Apartments vs. Micro condos in the west end.

With the current condo construction boom displacing rental stock some people are getting very frustrated with the state of housing in this city. Despite statistics of declining population growth and record levels of condo construction the rental market appears to be tight right now. I received this letter of frustration from Colleen last week, which with her permission I reprint here:

As a long time renter in the city I am very concerned about the possible changes to the moratorium on condo development at the expense of existing rental units downtown. The affordability of buying a condo is out of reach for most people in Vancouver. The rental costs for many of the condo's recently built is extreme, given the ridiculous size of new apartments. Less than 550 square feet for two people isn't living, no matter how small your murphy bed is. Accommodating desired population density in the city is not a justifiable issue-considering that the West End is all ready one of the {if not THE}most densely populated neighbourhoods in North America.

The developers who are concerned about accommodating population density do not live downtown in a 450 sq ft apartment. Nor are they likely to have an average combined family income of less than $80,000 annually.
Many of the owners of these new micro condos have 30 year mortages. Do you really think that these young, new owners are going to stay in their units longer than 5 years? Where will they go? After all, moving "out and up" to the suburbs in BC is not in the same league as moving from TO to Oakville, Burlington, Mississauga, Pt Credit, Guelph, Aurora, Kitchener, Paris, Ancaster, Waterloo, Waterdown, Dundas, Do I really need to go on??.......people require change to reflect their growth and development and their need for change and growth doesn't change. Mountains or no mountains. Lets compare Ancaster, Ontario to Langley, BC..PLEASE!!

One bedroom rental units are averaging rents over $1000./mth with restrictions on storage, balcony use, pets, smoking, decorating , barbequing, feeding birds, children and subletting.
There seems to be two types of people in this city:
Those who invest and develop at a large scale and those who are forced to pay them at an alarming rate.

This is a case of the ridiculously rich and the rest of us. Why are we not considering the quality of life in Vancouver for its citizens as well as its development? Where are our elected, well paid politicians? We do not live in London, New York, Tokyo or Hong Kong. This is not Europe. We are Canadians-with our own histories, roots and expectations about how we live. This is what makes Vancouver such a beautiful and special place.

Sincerely,
Colleen

Florida buyers scramble to get out of contracts

A reader sent in this link to an article in the New York Times about condo buyers trying to get out of presale contracts now that the florida market has tanked. Its an interesting example of how quickly sentiment can change from boom to bust: between March 2005 and 2006 speculators drove prices up 25% in West Palm Beach, but now demand has dropped off and many of the condo construction project started during the boom are starting to complete putting more inventory on the market and driving prices down.

As dozens of condominium towers conceived during Florida’s real estate boom near completion, investors who snatched up units in the preconstruction phase in hopes of turning a quick profit are increasingly trying to break contracts, even walking away from fat deposits.

“Motivated” sellers are flooding online forums like Craigslist with advertisements for condo units still months or years from being finished. And lawyers have been inundated with calls from people hoping to avoid closing on units they bought during the speculative craze of 2004 and 2005.

“I get two or three of these calls a day,” said James Ryan, a lawyer in Boca Raton who said he had 40 clients looking to get out of condo contracts. One, Mr. Ryan said, abandoned a $340,000 deposit rather than close on a $1.6 million unit that lost its appeal as the market faltered.

The numbers suggest that it will only get worse. In Miami-Dade County alone, 8,000 new condo units will be completed this year and nearly 12,000 more in 2008.

The median condo price in Boca Raton dropped about $13,000 in the year leading up to March '07. Could it happen here? Only time will tell, but here are a couple of graphs you may be interested in. The first is from the UBC Sauder school of business and shows Vancouver population growth over the last 19 years:


The second graph is from the City of Vancouver and shows Condo completions in the Downtown core for the same period, with future supply forecast for projects in the pipeline:

Friday free-for-all

Here's your open topic post for friday May 25th.

- Northern BC town suprised by mill closure.
- US new home prices drop 11% in one month.
- Steeper drops predicted.

Whats happening around Vancouver? What are you seeing out there? Post your links, news & anectdotes here!

The pros and cons of living closely.

A North Vancouver condo owner is suing her neighbor over second-hand smoke from the neighbors patio claiming that the smoke is "a nuisance causing her stress, irritability and disrupting her sleep". Now this sounds like a polarizing issue -Where do you draw the line between a persons right to smoke on their property and the rights of another to not have smoke pouring into their windows?

As living gets more dense in the city we live in closer proximity with our neighbors and a lot of personality variables enter the mix. Thankfully most conflicts can be worked out between neighbors and don't end up in Court or degenerate into a Hatfield and McCoy situation, but now that this one has I wonder if the stress of being sued is driving the neighbor to smoke even more?

Greenspan predicts trouble

Former federal reserve chairman Alan Greenspan can't stop saying 'boo' to the boom. Today he warned of the potential for a big drop in the Chinese stock market and fallout for the global economy.

Addressing a meeting in Madrid via teleconference, Greenspan said the recent boom in Chinese stocks could not last.

"It is clearly unsustainable," he said "There's going to be a dramatic contraction at some point."
...

"In the last five years, the world as a whole is a growing faster than at any time in the world's history," he said. "It can't last and it won't last because it's a one-shot adjustment."

Greenspan said asset prices around the world could fall but that the economy may escape unscathed if it were flexible enough to absorb asset price shocks.

"We will get major declines in certain levels but it need not feed back significantly to levels of employment or the real economy," he said.

Earlier this month, Greenspan reiterated that he believed there was a one-third chance the U.S. economy, the world's largest, would slip into recession this year.

Jeez, maybe they should call the guy 'gloomspan' his announcement today gave some investors jitters and knocked the North American market back a bit. Just to be safe I'm going to buy some local real estate because I hear prices can never go down there.

Thinking of relocating?

From the gosh-what-a-suprise department: the Sun has an article about Northern BC having the most affordable real estate.

The survey found that despite average house price increases of 30 per cent across northern B.C. in 2006, owning a home in the region consumes less than half the household income of a homeowner in Vancouver.

According to the BCNREB report, which was commissioned after RBC Financial Group released the results of a cross-Canada housing affordability study showing that B.C. was the least affordable place to buy a house, the Housing Affordability Index (HAI) for northern B.C. was 28.9 per cent compared to 68.5 per cent for Vancouver and 62.5 per cent for B.C. as a whole.

I wonder if anyone in Vancouver actually does spend 68.5 percent of their pre-tax income on housing.. Is that even physically possible?

Friday free-for-all

Here's your friday free-for-all post for may 18th.

-protecting rental stock
-government gets cranky about CB developments
-bubbles easier to spot once they've popped
-Rennie: green is the color of money

What are you seeing out there?

Post your news, links & anectdotes here!

CMHC on leaky condos: no 'duty of care'

The Canada Mortgage and Housing Corporation (CMHC) is facing a class-action lawsuit from leaky condo owners in the lower mainland and has a message for the people who suffered from this billion dollar debacle: F##k Off, its not our problem.

The lawyer for the CMHC argued on monday that his client shouldn’t be on the hook for the leaky condo crisis since it owes no "statutory duty of care" to homeowners.

Lawyer Ross Clark argued in B.C. Supreme Court Monday that the housing department is under no statutory obligation to Canadians in the wake of the billion-dollar housing construction disaster that first surfaced in the early 1990s.

Many families were left in financial ruin, forced either into bankruptcy or saddled with repair bills ranging from $25,000 to more than $250,000 per household.

Clark urged Supreme Court Justice L. Smith to dismiss the latest effort to certify a class-action lawsuit against the housing agency. The same court denied an effort for certification in 2002.

Why yes, now that you mention it, this is the same CMHC that claims on its website to be “committed to helping Canadians” by improving “building standards and housing construction” and providing “policymakers with the information and analysis they need to sustain a vibrant housing market in Canada.” It just so happens that this is also the same CMHC that was made aware of concerns about housing construction practices in coastal Canadian climates in the early eighties.

The CMHC isn’t to blame, Clark said, for the water-logged walls and mould-infested interiors of condominiums and townhomes built during the 1980s and 1990s. That responsibility rests with those behind the “poor design and construction.”

Peter Simpson, of the Greater Vancouver Home Builders Association, said he was puzzled by the CMHC’s arguments in court. “I think it was an unfortunate comment to place the blame squarely at the feet of two members of the whole building community.”

Simpson said the leaky condo crisis was a “systemic problem and so there’s no shortage of blame to go around.”

Condo-mania spreading like fungus!

Have you got your inoculation? Article in todays Vancouver Sun: Condo fever predicted to spread.

The Lower Mainland's seeming addiction to condominium living will continue to spread to other desirable regions of the province, Canada Mortgage and Housing Corp. reports in its latest British Columbia forecasts.

We just can't get enough of 'em! Its the lifestyle!

However, on cost, Frketich added that keeping housing "at a price that people will buy is the main motivator behind that move to multi-unit starts."

"There is no sense in building housing that people can't buy, and this is a response on the builders' side to bring forward product that people can buy."

In Kamloops, for instance, the average home price will climb 17.2 per cent to $305,587 in 2007 compared with 2006.

And what about mortgage rates? They've got a prediction for everything!

Frketich said she expects mortgage rates to edge up in 2008. Rates will remain historically low, but she expects they will put a dent in housing resales, which will spill over into less demand for new homes.

She added that for the past few years, B.C. has been building new housing faster than its population growth warrants. And as employment growth slows, Frketich expects new housing construction to remain at a still relatively high 30,000 units per year over the next five years.

Thank goodness housing prices can't actually go down or we might really have a problem with the combination of high prices, all that supply and slow population growth.

So what are the symptoms of condo fever? I feel a bit dizzy, but maybe its just the spin.

CB developments ordered to stop selling units.

CB Developments, the Vancouver developer that decided to cancel buyer contracts and resell houses at their coquitlam housing development has been ordered to cease marketing those units by the provinces superintendent of real estate under the Real Estate Development Marketing Act.

In his decision, W. Alan Clark said there is a "substantial likelihood" the company planned to remarket the properties to new potential purchaser "without providing accurate disclosure."

Clark said the fact that lawsuits have been filed against CB could affect the value and price of the units, and could influence the decision of would-be purchasers.

Even if the developer did re-sell the units to new buyers, they would likely end up tied up in litigation and might not receive title, Clark said, so he has suspended the company's right to sell them.

CB Developments has stated that they need to cancel the contracts and try to resell the units for more money due to 'rising construction costs and increased land values'. Ten years ago I sold a classic car that's now worth 10 times what I sold it for.. I should really look into canceling that buyer contract.

Full story on the CBC.

San Diego foreclosures drive down prices

Heres a link to a link of a story - Calculated Risk has a post about an article in the Wall St. Journal about foreclosures in San Diego.

A surge of foreclosures over the past year or so has left lenders struggling to sell a growing backlog of homes.
...
At the San Diego sale, houses and condos typically sold for about 30% below the previous sale or appraisal prices. In a few cases, the discounts were around 50%.

... A glut of condominiums also is weighing on the market. Peter Dennehy, a senior vice president at Sullivan Group Real Estate Advisors, a research firm here, estimates that at the current sales rate there are enough condos on the market to last about 29 months.

I'm posting the link to Calculated Risk instead of the WSJ because there are some reader comments attached to the story about BC and Alberta markets that some of you may find interesting.

BC's #1 industry is forestry which is in serious trouble. Population growth is the slowest in decades. The economy is being kept growing by real estate investment. "Everyone wants to live here" (note contradiction) and "This time it's different" (2010 Winter Olympics) are religious creeds in BC. I don't think I have to explain what that portends for the future.

Friday free-for-all

Here's your open topic for Friday May 11th -

- The ongoing saga of CB Developments
- Island construction hits 30 year high
- Spain fights speculation and fraud

Post your news, links and thoughts on our crazy real estate market here!

It can't happen where?

Bloomberg has an article about real estate markets that where once 'immune' being hit by the US housing market slump. These are areas with multi-million dollar homes that are not financed by 'sub-prime' credit, yet are seeing dropping prices since the beginning of 2007.

The average price in Westport, Connecticut, home of chief executive officers Herbert Allison of TIAA-CREF and Jeffrey Kindler of Pfizer Inc., and actor Paul Newman, fell 8.2 percent to $1.56 million in the first four months of 2007 from the same period last year, according to multiple listing service data. In Chappaqua, New York, where Bill and Hillary Clinton live, properties sit on the market an average of seven months before they sell, up from five months a year ago.

Wealth and excellent credit have until now spared bedroom communities in New Jersey, Connecticut and New York's Westchester County from declines in home prices. Now the tightening of credit in response to rising subprime defaults has disrupted the real estate food chain, bringing the national housing slump to Manhattan's doorstep. Prices fell as much as 18.8 percent this year in 15 of the 24 areas in which data was collected.

``People who may have bought their first home may not be able to do so now, and that stops some of the movement,'' said Doug Werner, a broker at William Pitt Sotheby's International Real Estate in Darien, Connecticut. ``Whales eat plankton. If the plankton disappears, what will happen to the whales?''

BC housing starts on a downward trend.

Housing starts continue to drop in BC - A downward trend that started in January and continues in the most recent report issued by CMHC. Starts are down about 22 percent for the first four months of the year compared to last year. CMHC senior analyst Robin Adamache has the standard disclaimer that this doesn't 'signal impending problems in the housing market'.

"We do know a lot of projects in the pipeline, and the building permit numbers were up. So we are still expecting that starts this year will come in at the same level of last year."

Adamache attributes part of the decline to the labour shortage, noting there just aren't enough construction workers to keep up with the demand.

But homebuyer demand remains strong, she said, because of the influx of new residents who need a place to live.

She said about twice as many new jobs have been created this year in B.C. as in the same period last year.

CB Development cancels contracts with home-buyers

So it looks like its not just first-time home buyers that have it hard in this real estate boom - Developers are seeing rough times as well. Look at CB developments for example, they recently had to cancel all buyer contracts on their coquitlam housing development due for completion April 2006 since they could make more money by reselling them today. CTV has an article about a disappointed buyer that was all ready to move into his new house:

However, he was told by the developer that at current prices, there was no way the company could break even by selling the homes for the original price.

CB Development's operator, Craig Lochhead, said "that the only choice that they had was to sever the contracts with all the existing homes and re-list the homes at current market value," said Bulat.

Bulat was also told that he would not be given the rights of first refusal -- meaning he'd have to compete with other buyers to repurchase his home.

So now the original buyers have to look for new homes and the developer has to look for new buyers. And if that wasn't bad enough it sounds like this whole thing is really going to cut into the developers family time as well, since his wife is the real estate agent listed to sell these homes the second time around. Its tough all over!

CBC Almanac - buying a new home.

Karen wrote in to let everyone know that the CBC show B.C. Almanac will be focusing on real estate today between 12:00 and 2:00 pm on CBC radio one (690 AM). It could be an interesting show to listen to, and its interactive with the open line segment!

If you have questions or comments during the show you can give them a call on their open line Numbers:
LOWER MAINLAND: (604) 669-3733
TOLL FREE: 1-800-825-5950

I hope to catch some of this show - it looks like they have an online archive if you miss the live broadcast. I'm curious to hear what the general opinion is of the market out there beyond the market watching boards and blogs.

Friday free-for-all

Here's your open-topic free-for-all post for friday May 4th.

-Canadian construction slowing.
-Where are the nice condos?
-Vancouver's still cheap to saudi royalty.
-New condos don't need parking?
-18,000 grow-ops suspected in BC.

What are you seeing out there? Post your news, links and anectdotes here!

REBGV benchmark prices April 2007

Well the REBGV has just released their sales stats from april - thanks agentwill for my copy. So where did prices go last month according to the Real estate boards benchmark figures?

Up.

Yep, thats right - we have a new 'high score' in every category - The detached benchmark was at $695,069, the attached benchmark hit $432,490 and apartments where at $355,108. Here's my standard short-term tracking graph updated with last months numbers:





Real estate in the GVRD is now more expensive than its ever been with prices drifting farther and farther away from rental values - one of my favorite examples was a house listed through Rob Chipmans office. It was rented for $1200 per month and was put on the market with an asking price of $620k. I'm not even going to bother running the numbers on that.

Apparently its not even worth building new rental property in Vancouver anymore - you just can't get the cash you can from condo-hungry buyers.. So where does it all end? Your guess is as good as mine, but the number of listings are going up and the number of sales are dropping so I guess eventually we'll figure out if there's anything to that old 'supply and demand' theory.

So there you go - Numbers up in every category, this must be an interesting time to be a speculator.. Deal or no deal? Do you let it ride? Can prices go up even more? .. We'll just have to wait until next month to find out.

David Lereah steps down from the NAR.

David Lereah - the head economist for the National Association of Realtors in the US is stepping down to take a job with an online real estate service. So far his sunny outlook on the US housing market has failed to be reflected in reality with foreclosures up, inventory up and prices down in many many markets. He's been accused of 'cheerleading' the US market and dubbed 'David Liar-ah' by bloggers who feel his reports have been biased and misleading.

The economist who prodded investors into the U.S. housing boom and has been skewered by bloggers during the bust is leaving a top real estate trade association, the group said Monday.

David Lereah, the author of "Are You Missing the Real Estate Boom?" will leave the the National Association of Realtors by the middle of next month after serving as the head economist for seven years, a spokesman said.

Lereah was the Realtors' analyst through the five-year run-up in home values that ended in 2005, and he has continued to deliver the group's outlook through the current downturn.

Here's a link to the full article about the 'anti-chicken-little' lereah on CNN.