Monday, October 1, 2007

A new day: Y2ThisTimeIt'sDifferent

VREB numbers are out. I'm not going to do much analysis other than to repeat what VG has already said (with an edit): "sales are down considerably from August (25%) and prices are basically flat for the median SFH." Condo median prices jumped almost $15,000, though I don't give much weight to this number because the number of condos sold is so relatively small that blips like this are common.

Anyway, enough about that, you'll get far superior analysis from PB at VT. So go there, then come back and buy some books from Amazon through this site so I can quit my day job and live the dream ;-)

On with the real show now...

I peruse statistics at work in my own research fairly often. I came across this dandy gem today:
CMHC is forecasting that housing starts in BC will total 14,100 this year, down 13.5% from the 1999 level. A surge in demand for high-end homes (those costing $500,000 or more) is not expected to be strong enough to offset the effect that higher interest rates and construction and land costs have had on the market for entry-level home buyers.

The cost of new housing in BC’s two biggest urban centres continued to fall in August. The new housing price index (NHPI) in Victoria was down 4.4% from a year earlier, while Vancouver’s NHPI slipped 1.0%. Elsewhere in Canada, only two urban areas–Saint John-Moncton-Fredericton (-0.4%) and Sudbury/Thunder Bay (-1.3%)–saw the cost of new housing decline. Prices are rising in other cities, at rates ranging from +0.9% in Windsor to +7.2% in Ottawa/Hull. Overall, new housing prices were up 2.4% from August 1999.

Since 1992, the cost of new housing in Victoria has fallen 28%, while average prices for new housing in the Vancouver area have dropped 17%. Prices for new housing in the province have been declining steadily since the mid-1990s. In Vancouver, the rate of decline is slowing but this has not yet occurred in Victoria. Land prices are beginning to stabilize, but the cost of homes built in the city has continued to drop. New housing prices are affected by a combination of factors, including the state of the housing market, the availability of land on which to build, and the type and size of housing that is being constructed. The long-run decline in the NHPI is a reflection of falling prices for both the land and housing components of the index. (emphasis mine)

When was this from? October 13, 2000. And they say Victoria is different. What was happening back then? Stock market was uber-bullish, the NDP government of BC was on the way out, and developers were ready for a pro-business change. Even then they claimed no one could afford the product on offer. So what does this mean? Just more confusion for yours truly unfortunately. My best guess: the markets change, but the rhetoric doesn't. Man, do times ever change fast in the RE market. That was 7 years ago, almost to the day. Someone. Please. Help. Us.


Anonymous said...

Since that time construction and land costs have escalated.

For example;
A 1,200 square foot rancher in Langford cost $70 per square foot to build in 2000 and is now around $120 or a 70 percent increase. The land cost has also risen from $100,000 to around $265,000 for a 165 percent increase. All in seven years.

To me this is hyper inflation. I believe things have been changing over the last year with the faltering US demand on our lumber and the high loonie (cheaper carpets, appliances purchased from US companies), will cause construction costs to tumble. In otherwords, the home that might be built 6 months from now will be cheaper to construct than the one completed last week.

Anonymous said...

The only real reason why cost of land and materials went up that high is GREED on the part of land-sellers and builders.

Do you blame land-owners for calling the highest price if they can get it?

Really, I wonder if tradesmen are charging, or rather, EARNING that much more per hour than 5-6 years ago?

OK, so drywall went up 10%. Does that justify the BS of home prices doubling and tripling in 7 years??

If (WHEN!!!!) prices decline to reality levels, I think the only losers will be developers and those who innocently bought during the last 3 years and are forced to sell at cheaper prices.


Read this from Greenspan. He says the good times are over for the housing market and economy - world wide.

vg said...


"says that higher interest rates and higher inflation are more likely in the future, leading to slower economic growth and lower housing and share prices."

"He says it is inevitable that house prices will fall or stabilise as global interest rates continue to rise, and he fears a sharp correction is possible."

I know he's out there pumping his book and that is alot of doom and gloom but remember he can speak his mind now in plain English and not the old Greenspeak.


He is a very smart man.4e555555


Sorry my cat jumped on the key board.

Anyway, Greenspan is no idiot. He made mistakes but he also got many things right too!

Anonymous said...

watch chek news right now. an item about being "priced out"!

Anonymous said...

well, that little news item started by pointing out how ridiculous the housing market is, but moved on the usual rah rah real estate rhetoric. they basically said that you should go buy a house in nanaimo now so that you can make big money on flips since that city is cheaper than victoria. oh my.


Here is an article on all of the RE problems in the UK.

vg said...

anon 6:08,

They failed to mention the 25% decline in sales and the cooling trend that has clearly developed,funny how they avoid the real news and spin it around to talking to an agent who says couples are buying houses together to "make it work". How about a good ole housing correction/crash ? nope,can't happen here,everyone is coming here thats why sales are down.