We are in a slow Vancouver real estate market. Yes, it’s a buyer’s market but what exactly does being in a buyer’s market mean for sellers? That’s a question that I wanted to dig into a little bit. Why won’t homes sell in a slow real estate market?

As readers of the Vancouver Real Estate blog, and local residents not living in a bubble, know the Vancouver real estate market has slowed down dramatically over the last six months. We all know this. We see new evidence of this at every turn. In fact, you can read my latest analysis of the Vancouver real estate market MLS statistics right here.

What isn’t as evident or clear is exactly how this slowdown is affecting us. One affect that is quite self-evident is that homes become harder to sell in a slower market. General real estate wisdom says that a home does not sell in a slow market simply because of price. If it hasn’t sold yet it means that the price is not low enough.

However, it’s not always so simple. A good Vancouver realtor will tell you that there can be other reasons why a Vancouver home won’t sell. For instance, we generally believe that condos with rental restrictions, that are expensive, that are older, are not freehold, or are tenant occupied are harder to sell. In a slow market, most realtors would say any properties with these characteristics would be more difficult to sell. However, is it true?

To answer this question, I did an analysis of the MLS statistics for Vancouver in November 2008. This research was done exclusively for condominiums in Vancouver East and Vancouver West.

Let’s put our hypothesis to the test and see what the results were:

As you can see, the results aren’t as clear-cut as we would have predicted. The majority (3 out of 5) of our categories bucked our prediction.

Tenant occupied properties are only slightly more likely to have sold (14.37% of sales were tenant occupied while 13.42% of all active listings were tenant occupied).

Older properties (defined as more than five years old) were actually more likely to have sold last month (64.67% of sales were in older buildings while 54.82% of all active listings were).

Condos in buildings with rental restrictions were also more likely to have sold last month (31.14% of sales were condos that had rental restrictions while 25.39% of all active listings were).

The two categories that followed our prediction were the expensive listings and the properties that were not freehold ownership.

Non-Freehold properties were less likely to have sold (5.39% of sales last month were not Freehold ownership while 8.13% of all active listings were listed with ownership other than Freehold).

Expensive condominiums (defined as those asking more than $1,000,000 CAD) were much less likely to have sold (4.19% of sales were priced above $1,000,000 CAD while 12.05% of all active listings were asking above $1,000,000).

If you are thinking of buying or selling, or just have questions, contact me here or send me a quick email.

Copyright © 2008 by  Sebastian Albrecht, Vancouver Realtor with Royal LePage Westside “What Won’t Sell in Today’s Vancouver Real Estate Market”

The Background

As I mentioned in an earlier post, the current Vancouver real estate market is the ideal market for trade up real estate buyers. I’ve received some inquiries from you readers asking me to explain exactly what I mean. Of course, as a Vancouver realtor I’m happy to oblige answering any and all of your Vancouver real estate questions.

Your wish is my command.

The Situation

Let’s take a situation where someone is currently living in a small one bedroom condo in East Vancouver. The owners are having a child and need a larger home as a result. They’d like to buy a two bedroom condo in Grandview (Commercial Drive).

The Details

The Vancouver real estate market peaked in March, 2008. So, we’ll compare our example scenario from March, 2008 to today. Let’s say that the market declined exactly 12% in this time period.

$300,000 x 88% = $264,000 (-$36,000)
$450,000 x 88% = $396,000 (-$54,000)

Home A (the current home) was worth $300,000 before the decline. Home B (the desired home) was worth $450,000. The 12% decline hits both homes equally resulting in Home A now being worth $264,000 and Home B $396,000.

The Bottom Line

$54,000 - $36,000 = $18,000 found money!

The difference in the price variation between Home A ($36,000) and Home B ($54,000) is $18,000 in the buyers pocket.

That’s real money. Our young example couple would actually be able to cover the costs of their move from the savings of trading up in the down Vancouver real estate market (real estate fees, lawyer’s fees, moving costs) and be in their perfect new home.

One More Thing

Not only is our young couple saving money, they are also more likely to find the home that they want in this market. There are lots of choices and you have the luxury of finding the right home for you in this market. That’s not a luxury you’d have in a seller’s market.

Right now we have a lot of homes for sale in Vancouver. Listings piqued in September and they’ve been coming down since (something that needs to happen for the Vancouver real estate market to stabilize). Who knows how much longer this situation will be ideal for the trade up buyer?

Want to Trade Up?

If you are considering trading up, thinking of buying or selling, or just have questions, contact me here or send me a quick email.

More Info on Vancouver Real Estate

Should you want to learn more about the Vancouver real estate market generally you can check out this page. You can also review all of the statistics for Vancouver East and Vancouver West broken down for you here:

• Vancouver Monthly real estate statistics
• Vancouver Weekly real estate statistics

Enjoy Vancouver real estate statistics? You can find all of the latest stats by area right here:

• Coal Harbour real estate
• Downtown Vancouver real estate
• Fairview Vancover real estate
• Kitsilano real estate
• Mount Pleasant Vancouver real estate

Copyright © 2008 by  Sebastian Albrecht, Vancouver Realtor with Royal LePage Westside ”Trading Up in a Down Vancouver Real Estate Market”

Who SHOULD Buy in Today’s Vancouver Real Estate Market?

The answer to that question really depends upon your circumstances. I believe that there are four types of people that could greatly benefit from buying in today’s Vancouver real estate market. These are:

1. You want to trade up in the market.

A down market is the classic trade-up market. Yes, you will make less money on the home that you are selling however you will also be paying less for the home that you are buying. The difference will be money in your pocket.

I’ve written a more detailed explanation of the benefits of trading up in the down Vancouver real estate market.

2. You want the ideal home at the best possible price.

You can take your time to find the best possible home in this market. Sales are slow and inventory is high. When the market is hot once again, everyone will be wanting to buy and your competition will be fierce. Now is the time to cherry pick.

3. You are an investor.

Buy when there is panic, sell when there is euphoria. When everone else is heading to the exits is when the smart investor puts their money to work. Besides, where else would you want to put your money these days? The equity markets have taken a pounding. With real estate, you have a hard asset that will always have value…which you can rent and have someone else pay off your mortgage for you.

4. You HAVE to move.

Perhaps you’ve just got a new job in a new area, or maybe you just got married or had twins? Realise that you will be able to make up the money when you buy. You won’t be able to buy a new home unless you sell your old one, so price your home to sell.

Who Should NOT Buy in Today’s Vancouver Real Estate Market?

There’s definitely one group of people that I would recommend stay away from buying in the Vancouver real estate market as it stands today. That is if:

1. You will have to move within the next two years.

It’s never a good idea to buy real estate for the short term. A risky move in any market, a strong buyer’s market is the worst time to own real estate for the short term. The reason is that there are significant costs in moving in and out of home ownership. Most owners rely on increases in equity in order to cover these costs (real estate fees, lawyer fees, appraisal fees, property transfer tax, etc).

Final Words of Advice

Do not try and time the market. No one can pinpoint when the market will turn precisely. If you can find a home you like at a price that you can afford, then you should take advantage of the historically low interest rates. If you wait, interest rates could be higher negating your savings.

Most of all you should take a balanced and thoughtful approach when making a purchase. Sit down and consider all of the pros and cons of owning real estate. Do not panic over media headlines. Make your own informed decisions.

More Info on Vancouver Real Estate

Should you want to learn more about the Vancouver real estate market generally you can check out this page.

If you are thinking of buying or selling, or just have questions, contact me here or send me a quick email.

Copyright © 2008 by  Sebastian Albrecht, Vancouver Realtor with Royal LePage Westside ”Who Should Buy in Today’s Vancouver Real Estate Market?”

I wrote last week about how we are seeing the credit crunch (originating in the US but now expanding globally) affect us here on the local level in the Vancouver real estate market. There have been further developments in the last week on this issue.

First of all, I commented last time that the Bank of Canada had dropped the overnight lending rate by 0.5% but that the banks did not follow suit. Rather than drop by the full amount (the banks aren’t required to move in sync with the BOC but they do in practice), they moved only by half that amount and reduced the prime rate at most banks by 0.25%. However, due to public and political pressures most banks have subsequently reduced their rates by the full amount of 0.5%.

There are reports this morning (in particular, from the Royal Bank of Canada) that the Bank of Canada will likely lower it’s policy rate by 0.5% next week. This comes after BMO announced this morning that Canada is headed for a recession. Up to now, most experts were optimistic that Canada could avoid the economic tailspin coming out of the US but that is beginning to appear less likely.

A very direct result of the crisis has been the announcement yesterday of the bankruptcy of the Infinity Towers development in Surrey. This was to be a $350 million, five tower, 1,400 unit development. While Phase I completed, the two towers in Phase II have been halted in mid-construction while restructuring is sought.

It would appear that the primary cause for the bankruptcy is that the major funder of the project, Lehman Brothers, itself went into bankruptcy. The lawyer for the developer has been explicit in saying that the trouble is not related to cost overruns at all. This is directly related to credit drying up in the US.

Lastly, I also wrote last week about the demise of the variable rate mortgage (which isn’t entirely true…you can find ones that offer prime PLUS 1%). According to this article in the Financial Post, it would appear as though banks are putting pressure on customers to convert their variable rate mortgages to fixed rate mortgages. The banks are saying that they are losing money on the variable rate mortgages (whether they are discounted or not), but they deny they are putting pressure on customers.

In an environment of declining interest rates, now does not appear to be the best time to lock in your mortgage rate. If you have a discounted variable rate mortgage it would be wise to keep it there for the time being. If you locked your mortgage into a five year fixed rate mortgage you could be paying in the neighborhood of 2oo basis points (4.25% - 0.6% = 3.65% vs ~5.79%) more in financing charges.

Copyright © 2008 by  Sebastian Albrecht, Vancouver Realtor with Royal LePage Westside ”How the Credit Crunch is Affecting Vancouver Real Estate - Part 2”

Last week the Bank of Canada lowered it’s overnight lending rate by -0.5%. Typically, Canadian financial institutions follow suit by matching the change in their prime lending rate. Instead, the Canadian banks lowered their prime lending rates by only 0.25%. The banks have essentially padded their own profits as a result. They are charging customers more for money that they are obtaining at a lower cost.

More interesting is what has been happening with the variable rate mortgage. Over the past few years this mortgage package has been one of the most popular options. Banks offered the flexible variable rate mortgage at a discount to the prime lending rate. Up to about a year ago, that discount was as much as -1.0%. Over the last year we saw that discount steadily shrink until it was recently down to about 0.3%.

Most banks quietly did away with any discount whatsoever (meaning customers would pay the prime rate with a variable rate mortgage) in the past week. Some financial institutions have actually done away with the variable rate mortgage altogether.

This is another indication of money becoming more difficult to come by. The already conservative Canadian banks are circling their wagons, refusing to take on risk and padding their profits wherever possible. Dropping the discounted variable rate mortgage is an indication that the banks feel that continued rate cuts are likely.

The silver lining here is that long term interest rates should also decline and thus the fixed rate mortgages should become cheaper for consumers. With house prices declining in Vancouver, and the cost of borrowing slipping as well, the investor and first-time buyer in Vancouver is in potentially a very profitable position. We just have less choice in the current marketplace when it comes to borrowing money.

Copyright © 2008 by  Sebastian Albrecht, Vancouver Realtor with Royal LePage Westside ”How the Credit Crunch is Affecting Vancouver Real Estate”

Being in the real estate industry, I am always scouring the internet for new sources of information. Honestly, there appear to be endless sources of information out there. Whether it is the traditional press, or new media bloggers, the sources are endless both locally and internationally. Recently, I came across a ranking of the “Top 100 Most Powerful Property People” by the folks at GlobalEdge.

Here’s the methodology that they used as explained on their website:

This list was compiled by searching Google’s top 100 results using terms like “real estate blog” and “property news”.  In this respect it is biased towards English-language sites. We also searched the blog rolls of some of the biggest blogs in the UK, US and to a lesser extent the rest of the world to add to the list. It took us several weeks to compile a list of over two hundreds sites. We then used the SEOMoz Trifecta tool to rank the importance and notoriety of the sites most relevant web page (we link to the page we ranked).

It’s well worth the read. For those of us that are looking for new and insightful sources of information, as well as alternative perspectives it’s a great resource.

There are only two entries on the list that are Canadian content. None of our local blogs made it to the list (although, hopefully one day the Vancouver Real Estate Blog will be considered amongst such vaunted company), but the two Canadian blogs are worth the visit:

67. Montreal Real Estate Blog by Deyanira Bautista - a great read by a realtor specializing in the sale of new construction condos and revenue properties.

93. Edmonton Real Estate Blog by Sara MacLennan and Sheldon Johnston - a high-quality blog with insightful opinions on the local market and excellent statistical analysis.

Aside from the story being an interesting read in and of itself, it also introduced me to a number of new blogs that I am going to be checking in with on a regular basis in the future. Why don’t you let me know what nuggets you’ve come across?

Copyright © 2008 by Sebastian Albrecht, Vancouver Realtor with Royal LePage Westside “The Top 100 Real Estate People Online″

I’m a bit late in referring to this, but I thought that it was better late than never. Last week, the Federal government announced that they were putting a halt to guaranteeing the 40-year and zero-down mortgages. They hope to avoid the type of housing crisis that we’ve seen in the US that’s been caused by their sub-prime mortgages.

Any of you that have ever spoken to me about mortgages knows that I don’t believe our two systems are comparable (US vs Canada).  In the US, their mortgage lending practices were far, far more liberal than our own. Even with the 40-year and zero-down mortgages that were introduced in recent years, our lending practices were by far more conservative.

Yes, increasing the amortization of mortgages and reducing the amount of equity a new owner must put down to own a property is not without risk. What these moves did was allow potential homeowners to stretch themselves a little further to purchase a little bit better home. I believe that most Canadians that used these products were doing so in order to take advantage of the flexibility that they allowed for, not as a means to enter into the market in the first place.

The new rules mean  that government backed mortgages will require a minimum down payment of five percent (no longer 0%), and will be restricted to a maximum amortization period of 35 years (no longer 40). The changes will take affect on October 15, 2008 so you have lots of time to still take advantage of the old ones for now.

The difference to the homeowner, with a $400,000 mortgage is that on a 35 year amortization they will be paying $81 more per month in mortgage payments than if it was a 40 year amortization.

With a cooling housing market across the country, this might not be the optimum time to make these changes. One could question the governments timing on the policy change. I don’t believe that these are significant changes that would price many people out of the market. However, the market can be fickle and who knows how this might affect market psychology.

Sebastian Albrecht, Vancouver Realtor with Royal LePage Westside

It appears as though the city of Vancouver is a victim of it’s own success. In the late 80s, the city began promoting a policy of “Living First” to encourage people to move downtown. In that time, we’ve gone from a Downtown population of 40,000 to more than 90,000 with the incredible growth and popularity of Downtown condominiums. 

We are in danger, however, of our Downtown core losing it’s viability as a workplace. The business community has been raising the issue to City Hall for years, and we are currently at an all-time low for office vacancy in the Downtown core. 

With building spaces at a premium, and demand for condominiums at a high, developers looked at converting office space to residential. The city placed a moratorium on these conversions four years ago. However, with an estimated 6 million sq ft of office space required for the City, they feel that more needs to be done. 

The solution? Within an expanded new commercial district, planners are proposing that new office tower development be granted 20% – 40% more density. They also plan to encourage developers to build as high as possible without blocking the designated view corridors. 

The City is designating a new area termed the “metro core” (everything north of 16^th Ave from Clark to Arbutus). The City plans to encourage the development of office space in this region, although exactly how is not clear. 

What’s the effect on residential real estate in the Downtown core? There is already a demand for more office space downtown. These changes will result in more of that space being built and thus more jobs based Downtown.

With rising fuel prices, increasing environmental consciousness, as well as the attractive lifestyle of downtown living, many of these workers will want to live within walking or biking distance of their work and thus put greater demand on the limited supply of Downtown residential condos.

 Sebastian Albrecht, Vancouver Realtor with Royal LePage Westside

On Tuesday, June 10th 2008 the Bank of Canada announced it’s decision to leave its target for the overnight lending rate at 3% and the bank lending rate at 3.25%. The Bank surprised most observers by leaving rates unchanged and cited concerns about rising inflation for this change in it’s policy (find the full press release here).

An article in the Globe and Mail (read the article here) today discussed the issue. Not only are mortgage interest rates expected to rise due to the shift in the Bank of Canada policy, but also because of the predicted rise in inflation. However, mortgage brokers interviewed in the article foresee only “modest” rises in the mortgage rates offered by banks to consumers.

CBC is reporting that on June 11th, 2008  banks are already making the move to raise interest rates (read the article here). Rates increased by as much as 0.5% for a posted five year rate.

Sebastian Albrecht, Vancouver Realtor with Royal LePage Westside

Ozzie Jurock (local real estate investment educator) recently wrote a piece featured in the Vancouver Sun (”Why I will always buy real estate“). It’s an interesting read, and worth considering in light of our “rebalancing” market.

You can read the article for yourself right here, but here are a couple of expercpts for you:

If you place a good portion of your assets into real estate today, you won’t have to worry about tomorrow. It doesn’t matter how wild or turbulent the economy or the marketplace. It’s like riding a horse with one spur - if half the horse goes, the other half has to go along with it. No matter how deep or tempestuous the water, you’re going to be floating on top of it.

Home ownership (the most common form of real estate holding) has been the single largest factor in the accumulation of wealth for the average North American, firstly because of straight appreciation due to inflation, secondly, due to the leverage involved and thirdly real estate has a use and therefore always a value.

Sebastian Albrecht, Vancouver Realtor with Royal LePage Westside