The local slowdown should not be confused with the collapse in the U.S.

December 5, 2008

Sellers are asking if the market value of their home is decreasing. Buyers want to know if they should wait for further price reductions. Homeowners not in the market to buy or sell want to understand the impact on their equity, which may affect decisions like plans for renovations.

The following is a summary of stats released by the Real Estate Board of Greater Vancouver. Most of it is specific to detached houses on the Westside of Vancouver.

Housing Price Index

Number of Sales

Number of New Listings

Total Active Listings (includes condos)

Total Sales (Includes condos)

EVERYTHING is down -- sales volume, listing count, and prices.  This is an unusual situation, and, short of Vancouver becoming a ghost town, it is impossible for all three of these things to continue trending in the same directly.  At least one of these has to go up.

The latest change is that we now officially have a trend of a decreasing supply of properties.  We're not in short supply of houses YET, but the listing counts are definitely marching steadily down!

As I said last month, the trend of sales going down cannot continue indefinitely -- Vancouver has a positive net migration, people have children, people get married, children move out, people die, people get divorced..... (although not necessarily in that order!)

Vancouver, and in fact Canada in general, is actually in much better shape than the News would have you believe.  We had a 3rd quarter GDP growth of 1.3%, and retails sales in BC were up 1% in September as well.  BC also has the lowest foreclosure rate in Canada.  And even in the US, sales volume on "Black Friday" -- which was forecasted to be way down -- was UP 6%.

Mortgage rates are also at all-time lows, and are expected to go even lower this month.  You can currently get a 5-year mortgage at 4.8%, and variable is available at prime (currently 4%).

As an interesting note, a secured line of credit from National Bank is available at prime (4%) and a 3-year GIC from BMO is available at 4.3%.  So you can now personally borrow money from one bank, and then lend it to another bank, and make a profit.  Never mind those smart people who locked in a line-of-credit at Prime-1 (3%!!!) over the summer, and who could now be making a profit of 1.3%/year without using any of their own capital at all.  What an interesting opportunity!  1.3% per year! 

If you had bought a house in Vancouver in 1978, you would have paid about $75,000.  Today, even after the market "crash", that same house would be worth about $750,000.  That's a 1000% increase, or over 33% per year.  (Even with compounding, that's still over 8% per year.)  Hmmm.... Which would you rather....  1.3% or 33%?

Slow home sales create window of opportunity

In its most recent statistics release, the Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver declined 69.7 per cent in November 2008 to 874 from the 2,883 sales recorded in November 2007.

Residential benchmark prices, as calculated by the MLSLink Housing Price Index®, declined 12.8 per cent between May and November 2008, amounting to an 8.3 per cent year-to-date price reduction for detached, attached and apartment properties in Greater Vancouver between November 2007 and 2008. In May 2008, the overall residential benchmark price was $568,411, compared to $495,704 in November 2008.

“Times of turmoil, from which we always emerge, offer excellent opportunities to buy quality real estate,” says REBGV president, Dave Watt. “For those whose personal finances allow them to get involved, there are opportunities in today’s housing market that have not been seen in many years.

“The local real estate market is not immune to the current economic challenges globally; however, Canada’s disciplined lending structure has kept the mortgage landscape steady in these uncertain times.”

New listings for detached, attached and apartment properties declined 10.8 per cent to 3,012 in November 2008 compared to November 2007, when 3,377 new units were listed. Active listings in November declined 4.7 per cent to 18,348 from the 19,257 active listings in Greater Vancouver in October 2008.

Sales of detached properties in November 2008 declined 69.8 per cent to 322 from the 1,067 units sold during the same period in 2007. The benchmark price for detached properties declined 8.6 per cent from November 2007 to $666,525. Since May 2008, the benchmark price for a detached property in Greater Vancouver has declined 13.6 per cent.

Sales of apartment properties declined 67.9 per cent last month to 410 compared to 1,276 sales in November 2007. The benchmark price of an apartment property declined 8.6 per cent from November 2007 to $342,315.  Since May 2008, the benchmark price for an apartment property in Greater Vancouver has declined 12.2 per cent.

Attached property sales in November 2008 decreased 73.7 per cent to 142, compared with the 540 sales in November 2007. The benchmark price of an attached unit declined 6.4 per cent between November 2007 and 2008 to $426,287. Since May 2008, the benchmark price for an attached property in Greater Vancouver has declined 11 per cent.