January 4, 2010
A Déjà vu Vancouver Real Estate Tale
At the beginning of 2009 a gloom and doom mentality, which had spilled over from the last quarter of 2008, made it hard for Buyers to believe that they were in a period of opportunity. Home sales in British Columbia had declined by one-third in 2008 as compared to the previous year and paralysis was the tenor of the real estate market. “B.C. Home Sales Start With a Whimper in 2009” read the headline from Cameron Muir, writing for the B.C. Real Estate Association on February 16th, with home sales down 61% YTD. BC Home Sales Start with a Whimper in 2009 .
Was the Bank of Canada going to react to kick start the Canadian economy and the real estate sector with a decline in interest rates or were we going to start seeing foreclosures rising alongside unemployment rates and interest rates? Looking South of the border to our American neighbors wasn’t reassuring as unemployment numbers and foreclosure rates were on the rise. Yes, our banking system wasn’t diseased like that of the U.S., but Canadians consistently take their cultural cues from our Southern neighbors and anxiety was leaking across the border at an alarming pace.
The Bank of Canada responded at its meeting in early March by cutting the overnight lending rate to .5%, taking the prime down to 2.5%. If your mortgage was on a variable with a discount of .85 below prime, and you still had a job, you were sitting pretty and perhaps starting to think about picking up a little bit of extra real estate since prices had come off by close to 40% YTD in some segments of the market. Those downtown micro apartments could almost carry themselves as rental investments at this point if you could just overcome the plague of fear and paralysis which had taken hold as the press dramatized a scenario which would make the Depression of the 1930s seem like a holiday. Consumers needed to fight stagnation, take a deep breath of positivism, and START SPENDING AGAIN.
By the end of the first quarter, conflict was on the horizon as higher demand begat higher prices. The possibility of buying an old house in Point Grey or Dunbar for under $1m. was fantasy once again. Would affordability decline while fear of rising interest rates rose? Prices were down YTD but activity was up by 24% from the previous month. Many purchasers began to think that they had missed the bottom of the market. From a Realtor’s perspective it looked like we might just see a robust Spring market.
Which, we did.
For East Vancouver and the West Side April sales actually surpassed April 2008 sales, with 1103 properties trading hands as compared with 979 sales in April 2008. By May there was a buying frenzy with 1211 properties selling as compared with 846 in May 2008, but not quite up to May 2007 levels when 1376 properties on the east and west side sold. By July the numbers had superceded 2007 when 1137 properties sold as compared to 1234 in July 2009—a serious jump year over year as July 2008 saw only 594 sales on the east and west side. Throughout the summer and fall of 2009 Buyers for single family homes experienced the pressure of multiple offers--just like the halcyon days Sellers had come to expect during 2006 and 2007.
“Torrid” was the adjective used consistently to describe the real estate market in the Vancouver area by the end of November, which was the hottest market for a November since 2005. December sales were on par with December 2007 with 466 sales on the east and west side as compared with 477 sales in December of 2007.
So, we ended the year with diminished inventory and high prices--which in many west side locales have exceeded previous highs. It is going to be very interesting to see at what level affordability does become an issue in the west side single family housing market given the constraints on inventory and density. My guess is more Westsiders are going to continue to become Eastsiders and that the Main Street divide between east and west will have far less cultural significance by the end of this new decade. Apartment living will be the norm for most Vancouverites and more socializing will take place in the public sphere. This should be good news for Vancouver restauranteurs, who will be providing livingrooms to all the apartment dwellers with homes too small to entertain their friends.
Copyright 2010 Christine Saulnier