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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

April 30, 2019 | So done

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.

It’s like watching a slo-mo train wreck. Or a speeding autonomous Tesla headed for a cliff. Or the federal Libs on their way to October. You just know what’s gonna happen. Guts everywhere.

And so real estate in Vancouver quietly, painfully, slowly implodes. The slow melt this blog has forecast for so long approached, arrived, now deepens. Even a developer who’s famously  offering avocado toast for a year to condo-buying moisters can’t stem the tide. This thing currently has four paws in the air, despite cheap mortgages, falling prices and spring hormones.

Little more than a year ago 94% of pre-con condos were snapped up by hungry Mills. They lined up in sales pavilions. They flooded online reservations. They unblinkingly coughed up whatever outrageous prices the developers asked.

That 94% has now dwindled to about 15%, which means the developers and sellers are desperate, not the kids. Prices have dropped 6% in a year with more to come. Sales levels have crashed to the lowest point in 18 years. The number of assignments is soaring as recent buyers scramble to get out prior to closing. As local realtor Steve Saretsky points out, the unsold condo inventory across the region has mushroomed 184%.

 

“Developers are facing difficult times as they navigate the shifting landscape,” he blogs, “with increasing risks that some existing buyers may simply walk away from contractual obligations. These risks have been heightened through lower prices, tighter financing, and an illiquid assignment market which has seen new monthly listings growing at levels we haven’t seen in over a decade.”

And look at the house porn quotes now filling the Van media:

Geller, who has worked in the real estate industry for 45 years, said this market is the worst he’s ever seen — and that includes downturns in the early 1980s and the 2008 financial crisis. Jason Soprovich, a realtor who has worked in the West Vancouver market for 26 years, echoed that assessment: “It has truly been the worst downturn I’ve seen in my career.” From stratospheric highs that peaked in early 2016, Metro Vancouver’s real estate market has slowed, and prices have dropped, in all areas and housing types.

House prices in West Van are down 15% to 30%. But that’s not the bottom. How could it be when there are virtually no buyers? Now realtors are dumping Audis. Brokers are laying off support staff. Marketing is kaput. It’s hang-on, survival time for people who were godly rockstars with sexy rides three years ago.

And remember the cautions this blog made about credit unions and their unholy alliance with mortgage debt? Right again.

Look at the Sandy Cove mansion that BlueShore Financial unwisely funded. The North Van credit union with 40,000 members handed over more than the current assessed value to a guy and his stepson to reno and flip a six-bathroom single home. After a long sojourn on the market the price crashed from $6.5 million to $3.98 million. Blueshore went to court for the right to dump the place as a foreclosure. Still for sale. Everybody loses, save the guys who worked on the property and were paid with credit union funds.

Formerly the North Shore Credit Union, Blueshore has over $3.8 billion in outstanding mortgages and commercial loans and has taken  in $3.9 billion in deposits to fund them. Last year its net income declined to $18.2 million from $20 million in 2017. Of total assets, 85.7% are in real estate-related loans.

Blueshore and all of the other house-heavy lenders in BC (and Ontario) may be okay. Let’s hope so. But we should also be realistic. If real estate topples, Canada’s provinces could face something along the lines of the S&L (savings and loans) disaster which befell the United States. That mess happened when rates rose, real estate values withered and credit union-type outfits faced insolvency. Between 1986 and 1995, 1,043 out of 3,234 savings-and-loans organizations failed.

The bottom’s nowhere in sight at the moment. The tone-deaf BC government’s suite of anti-real estate taxes took a natural market correction and turned it into a rout. At first people looked at the anti-Chinese tax, the anti-specker tax, the empty house tax and the uber property tax and concluded demand and prices would fall. So they stopped buying. The prophesy was self-fulfilling. The worse it feels, the worse it gets.

And the worse it shall be.

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April 30th, 2019

Posted In: The Greater Fool

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