Vancouver Price Drop

Documenting Vancouver real estate price movements

Moderate Price Drop Graph – January 7, 2013

Yesterday I posted a chart showing how Vancouver West’s descent over the last 8 months from its peak, which has been called moderate and flat, is actually coming down at a faster rate than any US city.  Vancouver West dropped 8.6% in the first 6 months and 11.1% in 8 months.  There were two issues with yesterday’s posting – firstly, there were no pictures and who doesn’t love a graphical chart.  Secondly, I only used the data from Vancouver West.  To me this was reasonable but I can see why there were some objections.

In this chart I have combined the data from Vancouver West, Vancouver East, North Vancouver, West Vancouver, Richmond, Burnaby and New Westminster.  This is a good representation of the metro Vancouver area and is a more accurate comparison.  By combining these additional areas the peak is no longer April 2012 but rather May 2012.  The result as you will see below is that the Lower Mainland is still dropping faster than any American city from its peak.

Click the image to see the full size image

Graph

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46 responses to “Moderate Price Drop Graph – January 7, 2013

  1. Pingback: Moderate Price Drop Graph – January 7, 2012 « Vancouver Price Drop « The Affluent Boomer™

  2. mike January 7, 2013 at 11:54 pm

    it looks similar to miami so far. i still dont believe it will follow miami’s pattern tho. u never no i guess.

    • an observer January 7, 2013 at 11:59 pm

      It would be hard to imagine a Miami style crash here (in terms of the velocity of the crash) and I do think this will be the last month we are down more than Miami by month but yeah, you never know

      • eastvanspecial January 8, 2013 at 11:42 am

        During my sunny, delightful trip to Miami last year,( teeming with Europeans on vacation ) I couldn’t help but wonder how Vancouver could possibly keep it up with the dismal weather and high cost of living.

  3. kelly January 8, 2013 at 12:23 am

    Kudos observer – chart is amazing!!! It really does paint the picture.

  4. gokou3 January 8, 2013 at 12:33 am

    Fantastic graph. Worth more than a thousand words and 10 thousand underwater mortgages.

  5. 604x January 8, 2013 at 12:46 am

    This scenario isn’t too much of a stretch:
    – flat Chinese New Year
    – listings surge
    – NDP government elected (impacts sentiment of all those right wing Boomers)
    – back-room Ottawa lobbying of realtors and mortgage brokers fails to change CMHC policies and OSFI
    – Boomers bail because they don’t have a ton of debt and can lower prices
    – prices continue to decline on thin volumes
    – new construction starts are delayed, construction workers get laid off
    – unemployment spikes (and many in the FIRE sector are speculators and will have to dump assets)
    – more downward pressure on prices
    – sentiment gets crushed and we’re in a vicious circle downward

    I don’t think you can model it, but it would lead to a nasty Miami-style implosion.

  6. rp1 January 8, 2013 at 1:27 am

    I greatly appreciate this chart because it puts the American housing recovery into perspective.

  7. jack January 8, 2013 at 3:23 am

    Dear Readers
    Just one note. I bought my property in West vancouver for 3.5 million in 2006. At the time I had bought the money over from the UK and for my exchange rate I was given 2.5 canadian dollars for each UK pound. so I had actually paid 1.4 million UK pounds ie (3.5/2.5). Today I want to sell it and it is valued at 2.4 million .The exchange rate today for canadian dollar to UK pound is 1.59). This means I will get 1.5 million pounds back. I’m not complaining ,as I am moving back to the UK..
    So dear readers please note the Canadian dollar presently is at its Highest value in HIstory compared to the major currencies. Most buyers of high end properties are from abroad. Prices in high end properties are partly decreasing due to the high value of the canadian dollar

    • Real Estate Tsunami January 8, 2013 at 12:01 pm

      Jack,
      Good point. Foreign Exchange risk is inherent in buying real estate from abroad.
      In your case, you were lucky. The exchange rate moved in your favor.
      Interestingly, you say “most buyers of high end properties are from abroad”.
      According due the RE talking heads, the impact of buyers from abroad is minimal in Vancouver.
      By the way, why are moving back to the U.K?

  8. Merganser January 8, 2013 at 6:18 am

    Don’t see Vancouver on the graph. There are only 14 lines – if I counted correctly.

  9. Thomas Holloway (@Zerodown0) January 8, 2013 at 9:07 am

    You can monitor Vancouver Teranet data too. They are more delayed than the MLS HPI, but use consistent methodology to the Case-Shiller. Which HPI category are you using?

    • an observer January 8, 2013 at 10:06 am

      I used the MLS HPI because it allowed me to break down the results by area (ie lower mainland vs entire greater vancouver area which would include whistler, pitt meadows etc) and differentiate between SFH and attached and I didn’t see a way to do that with the teranet data

  10. William Li January 8, 2013 at 9:18 am

    Though I admire the great work the owner has put forward, I have to point out the rather significant shortcoming of this analysis.

    That is the “POPULATION GROWTH”.

    Without this put into factor, any conclusion we draw is not going to be accurate.

    I seriously doubt American cities has been experiencing similar growth we currently see here in Canada. As a matter of fact, a better comparison may be the urbanization movement in China, in which 500 million people moved from rural area to urban cities, and the price has increased 10 folds.

    Frankly I won’t foresee this happening in Vancouver, or Canada, neither would “crash”.

    BTW, I am looking to move from Toronto to Vancouver but I am not going to wait.

    And my great appreciation towards the owner of this site for providing so many valuable info. Really fantastic work!

    • an observer January 8, 2013 at 10:09 am

      The population growth in the lower mainland of Vancouver has been very low recently. I don’t have the exact numbers but I know it has been very low vs historical averages and we also now have more people leaving the province to move to other provinces than are coming here and I would expect this trend to not only continue but to accelerate in the coming years.

    • eastvanspecial January 8, 2013 at 11:51 am

      “The Miami metropolitan area grew 11 percent between 2000 and 2010 according to the recently released census count.”
      vs
      “Statistics Canada released the first batch of numbers from the 2011 census on Wednesday and the population of what the government agency refers to as the census metropolitan area of Vancouver increased by 9.3 per cent since the last census in 2006.”

      So, Vancouver growing about the same pace as Miami, perhaps slower.

      • Many Franks January 8, 2013 at 12:24 pm

        Double-check your conclusion. The numbers you quoted:
        Miami: 11% growth from 2000-2010 (10 years)
        Metro Vancouver: 9.3% growth from 2006-2011 (5 years)
        That has Vancouver growing significantly faster.

      • an observer January 8, 2013 at 2:17 pm

        Hopefully someone has some recent data from Vancouver that can be compared to some of these US cities a few years ago. If I recall correctly, Vancouver (especially the lower mainland) has had very poor population growth recently

    • bailinginbc January 8, 2013 at 4:45 pm

      I don’t really get your point here. Even if there was very large population growth, which is questionable, dosn’t that just make the price dropping for the last seven months even more dramatic?

  11. Many Franks January 8, 2013 at 9:33 am

    Excellent work, observer. I recall seeing about a month ago a chart including a number of US cities centred at the peak, which showed the asymmetries in run-up and recovery. That might be an interesting chart to compare against this one, particularly if you included Vancouver’s run-up rather than just the decline from peak. Anyone have a URL hanging around for that chart?

  12. bullwhip29 January 8, 2013 at 10:28 am

    observer, some more nice work.

    At the risk of sounding like a troll, I’d also like to make a couple of comments/suggestions. I fully understand that this is your blog and you are free to do/say/respond however you wish (or not). Any and all feedback would be appreciated. Don’t get me wrong though. Overall, I believe the best years are likely behind us and that the direction of least resistance is DOWN. Having said this, the actual RATE OF DECLINE and MAGNITUDE of the drop from peak to trough will be harder to determine. It is probably too easy to say that Vanc will be another Miami just because this chart tell us that it will be so. Simply making a projection based on what occurred elsewhere in the past (under completely different circumstances) may not be that effective as we all found out looking back to 2008/09 when we assumed without a doubt whatsoever that the top was in for Vanc home prices. Maybe (just maybe???), prices here did not top in April 2012 and if it they did indeed do so, perhaps things take way longer to unwind than anyone is currently anticipating? Much remains in the hands of the powers that be. Just sayin’…

    *** For the sake of satisfying my curiosity, could you plot Vanc prices vs. US cities from 2005 (or earlier) to present. Maybe do a 20 city average and/or look at the 5 west coast cities? This way, we can get a better picture of how Vanc prices responded (in real time) to:

    (1) the severe US housing downturn and accompanying financial meltdown
    (2) the unprecedented stimulative measures that were to follow from 2009 to present (or shall I say to infinity and beyond?)

    Uber Bullish case:
    Central bankers continue to keep foot on the gas pedal, global financial markets remain on upward trajectory as issues in Europe and the US get kicked down the road (again), home prices in US start to gallop higher, Vanc home prices flatten out and possibly rebound (as some start to believe 2012 was a repeat of 2009). Flaherty and the BOC keep their powder dry…for now. The inevitable is delayed once again.

    Perma Bear case:
    Credit crisis in Europe reignites. This time fire spreads to Asia and N. America in a big way. Gov’ts and central banks around the world fail to resuscitate markets using the old 2009 playbook. The inflation boogeyman finally makes his presence felt on this side of the globe. Interest rates rip higher. CMHC projects they will run out of money in 2014. Curtain falls on biggest deadcat bounce the world has ever seen and a global depression ensues.

    Likely case:
    2013 winds up being a replay of 2012. Any/all issues that were front page news last year remain there this year. Very little gets resolved. For the most part, very few people care. Flaherty and the BOC wind up doing f*&k all after “warning” the public for the umpteenth time. Savers continue to take it on the chin. Vanc RE market remains in low gear, prices jockey up and down but wind up somewhat lower on the year. MSM remains in full damage control mode as we are currently witnessing. ie. Vanc Sun now publishing multiple articles daily, developers taking out full pg ads (ie. Polygon pg F3 Vanc Sun Jan 5), the usual cast of characters now in campaign mode 24/7 etc. Tug-o-war between bulls and bears to be continued…

    • bullwhip29 January 8, 2013 at 10:33 am

      edit:
      Uber Bullish case:
      ….as some start to believe “2013 will be a repeat of 2009”

    • an observer January 8, 2013 at 10:42 am

      You make a lot of good points and to clarify, my intention with the chart is not to say that Vancouver is going to follow one of the paths that an American city followed. Every city has its own unique circumstances.

      The key points behind this graph are 1) Vancouver is not experiencing a moderate decline or flat conditions as we are hearing (albeit less and less often) from the real estate industry and 2) We can look at very recent history from a very close neighbour to see how small initial drops can lead to steep drops with very little notice.

      My opinion (based on a little number crunching, some thought and influenced by the view points of others) is that the Vancouver area will drop about 10% this year bringing the total drop to close to 20% by next January and Vancouver West in particular will be down over 25% (from April 2012). 20% after 19 months also happens to put Vancouver in the middle of the pack in comparison to US cities after 19 months from peak. On the other hand, it is not difficult to imagine a scenario where prices are higher in a year than they are now – I believe all this will do is delay the inevitable by a year and likely make it even more damaging to our economy but it is still very possible.

      • bullwhip29 January 8, 2013 at 12:23 pm

        I understand what you are saying. The decline in just a few short months is anything but moderate and it has caught some (but not enough imho) completely by surprise. It remains to be seen which direction the dog will wag the tail over the short to medium term.

    • JR January 8, 2013 at 11:53 am

      Bullwhip, I appreciate your objectiveness.

      I’ve posted this opinion and I’ll post it again. I lived and travelled in the US through the buildup and the subsequent crash. My opinion is the largest contributing factor to the crash was the over-building in outlaying cities and towns. When demand began to evaporate as everyone who could be in were in, prices were at an all time high, there was an incredible amount of inventory coming online as developers raced for the top and nobody to buy it.

      An example of this is Deschutes County, Oregon. An awesome place to live, great skiing, biking, climbing, golf, fishing, rafting. But there are few jobs there. Most people buying there were vacation or retirement properties. This county was blacklisted by banks as early as 2005 I believe. The over construction there was unprecedented. That market tanked long before the peaks for the cities above. Sounds a bit like Kelowna, eh? I telecommute for work and my wife and I are considering moving to Kelowna. Housing is over half the price as the the cheapest lower mainland properties.

      All around the Seattle periphery over building happened. The infection of dropping prices as a result of inventory that could not be consumed eventually reached the core. Seattle SFH might have dropped 30% but in places like Snohomish, Renton, North Bend, dropped much, much more, despite the presence of large employers like Microsoft and Boeing. What is going on in parts of Langley, Pitt Meadows/Poco, and Maple Ridge is quite analogous in my opinion.

      The other factor people are ignoring is just how much of BCs GDP is based on construction. At 30% it is higher then it ever was in the US. Even if prices drop only 10%, if sales are especially anemic, new construction will grind to a halt, then economy weakens and begins to show signs of implosion.

      • Real Estate Tsunami January 8, 2013 at 12:31 pm

        JR,
        Very good point about the contribution of RE to the GDP of the Lower Mainland in the last ten years. Similar to Ireland and Spain.
        Also, I agree with your comment on recreational RE.
        Whistler RE is going down fast.

      • bullwhip29 January 8, 2013 at 1:03 pm

        Actually, the situation in the US was different. As the MBS market there went parabolic, the extreme overbuilding naturally followed in lock step (there and elsewhere ie. Canada). It got to the point where any/all warm bodies that were available became “homeowners” and with nothing to lose if things went bad, why wouldn’t they? I have argued that such a scenario would not play itself out in the same fashion (not to mention the same velocity) in Cda as loans are, for the most part, full recourse. It is possible that the RE bubble here never bursts overnight, but rather slowly leaks out air over a much longer period of time and ultimately leaves Cdns WORSE OFF than our counterparts south of the border (who had an opportunity to jump ship and de-leverage rather easily).

      • JR January 8, 2013 at 1:42 pm

        I’m not sure the recourse argument is a valid one. Some of the most significant drops in the US occurred in full recourse states which has been pointed out before. Maybe that can be added to the graph above. How does recourse differ in Canada? I remember Garth Turner writing telling people to not dip into their RRSPs to save their mortgage because those could not be touched in a default initiated bankruptcy. Are people with no savings, unable to pay their mortgage, losing jobs, and underwater by several hundred thousand going to be afraid to declare bankruptcy? It’s a huge question. If it’s anything like the states it will become less taboo and more socially acceptable as things fall apart. I think that will determine the trajectory six to twelve months from now.

      • bullwhip29 January 8, 2013 at 4:27 pm

        @ JR
        What occurred in the US was complicated and messy. End of discussion. The fact the many states are non recourse (coupled with the equally well documented sub prime issues and other fraudulent practices) definitely made the problem worse and helped accelerate the downturn in the process. IMHO, this is hard to dispute. In the US, many financially sound homeowners stopped making payments (and many continued to live in their homes) the very second it became clear prices were headed lower. I do not think such nonsense will occur north of the border (well, at least not to this degree). While we may very well wind up in the same position (or worse) in Cda at the end of the day, I believe the process could take much, much longer to unfold. Overall, I think Cdns as a whole are far more conservative in their views about life and would jump through every hoop and hurdle imaginable in an effort to save face before having to make a public spectacle of themselves.

      • Groundhog January 8, 2013 at 8:10 pm

        I’m not sure why this recourse vs. non-recourse thing keeps coming up. Here is a list of recourse states and non-recourse states:

        http://www.forecloseddreams.com/recourse_states

        From a quick view there does not seem to be much correlation between drops and recourse/non-recourse.

        Just did a quick google search as well, and this myth is prevalent in Australia as well, addressed here:

        http://theconversation.edu.au/debunking-the-myths-peddled-by-australias-property-bubble-deniers-4488

        “A study by two Federal Reserve economists debunks the notion that the US has non-recourse loans. Out of the fifty states and D.C., 11 are non-recourse. All of the remaining 39 states are recourse. On top of this, in some of the non-recourse states, the first mortgage many be non-recourse, but all proceeding mortgages are recourse. Also, it often depends on the legalities and judges’ decisions as to whether a borrower is required to pay back the full value of the loan in a non-recourse state.

        Worse yet, some of the states that experienced the largest housing bubbles have recourse loans, for instance, Florida and Nevada, whereas California and Oregon, similarly affected, have non-recourse loans. Overall, there is no real difference between states that have recourse and non-recourse loans, apart from recourse borrowers who tend, on average, to hold onto their properties longer before defaulting.”

  13. Village Whisperer January 8, 2013 at 1:46 pm

    FYI… I understand 12470 Blue Mountain Cres in Maple Ridge finally sold. I am told it went for $380,000.

  14. Real Estate Tsunami January 8, 2013 at 2:55 pm

    The recourse argument is a red herring.
    I was a loans officer in a medium sized Credit Union in the early 80s.
    People with under water mortgages were walking away. No court would touch them.
    We ended up being landlords and finally had to sell at substantial losses.

    • kelly January 8, 2013 at 3:53 pm

      please expand…”no court would touch them.” Their credit wasn’t affected? Their default not pursued by the bank/credit union? Their name on title mysteriously transferred without recourse? Please enlighten me real estate tsunami.

      • Real Estate Tsunami January 8, 2013 at 4:34 pm

        Kelly,
        Most of them were hardworking, young families who’s struggled financially due to the high interest rates prevalent at that time. Many banked with us since they were children.
        They simply could not afford their mortgage payments any longer.
        They were tough luck stories, and if we went the recourse route, the courts simply foreclosed on the property and remember the mortgagee never really has title until the mortgage is paid off.
        Also, can you image the negative PR if we’d had pressed too hard?
        Family of four, bread winner lost his job, financially distressed kicked in the teeth by heartless Financial Institution.
        Trust me, it was better to take the loss and move on.
        Sometimes, human compassion trumps profit making.

      • YVR Housing Analyst (@YVRHousing) January 8, 2013 at 4:43 pm

        I can confirm cases of lenders not bothering to pursue borrowers because it was not worth the time. Expected loss recovery, after all expenses, in many cases was pennies on the dollar. Not worth the time, and often even collections agencies wouldn’t get value. Borrowers’ credit rating was shot, but the same of course is true in “non-recourse” states.

        IIRC even today Canadian alt-A lenders are averaging 70% loss recovery (someone correct me if I’m wrong) because of the expenses associated with foreclosure and asset liquidation.

  15. YVR Housing Analyst (@YVRHousing) January 8, 2013 at 4:33 pm

    Good work on the chart, here’s one for aggregate Teranet/CS HPI I created over at housing-analysis, also modelled after the Seattlebubble one. https://docs.google.com/spreadsheet/oimg?key=0Aku6wWaKdvsQdGFHMFNmRFdZdVVIYURWZ0RNWk5XU2c&oid=10&zx=edzcmmhjoocl

    I would take into account previous comments about the overbuilding/subprime issues in other US markets that pushed through price drops through spring selling seasons. Notable exceptions were Seattle and Portland, both of which saw spring upticks even during the brunt of their GFC. Seattle had its own “subprime” problems as well as some overbuilding, albeit with price run-ups not as severe as some of the other US cities. I don’t dispute prices in Vancouver are going to fall, however I would not expect trajectories of the same order as some of the worst-of-the-worst stateside. That isn’t to say it’s impossible though.

  16. home-less January 8, 2013 at 11:19 pm

    What data did you use to compose your graph? Are these detached or mixed detached, townhouses and condominiums?

  17. CalgaryBoy January 13, 2013 at 11:02 pm

    How which city from the states represents Calgary the most?

  18. CalgaryBoy January 13, 2013 at 11:05 pm

    I meant “Now” which city from the states resembles Calgary the most?

  19. H.K Money February 6, 2013 at 7:01 pm

    This a reply to Jack’s comment on 8 Jan. I know it is hard to accept that you lost money in your property and try to think of ways to make yourself to feel better. It is true that you got approx. the same amount of U.K money but the amount of pound did not have the same purchase power as in 2006. U.K inflation is almost the highest in Europe. If it would make you feel better, you can say to yourself 2.4M isn’t so bad because if you don’t sell it now you may get 1.2M next year. Feel more happy now. I feel happy for you too.

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