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Rush of Homes on Vancouver Market: Prices to Slide?

Milestone of 20,000 homes for sale has realty blogs abuzz.

By Vanessa Richmond 29 Jul 2008 | TheTyee.ca

Vanessa Richmond is a contributing editor to The Tyee.

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Hopeful home buyers: at the top?

Does the number 20,000 represent the apocalypse, nirvana or nothing at all? Well, that all depends on how much or little money you have invested in Vancouver's real estate market.

The number of homes for sale tipped 20,000 on Friday and is still climbing. Paul Boenisch, a popular blogger who runs the North Vancouver Homes blog was the first to announce the turn of the dial: "20,000 listings. Is this the top???"

This time last year, there were around 12,000 listings for sale, and it was, to use the blogger lingo, a bullish seller's market. But when there are more listings, and the sellers outnumber the buyers, the theory goes that it becomes a buyer's market -- the law of supply and demand.

The tide may now be turning, and not just in the minds of those wishful-thinking real estate bears. Boenisch, a realtor, predicts even more homes will be listed by fall. "We saw prices decline last month and many feel prices are destined to continue moving downward," he blogs.

"Is this a good thing or a bad thing? Does cheering a price correction make you a pessimist? I guess it depends entirely on your current position."

The benchmark price of a detached house in Greater Vancouver was $771,250 in May 2008, but $765,654 in June 2008, according to the Real Estate Board of Greater Vancouver. Not a huge decrease, but significant because it's the first one in years.

"One thing is for certain," blogs Boenisch, "home prices were growing at a rate that could not be sustained. Now our market is re balancing. I personally would not want to be holding a bunch of pre-sales right now."

Rob Chipman is another popular blogger and realtor whose commenters started posting about "20K" as soon as it happened, then he joined in. Chipman consistently predicts a price correction on his blog, but doesn't think that 20,000 is "some sort of magic number causing sellers to capitulate."

In response to the hundreds of comments about the milestone, he blogged, "Apparently it's common knowledge that we're on the verge of another Great Depression. Mark me down as doubtful. Real estate prices rise, and real estate prices fall. We don't require a cataclysm for that to happen. The fact that the market is changing doesn't mean we're in for a Great Depression either. Just as we said three years ago when prices were rising -- real estate prices rise and fall, and that's normal. (I'm sure that should get the bears burning! :-)"

Dozens of commenters wished each other "Happy 20K!!" on both blogs. Here is a sampling of what else they said:

Reactions

"I cheer for a world where housing is affordable not just for those that already own it. Is that pessimistic?"
-Jesse.

"YEEEEEEEEEHAAAAAAAAW! Didn't think we would get there this fast!"
-Damien.

"I'm sorry that I don't share all of your enthusiasm, but I just don't see the significance of 20,000 listings. Sure, it's a big round number, and this may very well prove to be the peak of the current market cycle. But the reality is, I still can't afford to buy a house, and prices have barely come off their highs. What I've learned from this blog (and others) is that: 1) Prices are sticky on the way down and 2) Prices usually bottom about 2 years after a market peak. I'll get excited when prices drop 30% to 40% and I can actually afford to buy. That may take a while."
-Missed the Boat

Observations

"Times are certainly changing. My phone didn't ring at all today. I currently have 6 active listings on MLS, another 1 that should get processed by tomorrow, and possibly another three listings to hit within a week.

"I was chatting with one of my colleagues today who has 26 active listings and she told me that she was doing a lot more showings last year while carrying 8-10 at a time.

"From a realtor's perspective, this is bleak. I had to laugh earlier this week when a prospective client thought it was 'bleak' that I suggested $449k on his property that he bought for $138k in 1999, and it traded in 1992 for $131k. Greedy pig!"
-Jeff

"GUYS, the place I'm bidding on is 25% less Market…. and the realtor says there is a shot… as NO else is calling or coming to view…… so it can happen…"
-romeojordan

"Check out job growth in San Diego in 2007. Unemployment was not significantly increasing in 2007 even as house prices declined at double-digit annual rates. In San Diego, job losses indeed exacerbated the housing bust but price declines started before major job losses happened -- the job losses were an inevitable fallout of overbuilding."
-jesse

Predictions

"If past trends are an indicator, we'll probably stay around this level (+/- 1,500) until September or November with a decline towards December (expiries)."
-Vansanity

"I have to disagree with you there. With tighter lending (no $0 down, or 40 yr mortgages) coming in the fall, we will continue to see listings increase until the winter, especially in the next 2-3 months. Another reasoning is the fact that the [mainstream media] hasn't really focused on the story yet and many people still aren't aware of the current state of the market."
-Anonymous

"30,000 -- it is possible -- we could have one of the largest crashes on the planet in the [Real Estate Board of Greater Vancouver]… seriously, why not? Our listings to population is going off the charts… sales coming to a halt (and the great unwashed are still buying a bit -- when the fools wise up -- then watch the fun unfold… good times…"
-WoW

"Well, there's mighty stiff competition for that. I'm sure we'll have the biggest tank ($s and %) in the Pacific Northwest. Definitely the biggest $ drop in Canada. Maybe the biggest % drop in Canada, but Edmonton/Calgary will be tough to beat. For overall % drop there's no way Van could beat San Bernardino or Stockton CA. They'll be in the 50-75% range, we'll be lucky to hit 50% in sales price #s. I suppose it's conceivable, though, that the city of Van could have the biggest $ drop in SFHs anywhere in North America… Average SFH from $750 (or wherever it peaked in May) to $400, that's a $350K drop, tough to beat. But London will probably beat our pants off in % and $."
-Whybuywhenucanrent?

"Easy to beat. Edmonton/Calgary never got nearly as expensive as Vancouver, they have higher incomes, and have an economy that produces something the world needs (oil) as opposed to one based on [real estate], tourism, and drugs. No contest."
-patriotz

"It really is amazing how everyone is so happy to see 20,000. I must admit it is mind blowing. But, this is gonna have to affect us all. We all know what is going on in the US and how their entire financial system is blowing up. Foreclosures are rampant. Banks are failing. Employment is awful. This is all having a major impact on us in Canada. And now our own real estate meltdown. Our own concerns about banking failures. And employment opportunities aren't that great, especially in this small city. And it's gonna get a lot worse.

"US foreclosures up 121% in q2, this market is in big trouble as the worst of the mortgage crisis hasn't hit. I don't see a bottom in this market for 3-5 years, people have no idea how cheap housing is going to get."
-Anonymous

"Walking away from deposits on pre sales will become a common theme if things keep going the way they are. That doesn't surprise me :)

"I, personally, do not hope to see things become as horrible as they are projected here but I can entertain the idea that it may…My prediction is a two year downward trend back to 2004 prices at the bottom and a two year climb from there back up to 2006/7 prices."
-Lurker

"We are looking at 1998 prices. Prices will drop back to [what] it was a decade ago. Very scary. It's not going to be just a 30% drop."
-Anonymous

"Just did an open house. What a waste of time. No one. I had to listen to the concierge tell me how no one comes to the open houses anymore… and how last year they were so busy. He chatted with all the residents coming into the building and laughing how everyone needs to sell because prices are falling. He went on about how many of his friends and family sold their houses and moved back to China. And how a few remaining friends can't sell their Westside houses.

"How possible do you guys think it is that we shave 80% off current values? I'm talking pre 1990 prices."
-Jeff

"I'm predicting a 50% drop in Van area RE by from April 2008 to April 2012… Low end properties in LA are already down 37% (and only halfway through the expected foreclosure cycle).

"Based on other NA markets that are well into the tumble, 40% in 20 months is about par. It's a pretty conservative guess, really. Maybe it will take 30 months, but 40% on par with other cities.

"After all, why wouldn't Van's markets tank 40% if every other bubbly city but San Francisco tanks 40%?"
-Whybuywhenucanrent?

“I would tend to agree that 40-60% is most likely given our rational thinking… after all, that is where prices make sense to us today."
-Jeff

What do you think the current state of the market is? Where do you think it's going? Do you agree with any of the bloggers or their commenters? Why not write your thoughts and predictions below.

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