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August 11, 2016 | The mess

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

MESS-modified

Notes from the edge. (Of the coming mess.)

How much of an impact has the Chinese Dudes Crash Tax has on Van real estate in the last 17 days? Judge for yourself.

Rob Chipman’s a veteran YVR realtor with Coronet Realty, running a stats-drenched site where he uploads daily deal numbers for both the Vancouver and Fraser Valley Boards. In addition to telling you how many sales happen every 24 hours, the price and days-on-market, he also tabulates the sell-to-list ratio.

Here is his explanation of what that means:

“The sell/list is a simple measure of demand that divides a given number of sales by the number of new listings taken during the same period. It is expressed as a percentage. In a hot market, we sell more properties than we list, so the number exceeds 100%. Markets like that commonly see multiple offers over list price. Slow markets, on the other hand are characterized by low sell/lists, below 35%.”

The Friday before the tax was sprung on an unsuspecting market, the sell/list ratio was 121.15%. The average for this week is just51.2%.

Ouch.

As this pathetic blog pointed out in the weeks prior to the tax being announced, the Lower Mainland market was starting to roll over, with sales of detached homes plunging even while prices shot to new, dizzying heights. All it needed was a shove to topple over the cliff of buyer despair and seller greed. While foreign buyers represent less than 10% of sales, they account for 100% of FOMO. Wiping that level of activity away – or seriously diminishing it – is more than enough to advance the evolution of a dying market. Good job, government!

Did you get out of Van when I warned you to?

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Or Langley?

Real estate in this butt-ugly Van burb is emblematic of the region. Prices have wobbled insanely higher over the past year, while sales have been toppling in recent months. Not good. Detached home transactions plunged 34.2% last month from just the month before, townhouses were down 40% and condos off 24%. Meanwhile a detached home in this wilderness now averages just fifty grand shy of a million, up 36.8% since last summer. Higher prices on thinning volume. Beware.

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Meanwhile in Richmond, probable epicentre of the HAM invasion that scared the locals into bidding wars, the news is equally dismal. Realtor Steve Saretsky reports in a Tweet: “As of right now, since Foreign tax introduced July 25, 11 detached sales in Burnaby, 15 in Richmond.”

And there are 783 active listings. At this point, that’s a two-year supply of houses. #PrayForSellers.

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So what happens to the banks if this West Coast dive takes on national implications?

“We believe falling home prices would trigger a spike in loan losses, not from residential mortgage lending, but rather from unsecured household debt and household loans secured by other collateral,” says National Bank analyst Peter Routledge. The shock of a real estate rout “could quickly infect the broader Canadian economy.”

“As home prices start to fall,” he told the weenies at BNN, “people get a little bit more conservative – they stop spending. When they stop spending, the economy starts to shrink.”

Great. With the loss of 110,000 full-time jobs in the last two months, a record trade deficit and the GDP already contracting, that’s the last thing we need.

By the way, Routledge says the bank most vulnerable to a YVR meltdown is… CIBC.

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Speaking of which, that bank’s economist Avery Shenfield on Thursday issued his own warning about “important negatives” which are hitting the economy because house prices are just too damn high.

“A younger generation of yet-to-be homeowners faces the need for greater savings to build a down payment, cutting into their room for consumption,” he writes. “The lack of affordable housing for the next generation of workforce entrants could act as an impediment to business growth, or encourage businesses to locate elsewhere. And fears that a steep climb today risks a harder landing for house prices down the road could inject caution in lending that acts as an economic headwind.”

There ya go. Nothing good about what we have allowed to happen. Norr any easy way out.

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Donna saw that first-hand, in Calgary, where she was an enumerator for the federal census this summer. Guess what? She’s also a branch-level employee of the same bank, plus a happy tenant whose landlord just cut the rent.

“As an enumerator for the census I had to do our high density inner city, trendy neighbourhood in the south….LOTS of unoccupied buildings, even the lovely 1 million plus infills,” she says. “Two shops on our little high street are closing “due to the recession”  and hubby’s consulting engineering office (non oil and gas – whew) were offered pay-utilities-only  if they wanted to move to new office tower. It’s claimed we’re not  over developed, we’re under demolished here in Calgary!”

The office vacancy rate in Cowtown is now 21.6%. There’s a 15-year supply. Too much real estate, not enough jobs. Guess how this ends?

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August 11th, 2016

Posted In: The Greater Fool

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