Vancouver's Real Estate Market

[supafamous]

Originally Posted by Hakkaboy

The point of contention isn't if massive supply increase will changes prices, it's whether or not the demand here was fundamentally sound in the first place. Supafamous seems to think it's sound (i.e. won't decrease) but I don't.

We are still very early and we won't find out for another 2 to 3 years. If prices are still the same at that time with interest rates being more normal (not sub 3%), then he will be right. I have my doubts though.

As for sellers not wanting to sell for a loss and will just hang on to their properties, that's very true. Until they can no longer afford the payments of course.

I don't think the current prices are "sound", I think they're just a natural outcome of a very, very bad supply-demand problem. What's happened is exactly what happens when supply is constrained and the other externalities like foreign investors or people owning multiple homes etc are mostly distractions - they're easier problems to tackle but they don't really change anything and that's been the case ever since people started complaining about housing prices in the..................1950's.

Westopher explained it much better than I did - that it's an affordability problem. It's not the price of the house itself but how much it costs in total - I was wrong to simplify it to just price.

Example:

One year ago I could buy a $1m place at 1.2% interest - at 20% down ($200k) my payments would have been $2600/mo.

Today that $1m place with a 20% downpayment goes for $3500/mo at 3.45% (today's rate) so the cost of the house has actually increased ~25%.

For that house (haha, no, just a 2 bed condo folks) to have a $2600/mo payment would require it to drop in price to $800k (with the same downpayment, a $600k mortgage) - a 20% decrease in price.

At current interest rates the market would need to drop 20% in price just to stay level with what it was a year ago in terms of affordability. If the market does drop 20% it's a case of "nothing has changed" because people are still stuck spending as much as they can on housing (until they forced to spend even more).

Look at it another way: It's basically took a 25% increase in housing costs in the last 6 months to cause the market to almost grind to a halt. A house is the biggest purchase in someone's life so it should be fairly price sensitive yet it takes a huge increase to get people to bail - that says a lot about how desperate people are for a house.

People aren't paying a lot for houses b/c money is cheap, they're paying a lot of money b/c they're desperate.

[Hakkaboy]

Originally Posted by supafamous

I don't think the current prices are "sound", I think they're just a natural outcome of a very, very bad supply-demand problem. What's happened is exactly what happens when supply is constrained and the other externalities like foreign investors or people owning multiple homes etc are mostly distractions - they're easier problems to tackle but they don't really change anything and that's been the case ever since people started complaining about housing prices in the..................1950's.

Westopher explained it much better than I did - that it's an affordability problem. It's not the price of the house itself but how much it costs in total.

Example:

One year ago I could buy a $1m place at 1.2% interest - at 20% down ($200k) my payments would have been $2600/mo.

Today that $1m place with a 20% downpayment goes for $3500/mo at 3.45% (today's rate) so the cost of the house has actually increased ~25%.

For that house (haha, no, just a 2 bed condo folks) to have a $2600/mo payment would require it to drop in price to $800k (with the same downpayment, a $600k mortgage) - a 20% decrease in price.

At current interest rates the market would need to drop 20% in price just to stay level with what it was a year ago in terms of affordability. If the market does drop 20% it's a case of "nothing has changed" because people are still stuck spending as much as they can on housing (until they forced to spend even more).

Look at it another way: It's basically took a 25% increase in housing costs in the last 6 months to cause the market to almost grind to a halt. A house is the biggest purchase in someone's life so it should be fairly price sensitive yet it takes a huge increase to get people to bail - that says a lot about how desperate people are for a house.

People aren't paying a lot for houses b/c money is cheap, they're paying a lot of money b/c they're desperate.

Sorry, your right. We should be talking about sales volumes when addressing about whether demand is artificially propped up or not.

In Jan 2022, sales volume were +25.3% above 10 year averages for Januarys. The previous month, Dec 2021, it was +33% of 10year average for Decembers. November was also +33% above, etc. Those are the unsustainable demand numbers I was talking about.

We will see what those # of transactions rates will become 2/3 years from now. If there is healthy demand supported by fundamentals, then the sales volume will not decrease right?

[JDMDreams]

Sales drop = more and more pent up demand, less ppl rezoning or spending $ to increase supply = probably another run once this settles, as pretty much everyone knows this level of % also isn't sustainable in the long run. Also rents will go up then renters bitch to CBC they are homeless + stress test too high then gov makes up some program to help them = more demand.

[supafamous]

Originally Posted by Hakkaboy

Sorry, your right. We should be talking about sales volumes when addressing about whether demand is artificially propped up or not.

In Jan 2022, sales volume were +25.3% above 10 year averages for Januarys. The previous month, Dec 2021, it was +33% of 10year average for Decembers. November was also +33% above, etc. Those are the unsustainable demand numbers I was talking about.

We will see what those # of transactions rates will become 2/3 years from now. If there is healthy demand supported by fundamentals, then the sales volume will not decrease right?

I think that's mostly fair - while we'll see some short cycles where a correction takes place the general trend line if the fundamentals are reasonable should be of sustained, steady demand. I say "mostly" because the lack of supply on the market is likely the biggest driver of demand - eg. people deciding to put their homes on the market have the biggest impact, it's not the number of people who want to buy which is generally stable.

For what it's worth, I apologise for my tone in prior comments - I get really riled up about housing having watched year after years of city planners, politicians, NIMBYs etc ignore the problem - I was livid just following the debate on the Broadway Plan, the FUCK are these people doing!!! They've created villains out of innocents and hide their racism and classism behind language like "community character" or "liveability". Those people (I'm looking at you Colleen Hardwick) need to burn in hell for what they've done to people.

[westopher]

Originally Posted by donk.

Cue renters complaining because rental stock would shrink and bump prices even higher for rent

The imaginary situation I’m creating would do the opposite. It would take investment properties being used for short term rentals, or empty buy and holds and put them back into housing stock.
That situation would remove people from the renter pool as they could become homeowners, potentially decreasing the competition/demand for rental units.
Again I have no numbers or idea to back this up, so have no idea how much it will help, but it could be a little or a lot, and goes back to the fact that no one should own these properties to sit empty or be short term rentals where there is a housing crisis.
Short term rentals should only be allowed as a suite on a property that is occupied by renters or owners of the main unit, or in situations for what Airbnb’s original plan was, which was to allow homeowners who were somewhere else for say a 2 week vacation and to allow their home to be rented while they are gone.
The government should create rules that would decimate their current business model.

[JDMDreams]

Sounds pretty Communist doesn't it, that's like saying you can't buy 5 m3s and hoard them in your garage so others can have their m3s too

[westopher]

People don’t live in M3s. It’s not a basic human necessity.
Food, water, shelter, healthcare are all necessities. It’s not that hard to understand man. It’s such a stupid comparison.

[Traum]

Originally Posted by supafamous

For what it's worth, I apologise for my tone in prior comments - I get really riled up about housing having watched year after years of city planners, politicians, NIMBYs etc ignore the problem - I was livid just following the debate on the Broadway Plan, the FUCK are these people doing!!! They've created villains out of innocents and hide their racism and classism behind language like "community character" or "liveability". Those people (I'm looking at you Colleen Hardwick) need to burn in hell for what they've done to people.

And Colleen Hardwick is running for mayor in the October (municipal) election. In the municipal politics group that I follow, there seems to be a decently strong following for her. I cringe every time her cheerleaders try to portrait her in a positive light.

Goddamn she is part of the current City Council. She is part of the reason why we are in this shxt show now.

[TOS'd]

Went to an open house today.
Listed just under $4m. $15k property tax.
Was told the house has been vacant since the start of the pandemic.
Realtor shows us garage and an orange 4x4 g wagon parked inside.
Says owner just uses the house to store one of his extra cars.

[Gerbs]

At least you can look at $4M listings!

If you can afford a $4M house, you can probably afford a 4x4 G wagon. I got an extra parking spot if you need somewhere to store an extra car.

[GS8]

Every exit to Vancouver should read this.

[donk.]

[Alpine]

Originally Posted by GS8

Every exit to Vancouver should read this.

You have a better chance of swapping out all Vancouver postcards for a picture of the DTES lol.

[Alpine]

Originally Posted by TOS'd

Went to an open house today.
Listed just under $4m. $15k property tax.
Was told the house has been vacant since the start of the pandemic.
Realtor shows us garage and an orange 4x4 g wagon parked inside.
Says owner just uses the house to store one of his extra cars.

Yup. The wealth here is mind-boggling. Wife is in the construction industry and some of the clients/potential clients that she has come across have a net worth greater than all of revscene combined.

[supafamous]

Originally Posted by Alpine

Yup. The wealth here is mind-boggling. Wife is in the construction industry and some of the clients/potential clients that she has come across have a net worth greater than all of revscene combined.

We got nice cars though.

[Gerbs]

Originally Posted by supafamous

We got nice cars though.

We got a collective MSRP of maybe a 1BR Condo in King George Surrey if we minus out Harvey Spector and include every car we have

[sonick]

Originally Posted by supafamous

We got nice cars though.

*Looks at my signature with no car less than a decade old*

Do we though?

[AzNightmare]

How do you define "nice" car?
Age of the car?
Car brand?
Performance?
MSRP?
etc.

[Teriyaki]

Originally Posted by sonick

*Looks at my signature with no car less than a decade old*

Do we though?

Well between your two cars looks like you own a grand total of 12-cylinders. 12 Cylinders! That's supercar territory.

[Hondaracer]

This was a house around the corner from me, have been watching it pretty closely, basically sold as ask minus realtor fees



Nice place, move in ready without a suite, which most of the similar neighboring homes have. I think if you have a nice more desirable place you have more leverage as a seller as opposed to the dirty old house filled with hoarder garbage.

[Hakkaboy]

Originally Posted by supafamous

I think that's mostly fair - while we'll see some short cycles where a correction takes place the general trend line if the fundamentals are reasonable should be of sustained, steady demand. I say "mostly" because the lack of supply on the market is likely the biggest driver of demand - eg. people deciding to put their homes on the market have the biggest impact, it's not the number of people who want to buy which is generally stable.

For what it's worth, I apologise for my tone in prior comments - I get really riled up about housing having watched year after years of city planners, politicians, NIMBYs etc ignore the problem - I was livid just following the debate on the Broadway Plan, the FUCK are these people doing!!! They've created villains out of innocents and hide their racism and classism behind language like "community character" or "liveability". Those people (I'm looking at you Colleen Hardwick) need to burn in hell for what they've done to people.

All good man. I knew as well that you had upgraded/bought recently so I didn't take it personally

Btw, this article sums up how I felt about it

https://betterdwelling.com/the-canad...nraveling-bmo/

Excerpt:

Canadian Real Estate Was Driven By A Speculative Bubble, Not Supply Shortage
BMO has prominently challenged Canada’s supply shortage narrative. With the exception of SFU professor Andy Yan, few professionals questioned the supply narrative. It just made sense — interest rates were cut and there were no more houses. Obviously low rates designed to stimulate demand to help inflation had no role. Clear as mud to most economists.

It’s true there was a shortage of real estate inventory for sale across Canada… the US, Australia, the Netherlands, and pretty much every advanced economy. That’s an intended consequence and natural reaction to slashing rates.

Slashing interest rates help expand budgets but more importantly stimulate demand. This demand stimulus is meant to overrun the supply and increase home prices. When prices rise, it attracts more people to buy as well. No one wants to pay more for something, and it’s the same principle that drives deflation fears. Falling prices mean people wait to see how much they’ll fall, while rising prices lead to FOMO. It’s a well understood feature of inflation.

[GGnoRE]

Yea I don't buy the supply-shortage argument completely either. Building more housing for sure will improve affordability but I think the supply-shortage argument is exaggerated because it assumes that all demand is 'altruistic' (i.e. an ordinary family trying to buy their principal residence). Even in that CMHC report supafamous quoted, it completely omits the fact that government-backed studies have shown 25% of transactions and 30~40% of housing stock are attributed to multiple property owners (i.e. speculative investors) in recent years. Instead of focusing solely on "supply", why not make that artificial demand disappear?

If you read the full CMHC report https://assets.cmhc-schl.gc.ca/sites...2-6ebbddcd79a0, even by CMHC's projections to 2030, it shows that housing stock is projected to grow faster than the number of households without any changes (Figure 3, page 20). Put another way, CMHC themselves project that the ratio of housing stock to number of households will improve over time (Figure 5 Panel B, page 22). CHMC however argues that demand will far outpace the growth of households based on historical data and thus the supply-shortage conclusion. Well, we know for a fact that a huge chunk of demand historically has been speculative.

[68style]

I don't really understand the housing shortage thing either... at least so far as it applies to condos anyway... one walk down 3 road in Richmond will leave you stymied on that one, they must have added at least 2,500+ condos in the last 3 years with more coming... Capstan Way area alone is like a miniature community to itself

[Hondaracer]

Go look at the people lining up to buy those pre-sales and you’ll find your answer.

[hud 91gt]

I don’t take any article seriously that uses a word like FOMO. Almost as bad as reading the drama novels by Garth Turner.