Condo investors and speculators who bought their units for a quick flip will be in for a surprise. Presently, there are around 995 active condo/apartment listings in Richmond. More than 50% of these listings are under 5 year old - the figure is 520 units as of July 22, 2008. The past 6 months average sales per month for condos and apartments was 153 units.

New Condos Under Construction

The past 6 months average monthly sale for condos less than 5 years old was 58. At this rate of sale, it will take 9 months to sell off all the condos listed on the market. The sales todate for condos under 5 years old is reported to be at 12 units only. The inventory over-hang will be huge considering the market now already flooded with over 500 listings.

There will be many more new condos completing over the next 12 months. With the dismal sale of 12 units so far in July, it looks like the market is slowing down. There are already reports of condo sellers losing money selling their presale condos through assignment sale. The over-built and over-priced condos will take a heavy hit.

What's going to happen to Richmond's million dollar homes now that the real estate market is cooling. Below is a sale summary for Richmond's million dollar homes as reported through the MLS:

There are currently 226 million dollar listings in Richmond - as reported on July 22, 2008. Depending on how many more units will be added to the present total of 4, July will be a bad month for these million dollar home sellers. Even if over the next 9 days, another 4 sales are added, we will only finish the month with 8 sales. At this rate it will take 28 months to clear all the million dollar homes listed on the market.

Driving around Richmond and counting the number of new homes in various stages of completion, there will be a lot more million dollar homes available for sale. This is one market segment only the rich can afford.

The sales reported todate for Richmond for single family homes, townhomes and condo/apartments this month looks like a lot worse than last month. My preliminary figures showed that the overall sales is likely to be less than 50% of the total sales in June.

Home buyers are constantly perplexed on the question how home prices are determined. Generally, the value of a home is determined by the location, age, size, type of housing and the condition of the home. A home seller on consultation with his realtor used comparable market analysis to established the listing price for a home.

When a property is listed and priced accordingly, it will result in home buyers viewing the property and finally a sale and purchase contract is negotiated.

For example:

In Richmond, BC the price history for the Timberwood Village Townhouses to-date confirmed that ultimately, the market price of a home was determined by the the buyer and the seller. These homes differed in size, type (middle, end or detached) and conditions.

Buyer & Seller Motivation

The final selling price of a home is established based on the "motivation of the buyer and the seller". If a seller is very motivated, he or she may be more inclined to accept the priced offered by a buyer - even the price may not be what the seller hopes for.

Conversely, if a home buyer is really interested in buying a home he or she likes, the buyer will be motivated to accept the final price countered by the seller.

From a home buyer's prospective, when a suitable home is located, it is a matter of negotiating the best price possible. The buyers and sellers negotiated the best prices they could get, sealed the deals and moved on with their lives.

Greater Vancouver List/Sale Data - June 2008

The June housing data for British Columbia, Canada was showing a dramatic change from what happened a year ago. Although the average prices reported by the various real estate boards (except Victoria) were higher prices as compared with last year. the June 2008 listings and sales data were telling a different story. The market is not looking good!

Click here to view the June 2008 housing report released by the British Columbia Real Estate Association (BCREA) - "residential sales dollar volume on the Multiple Listing Service® (MLS®) in BC declined 34% to $3.31 billion in June, compared to June 2007".

An analysis and interpretation of the Fraser Valley, Greater Vancouver and BC data here is an attempt by the writer to predict the state of the housing market for the coming months.

Absorption Rate

The "absorption rate" or "the number of months to sell all the listed homes" in BC changed dramatically from 3.3 months in June 2007 to 8.0 months last month. The ratio being a leading indicator on pricing trend, had increasing steadily since March 2008. In June, the absorption rate - list/sale ratios for most areas passed the 6 months threshold. Now at 8 months, the housing market in BC can be called a "buyer's market".

The Calgary and Edmonton housing market experienced a short 2 years run-up in price gains. The markets there had declined for about a year now, and Calgary suffered a price drop around 5% while Edmonton was down around 13%. Click her to refer to Brian Ripley's housing price charts.

In Greater Vancouver, since 2001 house prices went through an uninterrrupted 7 years appreciation as can be viewed here. In view of the market now turning soft, possibly heading for a decline if market sentiment turn bearish. The question is "How much prices will correct... 10%, 15% or 30%?"

The BC housing market will re-balance in favour of home buyers, and home prices will likely give up some of the gains over the past few years.

A "buyer's market" is when the supply is more than the demand for real estate. They expect home prices to come down. In a buyer's market, selling time increases resulting in home sellers reducing their prices to sell their homes. In a down cycle, the decline in home prices could take a few years to reach a new balance in demand and supply.

Home sellers need to stay ahead of their competitors in order to sell their homes in a buyer's market:

1) Pricing To Sell

The number one key to selling a home quickly in a buyer's market is to price the property to sell. A Realtor has to communicate back to the seller changes in the market place. Overpriced listings take longer to sell or may not sell at all.

Homeowners who are determined to sell, have to forget about the real estate market of just a few months ago and face the new reality. They will have to compete for buyers.

When pricing a home in a buyer's market, it is important to know what prices similar properties were sold the past six to twelve months. In addition, keeping the price at or even below the price of competing listings helps to attract buyers. Overpricing a listing can keep buyers from even making the first appointment.

The only thing that matters is what a buyer thinks and is willing to offer. It is not what you or your Realtor think your house is worth. Your should set your price at or below market value to sell in a buyer's market.

2) The First Impression

"Most buyers know the house is 'the one' when they see it the very first time. Some of the things that can be done to help improve your home's appeal are:

> Sprucing up the yard; mow the lawn, prune the shrubs and keep the front and back yards clean.

> De-clutter the house; remove excessive furniture, store away toys, picture frames, etc.

> Clean the house; windows, floors, carpets, kitchen, appliances, bathrooms, etc.

> Paint the house where required paint over ceiling stains and repair cracked or chipping areas.

> Fix or repair leaky faucets, broken tiles and outdoor railings, sidings and deck.

> Staging helps to sell your home - it is more than decorating and cleaning. Staging can result in selling your home more quickly and getting a higher price, according to pros who offer those services.

3) Being Flexible

Buyers will make offer lower than the asking price. Many buyers may make a lower offer to gouge your reaction. The right thing to do is to make a reasonable counter-offer to close the gap between your price and their offer. If a buyer is truly interested to buy your home, he or she is willing to pay a higher price. But, very often in a buyer's market, the price gap may be too big for you or the buyer to come to an agreement.

The latest June sale figures for Greater Vancouver showed that sales of resale and new homes were down sharply - a startling drop of 41% compared with the same period last year. The inventory of home listed for sale was up 53% compared with that of last year. Real estate prices have begun to slip in some parts of Greater Vancouver. Click here for Richmond's June figures.

The housing inventory chart by Paul Boenisch of North Vancouver below illustrated the steady increase in listings this year as compared with the past 3 years.

In the Fraser Valley, the typical single family house fell by 0.3 per cent in price in the past three months, while apartments were up 0.4 per cent and townhouses rose 1.6 per cent. The biggest drop so far has been in West Vancouver, where detached houses fell more than 10 per cent in price in the last two months, from just under $1.6 million to $1.43 million. West Van house prices there are now up only 0.9 per cent year-over-year.

Gone are the days when a listing is getting multiple offers as soon as the property is listed on the market. Listings are now taking longer to sell, and many sellers are reducing their listing prices to make their home more attractive to buyers.

More people are saying it is a buyer's market now.

What is a Buyer's Market?

The phrases "buyer's market" or "seller's market" are used by real estate agents and the media to describe the market condition.

When sellers are in control, the demand is more than the supply.Buyers are motivated to buy and house prices tend to move up. Multiple offers are normally associated with a strong seller's market.

Conversely, in a "buyer's market" the supply is more than the demand for real estate. Home buyers sense the weakness in the market, and they hold back or wait for prices to fall. Selling time increases and sellers who wanted to sell their homes will reduce their prices to sell their homes. In a down housing cycle, the decline in home prices may take years to stabilize at a new price level where demand and supply are in balance.

In Greater Vancouver and The Fraser Valley, home prices are now adjusting to higher inventory and dropping sales. Although most housing experts are saying the real estate market for Greater Vancouver is entering a "balanced market", that price gains for 2008 and 2009 will be more moderately. There are other critics who are bearish on the market, and predicted house prices will fall.

You are welcome to post your comments here.

Richmond Housing Report - List Vs Sold June, 2008 Source: RealtyLink Online, Listings versus Sales

The Richmond total unit sale for detached homes, townhomes, and condos/apartments for June, 2008 registered a large drop of 19% - 345 sold for the month as compared with 424 for May 2008. The selling prices were maintained at around the same levels for May.

Active listings for detached home increased from 790 units to 895, and condo/apartment listings increased from 895 to 995. The List/Sale ratios or Absorption Rates for condos and detached houses at 6.82 and 7.78 months respectively were higher than the 6-month threshold.

Similarly, the List/Sale ratio for townhomes shot up from 3.30 months to 5.30 months. The sale momentum was reversing and and home sellers could be under pressure to reduce their prices in order to sell their homes. Click here for current real estate information in Richmond, BC.

Richmond Housing Report - List Vs Sold May, 2008 Source: RealtyLink Online, Listings versus Sales

The Richmond total unit sales for the month of May dropped from 464 in April to 424 - lower by about 9%, but the average prices reported were higher than the previous month. Active listings for all 3 types of housing were higher; detached home increased from 670 units to 790 and Condos increased from 810 to 895 in May.

The List/Sale ratios or Absorption Rates for Condos and detached houses were at 5.70 and 5.30 months respectively. The ratio for townhomes as registered for May was at 3.30 months. The next few months data will give us a better picture as to whether the market can hold on to the past few years price gains.

Click here for current real estate information in Richmond, BC.

Federal government rules out 40-year and zero-down mortgages

"In an announcement released today, the government said government-backed mortgages would require a minimum down payment of five per cent and a maximum amortization period of 35 years. The borrower would have to have a consistent minimum credit score and there would be new loan documentation standards."

Click her to read The Vancouver Sun report.

Rumour on the move by the Government of Canada to end the 40-year mortgage was posted here earleir on June 14/2008. An article by The Star "New 40-year term comes at a big price" aptly high-lighted the risks and costs to home owners using a 40-year mortgage.

Ending the 40-year program and disallowing $0 down payment is a prudent decision from the government.

The following is a Financial Post article on Candaian interest rates as presented by a panel of economists:

A panel of nearly a dozen non-government economists Thursday urged the Bank of Canada not to go ahead with an expected further interest-rate cut Tuesday, with some members voting for a rate hike instead.

Should the central bank follow that advice, it would rob Canadians with floating rate mortgages and other loans of hope for any interest rate relief until midsummer at least.

The C.D. Howe Institute's Monetary Policy Council voted to recommend the central bank leave its trend-setting target rate for overnight loans at three per cent, with five of the 11 economists voting for no change, three voting for a quarter-point cut, and three, all of them academics, voting for an increase -- one for a quarter-point hike and two for a half-point spike.

The commercial banks have so far matched any cut in the central bank's key rate with cuts in their prime rates, to which floating-rate loans are tied. But they have recently taken nearly a full business day to respond, indicating that the passing on of central bank rate relief to their customers is no longer a given.

The reason given for those delays has been that with the eruption last year of a domestic credit crunch, the commercial banks' borrowing costs in the bond market have not eased.

Read more...