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Homeowners' new reality: You're suddenly poorer
Average home values set to drop to below $300,000 threshold
Article Comments (168) LORI MCLEOD AND JOSH WINGROVE
From Tuesday's Globe and Mail
November 11, 2008 at 12:16 AM EST
When Pat Webb moved to Vancouver a year ago, she didn't think twice about buying a condo in tony Kitsilano, among the hottest neighbourhoods in the city's booming real estate market.
But in August, the 70-year-old retiree decided to move back to the United States. She had sensed Vancouver's market was slowing, but a neighbour's condo had sold a week earlier, so she too tried to sell.
She listed her one-bedroom, 705-square-foot condo for the price she paid – $509,000 – on Aug. 30. Ms. Webb has since reduced that to $485,000. It still hasn't sold.
Today time is all but up, as Ms. Webb is moving back to California. Barring a last-minute miracle sale by her agent, Lindsay Wilkinson, Ms. Webb said she will try to rent out the condo this year and relist in the spring.
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“I'm disappointed, but not overly surprised,†she said. “I was right on the cusp and then [the market] changed. So timing's everything.â€
After years of making Canadians feel steadily richer, home ownership is starting to do the opposite.
The average value of a resale home is expected to be $297,600 next year, according to the Canadian Real Estate Association. Just three months ago, it was forecasting that number would reach $320,200.
While that kind of decline might be a real hit only to buyers who got in at the peak of the market and want to sell in 2009, it captures an emerging trend where values have begun to erode. Homeowners are about to feel poorer even if they aren't ready to put out a for-sale sign.
The level of existing home sales is also expected to drop both this year and next, leading to the first back-to-back declines in home sales activity since CREA started tracking the numbers in 1980.
“Canadian economic growth is being sideswiped by financial market turmoil, slowing world economic growth and weaker commodity prices,†CREA chief economist Gregory Klump said in a statement.
Consumer confidence has been battered and home buyers are cautious, he added.
This change in sentiment is evident in hard-hit Vancouver, where homeowners have been blindsided by the speed of the housing market downturn.
A sense of irrational exuberance had people stretching to buy homes they couldn't afford, and agents say the overextended market there hit a wall this summer.
Monthly sales levels have been crashing since then, prices are easing on a year-over-year basis and sellers who can afford to do so are pulling out of the market to wait for better days.
In the past two months, for example, 1,435 properties were withdrawn from the Westside Vancouver market, according to information on real estate agent Diane Birk's website.
She and other agents in her office have clients who are considering pulling their listings from the market, Ms. Birk, an agent at Royal LePage Westside, said in an interview.
This includes a couple whose detached home has been on the market since August and failed to find a buyer despite two price reductions totalling $115,000, she said. Another seller is putting a downtown condo on the market, but will pull the listing in 60 days if it doesn't sell.
Ms. Birk said she expects many people will take their homes off the market in December and wait until spring to list them again.
The question is whether the picture will brighten next year.
Across Canada, existing home sales are expected to fall by 12 per cent this year from the year before, CREA said. That decline is expected to moderate to 3 per cent in 2009.
Prices are expected to fall slightly this year and by 2 per cent next year, reversing earlier expectations for yearly gains of 3 per cent in 2008 and 2 per cent in 2009, CREA added.
But next year's price drop could be more severe than what CREA is estimating, said Douglas Porter, deputy chief economist at BMO Nesbitt Burns.
A “disturbing†run-up in personal bankruptcies in September and a weaker employment outlook suggest tougher times loom, he added.
The downturn means some sellers will be unable to wait for better times, something that may have helped buffer the market this year, Mr. Porter said.
BY THE NUMBERS
Housing starts fell by 3.1 per cent to 211,800 units in October from September, Canada Mortgage and Housing Corp. said yesterday. A more pronounced drop was expected, and tight credit conditions should pinch new construction levels next year, Royal Bank of Canada economist Paul Ferley said in a research note.
New-home prices eked out a year-over-year gain of 2 per cent in September, Statistics Canada said yesterday. This was a smaller increase than in the month before, but higher than expected.
Personal bankruptcy filings rose to 8,347 in September, up 20 per cent from the month before and 30 per cent from the same period a year ago, according to statistics from Industry Canada. For the 12-month period ended Sept. 30, consumer bankruptcy filings were up by 7.2 per cent.
As job losses begin to mount, the cumulative increase in personal bankruptcies could be as high as 15 per cent in the coming 12 months, said Benjamin Tal, economist at CIBC World Markets Inc. “I think that those numbers will go even higher. The labour market is still holding strong, and the No. 1 driver of bankruptcies is the labour market. In the next six months it cannot sustain the kind of performance we've seen until now,†Mr. Tal said.
CIBC estimates the unemployment rate will average 6.8 per cent in 2009. Last month, it stood at 6.2 per cent.
Homeowners' new reality: You're suddenly poorer
Average home values set to drop to below $300,000 threshold
Article Comments (168) LORI MCLEOD AND JOSH WINGROVE
From Tuesday's Globe and Mail
November 11, 2008 at 12:16 AM EST
When Pat Webb moved to Vancouver a year ago, she didn't think twice about buying a condo in tony Kitsilano, among the hottest neighbourhoods in the city's booming real estate market.
But in August, the 70-year-old retiree decided to move back to the United States. She had sensed Vancouver's market was slowing, but a neighbour's condo had sold a week earlier, so she too tried to sell.
She listed her one-bedroom, 705-square-foot condo for the price she paid – $509,000 – on Aug. 30. Ms. Webb has since reduced that to $485,000. It still hasn't sold.
Today time is all but up, as Ms. Webb is moving back to California. Barring a last-minute miracle sale by her agent, Lindsay Wilkinson, Ms. Webb said she will try to rent out the condo this year and relist in the spring.
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Recent
PM, provinces agree to spend to stimulate ailing economy
“I'm disappointed, but not overly surprised,†she said. “I was right on the cusp and then [the market] changed. So timing's everything.â€
After years of making Canadians feel steadily richer, home ownership is starting to do the opposite.
The average value of a resale home is expected to be $297,600 next year, according to the Canadian Real Estate Association. Just three months ago, it was forecasting that number would reach $320,200.
While that kind of decline might be a real hit only to buyers who got in at the peak of the market and want to sell in 2009, it captures an emerging trend where values have begun to erode. Homeowners are about to feel poorer even if they aren't ready to put out a for-sale sign.
The level of existing home sales is also expected to drop both this year and next, leading to the first back-to-back declines in home sales activity since CREA started tracking the numbers in 1980.
“Canadian economic growth is being sideswiped by financial market turmoil, slowing world economic growth and weaker commodity prices,†CREA chief economist Gregory Klump said in a statement.
Consumer confidence has been battered and home buyers are cautious, he added.
This change in sentiment is evident in hard-hit Vancouver, where homeowners have been blindsided by the speed of the housing market downturn.
A sense of irrational exuberance had people stretching to buy homes they couldn't afford, and agents say the overextended market there hit a wall this summer.
Monthly sales levels have been crashing since then, prices are easing on a year-over-year basis and sellers who can afford to do so are pulling out of the market to wait for better days.
In the past two months, for example, 1,435 properties were withdrawn from the Westside Vancouver market, according to information on real estate agent Diane Birk's website.
She and other agents in her office have clients who are considering pulling their listings from the market, Ms. Birk, an agent at Royal LePage Westside, said in an interview.
This includes a couple whose detached home has been on the market since August and failed to find a buyer despite two price reductions totalling $115,000, she said. Another seller is putting a downtown condo on the market, but will pull the listing in 60 days if it doesn't sell.
Ms. Birk said she expects many people will take their homes off the market in December and wait until spring to list them again.
The question is whether the picture will brighten next year.
Across Canada, existing home sales are expected to fall by 12 per cent this year from the year before, CREA said. That decline is expected to moderate to 3 per cent in 2009.
Prices are expected to fall slightly this year and by 2 per cent next year, reversing earlier expectations for yearly gains of 3 per cent in 2008 and 2 per cent in 2009, CREA added.
But next year's price drop could be more severe than what CREA is estimating, said Douglas Porter, deputy chief economist at BMO Nesbitt Burns.
A “disturbing†run-up in personal bankruptcies in September and a weaker employment outlook suggest tougher times loom, he added.
The downturn means some sellers will be unable to wait for better times, something that may have helped buffer the market this year, Mr. Porter said.
BY THE NUMBERS
Housing starts fell by 3.1 per cent to 211,800 units in October from September, Canada Mortgage and Housing Corp. said yesterday. A more pronounced drop was expected, and tight credit conditions should pinch new construction levels next year, Royal Bank of Canada economist Paul Ferley said in a research note.
New-home prices eked out a year-over-year gain of 2 per cent in September, Statistics Canada said yesterday. This was a smaller increase than in the month before, but higher than expected.
Personal bankruptcy filings rose to 8,347 in September, up 20 per cent from the month before and 30 per cent from the same period a year ago, according to statistics from Industry Canada. For the 12-month period ended Sept. 30, consumer bankruptcy filings were up by 7.2 per cent.
As job losses begin to mount, the cumulative increase in personal bankruptcies could be as high as 15 per cent in the coming 12 months, said Benjamin Tal, economist at CIBC World Markets Inc. “I think that those numbers will go even higher. The labour market is still holding strong, and the No. 1 driver of bankruptcies is the labour market. In the next six months it cannot sustain the kind of performance we've seen until now,†Mr. Tal said.
CIBC estimates the unemployment rate will average 6.8 per cent in 2009. Last month, it stood at 6.2 per cent.
