Sunday, December 10, 2006

it's (almost) over




I believe that it is all over, but for the tears.

I know we have the mountains. I know we have great weather (sometimes, anyhow). I know the Olympics are coming (are you as fatigued by the refrain as I am?).

It is different this time, of that there is little doubt. Never before has Vancouver seen such a dramatic increase in housing prices, in so short a time.

Never before has BC had such a negative savings rate (not in my lifetime anyhow).

Never before has the affordibility in Vancouver been so low.

Never before have there been so many amateur investors to drive up prices with such dreams of plump sugar plums dancing in their heads.

I am going by my gut here, but I do not think that we have ever seen price declines through the summer and fall - followed by continued increases in the spring, and I don't think that it will happen this time. Of course, I may be wrong - I thought that last spring would see a return to the trusty fundamentals, and I was wrong. We all were. Not this time though.

RET has dwindled to a couple of posts a week. Gone are the hard-headed bulls, and the bears are so breathlessly awaiting the reverse trend, that they have no breath to speak any more.

The farmer has locked the bulls in the barn for the winter, and the bears are sniffing about at the silage left behind, hoping for some food soon. It's coming.

I'm going to go out on a limb, and predict 25% declines in prices by this time next year, but it won't be over until we see 40% - 50% declines. Cocky, ain't I?


28 comments:

Tulip Mania said...

25% within the next 18 months,and a slow, agonizing hiss for the next 5 years.

Tulip Mania said...
This comment has been removed by the author.
Tulip Mania said...

“By Gartman's estimate, in the current cycle a Vancouver detached house
rose from $340,000 at the last trough in the winter of 1998-99, reaching
nearly $800,000 this year.
"If the peak was made earlier this year, and if history is any guide to us,"
and Vancouver prices decline by the average of the last three cycles,
Gartman said it could take 25 to 30 months to go down the trough, and 65 to
70 months to see a new peak.
Based on past experience, Gartman added that the drop could be in the order
of 28 per cent, taking that $800,000 house down to $575,000.”

“Hewett and Dekker included Gartman's findings in one of the research notes
they send to clients, a copy of which wound up in the hands of The
Vancouver Sun.”

Uncertain Buyer said...

I agree fully with your Post. I know from, personal experience, that prices are dropping. I just finished selling my home and it wasn't the typical Slam Dunk like it has been. I had to work for it and lower my price as well.

My Gut is telling me it's going to keep going down, how much?? It's anyones guess. If you go by History then it should come down to what normal inflation would have put it at.

solipsist said...

tulip - I think that it is only reasonable that Gartman makes those statements, but I really think that a 28% decline is conservative. See uncertain above in the call to what inflation would have taken us to. I think 2002 - 2003 levels are more realistic.

uncertain - would you mind telling us how much of a reduction (%) you ended up with? How long were you on the market, and what made you decide to lower your price?

Thanks to all for posting.

Anonymous said...

I agree the gig is up people. Even those that are loaded to the gills in real estate like Ozzie Jurock are calling for a price correction. Cameron Muir is looking more like David Liareh with his pom-poms and constant bullish, mind numbing drivel.

I would love to see a 30% haircut in prices but I can't see it in a year-could take two or three.

However, once the trend is down watch how long a lot of people wait to buy in. I know I and others would have loved to buy a plasma tv the last few years but haven't due to falling prices and the idea that we could get one cheaper the next month.

The masses psychology might change a lot next spring!

Yoree said...

I lost all hope. I don't think it will ever come down. I think it will slowly start going up.

There's a billion of people just waiting for it, that want to buy, but waiting for the prices to come down. As soon as the decrease - they'll jump in thinking it's their showtime.

solipsist said...

they'll jump in thinking it's their showtime.

I think that those who have waited will have the good sense to ride it down. I hope so, anyway.

Patience Little Grasshopper. The darkest hour is the hour before dawn. Feel the Force, and believe.

solipsist's Sunday Sermon.

p.s. I don't think that there are a billion of us. Maybe a coupla thousand.

noturaveragebear said...

you got to love the title of this book. "real estate investment for canadians for dummies" literally

check it out at amazon

http://www.amazon.ca/Real-Estate-Investing-Canadians-Dummies/dp/0470834188/ref=dp_return_1/701-9772300-5423541?ie=UTF8&n=916520&s=books

What a joke. I guess they are being honest as they are calling anyone who buys this book a dummy.

patriotz said...

There's a billion of people just waiting for it, that want to buy, but waiting for the prices to come down

Yeah? So why haven't they already bought on the way up? Are there a billion more people who can afford to buy, and want to buy, in Vancouver than a few years ago?

Actually I disagree with "never before". I have seen and heard this before - in 1981. Nuff said.

My predictions: 40% or more nominal decline. Probable bottom after the Olympics (all hope lost). Nominal prices will not return to peak level before 2016, at best.

Anonymous said...

I'm looking to buy and can only hope prices will come down. But with everyone saying wait until 07 when prices come down, won't that just mean more pent up demand from those waiting on the sidelines.

solipsist said...

Thanks for posting all.

noturaverage - Can Real Estate and investing be used in the same sentence without laughing? It's an oxymoron, and maybe they might change the Dummies for Morons in the title.

patriotz - I did use "never" pretty loosely. I wasn't here in '81, but I think that it would pale in the light of the present madness.

I play fast and loose - just for rhetorical effect. Fact checking is welcome (I don't bother).

anon. - How much pent-up demand can there be? We have seen record sales, but I don't believe we have seen a matching population, or wage growth. I doubt there are that many waiting on the sidelines.

Uncertain Buyer said...

solipsist said...
uncertain - would you mind telling us how much of a reduction (%) you ended up with? How long were you on the market, and what made you decide to lower your price?

Reply

It was about a 4% drop. I had it up for about 7 weeks from October through to the end of November.

The reason why I dropped was due to two other similar homes being lower priced than mine.

All it takes is a few that need to sell that are willing to lower their prices and it brings the whole neighbourhood down.

Those, in my neighbourhood, who haven't lowered aren't selling.

patriotz said...

But with everyone saying wait until 07 when prices come down, won't that just mean more pent up demand from those waiting on the sidelines

There isn't any pent-up demand. It's all gone.

So people are saying that when prices drop, say, 10%, a whole bunch of buyers will jump in. But those buyers would have already bought when the price was 10% lower than it is now, right? Why would these people have held out buying in a rising market, and then buy at the same price in a falling market?

See the fallacy? There is nobody left to buy, which is why this bubble, like all the others, is doomed.

the pope said...

Yoree: I think that its easy to think that there are billions of people that want to live here with the recent boom, but of everyone I know there is only one other person still looking to buy in the spring, and thats pretty iffy.

There are seven families here at work that bought in the last couple of years. They won't be buying again anytime soon, and if prices dip or go flat at the level of debt they have they won't be joining the move-up market for many many years.

This is all anecdotal, but I think we've really borrowed most of our demand from the future. I don't know anyone else that wants to buy that can afford to without a minimum of at least 25-30% price drops.

Anonymous said...

patriotz said..

See the fallacy? There is nobody left to buy, which is why this bubble, like all the others, is doomed.


Hmm... I beg to differ. I'm buying, as are the twenty other couples I see in every open house I've been to. And this is in December!!

Realtors are advising clients to wait till spring when there will be more listings and price drops. But didn't they say the same thing last winter as well? Is this a realtor driven force to create more demand next year? While I think the market will stabilize next year, I'm very doubtful of a bubble burst as you predict.

Uncertain Buyer said...

People always go to open houses with no intention of buying. Just like people got to car dealerships just look at the new cars.

A house isn't Sold until it closes.

Anonymous said...

I thought the same thing...until the two houses I was looking at in North Van sold. Below asking mind you. I overheard a couple at an open saying they're from Langley and wanted to move closer to d/t to avoid the commute. I say if you're willing to drive all the way from Langley to look at an open in North Van, you're an interested buyer.

Anonymous said...

Yup. I am a 50 year old professional. I downsized in the fall when my kids took off to college. I am (gasp!) a cash buyer and could buy tommorrow. But I will wait until next fall if it will save me 30k to 50k per month in my price point. Your blog fyi is a godsend.
Cheers!

solipsist said...

Thanks for your report uncertain.

Congratulations on getting out so close to what we are perceiving as the peak.

I'll wager that come spring, you will see your move as prescient, and won't be at all worried by 4%.

It is my understanding, too, that the list is usually above what is hoped for, so you did pretty well in my estimation.

Another prying question - what general area were you in?

patriotz said...

Realtors are advising clients to wait till spring when there will be more listings and price drops

I suppose by "clients" you mean buyers. They can hardly be saying this to the sellers, can they? What line are the giving them?

How about an all-purpose slogan: "It's a great time to buy or sell?"

All the happy talk coming out of the RE industry is just the same as they said in the US a year ago. Why on earth should anyone in Vancouver believe it now?

Anonymous said...

Hi,

I'm from China and would like to move to Vancouver. I hear from friends it's a nice place. I want my family and children to be raised here. Can you tell me what part of Vancouver is the best to buy? I need alot of space but not too far from the center of the city. China's economy is doing very good so it's the best time for me to move my family.

bye,
Chen

p.s. I also have alot of brothers, sisters and family on their way.

--

Immigration in 2005 was almost as high as 1997 during the hand over of Hong Kong to China. Every quarter this year so far has risen by over 50k people. Take is for what it's worth. Good luck!

Anonymous said...

Chen = Bob Rennie/Aaron Best/Rob Chipman

Take your pick

solipsist said...

Hi Chen. Thanks for posting.

All of Vancouver is good to buy in.

It's a great place. Weather is superb, and we have the Olympics coming. There is a lot of work here too. Help wanted signs everywhere. We also have mountains made of gold.

You will love it here. Bring all your friends too. If you are a good swimmer, you might find Richman an enticing place to live.

Are you in China? Or Taiwan? Have you guys worked that out yet?

You say only 50,000 people came? I heard that it was a billion.

Anonymous said...

Boy the bailing squad is really going full tilt now.

Well Chuck, er, "Chen", Chinese immigration (including HK) is actually lower now than in the 90's, and it's dropping. Also the PRC Chinese who comprise the great bulk of the immigrants now are much less wealthy than the HK Chinese who came in the 90's.

http://van-housing.blogspot.com/2006/07/immigration-steady.html

solipsist said...

Aaron best might think that I am angry and jealous. I don't know that he would deign to waste his time having fun with me.

Rob on the other hand... he's got a sense of humour. He ought to be wiring or something though.

Blurb is too rich to care about me.

The logs do show a couple of lengthy visits by way of rireb at the coincident time of Chen's post, but there was also one from Taiwan about the same time.

?Quein sabe?

solipsist said...

Thanks for that post anon.

I knew that info. was over at VHB's place, my lassitude has got the better of me though.

The post @ VHB

Next.

solipsist said...

Incidentally, there was a report/item/whatever on CBC last night that said that a bit better than 30% of the users of food banks in Van. were immigrants working minimum wage jobs.