Blog by Patricia Houlihan - Personal Real Estate Corporation

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What is the market doing/going to do in Vancouver Real Estate?

What is the market doing/going to do in Vancouver Real Estate?

Here is an interesting article on the Canadian real estate market...Vancouver real estate does tend to fare better than most other markets BUT I would have to agree with a lot of what is said below.  Please call me to discuss or if you have any questions.


Patricia
(604)376-7653
phoulihan@vancouverviews.ca


Getting real 
Garry Marr, Financial Post; With Files From Paul Vieira • Saturday, Aug. 7, 2010
 

Erica and Jeff Manger never thought the price of their house could drop.

The Alberta couple bought a condominium in the Rockies resort town of Canmore three years ago and when they decided to move in 2008 to Sylvan Lake in Alberta, where they could afford a detached home, they kept the condo as an investment.

"It never occurred to us that we wouldn't be able to sell for what we paid," says Ms. Manger. "People were making $100,000 [on paper] a year on their condos."

Now they'd be lucky to get the $315,000 they paid for their condo, even though it may have fetched $345,000 in 2008 when they were thinking about selling it to help pay for their new home. Instead, they're getting $1,100 a month in rent for an investment that costs them $1,800 a month to carry and isn't going up in value.

It gets worse. They have to sell the house in Sylvan Lake because Jeff, who is a helicopter pilot, is looking for a better location for work. They paid $375,000 for the house and fixed it up. Not even counting Jeff's labour, the couple spent another $30,000 on supplies.

"We tried to sell it and put it up for $409,000. We lowered it to $385,000 when we hired a realtor, but that didn't work," says Ms. Manger. 
"We lowered it again and now we are down to $374,900," she says about the home that has now been on the market for two months. "We've lost all of our down payment, which was almost $30,000." 
Their tale is one not often heard over the past decade, the longest bull run in Canadian housing history. People have been competing wildly for homes and double-digit annual price increases have been the norm. The market corrected slightly in 2008, but the correction was short-lived. Average prices in Canada dropped 10.2% in the first quarter of 2009 from the previous year, but rebounded dramatically. By the fourth quarter of last year, prices had jumped 19.1% from a year earlier. 
But the market appears to be slowing again. Last quarter, prices were up just 5.2% from a year ago and July sales dropped as much as 40% from last year in some major markets. Even if there is no U.S.-style collapse, everybody from the consumer to the mortgage broker to the real agent may have to accept a new real estate reality: For the first time in a decade, housing might become boring, with flat sales and price increases just ahead of inflation.

"I was totally unprepared for this. People warned [us] ... but real estate has been considered such a safe investment," says Ms. Manger.

John Andrew, director of the executive seminars on corporate and investment real estate at Queen's University in Kingston, understands why people have been accustomed to a booming market. "It is all they've ever known," he says. "There are a lot of people who, for their whole adult life, there has been the perception that residential real estate does nothing but go up."

Don Lawby, chief executive of Century 21 Canada, who has been in the business since 1974, says no other time beats this past decade for housing. "We've had up and down, but this has been very good." 
But like many, he's forecasting a more balanced market and that means people's mind-sets will have to change. They might have to wait a little longer for a sale, or price their homes a little lower. 
"In the 1990s, it wasn't abnormal to see a home sit on the market 30, 45, 60 days," says Mr. Lawby. "People have more of an opportunity to look now. Houses that are priced right will get an offer and won't sit. But if you have 25 homes sitting on the market at $400,000, people will look around because they know they are not all going to sell overnight."

Sellers may have to get used to the fact price increases will go back to the historical norm -- a few steps ahead of inflation. "You'll get cost of living and a bit," says Mr. Lawby. 
What to expect next from the housing market has become a major guessing game among economists, consumers and those in the real estate community. There is little doubt that the spring market this year got an extra push from the one-time impact of tighter mortgage rules and the new harmonized sales tax in British Columbia and Ontario, which pushed people into buying. 
"What is going to be the new norm is the $64,000 question and it's still a very real debate," says Douglas Porter, deputy chief economist with the Bank of Montreal. "Did the market wildly overshoot or was it really just responding to the steep decline in interest rates?"

Mr. Porter doesn't see housing continuing at the same pace. "It's tough to see big further gains on top of what we've already gone through," he says. "I do think people have to get used to a more subdued reality. There is a feast-or-famine reality to the Canadian housing market and it's been mostly feast for the last 10 years." 
Traditionally, the real estate industry sold the safety and stability of housing compared with investing in the stock market. But over the past decade, the story has been capital appreciation. Statistics from the Canadian Real Estate Association (CREA) say the average house price has climbed 110% over the past 10 years. During the same period, the S&P/TSX composite index had a total return of about 40%. 
Toronto mortgage broker Sandra Epstein has been in the industry since 2003, and sees a much tougher market ahead. "I'm not seeing as many purchasers as I was, and there are fewer deals around," she says. "The competition on the mortgage side has intensified."

During this last cycle the ranks of brokers and agents swelled enormously. There are about 18,000 to 20,000 mortgage brokers in Canada, including agents called sub-brokers in British Columbia and associates in Alberta, says Jim Murphy, chief executive of Canadian Association of Accredited Mortgage Professionals. Although it is hard to compare the numbers with a decade ago, since many provinces did not have the licensing requirements, Mr. Murphy estimates the ranks have more than doubled in 10 years.

The number of real estate agents has also climbed -- CREA says there are now 100,000 realtors in Canada compared with 63,950 a decade ago. But the sector is starting to feel the pinch. 
In July, employment fell by 30,000 in finance, insurance, real estate and leasing -- back to July 2009 level. Avery Shenfeld, chief economist at CIBC World Markets, says the drop could be linked to the slowing in the real estate market.

"I would not want to be a broker starting out in the market today," says Ms. Epstein. "When I started in 2003, you had to hustle to get deals. Going forward, you have to be an established broker with a data base. It's going to be more challenging for all of us."

Read more: http://www.nationalpost.com/After+longest+bull+runs+Canada+housing+history+everyone+from+real+estate+agents+mortgage+brokers+consumers+should+reality+check/3371497/story.html#ixzz0w4lRFHjR

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