I'm going to exerpt a few things that jumped out at me.
Seems that they haven't noticed the declines and low sell/list numbers yet. And come on - only 8%? That is still double the historical, long-term YOY gains.Forecasting is hardly an exact science.
Many professional watchers were just as surprised as the rest of us by last year's sizzling housing market performance.
...preliminary numbers put out by The Real Estate Board of Greater Vancouver for 2006.
So what can we expect for 2007?
Three experts who watch the local real estate market very closely...predicted that housing prices will go up again this year but only by 8% or less.
Home sales are decreasing and it is taking longer to sell. Why?Errm, maybe this has something to do with it -
The Royal Bank of Canada released its Housing Affordability Index in December and not surprisingly, Vancouver has the highest index in the country. It now takes 75% of "median pre-tax household income...I think that they may have been doing some reading over at VHB. That same argument has been made there for the last year or so.
" Unless people have a huge increase in earnings, it's going to be difficult for people to step and pay more."
...interest rates dropped and buyers found they could carry bigger mortgages for less.Until the rates go up, and the value of their asset falls. Ooops.
Builders scrambled to meet the demand and now a lot of that pent-up demand has been met.And more, I'm sure. But the "pent-up demand" part kind of stumps me. I believe "instilled (by marketing) demand" would be a more accurate turn of phrase.
Affordability is making it increasingly difficult to pass on...costs to consumers.
On balance, there is still enough of a demand to push up prices slightly. Canada Mortgage and Housing Corporation is predicting a 7% increase on average. It says demand will be fueled by a strong provincial economy, increasing wages and an additional 45,300 people moving here.Well, it wasn't Cam who said that. I think he may have left his cue cards in his desk for his successor.
...a more balanced market will discourage speculators from buying up several pre-sale apartments at a time, hoping to flip them for a quick profit once they are built. She also says the days of lineups and sellouts of condos may be behind us.That is so 2006. Do you smell coffee? Good Morning!
There are plenty of others who are not as optimistic for 2007. Discussions in local housing market blogs predict sharp price decreases for the year ahead, although some writers admit their predictions for 2006 were far too pessimistic.OK! OK! Mea culpa X 3. (smug bastidges)
I dunno. Is that bearish? Or just non-commital? I think the latter. The MSM still does not want to stick it's collective neck out too far, it seems. Can't blame them, I guess. Relative anonymity makes that much easier to do. I'm calling for -17% to -23% by September (any of my earlier predictions are as meaningless as this one).Should you buy if you can afford it? Both Hennigar and Pastrick say the long term prospects look good for real estate, barring any unforeseen shocks. Short term buying and selling do not make sense however, if prices only go up 6 or 7%, that might not be enough to cover your taxes, real estate and legal fees.
If worse comes to worse, I can just delete this whole blog and disappear down the memory hole!
The article exerpted above can be read in it's entirety at the CBC link up top.
8 comments:
It's funny how they talk about percentage gains as if they're independent of the denominator (i.e. the price). Like it's a mystical force.
8% of $700,000 (or whatever the GVRD average house costs) is still over $50,000. That's a massive absolute increase considering that wages and rents aren't exactly skyrocketing. That's going to destroy whatever affordability is left.
Has anybody seen the methodology behind the forecasts? Any insiders out there who can share some insight? It's like their models assume that demand is constant (or even increasing) as prices rise.
That is a good point...
That is an increase of 4 grand and change a month. That is more than most families bring home after taxes.
"...interest rates dropped and buyers found they could carry bigger mortgages for less.
Builders scrambled to meet the demand and now a lot of that pent-up demand has been met."
I always wondered about the big picture in regards to this line of thinking.
Sure, lower mortgages allow us to pay more, generally, it is still one home one household. This arguments seems to suggest that the demand for housing increased without even mentioning population growth or an increase in the number of households.
I have no doubt that lower rates mean that we are more likely to pay more for housing, but does it really mean that we want to consume (live in) more housing. Somewhat I guess, as people may trade up. But people trading up do vacate something, and if builders are building to satisfy this "demand", there ought to be empty places somewhere. Should be interesting once the dust settles.
If it is one household, one
"Has anybody seen the methodology behind the forecasts? Any insiders out there who can share some insight? It's like their models assume that demand is constant (or even increasing) as prices rise. "
I honestly think their models are more about blanket assumptions about appreciation and extrapolation of past price movements. I don't think they see demand as finite.
Pastrick say the long term prospects look good for real estate
Well sure nominal prices always go up in the medium term, and real prices evenually go up in the long term.
But real prices didn't return to 1981 levels until ...drum roll... 2006!
Exercise: Bill bought a median house in 1981, Bob bought an identical house in 1983. Bill has just paid off his mortgage, Bob is two years off. Bob has been investing the difference between his payments and Bill's in the TSE. What is the present difference in their net worths? (hint: high 6 figures).
Thanks for your thoughts all.
Mystical forces compelled most families to pay 4 grand and change more a month to trade up and vacate something, armed with blanket assumptions about appreciation and extrapolation of past price movements. But real prices didn't return to 1981 levels until ...drum roll... 2006!
I couldn't really add much, so I made a nice pastiche for Pastrick out of all of your comments.
( Whenever I see the phrase "pent-up demand", I want to grab my crotch, swagger in a parody of a masculine stereotype, and growl: "Eh, baby. I got yer pent-up demand right here." )
As for finite demand; well... I think I can see some of the idea. Sort of. Reducto ad absurdum; if homes were, say, $10.50 and taking a realtor to coffee, I might buy a few extra places for out of town guests, and friends who didn't have $10 bucks on 'em, or whatever. And some of my homes might sit vacant. (But I don't think I'd buy 100 places, since rents would be, say, a penny or two a month, and who needs the hassle?)
So, I - who never wants to get near investment real estate, but who would be a happy owner/occupier - might see my interest increase past my own abode. Cheap may equal more demand from boring, plebian owners, but I imagine it's capped by a finite scalar multiplier, if you see what I mean.
Although obviously at THAT cost, investors would be pouring in from all over the globe, and demand would go through the roof. Which is perhaps what these folks think: that 700K is such a steal for Vancouver! Housing!, that people are lining up in Hong Kong to buy 10 at a go.
Thanks for sharing your thoughts on pent up demand aetakeo. Gotta wonder if Bile Raincoat has that propensity.
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