Portland Oregon vs. Vancouver BC

I just returned from a trip to Portland Oregon and thought it would be interesting to compare this specific US market to Vancouver. Portland is the 3rd largest city in the pacific northwest, after Vancouver and Seattle. Like most place Portland has seen a large increase in house prices, but has seen the market cool or drop recently.

According to the most recent numbers I can find:

Vancouver median family income for 2004: $56,200. (source)
Portland median income for 2003: $67,900 usd. (source)

Vancouver average house price March 2006: $705,000. (source)
Portland average house price: $318,200 usd. (source)

Converting the Portland numbers to $CAD at today exchange rate gives you an average household income of $77,107 CAD to buy the average house costing $361,347.

Here's a specific example on house prices in Portland: The house I was staying in was located in North Portland, 15-20 minutes out of the downtown core. In Vancouver terms I think it would be approximately like southeast vancouver. This is an older 2 story 'fixer upper' house on a double lot with full basement and some renovations on a quiet street near a major road. The house was recently assessed at $230,000.

More bad news south of the border.

The headlining story on MSNBC right now is home sales rise a bit but prices fall sharply.

Michelle Meyer, an economist at Lehman Bros., said the rise in sales was partly a response to falling prices and a recent dip in mortgage rates

"The pickup in home sales reflects stabilization in demand and the first signs that the housing market is beginning to balance," she said in a note to clients.

Economist Joel Naroff of Naroff Economic Advisors said the report "does not point to a major housing meltdown," but he noted that there is a "huge" supply of unsold homes and condominiums on the market.

The number of homes on the market is up 34 percent from a year ago and represents a supply of more than seven months at current sales rates, compared with an average of just four or five months in the boom years of 1999 through 2005.

"The housing market is far from the bottom," Naroff said in a research note. "Sellers will have to overcome their state of denial and start dropping prices even more to clear this market. And once that happens, we will then have to convince buyers that prices have stopped falling. We are a long way from that point."

There are concerns at the federal level that if the housing slump across the USA continues or gets worse that it could cause bigger problems for the US economy that has already started to slow down. Its suprising that this is a problem across most of the country. What ever happened to the maxim "all real estate is local"?

What do you get for all that money?

There's an article in the National Post today looking at what you get for the 'average' house price in various Canadian cities, mostly in comparison to Toronto. The typical Toronto house costs $356,423 while the average house in Vancouver costs $821,722. The article essentially claims that you get a lot more in Vancouver compared to Toronto for the 'average' price so the price difference is not as huge as it appears.

OK, maybe Vancouver is pricer than Toronto -- or is it? Most bedroom communities are not taken into account in the average Vancouver house price. And if you're willing to sacrifice a little neighbourhood safety and convenience, it is possible to find a nice starter house in the Vancouver core.

They go on to compare what you can get in Maple Ridge vs. what you can get in Markham:

B.C. commuters can find a lot more for their money. "Maple Ridge is a great bedroom community just east of Vancouver," says Mr. Antalek. "It's ideal for families, with great schools, parks and recreation areas. It's also very safe." That $356,423 will buy you a three- or four-bedroom, two-bathroom house on 65x130 feet of land -- 25x20 feet more than a lot in Markham. It will have ample parking and most houses require minimal renovations. And the drive to downtown Vancouver will take 45 to 90 minutes, or 50 minutes by train.

Meanwhile in Newfoundland for the $356,423 that it would take to buy the average house in Toronto (or a little bit less than half the average house in Vancouver) you can get a 5,050-sq.-ft. beautifully renovated home in St. John's on seven acres of land, but I bet its a lot trickier to get a decent supply of heroin.

Vancouver spin on the obvious.

The globe and mail article I linked to a few days ago about the housing affordability study has been reported on locally in a Vancouver Province article by Ashley Ford. Comparing these two articles is interesting in where they differ:

1) The G&M article doesn't draw any conclusions about future activity, but the Province article reports that: "That trend is expected to ease in some parts of the country next year as prices start to level off and even decline, but not in B.C. or Alberta." Interesting to note that prices in some categories have already started to level off or even decline here in Vancouver, so I'm not sure where 'not in B.C. or Alberta' comes from.

2) Where the G&M articles says "Renters were much more likely to fall into this category of people who struggle to afford housing" the article in the Province says "However, high prices notwithstanding, it suggests it is still better to own a home than rent." No. It doesn't. It suggests that owners tend to have more money than renters (obviously), NOT that it is better to own than rent even with current high prices, which is a dangerous view to take concerning affordability.

3) It is unfortunate that in the local article there is absolutely no info about affordability levels in Vancouver compared to the rest of Canada, just the same National stats from the Globe story. It would have been informative to include this information and would have given the story a local angle.

*subtly edited to make it look like I didn't make the obvious mistake that VHB pointed out.

repairs: 3400 block west broadway

I see that they've started taking down the tarps and scaffolding on the 3400 block of west broadway. The owners and neighbors must be breathing a sigh of relief, I believe the whole south side of the street has been covered for more than a year. How long does the average leaky condo rainscreen repair take in Vancouver? It seems like a lot of buildings are covered for a extensive amount of time.

Have we made it through the majority of leaky condo repairs in Vancouver yet? It seems like the vast landscape of tarps have started to recede somewhat from the fairview and cambie neighborhoods.

On a side note: if you have pictures of tarp covered condo repairs in the lower mainland I'd love to see them*. Email them to me with the address and any other info you may have and I'll post them. Ideally I'll build up a searchable database of condo repair photos that may or may not be useful when condo-shopping in Vancouver.

*clearly I am a freak.

A study of the obvious.

There's a story in the Globe and Mail today about a study on affordability across canada. Apparently its expensive to live in the most expensive cities and 14% of Canadians spent 30% or more of their income on shelter. The 30% of income thing is a standard indicator of lack of affordability.

The concept of affordability has traditionally been based on a ratio of housing costs to total household income, Statscan said. A household paying 30 per cent or more of its pre-tax income for housing is considered to have affordability problem.

During Statscan's survey period, 12 per cent of households spent between 30 per cent and 50 per cent of pre-tax income on housing. Two per cent spent 50 per cent or more to keep a roof above their heads.

Averaged across Canada, it was renters that were more inclined to have this affordability problem, so I'm guessing most other Canadian cities don't have the situation we have in Vancouver where owners buying at current prices are subsidizing renters.

Renters were much more likely to fall into this category of people who struggle to afford housing, Statscan said. Thirty-one per cent of people who rented in 2004 spent 30 per cent or more of their budget on shelter, compared with 6 per cent of home owners.

“These rental households consisted mostly of individuals living alone, those relying on government assistance, and those in low income,” Statscan said.

Not surprisingly, people who rented in Canada's two most expensive cities, Toronto and Vancouver, incurred the highest cost in terms of rent.

The best line of the whole study is at the end:

Renters who earned less than $19,190 a year were 18 times more likely to be cost-burdened when it comes to housing than people in the top one-half of the income chain.

Yes, the startling fact: People with lower incomes have a more difficult time affording things. Thanks Statscan!

Animal maxims for investment strategies

What's that old saying again?

Bears miss out on opportunities to make buckets of cash with no effort, Bulls keep betting till they go broke, and Pigs wallow in their own filth until such time as they are ready to become delicious crispy strips of bacon.

Mmmm.. Bacon.

More fallout from False Creek lease rate increases

There's an article in todays Globe and Mail about some of the anger and distress caused by the recent increases in False Creek lease rates.

The people who own homes in False Creek aren't rich and they aren't poor. They're teachers, child-care workers, retired professionals and small-business owners. Over the past 30 years, most of the nearly 300 homeowners have paid out their leases, so this increase does not affect them.

But the owners of 118 units, like Ms. Greene, still pay monthly. Ms. Greene said she could never afford to buy out her lease, last tabulated at more than $30,000.

The new rates were passed unanimously by city council last month, though some politicians are now saying that they 'didn't fully understand the issue'.

Michael Flanigan, director of Vancouver's real-estate services, said the increases were tabulated to reflect current market values. Mr. Flanigan stressed that the increases aren't carved in stone; residents will have their say at a council meeting. He said consideration may be granted to those who can't afford the fees.

"We are not insensitive," Mr. Flanigan said in an interview. "Not all homeowners are in the same socio-economic class or have the capacity to pay these increases. . . . We don't necessarily want to see economic evictions."

No, we don't necessarily want to see economic evictions, but you can't make world class omelette's without breaking a few eggs eh?

Greater Vancouver boil water advisory.

As I'm sure you've noticed the tap water in vancouver is running a murky yellowish brown right now, so there is a boil water advisory in effect. This means any water you consume should be fancy expensive bottled water, or cheap tap water that you have boiled to avoid risk of gastro-intestinal illness.

VHB has this topic covered with a request that comments stay on the topic of water and remain free of unsubstantiated rumours.

I'd like to stake my claim as the irresponsible vancouver real-estate blogger, so post info, conspiracy theories and unsubstantiated rumours below.

Just keep it cleaner than the water.

Story in the Sun

Is the media to blame for US housing market problems?

There's an interesting article in Newsweek about US real estate woes. The National Association of Realtors just had their annual meeting and the mood and topics up for discussion were decidedly different from last year. One of the topics discussed is the difficulty in predicting how hard of a crash the US housing market will experience:

That uncertainty stems from the fact that the current housing slowdown isn't like the more typical real estate busts of the early 1980s or early 1990s. Those downturns followed a traditional pattern: mortgage rates rose, job growth faded and the economy weakened, pinching people's ability to buy homes. Today, in contrast, mortgages are still near 45-year lows and unemployment is down, yet many buyers are reluctant to make offers. Lereah attributes this to high prices reducing the number of people who can afford homes, falling demand by investors and the public's psychological shift from celebrating the boom to worrying about a bubble. Those forces make this slowdown an anomaly, which makes it hard to predict where things will head next. Says Lereah: "You'd have to go back to the Great Depression to find a housing period that is this unique."

The Great Depression? Geez, thats encouraging. So if it wasn't rising mortgage rates or high levels of unemployment that caused the problem, who's to blame for the real estate slump? The media of course!

..many crowded into the convention center to attend seminars on how to adapt to the slowdown. In nearly every session, speakers spent a few minutes blaming the media for hurting the market. All those headlines about a bursting real estate bubble have a lot of potential buyers really freaked out, industry officials say, which is one reason they've begun running full-page newspaper ads reminding would-be sellers that despite slowing sales, conditions aren't really so bad.

So if you work in the media in Vancouver, please take heed: The future of our real-estate market is in your hands. If you run any stories reporting negative signs in our condo market you very well may destroy our economy.

But you don't really care do you? And why don't you care? ..because you'll be making money selling ad space to realtors telling everyone everything is going to be ok.

You greedy bums.. How could you?!

Real estate investing for retirement?

According to the Rob Carrick at the Globe and Mail Relying on your home to spit out cash is a recipe for disaster. With increased living expenses people have a lower percentage of their income to invest in their retirement, but increasing property values have led some to believe that their mortgage could be their retirement plan.

The average house price nationally in September was $277,470, which is about 50 per cent higher than it was five years ago. In cities like Toronto, Calgary and Vancouver, the average price was between roughly $350,000 and $527,000. It's rapidly becoming clear that certain financial sacrifices are inevitable when you buy a home at those prices, and one of them may be putting enough away in a registered retirement savings plan.

The average price for a house in Canada is under $300k? Isn't that quaint? With our high real estate values, I bet we all get to retire early! Unfortunately the article goes on to outline some of the reasons that housing is not the best bet for retirement planning:

Everyone loves the housing market during a boom -- it's no big deal as long as you regard your home primarily as a place to live. The harm is in getting grandiose ideas about how your home will help finance your retirement. In the Investors Group survey, 51 per cent of participants said they are relying on their home as one of their sources of retirement income. Among the baby boomers in the survey, 55 per cent said their home will be a source of funds in retirement (a total of 2,170 people participated in the survey, which was conducted last month).

The problem with using your home as a source of retirement income is that it's a very inconvenient source of funds -- you can't take cash out unless you either sell or incur some debt through a home-equity line of credit or a reverse mortgage. "You have to be realistic," Ms. Ammeter said. "The question to ask is, how are you going to realize on your investment in your home?"

Rent it out to the luge team for two weeks! Sell it to wealthy foreigners! Take out a giant home-equity loan and pass the debt on to your kids! I mean come on, it's not rocket science, what with global warming I'm sure it will be quite comfortable to sleep in the parks year round in 10 or 20 years, so you sell the house and live for free in Stanley Park! If you hunt and trap squirrels for food you can probably live quite comfortably off the interest from your nest egg and have the confidence and joy that comes from being self-sufficient.

Vancouver slowdown in the Globe and Mail

A reader sent in this link to this story in the Globe and Mail about Vancouvers current real estate slow-down.

When Stephen Webber and his wife put their Vancouver-area townhouse up for sale in September, they expected to close a deal within a month.

After several open houses, nearly a dozen private showings and two price cuts, they're still waiting.

“We have been surprised by the lack of activity,” Mr. Webber says. “It seems there is a lot of supply out there. Buyers have more choices. There is not that rush. And there might be hesitation because of what's going on in the States.”

If buyers are not rushing, it may be because they don't have to. The frenzy that characterized the Vancouver housing market since 2004 is disappearing, replaced by one in which buyers have more than mere hours to make a decision. Instead of multiple offers, bidding wars and homes being snapped up virtually overnight, the current market is characterized by growing number of listings, a slower rate of price increases and even price cuts.

The article is a bit confusing - it lays out all the reasons for the current slowdown: Lack of affordability and drying up of speculative activity, and how thats led to less buyers and price drops, but then goes on to relay the same old reliable quotes from Bob Rennie and Rick Valouche saying everythings great! I found the following particularly confusing:

But anybody hoping that prices may come back within reach for first-time buyers is likely to be disappointed. Slowdown or no, Vancouver real estate remains too expensive for many. A search for a single-family, detached home under $600,000 on Vancouver's west side yields three listings, all on land leased from the Musqueam Indian Band. (A fight over lease rates between leaseholders and the band in the 1990s led to a court case and a plunge in market value for homes on band land.) A heritage home in Mount Pleasant is listed at $799,000, despite having suffered a fire last year.

“Affordability is a big issue in Vancouver. And affordability is likely getting worse at a [September] rate of increase of nearly 17 per cent. Because there's very little chance that the income growth will grow at the same rate,” says Craig Alexander, deputy chief economist with TD Economics.

So if I understand that correctly, prices can't come down because they are too high and affordability is getting worse? Very strange that those very factors seem to be the only thing that caused the price drops currently happening all over the US, and yet here they will only cause prices to rise slower. Well, I guess they're the experts.

Buy now before the price goes up!

How do you KNOW that the price of this condo will go up? They tell you! Right now they are 'only' asking $319,000, but:

Open House Saturday November 11, 12-2pm. If not sold by Dec. 31, 2006 price will increase to $329,000.

Hoo-hah! What a deal! Buy now and save $10,000 bucks! How many other gauranteed investment deals like that can you find?

Costco comes to Yaletown

Remember when you had to drive all the way out to richmond for your 30 litre containers of Tang? It would take $15 bucks worth of gas and by the time you got there your latte would be cold?

Total drag man.

Well if you live downtown your life is about to change for the better with the new Yaletown Costco.

The cheese selection has been expanded to bring in products that might appeal to shoppers who aren't just looking for cheese to slap on a school sandwich.

In clothing, a popular area for Costco shoppers, the brands will include such upscale names as Louis Vuitton, Ross said.

"This is a place where you can buy tires and a two carat diamond ring for $19,699," he said.

Ross said the decision to open a store in the downtown core was made to meet the demands of "one of the most densely populated areas in North America.

"I think sometimes there is a misconception that Costco is always about bulk food products," he said. "Coming into a Costco, the first thing you hit is major appliances and electronics, plasma TVs, iPods and high end electronics.

"I think that fits very well into the downtown market."

Awesome! But where am I going to find room in my 500 square foot condo to store all that cheese?

VHB Bubble story in the Tyee

There's a story in the tyee this morning about the mysterious VHB and the Vancouver Housing Market Blog. I just checked, and he hasn't posted anything about this yet, which means I scooped him on a story about his site. Boo-yah!

(for the next five or ten minutes anyways)

Getting the boom going again in Texas and California

So what do you do when house prices are slowly dropping and demand has stagnated? Create more demand! According to this article on MSNBC there's a proposal in the states to change the way that credit scores are calculated to enable those that lack social security numbers or legal status as US citizens to get mortgages based on evaluating a prospective client’s utility bills, rent checks and other payments.

Should the new reporting methods gain wider acceptance on Wall Street and among secondary mortgage lenders like Fannie Mae, housing markets in places like California’s Central Valley would stand to gain the most, the National Association of Hispanic Real Estate Professionals said.

“Gateway states like California and Texas will disproportionately benefit from the housing boom because so many of their residents are immigrants,” said Gary Acosta, the association’s co-founder, speaking from the group’s annual convention in Las Vegas. “Boosting home ownership among these populations is a positive contribution to the overall fabric of our society and our economy.”

So with the current slowdown here, where can we turn to get more demand? Zero percent down and 35 year mortgages don't seem to be doing it.

Looking for a buyer or sellers agent?

Steveb over at realestatetalks posted a link to honestrealestate.ca, and it is perhaps the most entertaining and bizarre example of an honest realtor in BC.

He offers his views on the Fraser Valley market (last updated June 06):

Residential Real Estate SALES so far in 2006 are running at what should become ALL-TIME NEW RECORD-LEVELS! (quickly and decisively topping previous-record 2005, which in turn topped year-earlier record 2004). May 2006 registered as the HIGHEST MAY we have ever seen. Any listing that is at all ATTRACTIVE usually SELLS VERY FAST, often with competing MULTIPLE OFFERS (and selling prices often HIGHER than asking price!).

He also offers spiritual advice and commentary on his status as a wingless earth-angel:

This Realtor, in addition to being an extraordinary and exemplary realtor, is now TOTALLY convinced he is wingless, living 'EARTH-angel', in a here-&-now godless heaven. --and, is THIS ever a whole BUNCH OF FUN! -- just ASK ME!--

- I'm quickly getting into better physical condition, having so far dropped over 20 lbs.
- I've got truly huge amounts of energy & an infectious grin on my face. When I walk into a room, others can readily sense the energy coming from me. Most respond very warmly, positively. A few panic! (they'll get over it, no one will get hurt)
- I now operate brilliantly on about 1&1/2 hours of sleep a night
- Food seems to be optional, no longer mandatory!
- I can suddenly cook 'like an angel'
- I've got nearly-infallible INTUITION (when I remember to rely on it)
- Sex, even with just myself, is a whole new adventure every time. With my 59th birthday around the corner, I run around with a near-CONSTANT ERECTION that the viagra people would SIMPLE LOVE to be able to SELL you!).

(--NOW, IF MY LOVING BRIDE WOULD JUST PLEASE COME HOME, AND LOVE ME:There's nothing to fear, really!--)

>----DOES ANY OF THIS SOUND INTERESTING TO YOU??

.. oh, and thats not all, not by a long shot. Many more details including his connection with the rats, how to talk fun with dogs and his goal of converting as much of the world as possible into living earth angels who are ready to ride 'the love train' - All this and more available at honestrealestate.ca

Just when I was starting to lose interest in Vancouver real estate something like this comes along.

fan-tas-tic!

Negativity in the news

Remember the good old days when all coverage of the Vancouver real estate market was positive? While you can still find some bright uplifting positive coverage it seems like its getting harder to find under the avalanche of negativity in the news recently.

In this weekends Globe and Mail the 'financial facelift' section is running with the title couple urged to pay off debts, forget about real estate, and includes a few negative swipes against our market.

“The couple's goals are like many others,” he explains. “A house in a decent neighbourhood, kids and a solid retirement. In fact, there has never been a worse time in history to buy a house in Vancouver. It now takes 64 per cent of average pretax income to fund housing costs in Vancouver. House prices in Vancouver cannot rise forever.”

and

"Pay off those debts first, the planner urges, and forget about real estate for a while. House prices in Vancouver could decline within a few years. Waiting may be better than spending a great deal today when there are bargains tomorrow, he says."

meanwhile over at the Vancouver Sun the front page article in the business section is New house supply outstripping demand, with the following gem:

"A large number of projects were launched over the summer in Richmond and it is taking time for the market to absorb all the units, she said. In New Westminster, Podmore added, sales have slowed because little new supply has been put out. In Maple Ridge, a large amount of the same type of housing is being built and it is taking more time for the market to absorb all the units."

So if I understand that correctly, Sales are currently low due to the following factors:

- Too many houses on the market
- Not enough houses on the market
- Too much similarity between the houses

I think that about covers it, but lets try to stay positive huh? Where can we turn to for a little ray of sunshine? ReMax forecasts an increase in supply AND price, the best of both worlds! It sure is considerate of them to take the time away from the business of selling real estate and do an impartial study of the market reassuring us all of 8% gains. I think their positive outlook should be an inspiration for us all.

Just BUY something already!

You on the fence! Yes you! Hop down and buy something already! Octobers numbers are in and they don't look good. Its only a one or two percent price drop in most categories so it's not too late to stop everything from sliding downhill if we work together.

We're a couple of months into price drops for single family homes on the west side, so thats where we've got to act fast. If you're a move-up buyer or someone with a hefty down payment its time to take that leap of faith. Buy a place on the west side with no subjects now and then put your house on the market - hey it's worked out ok for some people, now is not the time for hesitation, now is the time for bold action.

First time buyers: If you don't start doing your part we're going to have a lot of move-up buyers stuck in a precarious situation. CMHC will insure a zero percent down payment mortgage so you don't even need to have any money, just BUY SOMETHING!

Look, I know its expensive out there but thats the price you pay for living in paradise. Just make do with a little less and we can keep the bottom from dropping out of this market. If we're going to prevent whats currently happening in the US its time for everybody to pitch in and do their part. Now get out there and BUY something!

Burnaby is an incredible investment!

With sales dropping in Vancouver you may be looking for the next 'sure-thing' investment in lower mainland real-estate. Where can you get in and ride prices up-up-up and away?

Burnaby.

Seriously. If the Oma Developement on Madison Avenue is anything to go by this is a can't lose investment. This 647 sq. foot condo was originally listed in May 2004 for a price of $207,900. It is still available for you to buy, but is now priced at $325,900! Thats nearly a doubling of value even without anyone buying it!

There are several reasons why you should consider buying this unit:

1) Its only 1 minute away from Vancouver!*
2) Price is going up. Buy now before you are priced out forever.
3) Buy it now before its gone. They're not making any more land to build condos on and there are only 334 suites available.
4) Bob Rennie!®

*not downtown Vancouver, but the far east side of Vancouver that is one minute away from Burnaby.
® actual Bob Rennie not included with suite purchase.