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Posted Nov 11, 2008, 4:49 PM
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Registered User
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Join Date: Sep 2006
Location: Vancouver BC
Posts: 6,438
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Originally Posted by duener
I'm a Vancouverite living in London, and the crazy thing is that Vancouver prices started approaching London prices (but without the economy/well paid salaries). So it's not surprising that with record amounts of stock, and speculators dropping out Vancouver prices are now falling faster than American cities did.
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Are you kidding??? Vancouver's housing price declines are not even close to matching the price declines in the states.
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REAL ESTATE
B.C. HOUSING HEADS DOWNHILL
Boom times are over for the province following explosive growth in demand, prices
DAVID EBNER AND LORI MCLEOD
October 30, 2008
VANCOUVER and TORONTO -- Canada's most expensive housing market is hitting a significant slump, with home sales numbers falling and prices declining, the British Columbia Real Estate Association said yesterday.
"The bull market in housing is over in British Columbia, and it's been over for several months," said Cameron Muir, the group's chief economist.
The association, in a forecast published yesterday, said prices could average $453,000 in B.C. this year. But for 2009, prices are predicted to slump 9 per cent to an average of $413,000 - with much of the decline taking place before the end of this year.
The market peaked in the spring, the forecast said. Over the summer, cracks began to show. Consumer confidence wavered. People would go to open houses but wouldn't buy. Sales fell almost 50 per cent in July, compared with a year earlier, and fell more than 50 per cent in August. Prices weakened. And then the credit crisis hit - and B.C. and Vancouver prices kept falling.
The Globe and Mail
Other forecasts are more dire. Last week, Credit 1 Credit Union estimated average B.C. housing prices at $385,000 in 2009 and in 2010 at $366,000 - down about 20 per cent from this year's peak.
In 2002 and 2003, when the B.C. boom started to take off, the average price of a home in B.C. was roughly $250,000.
The B.C. market, like others in North America, was powered by low mortgage interest rates. However, the region also had numerous other factors at work, including explosive demand following an economic slump from the mid-1990s through the early 2000s, the desirability of the province as a place to reside, and the influx of foreign money and speculators.
The slump could make the city and the province more affordable for other Canadians who have considered moving to B.C., and for businesses that see an advantage in locating in the region. Civic business leaders for years have said a major challenge in attracting new businesses is the lack of affordable housing.
The current situation also quells the mantra that accompanies all booms - "This time it's different" - said Paul Boenisch, a real estate agent at Prudential Sussex Realty in North Vancouver.
"I heard people say, 'There's no more land left to build. We're a global destination now in the world.' We have to keep in mind that five years ago, before home prices doubled, we were still the same city," Mr. Boenisch said.
Outside Vancouver, B.C.'s market was beyond hot as oil money rolled in from Alberta, with energy executives and engineers buying up lakefront property in the Okanagan in the province's interior. Prices in such areas could see large declines.
In the resort of Whistler north of Vancouver, the market has been mixed for several years since the boom sparked by the low Canadian dollar petered out around 2002.
Today, particularly since the credit crisis erupted, the market in Whistler is subdued, said Ron Mitchell, an agent and owner of Sutton West Coast Realty Whistler.
"The last three weeks have been quiet - there's no question," said Mr. Mitchell, who added that the winter is likely going to be slow because residents in and around Vancouver used to use home equity loans on their principle residences to secure resort property.
With Vancouver prices down, this option is gone.
The soaring supply of homes, accompanied by weak demand, is driving down the prices.
In Vancouver, it was similar to the frothiest moments in Toronto's real estate boom this decade, when bidding wars would see homes sold for tens of thousands of dollars more than the asking price.
No longer: The B.C. Real Estate Association predicted sales will be down about 30 per cent this year in Vancouver and around B.C.
Mr. Boenisch's experience is even more severe, saying sales are already down as much as 50 per cent.
"When you have 80 per cent more inventory with half the amount of buyers, this is a dramatically different market," Mr. Boenisch said.
Last week, the Canadian Real Estate Association said that housing prices in September fell 6.2 per cent from a year earlier in 25 major markets across the country, though analysts noted the size of the decline could largely be blamed on B.C. rather than a nationwide meltdown.
Due to recent experience, the B.C. housing market has been considered something that only goes up, never down. However, there have been two long slumps in the past several decades.
After a steep rise in the late 1970s, prices fell from 1981 to 1986. From there they took off again, peaking in 1995, when they fell through 1999 and were stuck in neutral for three more years, according to research from the Sauder School of Business at the University of British Columbia.
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Compare BC prices to that of the us.
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Housing: It'll get worse
Hard hit cities like Sacramento, Phoenix and Las Vegas are set for more steep losses. Some real estate experts are bracing for price drops of as much as 50%.
NEW YORK (CNNMoney.com) -- With home prices plunging by more than 30% in some markets, bargain-hunters are ready to pounce.
But it may pay for buyers to wait. Many housing experts say that the worst-hit metro areas have even farther to fall, and could see total drops of as much as 50%.
"The housing boom was unprecedented in U.S. history," said Michael Youngblood, a portfolio analyst with FBR Investment Management, "and the correction will be as well."
Many erstwhile bubble cities have sustained particularly brutal hits. The median-price of a home in Sacramento, Calif. was down 35% during the three months ended May 31 compared to the same period last year, according to the real estate web site Trulia.com. In Riverside, Calif. prices fell 29%, while San Diego prices dropped 26%.
Smaller cities in California's Central Valley, such as Stockton (-39%), Modesto (-37%) and Bakersfield (-29%), also recorded steep declines.
Outside California, hard-hit markets include Phoenix (-18.8%), Las Vegas (-22%), West Palm Beach, Fla. (-32%) and Cape Coral, Fla. (-35%).
Youngblood expects that these markets will likely endure total price drops of 50% or more.
The smart money
Indeed, prices are falling faster and further than in any other post-war housing bust. During the bust in Austin, Tex., which started in 1986 and is one of the worst on record, prices fell 25%, according to Local Market Monitor, a financial data provider. And that cycle took four years to bottom out.
In other major downturns, prices in Los Angeles fell by 21% during a six-year period in the 1990s, and Honolulu home prices saw a decline of 16% in the five years starting in 1994.
Youngblood's forecast "is quite plausible," said Nicholas Perna, of the economic consulting firm Perna Associates. He finds it especially significant that the smart money, investors in the S&P Case/Shiller Home Price Index, are still buying futures as if they expect prices to continue to plummet.
The index, which tracks the sale price of specific homes as they are sold and resold over the years, is considered to be one of the most accurate home price indicators.
"The people who are putting their money where their mouths are," said Perna, "are betting on more losses."
Specifically, Case/Shiller investors are betting that Las Vegas prices will fall an additional 22% by November 2009. Los Angeles futures predict a further loss of 24.2% through November 2009, while investors expect to see Miami down another 21.6% by then.
These markets may have a hard time recovering because, according to Perna, people are afraid to buy right now, because they're concerned about over-paying. That helps explain why price depreciation seems to be accelerating.
"The most severe declines are happening right now," said Mark Zandi, chief economist for Moody's Economy.com.
Prices vs. wages
This correction was inevitable, in Youngblood's opinion; home price gains had simply out-paced income by far too much to be sustained.
Historically, home prices have averaged about four times wages. Whenever homes got significantly more expensive, people could not afford to buy and home prices fell back.
But local price-to-income ratios are still out of whack even after steep price declines, which means prices have further to fall. In Los Angeles, where the ratio peaked at 22.7, according to Youngblood, it's still in the high teens. Home prices would have to come down another 40% or so to get that ratio back into the single digits.
And it's not just the housing fundamentals that lead Youngblood to expect more drops; he also cites the local economic conditions.
"Bubble cities are now seeing fleeing employment conditions," he said. In Miami, the unemployment rate rose 34.3% between April 2007 and April 2008, according to Youngblood. And the job picture in California cities, where many jobs were housing related, has been even more disastrous.
Housing was a key economic engine for towns like Riverside, Stockton and Modesto during the boom, according to Zandi. Builders, real estate salespeople, mortgage brokers and lenders, and even retailers, like Home Depot (HD, Fortune 500) and Lowe's (LOW, Fortune 500), depended on growth in the sector.
"In all those deteriorating housing markets, it's a double hit," he said.
Ten of the 11 cities with the highest unemployment rates in the nation are now in central California, with El Centro, at 18.4% in April, leading the way. Other double-digit disaster areas were in Merced (12.3%), Yuba City (11.8%), Modesto (10.7%), Visalia (10.3%), Hanford (10.2%) and Fresno (10%).
Many of these cities are also among the leaders in foreclosure rates. As more foreclosed properties hit the market, prices are further depressed.
"[The price drops] reflect a wave of distressed sales of [bank-owned] properties and discouraged sellers," said Zandi
The brighter side
Not all analysts are pessimistic. Richard DeKaser, chief economist for National City Corp (NCC, Fortune 500) points out that, thanks to the price declines, the national market is the most affordable it's been in years.
With the national median price of a single family home at $204,229, mortgage rates around 6% and the average household earning nearly $50,000, the average home buyer spent about 23.2% of their income on housing during the first quarter of 2008. That's down from 2006, when homeowners spent an average of 29% of their income on housing.
Nariman Behravesh, an economist with Global Insight, says that while he expects home prices to stagnate for the next five years, Youngblood's 50% price decline forecast is "a little extreme."
But that target is realistic, Behravesh says, after taking inflation into account. In markets where prices have fallen 35% or more, and remain depressed through five years of 4% inflation, home prices in real dollars will absorb an additional 20%-plus hit. That would push price declines to over 50%.
Of course, there are plenty of wild cards that could affect home price trends, such as the election, Congressional legislation, unemployment, gas prices, and interest rates.
"This whole market is fraught with all sorts of implications," said Perna, "and it ain't over until it's over." To top of page
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Vancouver is experiencing a market correction with the added drag of the US housing bust and worldwide financial crisis making things worse. There is no bubble bursting here.
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I'm looking at buying my first place sometime next year or the year after, man would it be nice if i was able to time it just right. Buying a place in the Shangri-La for a decent price and having that as your first place, wow, now there is a dream, haha (i am not holding my breathe). 
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