Home Capital Group Stock Plummets 65% Canadian housing bears are dancing in the street today. Canada’s largest alternative mortgage lender Home Capital Group appears to be on the verge of going bust. Today, the stock plummeted by 65% after the company disclosed that it struck an emergency liquidity injection of $2 billion dollars. Home Capital Group was the company famed American short seller Marc Cohodes has been targeting for over two years, who claims the companies equity is worthless after issuing fraudulent loans. As investors piled out of Home Capital, the contagion then spread to other alternative lenders including Equitable Group which plummeted more than 30% and First National which plopped by about 10%. So what exactly does this all mean for the Canadian housing market? Canadian housing bears are calling this the Canadian version of the “New Century” moment. New Century was a massive alternative lender in the United States during their housing boom/bust and was the first domino to fall back in 2007. Although it’s too early to tell how this all shakes up, there are many implications of today’s news. Firstly, for sub prime borrowers who can’t qualify at big banks it will now become even tougher to

Real Estate Investors are Encouraged to Sell Amidst Irrational Exuberance Calum Ross, a top producing mortgage professional, real estate investor, and author of the book ‘The Real Estate Retirement Plan’ is encouraging real estate investors in Vancouver & Toronto to sell. A rather bold statement from a guy with plenty of skin in the game. In his recent post titled ‘The Irrational Exuberance & Greed of GTA and Vancouver Real Estate Investors in 2017‘ Mr. Ross highlights two primary reasons for signalling the call to sell. Yield on Toronto and Vancouver Real Estate Has Diminished: Rising real estate prices in these markets have outstripped the increase in rental rates which has eroded yields. This now means many real estate investors are over-weighted in one asset class, and that many new real estate investments are in reality speculative grade investments because they don’t meet the suggested 3% interest rate cushion to sustain cash flow (a metric outlined in more detail in my recent book on borrowing to invest). Investors are Demonstrating Irrational Exuberance and Greed Towards Real Estate: I’m deeply concerned by the number of people who believe real estate values will continue to climb at these uncharacteristically high levels. Not

Buyers Snatching up Condos In the Push for Affordability I’ve been documenting the historical rise in the condo market for awhile now, basically ever since the detached market became unhinged. As the market began to exhaust itself last spring, the introduction of the foreign buyers tax appeared to be the final nail in the coffin for the detached market. As prices began to fall sanity reemerged, budgets were readjusted, and the race for affordability was on. Condos became the new prized possession. The sales composition began to shift, fewer and fewer detached sales were taking place. As foreign capital began to dry up, locals were unable to pick up the tab on a 1.8 Million dollar detached home. The sales composition (total number of sales across REBGV for all market segments) for detached homes hit a new low of 30% of total sales in August 2016, right after the introduction of the tax. Falling from their peak in February of 44%. Condos were left to pick up the slack, going from 43% in January 2016 to hitting a new high of 55% in November. The purge of multi million dollar homes is also seen in the total dollar volume (how

How Much Have Vancouver Real Estate Prices Increased? The last couple years have seen tremendous windfall gains in the Vancouver real estate market. The unprecedented gains have sent politicians scrambling and economists reaching for the red flag. Generally real estate is seen as a hedge against inflation, in most normal markets real estate should rise with inflation, usually around 2-3% per year. For many years Vancouver wasn’t too far off. Vancouver real estate prices had risen on average by 6.4% in nominal terms (amount of money generated by an investment before factoring in expenses and inflation.) In real terms (adjusted for inflation) prices were rising at an average of 3.2%. Suddenly, in 2015, the market ignited. Fuelled by low interest rates, easy access to credit, foreign capital, an exuberance of demand, speculation and a shortage of supply, prices exploded. Windfall gains stretched across the lower mainland. From January 2015 to January 2017 prices increased by as much as 52% (as per the MLS benchmark which adjust for inflation). The biggest increases appeared in Mission at 52%, White Rock 50%, and Abbotsford at 48%. If you bought here prior to 2015, well done. Perhaps most intriguing, the largest gains were seen

The often debated Vancouver real estate market continues to mystify the masses. A flurry of confusing stats and mixed signals are bombarding Vancouverites. Perhaps most evident in a report released from Royal Lepage leader Phil Soper today. The report states that in the past month, sales in the Vancouver area have leapt forward by close to 50 per cent on a month-over-month basis,  better than the seasonal average. “In the coming weeks, it is possible that six months of pent-up demand will be unleashed on the market, sending prices sharply upward again.” Quipped Lepage’s Soper. However, the report failed to mention sales are down 31% year over year across all segments for the Real Estate Board of Greater Vancouver. In fact, one could argue it’s more likely to see six months of pent-up supply, not demand. New listings have plunged by 24% year over year. Through the first three months of 2017 new listings are 19% below the 10 year average. Sellers appear reluctant to sell, perhaps due to a belief that their home will be worth more next year. Or simply an unwillingness to sell and be on the other side of the negotiating table, competing amongst a mob

New Listings & Sales Continue Downward Trend The Vancouver real estate market continues to turn heads midway through April. A puzzling phenomenon is underway as new listings evaporate and sellers refuse to cash out in perhaps the hottest sellers market of all time. The drought of new listings is rippling through all market segments. Let’s start with the detached market. REBGV Detached Detached sales are down 43% compared to the same time last year. Not much has changed here. However, new listings are also down 42%, this is keeping prices firmed up. Demand is not nearly what it was a year ago, so obviously if new listings should return to more normal levels we could start seeing prices move downwards. However, until that happens it’s merely speculation. Here’s the 10 year correlation between sales and new listings. REBGV Condo The condo market is also experiencing a drop in sales and new listings. Sales are down 29% year over year, new listings also plunged 29%. Sales are still tracking above normal levels and i’d argue they’d be higher if we had more inventory. The demand is definitely there right now. REBGV Townhouse The townhouse market is still humming along, and favouring

New Homes Under Construction At Record Levels The housing boom across Greater Vancouver continues to reach new heights. Recent data released by CMHC highlights an epic proportion of new construction underway. As of February 2017 new homes under construction across Metro Vancouver are up 30% year over year. Here’s how it looks across the board comparing February 2016 vs February 2017. So what does this mean? We’re about to witness a mountain of new supply hit the market. This is welcoming news after undergoing a record number of housing starts in 2015 and 2016 with 20,867 and 27,914 units respectively. To add to that we’re on pace for another frenzied year in 2017 with a projected 23,575 starts. As you can see we have a record number of apartments under construction with completions being flat in recent years. Construction appears to be backing up as developers struggle to complete projects. With the completion rate well below normal it’s worth questioning if developers are slowing construction intentionally or if projects are simply taking longer to complete amidst a lack of resources. Either way, construction is compounding and soon an avalanche of supply will descend upon us.

Why Politicians Don’t Want to Touch Canadian Real Estate Just last week I told you about the Bank of Canada’s reluctance to hike interest rates. There’s no doubt the economy isn’t ready, anemic growth, massive debt, and, well, a one trick pony (real estate) keeping it afloat. The argument wages on amongst economists whether it would be more prudent to deflate the bubble now, or keep it elevated and try to hold out long enough for the rest of the economy to recover to replace real estate as the economic driver. Big shoes to fill. Of the 10 Canadian provinces, real estate is the top producing sector as a percentage of GDP for 7 of the 10 provinces. In BC it accounts for nearly 20% of GDP. And so the show must go on. Condos are exploding, detached homes are heating back up. The exuberance is pushing into areas that should signal warning bells. The area of Whalley is experiencing a 99% sales/actives ratio. That means anything that even slightly resembles shelter is selling, likely in multiple offers. Condos in Abbotsford are up 38% year over year according to the MLS benchmark. Last I checked there was plenty of land

Vancouver Condos Selling Over Asking Price in March If you read the Vancouver Condo Report March 2017 then you’re already aware just how hot the Vancouver condo market is. After a cool off period during the fall and winter months the market has picked right back up in 2017 amidst falling inventory as sellers hold out. The market remains extremely competitive amongst buyers, while a tremendous opportunity still exists for sellers. So just how fast are Vancouver condos selling? Let’s take a look. Average Days on Market The average days on market for Vancouver West condos is 24 days. The median which I tend to find more accurate is 11 days. The typical procedure of listing a property, exposing it for a week of showings, including a couple open houses, then followed by offers remains the most common procedure for selling a Vancouver condo. Below I have included the median days on market by area. As you can see, condos are selling fast in every area around Vancouver. In fact, Vancouver West condos are selling 48% faster than the 10 year average for March. Percentage of Original Price Percentage of original price tracks how much sellers are getting on their

Vancouver Pre Sale Condos- Sold OffShore, Flipped Locally As the focus shifts from the single family market to condos the crunch to enter the market has never been more fierce. Bidding wars are ravaging anything that resembles four walls and a roof. To make matters worse, record supply under construction is being largely sold offshore. Similar to a Ponzi scheme, pre sale condos are sold to offshore investors who sometimes buy multiple units at a time and later assign or “flip” to local buyers at an even higher cost. Here is the current number of assignment sales listed on the MLS. This was exposed last summer by Kathy Tomlinson but in recent months has become even more glaring. Since the introduction of the foreign buyers tax, which has deflated the luxury house market, the attention has shifted to pre sale condos. Pre sale condos are exempt from the 15% foreign buyers tax, and have no doubt become a very attractive investment. Further, once assigned to a local buyer at a higher cost, it’s easy to avoid capital gains tax as nothing ever registers in land titles office. It’s the perfect speculative system. Pay deposit increments of 5%, if the market tanks,

Multiple Offers Soar in March as Inventory Falls 17% Similar to last month (Vancouver Condo Report February 2017) the Vancouver condo has maintained it’s red hot pace. This is largely due to falling inventory, which is down from last years record low. Despite sales plopping nearly 29%, prices are setting new highs in Vancouver. Vancouver Condo Sales   Vancouver condo sales fell across the board. Vancouver West condo sales fell 33% year over year, while Vancouver East sales fell by 14% when compared to March, 2016. The drop off in sales is likely more a result of record low inventory levels. New Listings/Inventory Levels New listings and inventory levels continue to plummet. For Vancouver West new listings fell by 24%, while overall inventory levels also sank by 18%. This is without a doubt the biggest contributor to the overheated condo market. Current inventory levels are at all time lows and it’s not even close. Just see below. Vancouver Condo Prices Click Here to Access Price Per Square Foot Summary The Vancouver condo market is arguably as hot as it’s ever been. After hitting it’s peak in June, 2016 it cooled down and we saw some downwards pressure on prices during

Multiple Offers Roaring Back as Inventory Scrapes Record Lows Following up to last month’s report (February 2017 condo/townhouse Market report), a growing inferno has ensued. The condo and townhouse market is perhaps as hot as it’s ever been. Multiple offers are rampant, amidst falling inventory. Further Government incentives such as the first time buyer program are only making things more unaffordable for entry level buyers. Sales [table id=38 /] Although sales fell across the board, besides Richmond, the market remains red hot. Unlike the detached market, this fall in sales is likely a result of all time low inventory levels. Nonetheless, REBGV condo sales fell 18% year over year, but remain 32% above the 10 year average for March. New Listings/ Inventory Vancouver East- 206 Vancouver West- 534 Richmond- 277 Burnaby- 276 REBGV- 2123 New listings for REBGV condos fell 14% year over year. While that doesn’t sound too bad the big story here is current inventory levels which are down 35% compared to March 2016. With virtually no inventory available buyers are competing on the majority of listings. Here’s how inventory levels are looking. Sales/ Actives Ratio The sales/actives ratio is a key indicator of demand, anything above 20%