It sounds like October was another month of drying sales and rising listings in all major centres. Yet from preliminary info it sounds like a few cities once again experienced rising prices, most notably Vancouver. The devil is always in the details, and we’ll get to those in a minute. But first, some buffoonery, courtesy of an intelligent commenter over at Greaterfool.ca:
“Why not (gloat about rising prices)?
Post-Olympic crash? Nope…
Post HST crash? Didn’t make a dent in the market…
New April mortgage rules designed to target the bubble markets in TO and Vancouver? Zero effect in Vancouver…
Rising interest rates? Many banks have reduced their rates on mortgages while BOC rates up have inched up with no effect on the market….
Why not gloat? The bulls have been right for 5 years, as it was only in 2005 when people first started calling Vancouver’s market a bubble according to all the so called economic fundamentals…
The market is still on fire…good thing all those smart bears sold their homes in 2008! Given the revised predictions of a multi year decline, their gains will effectively be eaten up in 7 years of rent…”
Indeed. Why not gloat? Well, anonymous poster, before you get too excited, let me rain on your parade, douse your fire, and pee in your cornflakes. Not all is quite as exciting as it seems.
Since the poster is referring to Vancouver’s gravity-defying stats, let’s use them to give the gloater a dose of reality. First of all, listings in attached homes, detached homes, and condominiums are all up over last year’s totals at +12%, +22%, and +18% respectively. Those are not small increases either! This is very significant.
At the same time, and despite the supposed influx of Hot Asian Money pouring off the Chinese mainland, sales are down an eye-popping -34%, -38%, and -38% across those same three market segments. If you think this can possibly be sustained, you need to lay off the cheap drugs! This is a market in serious trouble. As The Whisperer noted, this was likely the second worst month in a decade for new home sales with resales not faring much better.
Furthermore, it sounds as if the median value actually fell, while average home prices rose. Not good! This is indicative of a few larger homes, such as the $17 million home rumored to have sold in Vancouver this past week, pushing the average higher. These are called outliers and they have a pronounced impact on the average home prices in a smaller data set, but the median tells a different story.
The pattern is entirely predictable and completely indicative of a typical real estate bust cycle. If you doubt me, go to Google and search under the ‘news’ heading. Type in ‘home sales down inventory up’ and select the 2004-2005 date range. This was the peak in US home prices just prior to their bubble bursting. You’ll find hundreds of articles detailing the eerily similar data as what will soon be reported out of Vancouver. Here are just a couple from the first page:
Existing-Home Sales Drop As For-Sale Inventory Rises– New York Times, December 30, 2005
“Existing-home sales dropped to their lowest level in eight months in November and the total number of homes for sale rose…the impact seems to be limited, given that sales and prices remain near record highs.”
We know how that story ends!
Existing Home Sales Decline– ABC News, December 29, 2005
Read these following two quotes from this article VERY carefully!
“I truly believe the housing market will continue to expand. But rather than the double-digit price appreciation we’ve seen, we might see that drop to a 5 or 6 percent appreciation sometime toward the end of next year,” David Lereah (chief economist for the National Association of Realtors) told ABC News”
“We are still seeing everyone putting their homes on sale and [getting] high prices for it, but with the sales pace coming down and inventory rising, this is likely not sustainable. Inventory is likely to lead to a more sharp decline in prices over the next few months,” said Joel Naroff (Naroff Economic Advisors, an independent firm). “It’s Economics 101. More supply could lead to lower prices as buyers now have more options.”
Hmmm….an ‘economist’ for a real estate group “truly believed” that real estate would keep rising while an independent economist used principles taught in high school economics to see the writing on the wall. Keep that in mind as you watch CREA and all the local realtor boards contort wildly in the next few days as they try to explain why prices are safe.
Area home sales down, but prices increase– Buffalo News, April 16, 2005
Home sales dip, but prices remain high– Marin (California) Independent Journal, May 17, 2005
I could go on and on, but you get the point. There are hundreds of these stories! It’s entirely predictable. This is not a ‘new normal’. This is a typical market experiencing death throes.
Give it some time and we’ll see just how ‘safe’ real estate in any community is, but particularly Vancouver. And I’m not talking years here! This poster will soon join the likes of these fine folks who just never quite got it!