Wednesday, July 18, 2007

Mid-Month Low End Market Watch

Sorry for my lateness with this. Don't know where my head has been the last few days.

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.

167 total listings (16 new in July)
125 total sales (13 sales in July
)
sales to listings = 74% (no change)
17 taken off market (1 twice)

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

287 total listings (19 new in July)
199 total sales (27 sales in July)
sales to listings = 69% (up 5%)
45 taken off market

The SFH segment we watch has not had any changes to it in terms of the economics. Prices are still high; sellers are still discounting; though properties are still selling and getting close to asking prices. I would expect that if a property is discounting its asking price, then that would invite some low-ball offers. If that's happening, then one of two things is taking place: sellers aren't budging from their list price much, or agents are miss-reporting actual sales prices to keep things looking close on paper. I'm guessing that given the sales/listings ratio is still very much in a sellers favour, that it's the former and not the latter that is happening predominantly.

The condo market is dubious right now. I understand that it is pretty much the only property the wage-earner can afford these days without living completely house poor. But people have to be aware of the amount of product coming online in the very near future. The stats I count are also skewed in that new developments are still not being listed on the MLS system. Would that change the sales/listings ratio? Of course, nothing being built these days fits into our price ranges anyway. Also, for every new building, there are also some sold units, so that ratio may come down a bit, but I don't think it would drop down to under 50%. That number is what I'm looking for to signal a shift to a buyer's market in condos.

Big jump in sales in early July in the condo market, right around the time of interest rate hikes. What does this mean? Is there a bunch of FTB's scared of being priced out forever and not using their "discounted" pre-approved mortgages before their 90 days is up? It seems that the sales lines being used by Realtors and mortgage brokers are working.

I went back and re-read our "watching" posts from when we first started this thing. Nothing has changed really: neither up nor down. Is this good? Or is it bad? I want the market to correct. I'm starting to believe less-and-less that it will be happening anytime soon.

27 comments:

Anonymous said...

Hang in there, HHV. I just returned from a medical appointment. I was asked where I lived now, as they knew I'd moved. I answered simply and truthfully: "Still renting."

I was told that is the smartest thing to do right now. I said "What??? So somebody FINALLY agrees with me, or what???"

Everyone ELSE knows me as the person who's waiting for the bubble to pop, but nobody agreed with me until today. In fact, I've learned to zip it, as my prophecy seems to bring out the nasty in most home-owners.

To make a short story long.....we had a nice discussion/agreement about WHY this insanity cannot last. The doc knows of so many people who have sold or are selling at the top of the market, then sitting out the coming devastation.

As always, the smart money gets the 'inside' info first.

Anyway, HHV, your turn will come. Be patient, you'll soon have your pick of the best properties at fire-sale prices.

Anonymous said...

A lot of condos are being bought by home owners who are using their equity to buy an 'investment' property so that is one of the reasons for the hot condo market action. Once that all dies down the end should start...finally.

S2

Anonymous said...

Some of those investors are going to need to sell their home to cover the loses on the condo. I do hope this doesn't play out as bad as some think though. You may not have drank the koolaid, but doesn't mean your job won't feel the pain.

oh please said...

Doctors? Smart money? Man, everything I've ever heard about stereotypical docs and investment is the opposite. So maybe this sucker still has legs.

Keynes supposedly said "Markets can remain illogical far longer than you or I can remain solvent."

The only positive note I see so far is that the slowdown has begun working its way up the left coast. Portland's market is in decline, and inventory has been climbing substantially in Seattle (although it doesn't appear that prices are in retreat there yet).

And hey, maybe if the forest workers strike goes ahead that will bring the US housing situation into focus. My guess is the average Joe has no real concept of how ugly things are getting down there.

vg said...

oh please,

agreed, Bear Sterns sub prime funds have now collapsed and no one knows what the real value was but in the billions somewhere and what the next big funds will be to come out with the same news. It was stated somewhere I read in an article that this is the tip of the iceberg, I know we have heard this many times but if it is true we will feel the pain as the US economy will suffer huge,it is just running on the last fumes right now.

hhv,
as I said before,wait til late August into the fall,the cracks will start widening further,this may be the slowest start to a major correction i have seen but it will happen.

vg said...

Just a note on that Bear Sterns sub prime fund collapse,it was worth $20 billion at the peak,now it has almost zero value...ouch.

Bernake saying it will get worse before it gets better. I say alot worse,how can you have confidence buying a home as a FTB thinking you may get scammed on the paper work ? thats the psychological effect that can change markets for long periods of time. I wonder if that is possible here with places like Mortgage Depot etc lending to anyone still who has a pulse ?
I know of another young couple who flipped from a townhouse to a SFH with most of their equity used up in a LOC and their incomes are both in the mid/upper teens per hour,scary stuff out there still.

JMK said...

Inlfation numbers are out from Stats Can (pdf). Less than 2% everywhere except for the prairies, with Alberta leading the pack at 6.3%. I'm no expert on BoC policy decisions, but it seems unlikely they will push rates up much further to suppress a resource-driven boom in one province.

greg said...

jmk -

why not? They still need to compete with US treasuries when selling debt. If US rates go up, expect Canadian rates to march in lockstep.

JMK said...

Can you explain further? I thought the BoC set interest rates with the only criteria keeping inflation between 1 and 3%. How does that affect government bond rates?

vg said...

I would say it would be more than likely,they want to stay ahead of the game and not have to play catch up, Dodge already said that several times. Oil at $75 and that is a one province problem ? its a global problem,some people just don't get it.

greg said...

jmk -

"Interest rates in Canada are broadly determined by the level of interest rates in the United States, the relative inflation rates in both countries, and the relative stances of their monetary policies. A risk factor is also factored in. The result is that Canadian interest rates can be either higher or lower than U.S. rates but are never fully independent."

The link is here.

JMK said...

Oil at $75 and that is a one province problem ? its a global problem,some people just don't get it.

I never thought oil at $75 was a problem for Alberta. Its great for Alberta! 6% inflation is not a problem in Alberta becasuse they are rolling in money from the high price of oil.

On the other hand the rest of the country suffers dampened economies (i.e. 1.5% inflation) because oil prices are so high. Add to that the strngthened dollar, I'd be surprised if interest rates keep going up.

JMK said...

Greg,

Thanks for the article. That same article says US rates are on the way down, so I guess keeping up with the Fed isn't a problem...

vg said...

jmk,

gregs article was a few days old, this was today in an article today.


"Analysts said the market was trying in vain to glean some idea from Bernanke where interest rates might be headed. His comments on inflation again dashed any hopes to see a reduction in interest rates anytime soon. "

greg said...

vg-

I love how jmk says he doesn't think US rates affect Canada -

so I provide something that shows they do -

so jmk changes subject to interest rates going down based on what is happening in the US.

WTF?

Complete lack of logical consistencey from one post to the next.

vg said...

greg,
I don't get it either and have decided to put less energy to his posts. I don't mind debate but his duck and weave style is getting tiring.

JMK said...

Greg,

You are arbitrarily introducing logical inconsistencies because you read what you want into what I write.

I never said interest rates in the US don't affect interest rates in Canada. I said that the BoC doesn't make it a goal to track U.S. interest rates. The quote you found simply states that the two tend to track each other, which is hardly surprising given the fact both central banks have the same goals and our economies are so intertwined.

However, even if the BoC did try to track interest rates in the states, the article you cite says they are going down anyways.

vg said...

Going thru my regular search list that I haven't looked real close as of late and I am suprised to see the listings flat or slightly down but what is suprising is the noticeable lack of quality for anything under $450,000 in the SFH's. A few obvious flippers that have been buffed up but most have 900 odd square feet, 2 beds, one bath and the clincher is you still have to be a "handy" guy to finish some major stuff or they are in obvious need of a makeover for $30,000 mininum,all for almost half a million dollars.

Also notice alot of the same places that have been for sale for at least 2 months and they still won't reduce the price and they're dumps, I think we are in the staring contest phase and whose gonna flinch first ? I know from looking at this crap for sale it will be a long time til I blink.

Anonymous said...

I'm with ya vg.

I look on the MLS and can't believe the crap that is out there for such high prices.

I just can't (won't) bring myself to pay large sums of money for a place that needs to be completely gutted and redone.

I'm not stupid and I'm not blinking.

S2

Sam said...

If you want a laugh, there are one or two houses in Port Renfrew on MLS that are hilariously overpriced.

Sam said...

MLS 226885 is a good example - $400k for a 1950 slab with a "new roof!"

Anonymous said...

Is it just the time of the year, or does Craigslist have far more rentals being listed then 6 months ago. Still asking too much I find, but not so much more as before.

greg said...

I went back and re-read our "watching" posts from when we first started this thing. Nothing has changed really: neither up nor down. Is this good? Or is it bad? I want the market to correct. I'm starting to believe less-and-less that it will be happening anytime soon.

There were a lot of posts like this on Patrick.net in the second half of 2005, as bears wearily resigned themselves to renting forever, leaving town or capitulating to the bulls who would turn up on the blog and try to trample the bears with their good news views.

Two years later, a bull who turns up with the same line is pretty much treated as a laughing stock - so they just don't seem to bother anymore.

So now discussions seem to have moved on to other macro-economic issues or other political concerns.

Don't feel too weary hhv - one of these days you will be glad you kept a record of this whole process.

You can hand this historical record off to your kids 30 years from now, when someone new tries to tell them "It's hopeless and it's not going to change for the cheaper, ...er, better. And it is going to be difficult, but bite the bullet and buy that 50 million dollar house...."

...er, maybe in 30 years, houses will cost $50,000 again?

Anonymous said...

hhv,

Nothing in the high end is selling. It as if everything has just stopped. (except 1 big house on beach drive but it had been in the market for over a year).

Anonymous said...

hhv,

I know a couple from Europe over 6 years ago. He thought Victoria was a good place to make money in real estate by doing up homes. He got out of the business almost 2 years ago. He said there is no more money to make in real estate here. They are moving back to Europe because they miss their kids.

Anyway, people who are in the know are getting out.

vg said...

Don't know if anyone caught the Michael Campbell show on Saturday but they had Bob Hoye a very experienced stock market strategist on and he had a few interesting statements.
He went thorugh alot of stuff on the subprime problems and its relation to the bond and treasury markets and he is in the camp who feel this is just the tip of the iceberg and as Dennis Gartman said (a prominent market advisor to the rich) where there is one cockroach you will find many more.
The biggest statement was the effect on the subprime is going to move up mortgage rates "substantially". Sooner or later these funds have to cover the losses and it will deeply effect the banks.
The other major statement was that this will be the end to the easy liquidity market and its easy to see that this boom in particular had very excessive speculation at all levels of credit and the end result will not be pretty.

The most interesting part I found was him saying that in all this subprime meltdown it doesnt necessarily mean the demise or large crash in the stock market,a correction is no doubt due, but it was not an essential requirement for liquidity to tighten up big time and mortgage/interest rates.

olives said...

Bob Hoye is a regular contributor on the PrudentBear website.