Builders Could Not Possibly Have Timed This Any Worse – “As I’m writing this, I can hear the hammers on some of the seven new luxury single-family houses being built within *one block* of my own West Side rental.”
“As I’m writing this, I can hear the hammers on some of the seven new luxury single-family houses being built within *one block* of my own West Side rental. Indeed, there are not only For Sale signs on literally every block near me, there are often multiple houses/apartments for sale. Furthermore, there seems to be at least one SFH going up on nearly every block near me, sometimes more.
Builders still don’t seem to be getting the message about the housing market slowing down. After I read the Mayor’s excited comments a few weeks ago about a billion dollars’ worth of new building permits, I wrote to someone on City Council saying that what was being built near me, just as one example, didn’t look like it was selling well at all.
It’s the same old story: formerly affordable (some of it admittedly not in good shape) housing going down in favour of new builds that are way out of reach (statistically even!) for Vancouver incomes. I predict the West Side will have tumbleweeds rolling through it by next summer.”
Ben Rabidoux, at ‘The Economic Analyst’ posted a ‘quick note’ [3 Oct 2012] that documents Vancouver’s current sales weakness, making the excellent point that the weakness was present in Vancouver sales by April 2012, but that new mortgage rules were instituted in July – thus attempts by commentators to blame the low sales on the new rules are just dead wrong. Ben’s post also contains the following chart, which nicely complements epte’s anecdote above:
As Ben says: “High existing inventory and weak sales will only be compounded by rising new unit completions set to begin in early 2013. Builders could not possibly have timed this any worse.”
In most markets, insiders are a leading indicator of future market direction.
In real estate and construction, however, developers appear to be consumers like everybody else, and their analysis of market conditions is no better than the man or women in the (noisy) street.
When any RE bubble deflates, there are scores of late-to-the-party builders left high and dry; it appears ours will be no different from the rest.
Always love the ” VREAA editors ” comments…..(at the end ….in “italics”)…..so bang on.
In my 50+ years, I have lived through various cycles. Boom- Bust. When it is BUST, it takes a long time to recover…
IMHO, in this current market, it is a false economy based on fantasy…a bubble..highly political..mind candy that all is well. I think what has happened is that this “Off Shore” Money Myth, which started about 1986, is so ingrained in the industry. Think about it…someone who was a tradesmen..or even a major builder.. and started around 1986 feels this “mannah from heaven” building boom goes on forever. They must think the current slow down is temporary…..that the crash of 2008 was temporary as things boomed after…right?
No, the Crash of 2008 was long overdue…but Gov’ts are trying to band-aid it and inflate the balloon, but Gov’ts have run out of options.
There is a term “Smart Money”…and I think the Smart Money has bailed.
The only other possibility would be that these big Developers have an IN with Gov’t for a major bailout when the long overdue judgement day occurs, and the bubble bursts…which would be an even bigger disaster, as we, the average citizens, will be on the hook for it and ultimately enslaved by this mega – debt.
I took a course several years ago (late 1980’s) re: construction and the Instructor, a Builder…said that when Housewives, Telus employees and Fireman start getting into House construction,…its time to get out. What he meant is that when the amateurs get in…the market is.. or will be… flooded…and due for a collapse. The old school builder no longer exists,…..the “Builder ” or General Contractor tends to drive around in their nice leased high – end SUV and organize the trades and cut cheques. My late Grandfather was an old school builder…..a carpenter from framing to finishing….callused hands, wore overalls ..on site the whole time. Nowadays, any person with some financial backing by a pool of investors can be a Builder…which thus exacerbates the problem aka floods supply.
I have seen this up front. I recall a small time builder in Vancouver in the early 1980’s, who became THE biggest builder on the West Side of Vancouver at the time…they lucked out and had offshore investors that built and sold homes…they showed me a list once and they had 25 houses on the go. I also knew an Ex President of the GVHBA….who was a builder….actually an Ex Banker who got into building. I doubt he knew squat all about building, but knew how to move the $$$.
In Richmond, I see a lot of conflicting signs…but I see a lot of empty lots/old house demolished just sitting there. The builder is caught between a rock and a hard place. Bought the lot at likely at or near a peak price….so that cash outlay stands without return….BUT realizes that building now would be folly..the capital cost to build a new home will be even more riskier. What I foresee the smart ones doing is taking a loss on the lot and bailing, I do not foresee it turning around.
THUS:….The overall message is looks are deceiving and even the experts get fooled. Watch from the sidelines patiently and take notes..don’t dive in head first.