on some of the sales I've seen lately I wouldn't be surprised.

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