An Anecdotal Kind of Day

I was at a BBQ last night. A Realtor I know socially arrived a bit late who had been closing a sale getting contracts signed etc. We started chatting and I made some references to crazy new condo prices and even more ridiculous entry-level SFH prices. Throughout the conversation I made a couple of references to the status of ownership. I received this in reply: "I don't own my own place. Why would I own something that would cost me three times what I pay in rent?"

On new condos: "I've sold a couple. I try and stay away from them to be honest, I want repeat customers not people who will want to sue me. Let's just say we're in for a really big mess in the next decade. In the 1990s it was leaky buildings. I don't think the new stuff will leak. It's got pretty good breathability with the new code regulations. What will be the issue is this: they've thrown them up so fast that quality is a huge issue. Shutters, The Wave, Railyards, all junk. Some job sites have 1 ticketed journeyman per twenty guys working on the place. The stuff is happening so fast that the inspectors can't keep up with checking credentials. Anyone who had a $10/hour job can get on at these places for $16-$20/hour just by showing up with boots, a hard hat, some hand tools and a pulse. You're going to see a lot of unhappy buyers complaining about poor workmanship."

On flipped homes: "You see a lot of them for sure. I haven't sold any. My clients aren't interested in them so much. I'm selling a lot of land these days, mostly out of town. People with money are doing custom stuff rather than buying existing properties. I don't know many out-of-towners who want 50 year old homes with problems. If they're retiring here in the future, they're happy to move to Mill Bay, Shawnigan or the Peninsula and build a dream home. Flipped homes have a worse reputation for quality than the new ones, and they're getting to be bad enough."

On the state of the market: "Do you think Realtors pay attention to that stuff? Economics, sales statistics are what we get in our weekly updates from the agencies that we don't read. We're trying to sell. That's what we do. Not analyze."

On the number of Realtors in town: "1200 give or take a few. It's a tough business to make a buck in. Sink or swim. Every boom year we get 500 newbies who come in thinking homes sell themselves. Every flat year we get 500 newbies leaving shaking their heads."

Whose Buying Anyway? Redux

Great set of stats and corresponding report released recently by the Government of BC.

Let's see if we can make some sense of the stats.

I'm not sure why I've been having such a hard time finding more current income levels for the CRD. Apparently I'm not the only one. Gov.bc.ca has 2000 numbers. City hall has 2003 numbers (which are actually less than the 2000 GovBC numbers). Anyway, if you live in the capital and are a member of the defined family group (meaning married, with or without children, or unmarried with a child) there is a good chance you make just slightly more than your peers elsewhere in BC.

What if you're not married or don't fit into the above? Well the numbers change a bit when you factor in whether or not you work.

It seems fitting that we in the CRD seem to work a bit less than our provincial counterparts, except that those of us who do work 'enjoy' full-time work more than the rest of BC. We seem to have a few more entrepreneurs amongst us too. What 's telling though, is less of us here in the capital make more employment income. This means our wages are less and that 'family income' isn't indicative of employment; rather much of it may come from RE and other investment income.

So we know that employment and investment income isn't a part of the astronomical RE prices in Victoria. After all, when is the last time you heard a bull proclaim "we're all just making so much money these days; it's got to go somewhere?" Nope, Bull lines of the Bubble are "everyone wants to be here. People are coming in droves. Don't you see all the foreign license plates?"

Well apparently that's simply not true. We in Victoria trail the rest of BC by 0.5%. Who leads? Shuswap Lakes, Squamish and the rest of the Okanagan. Turns out when people want cottages and other secondary homes, they buy not in cities, but where other cottages and secondary homes can be found. But the most telling stat is over the past 10 years our average population growth rate hasn't changed at all. Put that in your pipe and smoke it Bulls.

And because no post on HHV is complete without a current RE price rant I give you this dandy chart:

I'd like to point out that in 2001 (6 years ago, before the boom) 19% of homeowners were spending more than 30% of their gross income on their housing costs. Think that number has gone up at all? Renters were obviously higher. But guess what? Rents only climbed from $726 to $892 or 19% compared to almost 100% increases in housing ownership costs.

New Home (to you) Must Haves

When we go out house hunting there are certain rooms that stand out for us in importance. Here's our list:

The Kitchen

It need to be grand. It need not be granite. It need not have stainless or even hardwood floors. But it does have to have two things: good storage and good workspace. I am flabbergasted at times by how little counter space exists in some galley-style kitchens in older homes and newer condos these days. Maybe it's reflective of the sociological trend of eating out and ordering in. Or maybe it's just that everything comes pre-packaged these days and you need not have the prep room. I like to cook. I need the space. We won't compromise on this one.

The Bathroom

We're not unrealistic with our expectations in this room. We'd like to have two of them, but that isn't necessarily realistic in our purchasing options. Where we live now has the nicest bathroom we've ever rented. That's because it has a full tub (rare in suite's for rent in our experience). Ms. HHV likes to soak, she'd love a jetted-soaker tub, but will settle for a tub instead of a shower stall.

Again, no need for granite counter tops. But cabinetry ideally is real wood, not melamine or wood facade with metal drawers. Like in the kitchen, we'd expect hardware (drawer slides and hinges) to be metal, same as the handles. Wandered through Home Depot or Rona lately? This stuff is cheap. Sure you can get cheaper, but in a small place, that extra couple of hundred spent can make all the difference in impressions of these two rooms.

We'd like to see a really good exhaust fan to protect our investment from steam-caused mold. On that note, we'd love to see a glassed-in tub enclosure and concrete backer board instead of drywall. Those are pretty rare these days as the building code makes no mention of them and they are pricey additions.

The Bedroom

We don't need big, but big enough to fit a queen bed and a chest of drawers. The closet needs to fit all of her shoes and my shirts too. We actually prefer carpet to hard flooring in this room; it's nice on the footsies on those cold winter mornings.

Wooden Windows

When I was much younger, I worked in a wooden window factory. I never proved much talent for woodwork, but I did fall in love with the craftsmanship that can only be found in quality wooden windows.

That said, wood windows require maintenance that isn't necessary in most other incarnations of the looking glass. I won't be heartbroken if I can't find them, but they'd be there in my dream home.

The Garage (or storage)

We're pretty good about not being pack rats. We don't need a ton of storage. But we do live pretty active lives and it would be great if I had a place to store my bicycles--I'm forever looking for new ones. Anyway, I'm none too handy, which is OK because I'm plenty handsome :) so I don't have much of a tool collection, but a place to put my dirty cycling stuff and bikes, and a place for Ms. HHV to banish me and my stuff to when she needs some space to do yoga or whatever would be high on our list of expectations when shopping for a new place to call home.

What are your must haves? How much will they influence your decision to purchase? Would you pay extra for any of them? Can your home be an emotional purchase or is it simply driven by economic fundamentals (to all you bears out there)?

The things you learn on late-nite TV

Watched ABC's 20/20 tonite. Shouldn't have. Talk about a disjointed, waste of an hour dedicated to Real Estate sensationalism.

Here's what we learned:

1. If you want to be rich, apparently you have to own a home
2. If you want to out smart a Realtor, you have to understand their language
   
3. In the future, all Realtors will only get $500 to sell your house
4. In a stagnate market, apparently buyers only look at the outside of your house
5. Buyer Beware (of the neighbours, they may kill you)
6. If they do kill (the previous tenant) don't worry, selling is just a matter of time
7. Never, ever buy a house built on a subdivision that used to be a WWII Air Force practice bombing range. If you do, you may find not 1, but 19 unexploded bombs in your yard

Have we mentioned how much we love sensational media?

Have the Mighty Fallen?

Might be more a stumble than a fall, but it appears like a downward motion none-the-less.

This dandy gem of a quote is my nomination for positive-spin of the year:

"Sellers can expect to see offers with the conditions that we normally have, such as subject to financing and subject to inspections," said Carolyn Pratt, president of the Edmonton Real Estate Board.

I guess Ms. Pratt means to say that a declining market is the norm for Edmonton. Were people really buying properties without inspections? I guess greed does make you stupid.

For anyone interested, this little interactive dandy from CBC demonstrates just how far prices have gone from fundamentals (remember the 150 times rents rule?).

When Politics Trumps Economics

Most of the time I leave politics out of the mix of stories on this blog primarily because it's such a divisive subject. But some media yesterday and today has got me thinking that we can't ignore it completely like we are wont to do at times.

Yesterday, this story, out of Meech Lake (oh, the irony of political failures there) has most provinces calling for Dodge to leave interest rates alone out of fear that increasing the dollar's value will hurt exports. And they're right. But on the flip side, touching the interest rate will slow-down the crazy spending Westerners (who coincidentally don't buy a whole lot from the East anymore) who are responsible for much of the RE run-up and other inflationary pressures.

H/T to Greg for this timely link where C.H. Smith really gets into the craziness that is government controlled economics. Scroll down a ways to see just how big the household debt has become in the US. Ah, yes, but we're not them. Or are we?

Between 1982 and 2001, per capita debt doubled, stemming from dramatic increases in both mortgage and consumer debt.

Other studies show that increasing financial wealth, particularly home equity, stimulates household spending. So the recent run-up in real estate values in many areas of the country may have helped to loosen the purse strings of homeowners. (Ya think?)

Eastern Canada has truly become a diesel engine in the Canadian economy: slow and steady. The West is like an F1 car being driven by Lewis Hamilton: fast, loose and nothing to lose. Until we hit a wall. Inflation and affordability are macro economic factors that should not be ignored. 1981 taught us that. Does anyone remember?

A Sherlock Holmes Kind of Hunt

I was driving in from a swim at Thetis lake yesterday when I heard an advertisement for Reflections on the Zone. The radio add differed from the print: the price for the radio one was $344,900, print is $334,900. Anyway, the catch is that for the first 12 months your mortgage payments are cut in half (on a 0 down, 40 year amortization plan). Clearly this deal is aimed at FTB's.

PB over at Victoria's Truth wrote about this on Sunday and some discussion took place in comments. Anyway, long story short, the radio add really got under my craw and I knew I wouldn't get it out from there until I figured out just how the sellers were going to pull this off. The discussions provided some questions, but no answers were found.

Was this kind of sales tactic some new relationship with financiers? Were we going to see banks get into the "buy now, do not pay for 12 months" Brick game? The tactic has obviously had remarkable success in the electronics and furniture world. Is this just a logical extension into real estate marketing? Never mind that car manufacturers haven't caught onto this in any big way.

So I did some digging. I talked to some people. I peered around corners. I lifted rocks. I followed some leads. I got lost. I sat down exasperated. I did what all great men do when they need some help: I turned to the brains of the operation and said "Ms. HHV, what should I do?" Her answer was so brilliant it defied odds of simplicity: "how 'bout you give 'em a call? Now stop bothering me at work."

And like all good detectives I hid my true-voice with the sound of crinkling paper and asked my question: "Just who is paying the difference in mortgage payments during that excessively cheap first year?"

The answer surprised me. As it turns out, there is no great conspiracy theory. The Bank isn't involved at all. And you aren't deferring those payments either. Here's how it works: you go get your mortgage based on an agreed upon purchase price. In this deal, it's either $344K or $334K or somewhere around there because, of course, each unit has a different sticker price. Anyway, the developer then gives you a discount, but not in the form of a discount, rather it's like a cash back financing option, except it's not really cash.

You get somewhere in the neighbourhood of $9K-$11K, again depending on agreed upon purchase price. You can get them to cut cheques to your bank for mortgage payments bringing your's down to that magic advertised $995/month or you can get some combination of cheques to the bank or credits at furniture stores or even credit card credits (maybe you can collect the airmiles and get a free trip too!). You still have to qualify for the purchase price: $334,900 plus GST = $354,994, which means you need an income of just under $83,000 and no other debts.

So what do we think? I actually respect the chutzpah underneath the brains behind this scheme. S$&%, you got to give 'em credit for creativity. If you make your money selling RE, you don't want to reduce your prices. At the same time, when the competition heats up, as it obviously has in the local condo market, you have to attract buyers, and, well, money talks. So this scheme satisfies two criteria in that conflicting scenario: buyer's get their discounts, and RE market watchers see that prices did not go down.

Is the scheme deceptive? Sure. Is it ethical? I suppose that depends on who you ask. We don't call the sales tactic unethical, rather the problem lies with the reporting of the sales price. I'm sure your complaints to the VREB will end up in the recycling box. It's a good thing we have new media to make sure the truth gets out there.

Post #100: An open thread dedication to readers

This one is all yours. Thanks for making our blogging experience so enjoyable.

Who Wins the Wealth War?

Renters or buyers? Many arguments for ownership surround the "renting is like burning cash theory." But just how true is this?

An interesting article is out today. H/T to S2 for the link.

Mr. Powers kind of hedges his bets in this one, me thinks. But what he has to say is likely more factual than anything I'll give you. Here are some highlights:

• Only about three in every 10 Canadian households currently rents, compared with four in every 10 in 1986, Stats Can reports
• home prices are rising more rapidly than landlords' levies (rents)
• [home ownership] ties up hundreds of thousands of dollars that might be invested more safely, and sometimes more lucratively, elsewhere
• most Canadians who own their homes can expect to grow wealthier over time than renters (Sauder School of Business UBC)
• Buyers have to pay property taxes on top of their mortgage, while renters have the taxes included in their monthly rent bill
• Renters... can invest what they would have spent on closing costs and a down payment in the stock market
  
• Under best-case conditions in Ottawa, Winnipeg, and Vancouver, Canada's most expensive housing market, renters could accumulate at least as much wealth as owners
• buyers are basically betting that home prices will rise smartly in the near future
• astute renters in Edmonton, Halifax, and Montreal could accumulate 24% more wealth than homebuyers
• renters are able to invest in much more liquid assets with little or no sweat equity involved
• owners have 100% percent of their assets in residential real estate – not a prudent choice for most people
• only renters who are highly disciplined, savvy investors are able to match the wealth that owners can accumulate simply by making their mortgage payments

Yes, the old "your home is a forced savings plan argument." It never gets old, does it? Let's see if we can apply this to Victoria, and more specifically to our situation. We have no trouble getting qualified for a modest 2 bedroom condo. For ease of analysis, we'll use $225K with 20% down as our baseline. We'll suggest that rate of return for housing follows a consistent 6% (may be a bit generous) YOY return for 25 years (the time it takes us to pay off our mortgage).

Down payment is $45,000. Our monthly mortgage payment at 6.5% (below historical average, I'm feeling generous) is $1206, but we'll round to $1200 for ease of calculations. I know we can rent this same condo for $975/month. Now lets factor in M.A and property taxes. M.A. is $175 and property taxes are $125, for a total monthly obligation (before inflation) of $1500/month.

So if we're disciplined, we take that $45K down and put it into a blue-chip mutual fund (TD Blue Chip fund averages 9.2% since inception) and set up regular monthly contributions of $525 (the difference in own vs rent costs in this market). Coincidentally, I have room in my RRSP to do exactly this scenario.

What do we get?

Ownership

$965,670 is what our condo would be worth based on these flawed assumptions after 25 years. But that isn't our true worth, because we would have had interest costs bringing down our investment's net worth (we were out of pocket money that we won't see again right? So it's a deduction) in this case it's $182,000, so our "investment's" net value is now $783,671.

How did we do if we kept renting and saving disciplined-ly?

Rent

Our doesn't-need-to-be-adjusted-given-the-same-assumptions future value is over $1M, just slightly. Ironic that the actual difference in the Wealth War outcome is eerily similar to the same purchase price of $225K.

Now, we can argue that inflation changes this outcome, but all the costs associated with renting and buying are subject to inflation except the mortgage principle amount. I'm too intellectually lazy to delve deeper into the calculations but I highly doubt that the outcome would be disproportionately dissimilar to what we have here.

In this town, in this market, if you are a disciplined renter/investor and can stomach blue-chip equity exposure, have the room in your RRSP to shelter from taxes, you come out ahead by not owning.

Ask and You Shall Receive: Redux

The Empty House. Could this be an elephant in the closet?

A regular reader posted that 30% of listings on MLS were empty homes. I'm too lazy to qualify this statistic; actually, I'll qualify that statement, I'm too time-challenged to qualify that stat, so let's assume it to be true.

What are some reasons for a glut of empty homes on the market? And why would people be selling them? Any staging professional worth their money (if that isn't an oxymoron to you yet then have a read here) will tell you a house needs to look well-lived in to be attractive to potential buyers, well, because potential buyers are apparently too daft to be able to see how their own furniture or art or whatever would fit into the place. Anyway, digression over, back to the original question and our thought out impending answers:

1. An empty house is a flipped house. Maybe. But of the ones we've seen, many are. Here's a quick way to tell: it smells like paint over mould and new carpet glue. Actually, I think the new carpet glue scent has caught on with flippers and may be one of the key reasons why they choose laminate (or engineered flooring for the more refined amongst you). Not all flipped homes are bad. But a note of caution: they're flipping for the money, the less they spent on upgrades the more potential profit there is in the deal. If you're looking at the, ahem, affordable end of the MLS, chances are pretty good that the flip is a floppy deal with lots of mis-tint paint use and cheap laminate flooring.
2. An empty house is a must sell. Maybe the seller bought, moved and didn't sell the one you're looking at before they took possession of the new. I know of several anecdotal stories of this taking place and the sellers accepting upwards of 20% less than their asking prices just to be rid of the stress of two mortgages. You could re-read this empty house reasoning as an opportunity to low-ball, but let's say you do and they accept 20% less, then the market corrects 20% (not an outrageous amount all things considered), did you really get a good deal?
3. An empty house is a speculator's home. This one may be more prevalent than you may have previously considered. We've seen lots of empty homes that haven't had a lick done to them. Could be that cheap money combined with fast-escalating home values has led to people parking $50-$100K of retirement capital into assets that were gaining 20%/year for the past 3. Not wanting to deal with tenants, or tired of dealing with tenants, these guys just say F$&K it to the rental income and take the easy money. Let's say you did this. $100K of your RRSP 3 years ago would have got you into a house at $350K that is now selling for $550K or more. That's a pretty good return on investment even when you consider the interest on the original mortgage and the penalty for early payout.
4. An empty house is owned by an Albertan. Or another "from-away." Similar to the above "speculative investor", from-away's have long-been over-recognized as having a hand in driving prices up and not occupying their new homes here. Maybe a small percentage have spent a combined month or two here to recognize this town doesn't live up to its hype and have decided to sell their pad and take their gains while the gains are good?

Are all these empty homes an issue for Victoria's buoyant RE market? I'm thinking not right now. This market has a never-before-seen resiliency that will take a combination of forces to crack. There are just too many reasons for a house to be sold empty to ascertain that all empty houses indicates a symptom of a market peak or potential implosion. Of course, as always, I could be wrong, likely am, and welcome your views in the comments...

Much Ado About Nadda

Victoria legalizes what's always been there. Do you think this means either of these:

1. Home prices continue to climb because now it's legal to have strangers live in your basement?
2. Rents suddenly decrease because of a massive number of homeowners moving strangers into their basements?

I support the city doing this only because it means that (hopefully) renters living in crappy basement apartments will be more likely to complain about the crap they're living in without fear of being evicted from where they weren't legally supposed to be.

I can't imagine, in these market conditions, that there will be a sudden surge in house-lifting and suite additions. Contractors are busy. How busy? Booking 6 months to next-year-soonest busy. Old home renovations are costly, time-consuming jobs that are extremely hard to bid because you never know what you'll uncover when you start knocking out the plaster.

Most contractors I know through the family network won't touch jobs like these because they're seen as no-win. The customers want to do the job on the el cheapo and rarely agree to an open-billed arrangement that protects the contractor. Hence, the contractor picks and chooses other work; and in this market there is no shortage of safer, more lucrative work for contractors.

Sure would like to see other municipalities follow suit though. Heck, I'd like to see them amalgamate. But that's a whole other issue vaguely related to this blog.

Mid Month Market Watch

Our area of interest is Oak Bay, Victoria, Saanich, View Royal, Esquimalt, and Langford.

Our criteria for houses is under $425K with a suite or suite potential. These are total numbers of listings and sales since late January.

138 total listings (9 new in June)
101 total sales (12 sales since May 30)
sales to listings = 73% (up 4%)
14 taken off market (1 twice)

Our criteria for condos is 2 bed 1 (or more) baths under $250K. Again, total numbers since late January.

247 total listings (20 new in June)
155 total sales (11 sales in June)
sales to listings = 63% (no change)
38 taken off market

Inventory continues to decline in SFH homes in our segment while condo choice increases. The positive news is that condos are the only remaining affordable options and things look promising for dwindling prices in the near future. It will be interesting to see if mortgage rate hikes will transform the low-end SFH market anytime soon. I'm guessing that it will be 6 months to a year before any significant trends start taking shape.

Everyone a Loser Baby

Judgment on Riverbend Developments lawsuit out yesterday. Lawyer for the would-be-owners claims victory of sorts as apparently the difference between the pre-sale price and the finished sale price will be held in trust until a later date and another decision.

Anyway we look at this it stinks. After reviewing all the media reports we could find, we think we'll likely would never take the risk of purchasing a pre-sale. The contract is one way. As a buyer you can't walk away from it. Apparently the seller can. The system is complex; they're are a lot of competing interests involved: developer, financier, tradespeople etc. But it would appear that the least important interest is that of the would-be-owners. I can't help but wonder if this would be the case in a different market climate?

Mid-month market watch to come later today.

Y2ThisTimeIt'sDifferent

Back in the 1990s, all the fear surrounded what would happen when the computers all crashed because of the Y2K dilemma with using 0s and 1s for programming. Anyway, long story short the techies figured it out, the markets didn't crash, we put all of our faith in the dot commers and low and behold, just two short years later KABOOOM!

Many people lost their shirts, their savings, their jobs and some even their homes by being heavily involved in companies called Cisco, JDS Uniphase, blahblahblah.com, etcetcetc.com and so forth. Did they learn? Sure did. The proof is in the (no, not pudding) in the world wide (no, not web) real estate market.

Many people ignored the warning signs: like where companies didn't have anything other than a website to claim their existence, let alone anything that indicated sales. But some just got caught up in good companies that got overvalued as a result of a hyped up market. Last time I looked Cisco is still around and doing quite well. Much like many of the other overvalued established companies from just 5 years ago. Except now they're priced more relative to their underlying economic fundamentals.

Perhaps the current RE market run-up is a direct result of people having lost in a more liquid market and looking for a tangible "investment" that they could look at and feel? Now the real estate market is showing similarities to that crazy time; every house party I go to has people standing around talking about how much money they've made in their home; like back in 2001 those same people were standing around talking about how they were going to retire at 45 thanks to their investments in tech stocks. Remember the Internet was going to change the world, this time things were different.

Reminds me of what people say about our RE market these days: we're not the US, this isn't the 1980s, this time it's different. To those I offer up an original catchphrase: Y2ThisTimeIt'sDifferent... Not too original and a bit long so have at 'er in comments. To those still clinging onto those myths of our market I give you this:

It's the latest blow for Canada's beleaguered forestry sector, which has seen dozens of mill and plant closures in the past few years.

A report from PricewaterhouseCoopers said the Canadian forestry industry lost $152 million in the first three months of this year.

The housing slump in the U.S., weak demand for newsprint, falling prices and a soaring Canadian dollar have resulted in big losses.

"Earnings in the quarter were affected by sharp declines in prices for structural lumber and panel products, higher fibre costs and weaker paper prices compared to the same quarter in 2006," the report said.

Commonwealth Plywood laid off 1200 of its 2500 workers. That's 1200 well paid Canadian jobs. That's likely 1200 people who are going to have a tough time paying their mortgages. That's 1200 people who are suffering purely because of a hyper-inflated global RE market. And that is just one company in a multi-billion dollar Canadian industry that is suffering and will continue to do so for some time. Reminds me of those unfortunate Nortel employees who got caught in tough times.

Yah, this time it's different all right.

Lock, Stock and Two Smoking Barrels

Or was that 3 mortgage interest rate hikes in 2 weeks?

H/T to VG for this link. Scroll down to 11:11, watch it. An increase of 1% interest on a $300,000 mortgage over 5 years is $23,000. That's $383/month. If you've got a suite you could up your rent right? Only 4% per year though, unless your suite is vacant. So if you're getting $800/month you could up it to $832. You'll still be on the hook for the other $351/month. No worries, you can sell your car, that will free up that payment; the bus is only like $80/month. You should be able to make it work, and hey, maybe you'll do something for your health and the planet at the same time with those walks to the bus stops.

That said, the stats suggest only 30% of mortgage holders didn't lock in for 5 years. I'm guessing a lot of that 30% is locking in as you read this.

We don't expect a glut of foreclosures anytime soon. But Victoria just became that much more unaffordable. I wouldn't expect a rush of sales anytime soon. Smart money will recognize that the-tides-they-are-a-changing, and let the developers/current owners take the hit before they buy.

UPDATE: sorry, that link should have read 11:11, not 11:15.

This time it is different

Everyone wants to be here. Or apparently not. Of Canada's 12 major cities, Victoria humps the trend and leads the way: DOWN. Read more here.


Maybe the bears are multiplying?

What does $400,000 look like?

Give or take a few dollars. No disrespect meant to past, current or future owners.

MLS #231126 current price: $409,900 1200 SF 2 bed 2 bath in Langford


MLS #231281 current price $419,900 2470 SF 5 Bed 3 Bath in Fernwood


MLS #231271 current price $405,000 1877 SF 3 bed 2 bath in Esquimalt


MLS #231037 current price $387,900 1600SF 4 bed 2 bath in Saanich West


MLS # 228907 sold for 362,000 (ask was 389,900) 1590 SF 3 bed 1 bath in Saanich East

Just thought it'd be fun to have a look at what constitutes entry-level SFH around this town now. It wasn't that fun. Really kind of sad.

A Side Note: we'd like to say thanks to all who read this blog. This weekend, while I was in Vancouver watching the World Cup Triathlon, this site rolled over the 10,000 visitors mark! Not too shabby for barely 4 months worth of work. We estimate based on the site meter reports that 1 in 10 visitors stick around to read it and a total of 10 or so of you engage in discussion on the posts. We thank you. We enjoy doing this and will continue to do so for the foreseeable future.

UPDATE: Further to the discussion going on in comments, here's what it looks like financially. You can use the link on the sidebar to run your own numbers.

Using the How much can I afford calculator:

That's it folks. And that's using 25% down (on a $400K place) and assuming no other debt. I'm thinking the output is conservative and that a mortgage seller can get you "better" (read more) $. Sure you can amortize longer, why would you?

Here it is using the mortgage calculator:

Assuming household income of $72K (which is likely close to average in Victoria) $1830/month represents 30.5% of gross household monthly income.

Conclusion: given 25% down, over 25 years, at 5.5% interest, the average family can't afford the average home; instead, they can by a home that will require work in a neighbourhood that may be less than appealing.

The Seven Wonders of Victoria Real Estate

In honour of the CBC's Seven Wonders of Canada released today, we bring you the Seven Wonders of Victoria Real Estate. Thought we'd have a little fun with what this town has to offer and give you a change from the boring, old, cynical BS I usually serve up.

I won't number them. You can vote for your pick for top Wonder in the comments if you'd like.

Central Saanich Palace

Ever thought that a $14.5 Million property existed on the Island outside of Uplands or Land's End? Neither did I.

Uplands Hockey Hall of Fame

For $8.7 Million you can get a castle with a story. I've actually been inside this house. I've even slept there a few times. OK, well, not as it stands now. Before one of the Courtnall brothers picked this baby up for a fraction of what it's worth today, in our family's circle of friends this house was owned. We got to house sit on occasion. I can tell you it looked nothing like this then. I think the only thing they didn't change is that chimney.

The Condo That Started It All

OK, maybe they didn't build this one before the Songhees started the luxury-condo trend in Victoria, but this is arguably the finest example of harbour living in town. Shoal Point is heads above the rest, not for its height, but for its attention to sustainability and environmental responsibility. I'm not sure what that means, but I'm guessing that the people who built it and those that live in it do. My favourite part about Shoal Point? I can afford to rent there for the same price as it would cost me to buy a $235K condo in Quadra Village.

Ah, Rattenbury

Has anybody ever done more for Victoria Real Estate? Arguably the most recognizable building in town, The Empress boasts the best-paid and longest-tenured bell boys in the Fairmont chain. I know, I was one of them for 3 weeks years back. Some of them own homes in Broadmead, paid for with cash tips, usually in US$.

Where It All Happens

Another work of Rattenbury, and possibly the only other real estate in town more recognizable than The Empress, the Leg as we politicos affectionately call it is where it all happens. OK, that's a lie. Another thing I learned in my bell hopping days is that really it all happens in the Bengal Lounge across the street. But this is where it all comes public. Just how expensive is this land? A recent land claims settlement valued it at $31.5 million. And that's just the land, without the building, furnishings or art.

The Real Castle

Robert Dunsmuir put the money up for the buildings that may rival Rattenbury's work in town. He sired an eccentric boozer too, so bonus points for that. He may have been BC's biggest union buster, though after 2001, Gordon Campbell will likely take that crown. Regardless, its a big place, on a big property, in an expensive neighbourhood, and who knows how much its worth today. Though back at the turn of the last century, BMO picked it up for an unpaid debt of $300,000.

Where The Rich and Famous (read ex-hockey players) Live and Play Today

I've got a friend that works up on Bear Mountain. Apparently there is a "private club" within the private club that generates stories to rival Alexander Dunsmuir's drunken escapades. Not to say that gang are drunks, but I've heard they enjoy their fun. I'm sure they're enjoying their windfall winnings from Victoria's most recognizable environment-changing development. Some people bitch about the ruined views from the Mt. Finlayson hike today; I'm still bitter about the ruined mountain bike playground that used to be there. I guess you'd be pretty happy if you're a golfer though. Times change. All said, you can't argue its wonderment.

Oh, I get it now...

I think maybe they do all want to live here. Maybe this is why?


That's the Deerfoot Trail two days ago: June 5. I'm guessing the rain fell pretty quick, eh? Maybe this will put some water on their RE fire? Sorry.

For what its worth

Interesting survey on MSN Finance (Canada) website today. I always take any kind of survey/poll results with a huge grain of salt, but the number of responses lead me to believe that these may be fairly reflective of the true state of mind of the Canadian homeowner/purchaser these days.

I'm not at all surprised that the largest response segment is below average price purchasers. I am a little surprised that the next-biggest is "I wouldn't buy a home at current prices." If this is the true trend, lookout market, seems like Canada is losing confidence in you pretty big.

The line of question is pretty funny really, especially considering the final answer. Why is the question not "what would you pay" rather than "what can you pay?"

Other News

We're watching the lower mainland developments awash with mixed feelings. We feel bad for homeowners and investors, but at the same time, greed does make people do stupid things. Like build on a pretty-regular floodplain.

Rental markets remain tight: no surprise there.

I thinks it may be time to get out of debt completely, don't you?

On demographics and Real Estate:

"This less favourable demographic trend does not in itself pose a major risk to the housing outlook," said Adrienne Warren, senior economist with Scotia Economics. "Real household income growth and the level of interest rates have a statistically more significant influence on housing sales and price appreciation."

Emphasis is, of course, mine. Remember that real income growth is stagnant and mortgage interest rates have already gone up over 2% in the past 3 years and they look to climb back up to historical norms of 7.5% over the next year or so. Interesting times ahead.

But of course, we'll just keep buying new cars to make ourselves feel better.

Can a hillside peak? Or is it just the Market?

Welcome to Soaring Peaks... "where your most pressing decision is what time to flip." I should state that the ad pictures a rather youngish-looking lady sunning herself poolside; so that reference isn't to suggest that those ad-marketing geniuses up at Bear Mountain still believe it possible to flip condos for income anymore...

We usually buy the Post or the Glibe & Frail on Saturday's to read Sunday... we're that way. We've been entertained by the RE marketing madness lately and today it's no different. After having seen the ads for Tuscany Village with their now infamous weekly updates, we figured we go get sold in person. Let's just say the sharks were hungry, but we fishies were swimming too fast to get caught in the jaws.


We pulled in to an empty parking lot wondering if the show suite was still open. In we walk, lights were off (they must be doing their part for the environment), but when turned on, the suite showed rather nice, as long as you didn't open anything.

I'm in love with kitchens. I love to cook. It's my favourite room. That's the first place I go when we look at a suite/home and it's the room I always end my impression with after the tour. I always open cupboards and drawers. Anyone--well I should say in the days of flipping--everyone has really nice faces on their kitchens; especially when they are selling them as luxury. But like most beauty, it's whats inside that counts. Tuscany lacks. Their kitchen, granite counter tops, real-tile back splashes and all, are cheap. Beyond cheap.

Where Home Depot uses melamine, whoever built Tuscany's kitchens used plastic. Plastic drawers. Plastic rollers. At least the door hinges were metal. But no fancy slow-rolling real ball bearing , self-closing glides that I would expect in a $490,000 1000 SF luxury condo in a real nice neighbourhood.

This development is just over 50% sold. They have 91 units total and over 40 remaining. I'd go on record to say they're in trouble. They don't have a restaurant tenant yet. If it wasn't for Thrifty's, Starbucks, Blockbuster and Pharmasave, I'm doubting that this place would still be under construction.

We didn't ask about prices, but were told point blank: "we're open to offers." The whole sales pitch revolves around the village lifestyle. In this I can't fault them. When we lived in Cook Street Village, we loved it. We loved the little shops, the coffee places, the grocery stores etc. We loved to walk the streets and dream about one of the houses we would live in 20 years from now. But Tuscany is trying to sell us a condo, for the same price as we could have bought a Fairfield home back then (3 years ago), and give us shops that are pretty much everywhere, rather than unique, one-offs like down in the "village" we all know and love.

How does Tuscany create some motivation for buyers beyond the "village" pitch. We had a great guffaw at the framed letter to the editor that was found on the minimal kitchen counter space. It was a letter about the downtown lifestyle being less than appealing for those of "us" Victorians that don't like our books and coffees with a side of crack cocaine. We were shocked and awed at the blatant fear tactic that is usually reserved for insurance sales pitches.

When they get hungry, they really get hungry at Tuscany... where currently you can get wine and food, but no one to cook it for you but yourself. But at least we'll still have Subway downstairs, or Quizno's across the way. Ah, that luxury village lifestyle indeed.

h/t to PB at Victoria's Truth for the graphic.

May low-end market watch

VREB numbers are out; Do they want us to keep dancing around the pole? Roger's predictions are oh-so-close.

Victoria's Truth always does a much better job of "having at 'em" than I ever could, so for now, I'll wait patiently for him and leave you with this highlight:

"Buyers now have a lot more properties from which to choose and the increase in sales points to ongoing high demand for properties that are priced realistically." emphasis mine

Of course, Bev McIvor doesn't state unequivocally what "priced realistically" means but this suggests two things: first, VREB are finally admitting people are asking ridiculous amounts for properties; and second, prices are coming down, both average and median, not significantly, but a 1-2% drop in one month is a good start for me, especially in May. Prairie Boy always likes to use a football score in the Bulls vs the Bears game. I'd say the Bears kicked a field goal for 3 points at least.

Here's our market segment numbers as we've been doing up bi-weekly:

Our area of interest is Oak Bay, Victoria, Saanich, View Royal, Esquimalt, and Langford.

Our criteria for houses is under $425K with a suite or suite potential. These are total numbers of listings and sales since late January.

129 total listings (15 new since May 17th, same as previous two-week watch)
89 total sales (10 sales since May 30, same as previous two-week watch)
sales to listings = 69% (no change)
14 taken off market (1 twice); the two new OMs are expired 90-day listings.

Our criteria for condos is 2 bed 1 (or more) baths under $250K. Again, total numbers since late January.

227 total listings (19 new since May 17th)
144 total sales (44 sales since May 17th, WOW!)
sales to listings = 63% (up 15% since May 17th, did I say WOW)
32 taken off market

I wonder if my last condo sales count was incorrect? That seems like a ridiculous jump in sales in just two short weeks. I can go through them individually, we I probably should do as punishment, but it's a long and tedious process that isn't happening right now, so we'll let that stand as is.

The low-end still seems a bit detached from the other market segments. This could be that as prices have increased, there is just less at the low-end.

As an aside: are you familiar with Russ Whitney, RE investor get-rich-quick guy? Received an interesting mail out from him promoting new workshops in town with this headline:

If the "bubble bursts," you can still make a fortune in real estate...

Funny. As a buyer, I didn't realize you could make money on the way down. I mean you can't flip 'em for less and make money can you? Has Russ decided buy and hold is the new get rich quick scheme? I don't think rents cover mortgages and expenses anywhere in this town anymore, so that can't be it. Oh, I get it... if making money in RE was so easy, he'd be doing it and not making his money teaching it. But there is so much more money in teaching these days.

Here's a little stat Russ uses: "did you know that real estate has appreciated over 6,281% since 1940? I didn't. I would like to know if that number is true (I doubt it) and if it is, does it include everywhere where you can buy land in the entire globe, which it must to come up with something so obviously skewed. The mail out is BC specific in its content too... his marketers must really expect us to be like this guy. Too bad he's off the Internet... though I guess he no longer has a computer or a connection, or a car, house etc... you get the drift.