Friday Wrap up!

142 new listings; 198 sales. That's a sell to list ratio of 139%. 67 price changes - 57 price decreases, but 10 price increases.

Over the past 14 days the numbers get closer: 1585 listings to 1456 sales, or a 92% sales to list ratio.

It looks like we're shaping up to have a good November. With low interest rates its clear that you should be in the market if at all possible. Bubble fears are clearly over-emphasized, and its possible to insulate yourself from most of the downside, due to the unique characteristics of real estate.

What's unique about real estate? Well, here's one thing - its not going anywhere. If you invest in a stock your worst case scenario is that the value of the stock will fall and the company will eventually be de-listed. That won't happen with Greater Vancouver real estate. For prices to drop enough for an investment in land to rival one in a de-listed joint stock equity company we'd need something akin to nuclear war. Demand for land would have to disappear.

I'm not saying that a catastrophe of epic proportions won't happen. I am saying that the prospect is extremely unlikely, and that an epic catastrophe is what we'd need to take a real hit in real estate. Because real estate doesn't disappear, so long as you can hold onto it you don't need to sell in a down market, and if you don't sell you don't crystallize your loss. In that sense any piece of Greater Vancouver real estate is more solid than any blue chip stock.

There's a very good reason that what we call "real estate" in English is termed some variation of "immobile" in many others. ("immobiliers" in French, "propiedades inmobiliarias" in Spanish, "bene immobile in Italian ) http://world.altavista.com/tr

Fast Company tags Vancouver

Fast Company magazine's November issue http://www.fastcompany.com/ identified Vancouver as one of 5 global cities competing with the traditional creative centers of San Francisco, LA, and New York. Vancouver gets recognition along with Dublin, Helsinki (home of Nokia), Sydney and Montreal.

Long time Vancouver residents will remember pre-'86 Expo times. We were drunk on the concept of becoming a "world class" city. In hindsight there are some aspects of achieving that status that affirm the caveat "be careful what you wish for, you might just get it". While we enjoyed many of the changes that Expo brought, we also suffered through the problems of increased traffic and strained infrastructure. However, we've also learned that change is inevitable. As more people learn about Vancouver, more people want to come here. Pity the municipal politicians who will have to oversee the growth and change, but the change is inevitable: Vancouver has always been attractive, but now the whole world is becoming aware of it.

Zero down investments?

Its funny how real estate is regarded as an investment. Like Rodney Dangerfield, it gets no respect. While stocks and bonds get the Financial Post and the Wall Street Journal, do a search on "how to invest in real estate" and you'll find all kinds of no-money down schemes that seem designed to sell books and tapes instead of real estate. On TV you'll see Report on Business TV, but for real estate you'll see infomercials or decorating shows. It strikes me as pitiful that such a fantastic investment opportunity gets such shabby treatment.

Of course it is possible to buy with no money down, but it involves arranging a 100% (or more) mortgage, and for rental property you'll only do that if you have other equity. For example, if you have one property bought and paid for its not difficult to arrange a line of credit at prime. A $100,000 apartment would cost about $400 per month, plus taxes and maintenance of about $200. In other words, it would carry itself and give you money to feed the mortgage. There are rented listings like this available in the Greater Vancouver area right now.

Another day with more sales than listings

177 listings today, compared to 202 sales. Only 45 price changes. That's a sell to list ratio of 114%; in other words, 14% more properties were sold today than were listed. Inventory is leaving the shelves faster than it is coming on.

As the saying goes, one swallow does not a summer make. Earlier in the week the sell/list ratio was 57%. Over the last three days there have been 490 new listings in my market, and 503 sales. Thats 102%.

How do these stats come into existence? From my point of view Realtors play a role. When inventory is low, we try a little harder to list. Listings start to outnumber sales. When we get a few listings, we relax a little and concentrate on selling our inventory. Sales start to outnumber listings. So, the sell to list ratio is a stat you want to watch to monitor market health, but you need several days in order to a trend emerge.

As I've said before, (and this isn't scientific by any means), a sell to list ratio in the 70%-80% range is indicative of a healthy market.

Daily stats

137 new listings in my market area. 200 sales. That's a sell to list ratio of 146%. Put yesterday's numbers with todays and you get a sell to list ratio of 96%. My bet is that by month end we'll see something in the mid-70 percent range.

68 price changes. Most are price decreases (a sign of a healthy market), but there are a few increases as well (even the best Realtors make the odd pricing mistake ;-)

Housing Bubble Blog Link

I've added a link to a Vancouver housing bubble blog. Its interesting stuff. In my view we aren't in a bubble, and in fact I'd buy more property right now provided I could do it according to my personal investing rules. After being around real estate for many many years I ahve to point out that the current market is nowhere near as hot as the media implies. I've seen markets so hot that you throw a sign on the property and ahve an offer wating for you when you get back to the office. I've heard the old story that the market can only go so high before people can't afford property. The idea is that if Joe Lunchbucket can't afford to pay the mortgage the market softens, or implodes.

We saw that happen in the winter of '81-'82. Rates were in the low 20s then. Until we get back to such inflationary times and such extraordinary measures I think that bubble pressures will be trumped by the neccesities of life, which of course are food, clothing and...shelter.

Real estate is shelter. Its a requirement of life. You need it whether you can afford it or not.
That may sound cold hearted, but its good news for investors.

Daily stats

In my market area we had 176 new listings and 101 sales; thats a 57% sale to list ratio, which is a big drop. 108 price changes. Most are reductions. These numbers need to be monitored.

"Realty sector sizzling" - National Post

Monday's Financial Post contained an article by Gary Marr citing some interesting figures and trends for commercial real estate. Apparently commercial listings are recieving multiple offers on a regular basis. Pension funds, institutional investors and REITs are now facing competition from private real estate syndicates; the resulting demand pushes prices higher and cap rates lower.

Private investors have so far tended to go after properties worth less than $20 million, with REITs and pension funds dominating the over $20 million dollar properties. Apparently the private guys are starting small (size is relative, right ;-) and avoiding going head to head with the big guys, but still getting in the game. As the article points out, 10 year Government of Canada Treasury Bonds pay 4.2%. If caps rates drop to 6%, there isn't a huge risk premium in real estate.

Is this move smart? Like all sales, where there are willing buyers there are willing sellers, and if cap rates are being driven down, then the sellers are probably pretty happy. Does that mean buyers are paying too much, or does it mean that they're searching hard for new opportunities? It looks like the latter: some funds are being created that invest soley in student resdences or seniors' housing. Niches hold some appeal becuase there is less competition.

How long until we see this begin with run of the mill residential real estate? Most big commercial stuff is held by big players. Most residential rental property is held by individuals. I oversee in excess of $40 million in residential rental real estate assets. Multiple owners are rare. Economies of scale don't really exist. If one large player owned that much....