Why is the West Coast Market so Hot?

Not too long ago, Diane blogged about how the real estate market is different in different parts of the country. I just got back from a week in Vancouver, Canada, taking care of some family business. While I was there, I got first-hand evidence of just how true that is! My travels took me back and forth across the Lower Mainland (which encompasses the city of Vancouver and 20-30 miles of surrounding suburbs) in just about every direction possible. I was completely floored at the amount of construction activity going on up there!

Everywhere I went there were new high-rise apartment buildings, or low-rise condominium complexes being built. You can’t get a contractor to save your life right now, and there’s plenty of work to be had. Entire neighborhoods were being created out of what had always been raw, forested land. Interestingly, there were only a few single-family home developments. The focus throughout the Lower Mainland was on building high-density housing.

Prices are at an all-time high up there as well. In certain parts of Vancouver the median purchase price is topping $750,000, and apartment homes can set you back $500k, easily, depending on the size of the apartment and the proximity to downtown Vancouver or to rapid transit. Yet despite numerous media reports of people being priced out of the market, strong sales continue. They must be - the sheer volume of construction wouldn’t be happening otherwise.

What a huge difference from Reno, where many of our large high-rise projects have been abandoned or never started, and the foreclosure rate is high. As I passed through the I-5 corridor through Oregon and Washington, I noticed activity in both states as well. Portland especially had a lot of construction cranes.

So I started thinking about why. Vancouver is on a pre-Olympic surge right now, which could be part of the reason. Many industry experts think will crash in 2010, after the Winter Olympics wrap up. But many others don’t. They think that the market will slow down and flatten out, but it won’t collapse. Besides, while that may explain part of Vancouver’s market it doesn’t address the activity in Seattle and Portland - they’re too far away.

I don’t think it’s creative financing, either. Canada never adopted a lot of the interest-only and Option ARM products, and so the foreclosure market is quite different than it is here. Mortgages are harder to get and down-payments are higher. Part of market is certainly being driven by investors, flippers and speculators, but with such high prices and lack of creative mortgage products, investors will be putting a lot more money into a deal.

And I can’t believe it’s the weather. Yes it’s mild … but it still rains 364 days out of the year (okay, maybe not quite that much).

So why is it? Why is this 350 or so mile stretch of the west coast market so hot?