Richmond Condo News

The real estate market in Western Canada is expected to face some major challenges. Large inventory build-up of resale and new homes surpassing 20,000 active listings and unusual contraction in sales over the past few weeks are alarming. Canada especially Greater Vancouver may finally join other countries, to deal with a declining housing market.

The drop in housing demand was reported in The National Post “West leads drop as Canadian housing slumps“. Un-official July sales reported through the MLS system is pointing to a slump (over 60% drop in sales compared to June) in BC housing sales. When the official report is released ealry nex month, much worst headlines will be reported by the media.

The National Post reported “Mortgage crisis may be looming for Canada.“ The tighter under-writing, termination of the 40 years amortization and 0$ down payment financing by CMHC, rising interest rates, higher inflation and declining exports are making Canadian consumers less confident of their future.

Moving forward, the state of Canada’s economy and the challenges faced by consumers were summed up by National Post Columnist, Diane Francis’s ” Debt meltdown summer notes“ Canada’s housing market could follow the decline in house prices as in the US, UK, Spain, Australia and now New Zealand.

The Richmond new condos market is taking a turn for the worst in July if the weak sale trend continue.  Presently, there are close to 1,000 condo/apartment listed fro sale in Richmond. The average condo sales in Richmond over the past 6 months was 153 units.

More than 50% of these listings are under 5 years old (as per mls record there were 520 units listed for sale as of July 22, 2008). The past 6 months average monthly sale for condos less than 5 years old was 58. At this rate of sale, it will take 9 months to sell off all the condos listed on the market.

The sales todate for condos under 5 years old sold as per mls record was 12 units. The slowing down in the sales of condos will put pressure of condo prices.

New Condos Under Construction

There will be many more new condos completing over the next 12 months. With the dismal sale of 12 units so far in July, there will be too many condos for too few buyers. There were already reports of condo sellers in Richmond losing money selling their presale condos through assignment of their contracts.

Those who bought their new condos after 2006 with anticipation of price appreciation, may have to hold on to their investments with little hope for price gain. The market for resale new condos or assignment sales is expected to be adversely affected by the slow down.

Most areas in Greaater Vancouver and Fraser Valley are now having over 6 months supply of inventory. This put pressure on home sellers to reduce their selling prices in order to sell their homes.

The sales activities for million dollar homes in Richmond had slowed down considerably the past 2 months. There are now a large number of million dollar homes that are in various stages of construction.

What's going to happen to Richmond's million dollar homes now that the real estate market is cooling?

During the last correction in 1994 to 2001, many of those new homes were priced at $800,000 to $1,000,000. These homes languished on the market and eventually, many of these homes were sold off at steep discounts.

Over the past 12 months, builders were paying $650,000 to $800,000 for old houses on large lots in prime Richmond locations. These new homes have to be sold at $1,500,000 or more for the builders to make a profit.

Below is a sale summary for Richmond's million dollar homes as reported through the MLS:

There are currently 226 million dollar single family homes listed for sale in Richmond - as reported on July 22, 2008. Depending on how many more units will be added to the present total of 4, July will be a bad month for these million dollar home sellers. Even if over the next 9 days, another 4 sales are added, we will only finish the month with 8 sales. At this rate it will take 28 months to clear all the million dollar homes listed on the market.

The sales reported todate for Richmond for single family homes, townhomes and condo/apartments this month looks like a lot worse than last month. My preliminary figures showed that the overall sales is likely to be less than 50% of the total sales in June. Follow this link to view Richmond's million dollar homes listed for sale.

Home buyers are constantly perplexed on the question how home prices are determined. Generally, the value of a home is determined by the location, age, size, type of housing and the condition of the home. A home seller on consultation with his realtor used comparable market analysis to established the listing price for a home.

When a property is listed and priced accordingly, it will result in home buyers viewing the property and finally a sale and purchase contract is negotiated.

For example:

In Richmond, BC the price history for the Timberwood Village Townhouses to-date confirmed that ultimately, the market price of a home was determined by the the buyer and the seller. These homes differed in size, type (middle, end or detached) and conditions.

Buyer & Seller Motivation

The final selling price of a home is established based on the "motivation of the buyer and the seller". If a seller is very motivated, he or she may be more inclined to accept the priced offered by a buyer - even the price may not be what the seller hopes for.

Conversely, if a home buyer is really interested in buying a home he or she likes, the buyer will be motivated to accept the final price countered by the seller.

From a home buyer's prospective, when a suitable home is located, it is a matter of negotiating the best price possible. The buyers and sellers negotiated the best prices they could get, sealed the deals and moved on with their lives.

Greater Vancouver List/Sale Data - June 2008

The June housing data for British Columbia, Canada was showing a dramatic change from what happened a year ago. Although the average prices reported by the various real estate boards (except Victoria, BC) were higher, the June 2008 listings and sales data were telling a different story. The market is not looking good!

Click here to view the June 2008 housing report released by the British Columbia Real Estate Association (BCREA) - "residential sales dollar volume on the Multiple Listing Service® (MLS®) in BC declined 34% to $3.31 billion in June, compared to June 2007".

An analysis and interpretation of the Fraser Valley, Greater Vancouver and BC data here is an attempt by the writer to predict the state of the housing market for the coming months.

Absorption Rate

The "absorption rate" or "the number of months to sell all the listed homes" in BC changed dramatically from 3.3 months in June 2007 to 8.0 months last month. The ratio being a leading indicator on pricing trend, increased steadily since March 2008. In May, the absorption rate - list/sale ratios for most areas passed the 6 months threshold. The ratio for BC in June as shown above is now at 8 months - the can be considered a "buyer's market".

The Calgary and Edmonton housing market experienced a short 2 years run-up in price gains. The markets there had declined for about a year now, and Calgary suffered a price drop around 5% while Edmonton was down around 13%. Click her to refer to Brian Ripley's housing price charts.

In Greater Vancouver, since 2001 house prices went through an uninterrrupted 7 years appreciation as can be viewed here. In view of the market now turning soft, possibly heading for a decline if market sentiment turn bearish. The question is "How much prices will correct... 10%, 15% or 30%?"

The BC housing market will re-balance in favour of home buyers. Home prices will likely give up some of the gains over the past few years.

NOTE: This representation is based in whole or in part on data generated by the Real Estate Boards of Greater Vancouver

"Get Real With Write Down"

The Federal Reserve currently has a list of 90 banks on watch for failure and it is imperative that the Federal Government begins to get ready for the probability of a wave of failed banks.

All you have to do is look at the numbers: As of Monday, Wachovia's stock had fallen over the past year by 81 percent, Citigroup's by 71 percent and SunTrust's by 69 percent. And the stock of Washington Mutual, the nation's largest savings and loan, had tumbled 92 percent.

Oppenheimer & Co.'s analyst, Meredith Whitneythe analyst joins Bloomberg to discuss her outlook for the banks. Whitney suggests that the decline in house prices must lead to more write-downs that will be equally if not more significant to the ones seen to date.

She quoted:

> "That the US Banking industry's failure to anticipate the steep fall of home prices could lead to a material and protracted write-down and capital pressure scenario for the banks well into 2009."

> She added "bank stocks will keep falling until asset prices `get real' and "Mortgage assets are still priced too high on U.S. banks' balance sheets"

Originally aired on: 7/16/2008 on Bloomberg. Click here to view the discussion.

Running Time: 15 minutes 46 seconds

Until confidence in the secondary market returns, and investors can trust the true value of the mortgage assets used in securitization, the housing market will suffer for lack of liquidity. Until liquidity is restored, home buyers will have difficulties in getting bank financing thereby prolonging the recovery of the US housing market.

A "buyer's market" is when the supply is more than the demand for real estate. They expect home prices to come down. In a buyer's market, selling time increases resulting in home sellers reducing their prices to sell their homes. In a down cycle, the decline in home prices could take a few years to reach a new balance in demand and supply.

Home sellers need to stay ahead of their competitors in order to sell their homes in a buyer's market:

1) Pricing To Sell

The number one key to selling a home quickly in a buyer's market is to price the property to sell. A Realtor has to communicate back to the seller changes in the market place. Overpriced listings take longer to sell or may not sell at all.

Homeowners who are determined to sell, have to forget about the real estate market of just a few months ago and face the new reality. They will have to compete for buyers.

When pricing a home in a buyer's market, it is important to know what prices similar properties were sold the past six to twelve months. In addition, keeping the price at or even below the price of competing listings helps to attract buyers. Overpricing a listing can keep buyers from even making the first appointment.

The only thing that matters is what a buyer thinks and is willing to offer. It is not what you or your Realtor think your house is worth. Your should set your price right to sell in a buyer's market.

2) The First Impression

"Most buyers know the house is 'the one' when they see it the very first time. Some of the things that can be done to help improve your home's appeal are:

> Sprucing up the yard; mow the lawn, prune the shrubs and keep the front and back yards clean.

> De-clutter the house; remove excessive furniture, store away toys, picture frames, etc.

> Clean the house; windows, floors, carpets, kitchen, appliances, bathrooms, etc.

> Paint the house where required paint over ceiling stains and repair cracked or chipping areas.

> Fix or repair leaky faucets, broken tiles and outdoor railings, sidings and deck.

> Staging helps to sell your home - it is more than decorating and cleaning. Staging can result in selling your home more quickly and getting a higher price, according to pros who offer those services.

3) Being Flexible

Buyers will make offer lower than the asking price. Many buyers may make a lower offer to gouge your reaction. The right thing to do is to make a reasonable counter-offer to close the gap between your price and their offer. If a buyer is truly interested to buy your home, he or she is willing to pay a higher price. But, very often in a buyer's market, the price gap may be too big for you or the buyer to come to an agreement.

The latest June sale figures for Greater Vancouver showed that sales of resale and new homes were down sharply - a startling drop of 41% compared with the same period last year. The inventory of home listed for sale was up 53% compared with that of last year. Real estate prices have begun to slip in some parts of Greater Vancouver. Click here for Richmond's June figures.

The housing inventory chart by Paul Boenisch of North Vancouver below illustrated the steady increase in listings this year as compared with the past 3 years.

In the Fraser Valley, the typical single family house fell by 0.3 per cent in price in the past three months, while apartments were up 0.4 per cent and townhouses rose 1.6 per cent. The biggest drop so far has been in West Vancouver, where detached houses fell more than 10 per cent in price in the last two months, from just under $1.6 million to $1.43 million. West Van house prices there are now up only 0.9 per cent year-over-year.

Gone are the days when a listing is getting multiple offers as soon as the property is listed on the market. Listings are now taking longer to sell, and many sellers are reducing their listing prices to make their home more attractive to buyers.

More people are saying it is a buyer's market now.

What is a Buyer's Market?

The phrases "buyer's market" or "seller's market" are used by real estate agents and the media to describe the market condition.

When sellers are in control, the demand is more than the supply.Buyers are motivated to buy and house prices tend to move up. Multiple offers are normally associated with a strong seller's market.

Conversely, in a "buyer's market" the supply is more than the demand for real estate.  Home buyers sense the weakness in the market, and they hold back or wait for prices to fall. Selling time increases and sellers who wanted to sell their homes will reduce their prices to sell their homes. In a down housing cycle, the decline in home prices may take years to stabilize at a new price level where demand and supply are in balance.

In Greater Vancouver and The Fraser Valley, home prices are now adjusting to higher inventory and dropping sales. Although most housing experts are saying the real estate market for Greater Vancouver is entering a "balanced market", that price gains for 2008 and 2009 will be more moderately. There are other critics who are bearish on the market, and predicted house prices will fall.

You are welcome to post your comments here.

Richmond Housing Report - List Vs Sold June, 2008 Source: RealtyLink Online, Listings versus Sales

The Richmond total unit sale for detached homes, townhomes, and condos/apartments for June, 2008 registered a large drop of 19% - 345 sold for the month as compared with 424 for May  2008. The selling prices were maintained at around the same levels for May.

Active listings for detached home increased from 790 units to 895, and condo/apartment listings increased from 895 to 995. The List/Sale ratios or Absorption Rates for condos and detached houses at 6.82 and 7.78 months respectively were higher than the 6-month threshold.

Similarly, the List/Sale ratio for townhomes shot up from 3.30 months to 5.30 months. The sale momentum was reversing and and home sellers could be under pressure to reduce their prices in order to sell their homes. 

Richmond Housing Report - List Vs Sold May, 2008 Source: RealtyLink Online, Listings versus Sales

The Richmond total unit sales for the month of May dropped from 464 in April to 424 - lower by about 9%, but the average prices reported were higher than the previous month. Active listings for all 3 types of housing were higher; detached home increased from 670 units to 790 and Condos increased from 810 to 895 in May.

The List/Sale ratios or Absorption Rates for Condos and detached houses were at 5.70 and 5.30 months respectively. The ratio for townhomes as registered for May was at 3.30 months. The next few months data will give us a better picture as to whether the market can hold on to the past few years price gains.