Key quotes from James Wong this month: - "Richmond detached homes are expected to suffer the most in price erosion." - "2013 will be another difficult year for Richmond" Richmond Stats bits: Inventory: - SFH at 12.2 months of inventory (MOI)
SFH > $1.0M: 16.4 MOI
SFH > $1.5M: 24.4 MOI
- Condos at 9.9 MOI - Town Houses at 8.2 MOI Jan 1st, 2012 Total Inventory (all types) in Richmond: 1655 Projected Jan 1st, 2013 Total Inventory in Richmond: 1950 (+18% YoY) "The absence of home buyers, dampened market sentiment, and tightened lending rules are expected to continue into 2013. The current MOI though better than the past 2 months, will likely be reversed when more new listings hit the market the next few weeks."
"There are no signs of the Government changing or relaxing the current lending directives to Canadian Banks. Richmond’s market for 2013 is expected to have persistently high number of homes for sale and below average buying interest."
Forum member 'helen qian' asked today: "Why don't realtors swoop in to snatch the 'bargains' today themselves?"
GF gives her 3 reasons:
1. The smart ones already cashed out. They know that we've just past the peak, but still a long way from bottom.
2. The others aren't so lucky, their RE investments are still tied up in this illiquid market. The ones that bought within the last 1-2 years basically will all lose money if they sell today.
3. Since mid 2011, Greater Vancouver sales witness sustained decline. 2012 annual sales volume is expected to end up close to 2008. Also, total number of realtors in Greater Vancouver increased from 9500 (Nov 2008) to 11000 (Nov 2012), a 16% gain. As Chinese proverb goes, "more monks, less congee." In addition, there are more realtors/RE companies offering fee rebates and discounts, including the growing "1% realty", "2% realty", and realtors that offer to list on MLS for a couple hundred dollars. Growing competition in this down-market has been eating into realtors' commission-based income.
Dec 1-7 Stats 2012 vs 2011 Sales: 343 vs 494 (-31%) vs Nov/12: 343 vs 404 (-15%) New Lists: 508 vs 595 (-15%) S/L Ratio: 67.5% vs 83.0%
Est month end sales: 1160 vs 1658 (-30% YoY, MoM) Est month end lists: 1300 vs 1629 (-20% YoY) Est month end inventory: 13500 vs 12000 (+ 12-13% YoY) Est month end MOI: 11-12 months vs 7.2 (2011)
Greater Vancouver months of inventory is projected to reach 11-12 months by year end, worse than November's MOI (9.3 months), bringing Vancouver deeper into buyer's market territory.
Sales and S/L ratio will both rank as 2nd worst in past 11+ years.
HPI price is expected to continue its decline, both MoM and YoY.
GF: The self-reinforcing "Financial Decelerator" risk that was discussed here 3 days ago - now BoC is expressing similar worries.
Published
Bank of Canada warns on condos
The Bank of Canada issued a harsh warning today about overbuilding of high-rise housing, notably condos.
“In the current context, a specific concern is that the total number of housing units under construction has been increasing and is now well above its historical average relative to the population,” the central bank said in its financial system review.
Today, as The Globe and Mail’s Barrie McKenna reports, the Bank of Canada again voiced in concern over the vulnerability of consumers to “economic shocks,” such as a housing bust or a spike in unemployment.
“If the upcoming supply of units is not absorbed by demand as they are completed over the next 18 to 36 months, the supply-demand imbalance will become more pronounced, increasing the risk of a sudden correction in prices”
That, in turn, could pressure house prices in general, which itself would spread through the broader economy.
“This would likely lead to a decline in housing activity, adversely affecting household incomes
and employment, as well as confidence and household net worth, which would in turn reduce household spending,” the Bank of Canada said.
“As the declines in incomes and employment impair households’ ability to service their debt, loan losses at financial institutions would likely rise. These effects may be amplified by tighter borrowing conditions as lenders come under increased stress. These interrelated factors would further dampen economic activity and add to the strains on household and bank balance sheets. They may also cause house prices to fall below the level required to correct any initial overvaluation.”
I wanted to add in Consumer confidence, which I suppose is tightly associated with most of the above factors (income/unemployment/debt level/macro factors). While searching for articles linking consumer confidence with housing price, this article popped up high on google's search result list:Self-reinforcing effects between housing prices and credit - Evidence from Norway Mostly over my head, even more so at 2am, but managed to read the conclusion. Looks like it's describing the "self-reinforcing" cumulative effect of credit and housing prices (formation of bubble), and how consumer confidence is a major variable determining short-term home price movements.
That led me to wonder, if multiple negative factors (credit tightening, income stagnation, unemployment, high debt, poor national/global econ outlook) coexist, perhaps a self-reinforcing cycle of RE-depreciation and further-decreased credit availability will emerge in Canada - unless the government steps in to break the negative cycle (not likely in near future as reducing household debt level seems to be Flaherty's main goal).. 2013 might very well be the year for the self-reinforcing "financial decelerator" to kick in, a.k.a "bursting of a bubble"..
Let us dig deeper:
Basically, these areas all recorded price drops vs 1 month, 3 months, and 6 months ago.
Even though they're hanging on to Year-over-year positive HPI territory, after a couple more months they too will become negative.
SingTao Newspaper was deliberately/unintentionally misleading when it said those areas "Beat the trend".
Nov 2012 Single-Family House HPI: Coquitlam: MoM: -0.4% 6 Mo: -1.9% YoY: +2.6% (+2.8%,+3.6%,+3.7%,+4.3%) (declining YoY % gain over past months)
North Van: MoM: -1.5% 6 Mo: -5.4% YoY: +0.3% (+2.2%,+5.2%,+5.2%)
Port Moody MoM: -2.3% 6 Mo: -1.0% YoY: +4.7% (+6.9%,+5.3%,+2.9%) *The same conclusion holds true for Composite (SFH+Condo+Attached) HPI. GF 来澄清一下: 基本上这些地区比半年前,比三个月前,及比上个月 皆全面下跌。 而比去年同月,虽还是维持在 同比"上升", 但看来再过几个月,便将沦陷至同比下跌的地步。 而星岛日报说这些地区 “逆市上升”, 是错误的理解, 不管是故意的还是不小心的。
