Wednesday, August 1, 2007

Volatile Day and Market Commentary: Oh, Happy Day!


Stock markets around the globe are taking a big-time hit again today.

The 40 year mortgage is the most popular mortgage product in Canada says the CBC, despite the extra $70K one would pay in interest versus the 25-year option on a $250K mortgage. Canadians are, in fact, stupid: like this article suggests.

VREB have their July numbers out today; rather quick I might add:

Sales of homes and other properties in the Greater Victoria area continued to show exceptional strength last month reaching the highest level for the month of July in over 15 years. There were 922 sales through the Victoria Real Estate Board’s Multiple Listing Service® (MLS®) in July, up over 36 per cent from the 677 sales in the same month a year ago. There were 949 sales in June of this year. Meantime, 27 sales of over $1 million helped push the average price of single family homes sold in July to another record high of $574,753; the median price was considerably lower at $515,000; the six-month average was $560,393.

Victoria Real Estate Board President, Bev McIvor, says the continued strength of the market is remarkable, "Despite the significant increases in prices that we have seen in recent years, the total number of sales shows that demand remains very strong. The number of sales so far this year is running over 11 per cent higher than in the first seven months of last year while the six month average price for single family homes has risen over seven per cent since the beginning of the year."

The average price for all condominiums sold in July was $306,668; the average for the last six months was $311,568. The median was again lower at $268,000. The average price for townhomes last month was $402,558; the average for the last six months was $397,434. The median was $379,900.

MLS® sales last month included 499 single family homes, 241 condominiums, 106 townhomes and 22 manufactured homes.

There were 3,402, properties listed for sale on the MLS® system at the end of last month, up from the 3,318 properties in the same month a year ago.

We should notice several things about this month-end report that aren't the same as previous ones. I've highlighted them above.

Despite record numbers of sales, 7% return on your investment if you've bought in the last 12 months should have you worried, non? Had you bought with the intention of trading up/flipping, you haven't broke even yet when you consider that 6% of your sale price will go to your Realtor and that other 1% goes to property transfer tax. Sounds like not too many of these get-rich-quick believers are getting rich.

Condos are, in fact, according to VREB, coming down in price. Anyone who tells you different doesn't read this monthly update obviously. If you're thinking of buying a condo: WAIT.

I can't remember any other monthly summary that included the numbers necessary to do a listings-to-sales ratio calculation (in case you're interested it's about 26%). The changes that MLS made to their website have made it very difficult to track (just ask Prairie Boy at Victoria's Truth), nice of them to do it for us, eh? Can we say that too much self-regulation is not necessarily a good thing in this market? But a listings-to-sales ratio of 26% is a great thing for this market.

I also need to point out that whoever writes the MLS sales stats update has worse math skills than I do (is that possible?). I tallied their total sales (868) and then looked at the total they gave us (922) for a difference of 54. The only logical explanation is that 54 sales went through the board that weren't on MLS, which is highly likely, and that I can adjust my sales/listings ratio from 26% up to--wait for it--a staggering 27%. Today is a good day to be a RE bear.

UPDATE: OK, after some careful reasoned analysis, I realize I got a bit ahead of myself with this post. After having done our segment analysis yesterday and counting barely one-month's inventory supply in SFH and just slightly more in condos, I was overly excited about 4-months general market supply. A more realistic "Oh, Happy Day!" for bears will be when inventory approaches double what we have today.

The likelihood of 6000-plus properties for sale in Victoria seems far-fetched. I'm guessing that we're more likely to see a considerable drop in sales before we see a doubling of listings. Maybe it will be a combination of declining sales and ever more listings that is the undoing of this market. I don't see any signs of that happening right now. I'll leave this post untouched as a reminder to not think out loud on screen anymore... :)

22 comments:

JMK said...

Hi HHV,

Condos are, in fact, according to VREB, coming down in price. Anyone who tells you different doesn't read this monthly update obviously. If you're thinking of buying a condo: WAIT.

I think you need to take the monthly numbers with a grain of salt before calling trends. For condos: May was low, June was high, July is low again. Very noisy. YTD, condos are up 10.5% over last year, better than SFHs at 7.9%.

You can get the sales-to-list ratios from the latest CMHC report. YTD sales-to list is better this year than last, except for townhouses.

hhv said...

It's just one day I realize. It's just one month too... but I needed a day to just go phhht... so I'm taking it.

olives said...

HHV, what is a good sales to listing ratio and when does it become a bad one? If it was 50 percent, would that be "good"?

hhv said...

not really... 25% basically means 4 months supply. That's still borderline sellers territory. But if supply starts getting bigger than that, bears rejoice.

Anonymous said...

I'm honestly surprised the market is still as hot as it is. Makes me wonder who in fact is actually buying all these places at insane prices. I can't say I expected it to crash, but I did think it would be much flatter, slower overall this summer.

vg said...

How can you service the rich if there's no one there to serve them ? looks to me like the businesses are going to have raise their wages substantially to keep what young people are left to keep the economy going in this town. Call it a demographic problem that has been known for years but a place like Victoria will suffer way more as we have less population increase and less immigrants coming to town.


http://www.canada.com/victoriatimescolonist/news/story.html?id=9b8b2cc5-d094-49ab-861d-26fbb9aaf55f&k=23328

Aleks said...

That article about people not knowing the interest rate on their credit card is fairly meaningless, because it doesn't differentiate between people who carry a balance and people who don't. I have no idea what the interest rate on my card is, other than "high", but I don't really need to know because I've never carried a balance in my life. According to the most recent data I could find (2003) only about half of credit cards have a balance on them, so the fact that 30% of people with a credit card don't know their interest rate isn't necessarily alarming.

Anonymous said...

I know the interest rates on my cards. And let me tell you, boy are they stinging me. You don't need a house to spend like a drunken sailor.

vg said...

Was just reading a comment by freako on the Vancouver Condo thread and he mentioned Victoria RE prices being almost 30% higher then Seattle. Not sure if a post of mine a few threads back will get read so i will mention again that I was just down to Seattle this past weekend for the first time in a long time and I can tell you that Victoria aint no Seattle,that is a happening world class city and not once did I see one homeless person sleeping on the street or sticking a needle in his arm or a crack pipe in his face. I am sure they have them somewhere in the city but the several areas I travelled about I was most impressed to not have to witness what I see here on a regular basis. There were a couple of down and outers and a couple of ramblers but no shopping cart people and only one person asking for a cash handout and he was very polite at that. Something is very wrong in this town.

Anonymous said...

i purchased a brand new condo downtown on the first of july. the very same unit, one floor down, just sold for an additional $10,000 last week. it was identical. condo prices may be going down in general, but i still think it's about location. if you're in a high-demand area, someone will always want to buy your unit.

z

JMK said...

Hi VG,

Gald you enjoyed Seattle. Lived there for 7 years, still visit pretty often, and I love it there.

Seattle is a very sprawled out city, with quite low density. The densest parts of town (Capitol Hill, the U District, and Belltown) have pretty modest condo developments. Unless you live in one of those areas you pretty much have to drive everywhere. If you think the Colwood crawl is a pain, try the 520 bridge between 7 and 10 and 3 and 7. Or the I425 or I5.

Also, houses costing 30% more in Victoria sounds way off base to me. I did a quick search and found this at Ziprealty that indicates Seattle average home price, for both SFH and condos is $511k. Here it is $574k for just SFHs, which is hardly 30% higher, and certainly does not include condos (in which case the average would be more like $412k)

As for down and outers etc - Seattle has 4.2 murders per 100,000 of population. Victoria's is 0.6, or 7 times lower. I know where I'd rather live.

Check out Pine and First where there were daytime drivebys just last week. Go down just N of the Kingdome around the missions and soup kitchens. Try Georgetown. And those are just the parts of town I would go to. Victoria's social problems are pretty minor in comparison.

Anonymous said...

z

I hope you don't mind questions as I'm sure you would expect to get them when you post here.

Are you a first time buyer?

You don't mention that you are living in the condo. Did you buy it to live in or rent out or hold on to for a while and then either move into or sell?

Are you downsizing? So, did you purchase it after selling something larger or did you purchase it but did not sell your principal residence but took the equity out of there to purchase this condo.

I apologize for all the questions. I'm just trying to get a sense of who is out there still buying and you are the most recent one I know.

Thanks

S2

vg said...

jmk,
I know the traffic well, stuck for two hours coming into town, stop and go on a hot day,wasnt fun but it was unusual they said as it wasnt rush hour yet. I expect it in a huge city like that but was hoping to miss it by ebing a little early. Vancouver has the same,got in that coming back.

As far as the crime goes no doubt it is more dangerous,didnt say I wanted to live there but in comparison to prices even if freako is off by some it is still no comparison for big city entertainment,Mariners game at Safeco Field was most awesome and the football experience puts the Lions to shame. Victoria cannot even come close to it. Drivebys will eventually happen here,just like Vancouver,there's been a couple already.
I did say I realize there were areas of Seattle that were for the less fortunate but at least they don't take over the main streets like they do here camping out setting up tent camps in high tourist areas.

So the point being Seattle RE prices show us Victoria is way out of line for what it has to offer.

Anonymous said...

VG,

You are so right. They are out of line. I think earlier someone posted the average salary in Seattle vs Victoria.

Victoria does not have big companies (I think Thrifty's is the largest), big law firms, large banking sector. Victoria has big city prices without the big city money.

If Victoria does in fact turn into a town for retired baby boomers I really don't want to live here or raise a family here. I would much rather be somewhere else that is a little more "normal" with young and old alike. Not just well-to-do baby boomers. Frankly it would be too strange. As my 9 year old would say freaky!!!!

Aleks said...

"If Victoria does in fact turn into a town for retired baby boomers.."

Turn into?! They were calling this the land of the newly wed and nearly dead when I was in elementary school 20 years ago.

Anonymous said...

Victoria is a joke. This is on CNN money: 10 best places to live and what it will get you.

Is Victoria ever out of whack!

http://money.cnn.com/galleries/2007/moneymag/0707/gallery.expensive_homes.moneymag/index.html

Anonymous said...

Now look at this what someone is asking for in North Oak Bay MLS No..233801

Anonymous said...

S2,

i'm a first time buyer who had a %30 downpayment. i lived here before, but have been in ontario for the last 6 years. because i got a job in victoria, i decided to come back and i bought a place because i didn't want to have to move again anytime in the next few years (i live in the condo). that wasn't necessarily the smartest move, i'll admit, but i looked into the market as best i could and figured it hadn't flattened out yet (at least in the downtown core). we'll see what happens.

z

Anonymous said...

z

Hey, you answered me. Cool. Thanks for the info.

S2

vg said...

hhv, on your update,we have all have thought out loud on screen,infact I still do,lol.

I was thinking the same tonite about how this will unravel and the low sales and the "have to sell's" will be the way it plays out. I recall 1981 was the same,the listings were actually very few when it started ,as in less than one page of the newspaper. I don't recall a mad rush to the exits either,just a steady decline but very harsh. When the buying stops it is a very very harsh feeling and I am sure in this new age "I want it now" society I anticipate many newish owners not having the patience to ride it out.

Anonymous said...

And this is why owning your own home is not an investment.

http://www.canadianbusiness.com/my_money/spending/home/article.jsp?content=20070419_134727_5436

S2

Anonymous said...

this is also interesting:

http://www.canadianbusiness.com/rankings/bestplacestolive/list.jsp