So, the 30% correction in Richmond is normal.
The housing market has leaped head first into recovery mode. March’s housing numbers show that the S&P Case-Shiller Index is rising more quickly on an annual basis than it has since 2006, existing-home sales have experienced 12 months of year-over-year price increases and new home sales are 29% higher than they were a year ago.
A new survey by PulteGroup shows that the housing market will continue its upward trend. The study interviewed renters between the ages of 18 and 34 (otherwise known as generation Y or millennials) and found that 65% of respondent's intentions to buy homes had increased over the past year. 52% of millennials indicated a desire to own and build equity.
There are around 90 million millennials living in the United States, making them the largest demographic group in the county's history - an onslaught of this group into the housing industry could create a boom larger than anything the U.S. has ever seen before.
Sales are down from last year and inventory is up. All else equal that will mean weaker conditions year-on-year. Now we find out who's the grasshopperlooking at recent published stats, it is painfully obvious that the recent bull is dead
This is not Iraq 2003. This is Vancouver 2013.
Actually, I did not expect three years ago to see the sharp rise in SFH prices. So, a 30% correction (of the price increase from 2008) in Vancouver West is fine. The benchmark is till up handily over 2008. Of course, the market has not given up any of its gains from 2001-7.
Which one of these bullish jerks on here would have said that a year or two ago?
OP asked "Is our bull trend still intact?"
Fairly obvious answer: No.
The board's Feb stats package shows it clearly.
The home price index for detached, townhouse and apartment are all down year over year. Townhouse and apartment are even down over a five year period.
Eyeballing the average prices near the end of the stats package shows the bull market for all three classes ended around January 2011. That is a mighty toppy looking chart.
Interesting start to April.paulb Says:
April 2nd, 2013 at 6:18 pm
New Listings 382
Price Changes 198
Sold Listings 100
What You Are Not Being Told About Housing … And Why You Should Care
By The Editor on April 2, 2013
By Mike Archer and Win Wachsmann. A generation of boomers has based most of its financial planning on the three false credos: if you get a good job, your retirement is safe, real estate always goes up and your home is your biggest investment.
While those statements were true for most of North America during the 1970s, 80s and ’90s everything has changed in the last ten years
Manufacturing jobs were shipped offshore and businesses across North America shuttered their doors and collapsed their pension obligations, putting hundreds of thousand of middle-aged middle class workers out of work.
The boomers who bought their homes when prices were lower, who upgraded several times and saw their home values increase in metropolitan areas are in for a rude shock.
They have been told in the great sales pitches of the real estate and the newspaper industries - two industries which have been glued at the hip for 50 years – that values and prices would increase.
The demographics and the housing math has changed.
The newspaper stories haven’t.
The stories now make up part of the legends of the childhoods of the kids from the 50s to the 70s. Mom and Dad bought a house for $13,000 and sold it 20 years later for $130,000. Then they moved and bought a $250,000 home which they sold ten years later for $430,000 and retired to a small condo or used the money to pay for their short stay at a retirement home before dying.
So the baby boomer, fresh out of college, went out and, based on two incomes, bought a starter home for $150,000 which they were told would easily be worth $350,000 to $450,000 by the time they retired.
New, younger buyers entering the housing markets continued to drive the prices up.
In the metropolitan Vancouver area, house prices reached the million dollar mark for that same starter home.
Coupled with low interest rates set by the Bank of Canada many people were still buying these homes in the 2009 and 2010 based on the promise of cheap mortgage money and an increased demand from offshore buyers.
But the reality was somewhat different.
As the economy tanked in 2008 and as boomers lost their jobs or were downsized, they couldn’t adjust their lifestyle quick enough.
The solution - rack up credit card debt and/or remortgage the home (if possible) or (if not) get a second mortgages .
Now, a home that was going to finance retirement, was supporting a current lifestyle - sacrificing tomorrow for today.
All the while these homeowners were expecting the value of their home to rise to cover their spending. That’s what they were told to believe.
Many mortgages were based on 5% down and 35 year amortizations. (in 2007 the the federal government introduced a 0% down, 40 year mortgage which qualified for Canada Mortgage and Housing Corporation (CMHC) insurance coverage in an effort to entice even more people to buy) With that payback period, monthly payments in the early years were almost all interest – no principle. Just like rent but with a lifetime of debt.
A modest market correction or a rise in mortgage rates would drop the resale value of a home below the value of the mortgage.
In order for home prices to increase, there must be a demand for those homes. However, today few can (or want to) afford those expensive homes and the demand is decreasing.
The children of the boomers, the natural buyers of all those boomer homes are either unable or unwilling to move up . Unable to afford the down payments and massive debt loads. Unable to because they have very little equity and too much debt. Unwilling because of lifestyle choices.
Housing starts are also down, indicating decreased demand for new homes.
Slowly the boomers are seeing the light. As more and more people are putting their homes on the market, for whatever reason, and, as the listings increase it puts a corresponding pressure on prices.
In February for example the number of sales and prices of homes from North Delta to Abbotsford and Mission has started to drop. Single family sales numbers are down 34.5% from a year ago while townhouse sales numbers have dropped 44%. Prices have dropped 4.8% – from $495,345 to $471,767 on average.
What will happen next?
As personal debt increases so does the debt accumulated by the Federal, Provincial and Municipal governments. Many are broke or on the way.
Years of mismanagement, vanity projects, and rank incompetence based on changing or faulty demographics means only one thing – increased fees and taxes. There is no impending population boom to bail out the schools and governments.
And what about those boomers who have paid off their homes?
Their taxes and fees will just keep on going up. Eventually they will get tired of the big empty home with all the maintenance and decide to downsize. They have no reason to keep their house prices artificially high to cover mortgage costs. The result – lower listing prices in order to unload their homes.
While this sums up the situation faced by a great many members of the single largest demographic group in history you will find very little discussion of the housing market in local newspapers or on TV or Radio news programs.
As the real estate balloon, which many say burst last December, (the market peak was actually in May 2012) is quickly deflating all over the Lower Mainland, across BC and across the country, who is warning the homeowner?
Not the newspapers, TV and Radio who depend on realtors and a stable housing market. Why would they rock the boat?
If the housing market collapses and billions of dollars worth of phantom net worth goes up in smoke, just how is everybody going to pay their bills, thir credit card debt or their taxes and fees?
Just how is an economy that is mostly a service economy, based on people importing stuff and selling it to other people who consume stuff because they can borrow against the equity in their home, going to function?
And what about the high reliance on housing related jobs – real estate , construction, home furnishing etc., which will be adversely affected by a downturn? They are at historic highs and will suffer the most as the BC economy slows down.
And, it turns out, some people (other than newspapers) have been looking into the matter for you.
Right. Listen to the guys from an Abbotsford newpaper lecture on economics. Do they also write for greaterfools?http://www.abbotsfordtoday.ca/what-you- ... ould-care/
Quite an interesting article from my old home town newspaper, funny enough.
It wil be ignored by many though, including the esteemed freshie economist who started this thread.