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What’s Different About This Downturn Is That It’s Been Quite Dramatic After Such A Huge Upturn

A report from Huffington Post on Canada. “Vancouver’s epic housing meltdown has made news around the world, and with sales down by 31.6 per cent over the past year, people listing their homes are turning motivated. After years of what can only be described as a ludicrously strong seller’s market, buyers are in the driver’s seat today.”

“And to chronicle this turnaround, a number of Twitter accounts have popped up, gleefully displaying homes sold for way below asking, or listed for well below their last sold or assessed price. Chief among them are Mortimer_1 and Vancouver Real Estate Flip Flops, where new examples of house resale flops appear constantly, to the chagrin of realtors.”

“JUST SOLD: +$2M LOSS IN 11 MONTHS. 4448 Chaldecott St, Dunbar Area, West Side. Purchased May 2018 for $6.06M, $6.281M inc PTT. Listed Dec 2018 for $5.99M. 2019 Assessment $5.06M. Sold today for $4.12M, $3.996M after commission.”

“The British Columbia Real Estate Association reported numbers showing the slowdown in Vancouver’s market is now spreading to other parts of the province. Sales are down steeply, when compared to a year ago, at real estate boards in Chilliwack, the Fraser Valley and the Kooteny and Okanagan regions, as well as on Vancouver Island, including Victoria. Province-wide, the benchmark house price is down 5.4 per cent over the past year, to $687,720.”

“‘B.C. home sales continue to be adversely impacted by federal mortgage policy,’ BCREA chief economist Cameron Muir said in a statement. ‘The erosion of affordability caused by the B-20 stress test has created near recession-level housing demand despite the province boasting the lowest unemployment rates in a decade.'”

From News.com.au on Australia. “With Sydney and Melbourne’s falling house prices infecting other capitals such as Brisbane, Darwin and Perth, some doomsayers say property prices could slump by as much as 50 per cent by 2022.”

“‘In some places, for example western Sydney, prices are 23 to 25 per cent down or more, but areas closer into the city, particularly houses, are probably only 3 to 5 per cent down,’ said Digital Finance Analytics chief Martin North. ‘Perth is down 15 to 18 per cent on average. And if you look at Darwin, it could be 25 to 28 per cent. So these are big movements, they really are.'”

“North believes the biggest falls will affect high-rise apartments. He says the Opal Tower drama is partly to blame, with valuations for some new builds coming in 50 per cent less than what people were quoted when they bought off the plan at the height of the price boom in 2017.”

“Land values are also falling. Blue Ribbon Property’s Edwin Almeid says land values in Sydney’s western suburbs have already dropped 40 per cent, with the average square-metre land price in Bankstown Local Government Area falling from $1500 to $700-$800. ‘Land has dropped in Lalor Park and Mount Druitt by around 40 per cent already,’ Almeid says.”

“Core Logic Australian head of research Cameron Kushner says Sydney has led the nation’s property price falls, with the most expensive properties suffering the biggest falls. ‘We’re already seeing areas in Sydney, which have come back 20 per cent or more,’ Kusher says.”

“‘If you look at Sydney, Pennant Hills and Epping have fallen by 26 per cent from its peak, Ryde and Hunters Hill by 19.6 per cent and Kogarah by 18.4 per cent whereas the lower Blue Mountains has only fallen by 1 per cent,’ he says. ‘In Melbourne, it’s similar where the top end has dropped, with some areas coming back 18.1 per cent and others like Wyndham only 5.7 per cent.”

“Real Estate Institute of Australia president Adrian Kelly says Sydney and Melbourne account for 70 per cent of the total value of Australia’s real estate. ‘What’s different about this downturn is that it’s been quite dramatic after such a huge upturn,’ he says. ‘The federal election campaign won’t help things, particularly with taxation changes on the agenda.'”

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This Post Has 28 Comments

  1. ‘some doomsayers say property prices could slump by as much as 50 per cent’

    Sounds like they already have. Does that make me a doomsayer? I never thought of myself as a doomsayer. I do like a good FB story though. These guys in Canada are having a good time.

  2. ‘Sydney has led the nation’s property price falls, with the most expensive properties suffering the biggest falls…In Melbourne, it’s similar where the top end has dropped’

    And London, Manhattan, Miami Beach, Vancouver, Toronto and California. All confirming a blow out bubble peak and sharp decline. There’s no other explanation of the top end leading the way down.

    1. ‘What’s different about this downturn is that it’s been quite dramatic after such a huge upturn,’

      Sounds like a classic bubble, characterized by a huge, multiyear price runup to a level almost nobody can afford, followed by a temporary plateau, then finally a spectacular collapse.

      If it booms like a bubble,
      peaks like a bubble,
      and collapses like a bubble,
      IT’S A BUBBLE, FOR CRISSAKES!

  4. “Land values are also falling. Blue Ribbon Property’s Edwin Almeid says land values in Sydney’s western suburbs have already dropped 40 per cent, with the average square-metre land price in Bankstown Local Government Area falling from $1500 to $700-$800. ‘Land has dropped in Lalor Park and Mount Druitt by around 40 per cent already,’ Almeid says.”

    I guess they can afford to build affordable housing now! SF, San Jose, Seattle, LA, OC, San Diego, Denver, etc., coming soon.

  5. “the slowdown in Vancouver’s market is now spreading to other parts of the province.
    …
    “With Sydney and Melbourne’s falling house prices infecting other capitals such as Brisbane, Darwin and Perth, …”

    It seems like the Ebola outbreak is worsening and spreading rapidly. Hopefully all California homeowners are all vaccinated, in case the outbreak hops across the Pacific.

  6. Dual citizen here. You’re on it Ben!

    Cameron Muir and his press release titled “Pent up demand” got my laugh for the day.

    Your Canadian counterpart is Garth over at greaterfool.ca for those interested in Maple flavored affairs

  9. Off-topic… I’m puzzled by this whole Amazon hq2 thing. In particular, the 25000 people they need to hire, that they were going to hire in New York.

    Since they backed out of that deal, they have not announced a another destination for a big campus employing 25,000 people.

    What am I missing here? If I were cynical, I would think that they never really needed to hire those people, and never really planned to.

    1. FWIW: I was discussing the tech and biotech booms in Austin, TX last week with long-time resident. She said that Amazon is expanding there but it’s not officially HQ2.

      1. What struck me was there was no listings of what the jobs are. If it was going to take 3-5 years to build out, that would be enough time for locals to get the training for the jobs. Even if it meant getting a college degree if they started today.

        1. Tech companies for a couple decades now have had zero interest in growing their own employees locally. When you can get the top 0.1% from anywhere around the world, the top 10% of any local area aren’t satisfactory any more. Speaking of engineering/software specifically. If you just need warehouse workers I suppose it still matters what’s available locally.

  11. If banks are leaving the mortgage lending game in droves, then who is making all the fracking loans that hold the bubble aloft?

    1. Mortgages? Big banks may be throwing in the towel
      By Andrea Riquier
      Published: Apr 16, 2019 3:09 p.m. ET
      – ‘Non-banks’ made over half the mortgages taken out by American consumers in 2017
      Courtesy Everett Collection
      – Mortgages aren’t looking wonderful to the nation’s largest banks.

      You can kiss George Bailey’s mortgage market goodbye.

      As the small-town banker in Frank Capra’s “It’s a Wonderful Life,” Bailey epitomized an old-fashioned world in which bankers know every borrower personally. In the mortgage market of 2019, borrowers can do just about everything online, never meeting the lender behind the process.

      And as comments from executives of America’s biggest banks made clear last week, that person – or institution – making the loan is increasingly less likely to be a banker.

      In an earnings report last week, JPMorgan Chase (JPM, +1.06%) said that mortgage originations were down 18% compared to a year ago in the first quarter. For Wells Fargo (WFC, +1.88%), which reported earnings the same day, mortgage lending was down 23% compared to the year earlier. (Wells Fargo is still the largest originator of mortgages in the U.S., with a 10.7% market share in 2018, according to Inside Mortgage Finance.)
      …

      1. “In the mortgage market of 2019, borrowers can do just about everything online, never meeting the lender behind the process.”

        Sounds like a great recipe for mortgage fraud.

        1. Sounds like a great recipe for mortgage fraud.

          Who cares? You can sell it off or the Fed will make sure you’re ok. In the meantime you can make money hand over fist.

          2. when the investigations ramp up.

            Wouldn’t that be nice. Just being a smarta$$, I’d love to see people care a lot more about fraud. Maybe even go to prison over it.

  12. Anyone else seeing green shoots of infliation, such as gasoline rapidly spiking towards $4/gallon?

    2. $4/gallon

      In California, that more reflects the cost of government. It’s about half that in some places.

      1. It was $3 / gallon a few months ago, before the Fed announced that its punchbowl removal process was on hold.

  13. “The sharp erosion of affordability caused by the B-20 stress test is now creating pent-up demand, as many would-be home buyers are forced to wait on the sidelines. Unfortunately, new home construction is slowing as well, which will likely lead to another housing supply crunch down the road.”

    Another graduate from the Diana Olick school of “the ridiculous price of houses has nothing to do with the ridiculous price of houses”.

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