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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

September 10, 2018 | From Here

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.

Recently this blog’s been crusading. It dissed the real estate gods for massaging, diddling and mispresenting markets stats. It called out realtors who brag and mislead. It provided street evidence of a 20-40% price collapse. The reason is simple. You should know the facts. Canadian housing is in correction, and this is likely to continue. So think twice before you leverage up your family or buy a pre-con condo that could wipe you out in five years.

Also be very careful from this point forward of what you hear from the lips of real estate execs, realtors and brokers, or read in the MSM. They seem to be working hard on the fiction that housing is in recovery mode. It isn’t. Big detour.

Not just the GTA, of course. Sales and prices are falling in Calgary, Edmonton, Victoria and across the Lower Mainland. All real estate is local but the common threads are there – like rising rates, tighter lending regs and seriously over-stretched, indebted households.

Much to the shock of the locals, Vancouver’s no exception. Over the past months we’ve shown tumbling prices on the Westside, cascading sales in the Fraser Value and now a melt on the Island. The latest monthly numbers were, well, piteous.

YVR agent Steve Saretsky has two lessons for us.

First, the state of the market. Sales have crashed. Detached deals, at just 116 in August, were 30% lower than last year and the worst showing in 27 years. This is no blip. Look at the trend.

 

Meanwhile the number of properties listed is increasing steadily. Inventory’s at a 6-year high for detached houses, and is exploding for condos. While apartment sales are also off 30%, available units have catapulted by 51% with a record 43,000 currently under construction. “In other words,” says Saretsky, “there’s a pipeline of supply coming and the demand might not be there to meet it.”

 

So, falling demand and rising supply inevitably means one thing – lower prices. Residential real estate is sticky, since sellers never want to admit a weakening market, but eventually it happens. And it’s started. Detached prices in YVR peaked two years ago, and are 18% lower – something the real estate board has not pointed out, and never will. “This is particularly the case in Vancouver’s west side,” adds the agent, “where many detached homes are trading back near 2015 prices, erasing a portion of the bull market run-up.”

 

So the numbers that realtors report don’t support their own narrative. There is no stabilization, recovery or renaissance. Rather, an analysis shows downward momentum. Sadly those who may be squished flatter than roadkill squirrels are the kids. You know, the moister condo buyers responsible for crazy apartment prices and a buying orgy that resulted in those forty-three thousand units under construction.

Most buys are now pre-con so, as mentioned here many times, this is akin to entering a futures contract. People plunk down money for an asset yet to exist, to be delivered on a future date at a set price. If the market advances, they make money – which is what 100% of buyers expect, allowing them to sell at a profit. If the market reverses, buyers are forced to close on a property worth less than they agreed to pay, for which they’ll probably be unable to secure financing. Crisis. It’s coming.

This, then, is what’s happening in Vancouver. As it is in Toronto, and most of the country inbetween. There is no recovery. Forget that. When the facts change, so will my opinion.

Finally, I told you Steve Saretsky had two lessons.

The second is the value of honesty in a business where sales, commissions, relationships and reputations depend on trust. Never lie to anyone in order to sell something. In the end, there’s nowhere to hide.

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September 10th, 2018

Posted In: The Greater Fool

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