DATE

Bottom of the barrel
Steve Saretsky -

Condo Buyers Competing Amidst Record Low Inventory I’m writing this as I stumble my way out of an open house, beaten black and blue from flying elbows as buyers push and claw their way through a Thursday evening open house. An 800 square foot condo teasingly priced under $550,000 was jammed wall to wall with inventory starved buyers. Yep, the feeding frenzy of multiple offers is still alive and well for Vancouver condos, despite the snooze fest in the single family market. Condo prices are hitting new highs, yet sellers refuse to sell. Inventory has officially hit record lows, and is down 21% from last year. New listings are also down. In fact, this past February experienced the fewest number of new listings over the past 12 years. The purge of new listings and low inventory continues to crush the hopes and dreams of young first time buyers desperate to enter the market. But it’s never been sweeter for sellers, like shooting fish in a barrel. Yep, multiple offers are hitting buyers where it hurts most. The more affordable the unit, the more likely it enters into multiple offers. In Vancouver, during January and February 2017, 43% of condos priced

Steve Saretsky -

Why Most Sane People Are Hoping for a Return to Normal The Vancouver market has been on a torrid pace. With prices surging 39% since February 2015 and condo prices still climbing the risk of a significant downturn remains. The nearly 20% annual return on investment makes Warren Buffett look like an amateur. So much so that other Realtors I have spoken with seem to be hoping for a return to a more neutral market. The sentiment is also growing in Toronto where they have entered a bubble of their own. Michelle Makos, broker at Royal Heritage Realty recently penned a post on LinkedIn titled ‘Why am I not celebrating?‘ Despite Makos recently selling a Toronto townhouse for $132,000 over asking price she found it awfully tough to celebrate, in fact she was left shaking her head after receiving 14 offers. “What happens when all these expensive homes have mortgage renewals in a few years and the interest rates are higher, can they afford the payments? Will the values have decreased and now the homes aren’t worth what they have invested in them? This is just a dangerous ride we are on right now.” No kidding Michelle. Any wonder the

Steve Saretsky -

How much have Detached House Prices Moved? Always a heated debate, just what the heck are detached prices doing these days? The truth is, it’s up for interpretation. Some people think the sky is falling, others can’t see the forest past the trees. So let’s get factual. Detached prices are down, that is a fact. By how much exactly is up for debate. Depending on the metric you use, whether it’s average, median or the MLS Benchmark. I’ve highlighted my concerns with the MLS Benchmark here. Data shows it tends to lag by as much as 6 months behind the average sales price. Which is why most real estate investors and analysts will use the average sale price when studying a market, such as Ozzie Jurock. As of February 2017, the average sales price for REBGV (Greater Vancouver) is down 3.1% year over year. Again this is a year over year price drop. So although the average sales price fluctuates signficantly month over month, we have a rolling one year data set which should eliminate any flaws. The median sales price paints a similar picture. The median sales price shows a 2.4% price drop year over year. So essentially, as

Steve Saretsky -

Condo Prices Hit New Highs, Inventory Remains Scarce The Vancouver condo market remains as hot as ever. Similar to Vancouver Condo Report January 2017 inventory remains at record low levels despite sales falling. Multiple offers are heating up as buyers compete for the dismal amount of supply available. Full break down of the February numbers below. Sales [table id=36 /] Vancouver West condo sales fell 33% year over year for the month of February. Sales were virtually right on par with the 10 year average of 371 sales. Unlike the detached market, the drop in condo sales is more a result of ultra low inventory levels than from a big drop off in demand. Inventory is 21% lower than February 2016. Average Days On Market Vancouver West- 21 days Downtown- 18 days Yaletown- 27 days West End-27 days Kitsilano- 11 days False Creek- 17 days Vancouver condos are selling quickly. Again this comes as no surprise as there is simply not enough inventory. Activity is picking up and has brought the average days on market down from 34 days in December and January to just 21 days in February. This month, 32% of Vancouver condos sold over asking price, up

Steve Saretsky -

Condos Remain Red Hot, Townhouse Inventory Scarce Once again the three markets have never been more segmented. Detached sales plopped 57% year over year (February 2017 Detached Market Report) however that hasn’t stopped the condo market from hitting record high prices while keeping the townhouse market stable with low levels of inventory. Let’s break it down. Condo Sales [table id=35 /] Sales fell across the board year over year, however this is likely more a result of record low inventory available keeping buyers locked out of the market and limiting the overall number of sales. With that being said it’s something I’ll continue to monitor. REBGV condo sales fell 28% year over year, but remain 14% above the 10 year average for February. New Listings Vancouver East- 162 Vancouver West- 454 Richmond- 205 Burnaby- 199 REBGV- 1604 If you think we had low inventory last year this year is shaping up to be even worse. New listings for condos are down 28% year over year for REBGV. Dating back to 2005 this was the fewest number of new listings for REBGV of any February on record. To get an idea of just how low the overall inventory here’s how it

Steve Saretsky -

Detached Sales & New Listings Plunge, Uncertainty Looms Not much has changed in the detached market from previous months. Sales continued their trend as most recently reported in my January 2017 Detached Market Report. Detached sales plopped 57% across Greater Vancouver for the month of February. However, new listings also plunged by 50%, setting the stage for an interesting March spring market. Sales [table id=33 /] REBGV detached sales fell 57% year over year. For Vancouver West it was the fewest February sales recorded over the past 12 years, and Burnaby matched a previous low of 48 sales in February 2009. So, overall not a good month for detached sales. However, this should come as no surprise as it has been the trend for the previous 6 months or so. New Listings Vancouver East- 171 Vancouver West- 167 Richmond- 190 Burnaby- 144 REBGV- 1412 Last month I reported that new listings for REBGV detached homes were right on par with the 10 year average. However, this month there’s been a complete reversal. New listings are way down, as sellers appear to be holding out for some odd reason. REBGV new listings fell 50% year over year, and were 33% below the

Steve Saretsky -

How Credit Has Inflated Real Estate Prices The debate rages on as to why real estate prices have grossly inflated and have completely diverged from basic economic fundamentals. Some blame foreign buyers and speculation while others dumb it down further to population growth and supply constraints. However, research from the brightest minds in finance and economics will tell you those are all symptoms of an underlying disease. The disease, is a prolonged credit cycle, combined with low interest rates, lax lending standards, and a hunger from banks to provide more and more leverage for homebuyers in need of a mortgage.  As a result, household debt levels and real estate prices are at record highs. To explain further, I’ll pass this one off to the experts. Here’s what billionaire hedge fund manager Ray Dalio has to say. “There are two important cycles to pay attention to — the business cycle, or short-term debt cycle, and the debt supercycle, or long-term debt cycle. We are eight years into the expansion phase of the business/short-term debt cycle — which typically lasts about eight to 10 years — and near the end of the expansion phase of a long-term debt cycle, which typically lasts

Steve Saretsky -

Toronto Real Estate Following In The Same Footsteps as Vancouver I often get asked what are my predictions or thoughts on the Toronto Real Estate market. While I can’t comment from a statistical or feet on the ground perspective what I can tell you is all financial markets tend to function the same regardless of the location. There’s no such thing as “it’s different here.” With Toronto real estate prices soaring 22% last year, and expected to increase by 25% or more this year, the housing plague has gripped Toronto residents. Economists and other market experts are now sounding the alarm bells. “Overall, while the investment boom in housing supported the economy through the oil shock, the further deterioration in housing affordability and greater housing imbalances are worrisome, symptomatic of an economic crisis in the making caused by investor speculation and excessive financial leverage.” – David Madani, Capital Economics  “Let’s drop the pretense, The Toronto housing market — and the many cities surrounding it are in a housing bubble. Housing starts in Toronto and Vancouver have been chugging along at almost 70,000 units per year recently, an all-time high, while overall Canadian starts are above demographic demand at 200,000 units

Steve Saretsky -

Price Trends Suggest a Correction in Vancouver There’s no shortage of predictions for Canadian real estate prices nor is there a shortage of opinions on how financial markets function. But predicting markets correctly is an almost impossible task, as famed economist John Maynard Keynes once said “The market can stay irrational longer than you can stay solvent.” But let’s dive in anyways. The latest from Macquarie Research group, a leading provider of financial, advisory, investment and funds management services believes that a 25% correction in the Canadian National home price index would bring it back to trend. Of course, in Vancouver that’s even higher. Famous Blog dog Garth Turner‘s doodling shows a 33% price correction would be required for Vancouver real estate just to fall back to it’s “normal” trend line. There’s no question a price correction would come as welcoming news to many Vancouverites. According to Metro News, Doctors, lawyers, computer programmers and accountants can’t afford to buy a home in Vancouver. But alas, segments of the market are still hot hot hot leaving some bulls to believe prices could triple this year and heck may even quadruple next year…

Steve Saretsky -

Why All Levels of Government Are Reluctant to Prick the Bubble When it comes to the housing crisis in Vancouver there seems to be much finger pointing. Trudeau says it’s a provincial problem, Christy Clark alleges it’s a city problem, and Mayor Gregor just wants more bike lanes. So who’s bubble is it anyways? From a federal level Trudeau and the gang have been backed into a corner. GDP growth is anemic, commodity prices are in the gutter, and interest rates virtually at rock bottom. Canadian residential real estate is one of the last legs holding up the economy. HELOC’s (Home Equity Line’s of Credit) made up a staggering 12% of Canadian GDP in 2015. Even more pathetic, home ownership transaction costs represented nearly 21% of total GDP growth post-2014. No wonder Trudeau passed the hot potato over to CC. After holding out for years Christy Clark painstakingly pulled the lever on a 15% foreign buyers tax. The market fluttered into a tailspin, so a panicked CC pulled the other lever, this time in the form of sub prime loans to first time buyers. After all, don’t kill the hand that feeds you… Next up, Mayor Gregor. High house prices?

Steve Saretsky -

Housing Debate Gets Heated Amongst Finance Committee Just the other day local politicians got together to discuss the future of Canadian housing. There was about a one hour segment where politicians grilled CMHC’s Evan Siddall. Most of the focus was on the stress test and further lending policies moving forward. You can watch that full interview here. Mortgage Stress Test Since the implementation of the stress test CMHC says there has been a 15-20% reduction of first time buyers being able to qualify for an insured mortgage. CMHC says they are pleased with the results to weed out over leveraged buyers.  Of course, this had some local politicians up in arms saying that CMHC is denying first timers the Canadian dream of home ownership. How quickly they forget just how generous the banks have been in recent years. The massive lending towards residential real estate is unprecedented. Risk Sharing with Banks CMHC’s Evan Siddall says the Bank of Canada is continuing their research towards implementing risk sharing with the big banks. They want the banks to pay a deductible should someone default on their payments. CMHC says if this is implemented that borrowers can expect between a 10-50 basis point

Steve Saretsky -

Activity remains sluggish in Vancouver Real Estate Market Activity in the Vancouver real estate market remains quite sluggish through the first half of February. This report follows the two previous January reports (January 2017 Detached Market Report and January 2017 condo/townhouse Market Report). So what do I mean by sluggish? Well sales are down, way down from last year. New listings are also quite scarce. Let’s take a look. REBGV Detached Detached sales are following the exact same trend as the past six months or so. Detached sales through the first 15 days of February are down 52% year over year. There have been a total of 385 detached sales across Greater Vancouver which is 28% below the 10 year average.   There have been 690 new listings added so far in February. This puts the current sales/actives ratio at a paltry 9%, which of course means it’s still considered a buyers market. REBGV Townhouse Townhouse sales remain relatively stable, once again following a similar trend we have seen over the past few months. Through the first 15 days of February sales are down 30% year over year, and are also 8% below the 10 year average. Through 15 days

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The Canadian Economy

Steve Saretsky -

Condo Buyers Competing Amidst Record Low Inventory I’m writing this as I stumble my way out of an open house, beaten black and blue from flying elbows as buyers push and claw their way through a Thursday evening open house. An 800 square foot condo teasingly priced under $550,000 was...

Steve Saretsky -

Why Most Sane People Are Hoping for a Return to Normal The Vancouver market has been on a torrid pace. With prices surging 39% since February 2015 and condo prices still climbing the risk of a significant downturn remains. The nearly 20% annual return on investment makes Warren Buffett look...

Steve Saretsky -

How much have Detached House Prices Moved? Always a heated debate, just what the heck are detached prices doing these days? The truth is, it’s up for interpretation. Some people think the sky is falling, others can’t see the forest past the trees. So let’s get factual. Detached prices are...

Steve Saretsky -

Condo Prices Hit New Highs, Inventory Remains Scarce The Vancouver condo market remains as hot as ever. Similar to Vancouver Condo Report January 2017 inventory remains at record low levels despite sales falling. Multiple offers are heating up as buyers compete for the dismal amount of supply available. Full break...

Steve Saretsky -

Condos Remain Red Hot, Townhouse Inventory Scarce Once again the three markets have never been more segmented. Detached sales plopped 57% year over year (February 2017 Detached Market Report) however that hasn’t stopped the condo market from hitting record high prices while keeping the townhouse market stable with low levels...

Steve Saretsky -

Detached Sales & New Listings Plunge, Uncertainty Looms Not much has changed in the detached market from previous months. Sales continued their trend as most recently reported in my January 2017 Detached Market Report. Detached sales plopped 57% across Greater Vancouver for the month of February. However, new listings also plunged...

Steve Saretsky -

How Credit Has Inflated Real Estate Prices The debate rages on as to why real estate prices have grossly inflated and have completely diverged from basic economic fundamentals. Some blame foreign buyers and speculation while others dumb it down further to population growth and supply constraints. However, research from the...

Steve Saretsky -

Toronto Real Estate Following In The Same Footsteps as Vancouver I often get asked what are my predictions or thoughts on the Toronto Real Estate market. While I can’t comment from a statistical or feet on the ground perspective what I can tell you is all financial markets tend to...

Steve Saretsky -

Price Trends Suggest a Correction in Vancouver There’s no shortage of predictions for Canadian real estate prices nor is there a shortage of opinions on how financial markets function. But predicting markets correctly is an almost impossible task, as famed economist John Maynard Keynes once said “The market can stay...

Steve Saretsky -

Why All Levels of Government Are Reluctant to Prick the Bubble When it comes to the housing crisis in Vancouver there seems to be much finger pointing. Trudeau says it’s a provincial problem, Christy Clark alleges it’s a city problem, and Mayor Gregor just wants more bike lanes. So who’s...

Steve Saretsky -

Housing Debate Gets Heated Amongst Finance Committee Just the other day local politicians got together to discuss the future of Canadian housing. There was about a one hour segment where politicians grilled CMHC’s Evan Siddall. Most of the focus was on the stress test and further lending policies moving forward....

Steve Saretsky -

Activity remains sluggish in Vancouver Real Estate Market Activity in the Vancouver real estate market remains quite sluggish through the first half of February. This report follows the two previous January reports (January 2017 Detached Market Report and January 2017 condo/townhouse Market Report). So what do I mean by sluggish?...

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The Saretsky Report. December 2022