Tuesday, September 4, 2007

August Numbers

You may have noticed, if you're a regular reader, an absence of "low-end market segment" numbers last month. I decided not to do a count because a) it was depressing and b) I'm not sure if anyone else was getting any value out of it. If I'm incorrect on b, let me know in comments and I'll begin again September 15th.

VREB released their August numbers today. It's a mixed bag 'o' positive if you're selling a house or make a living selling/building housing in this town. Here's some highlights:
  • There were 846 sales through the Victoria Real Estate Board’s Multiple Listing Service® (MLS®) in August, up 22 per cent from the 694 sales in the same month a year ago.
  • There were 922 sales in July of this year. Meantime, 23 sales of over $1 million, including one sale in Oak Bay of over $5 million, helped push the average price of single family homes sold in August to another record high of $576,632
  • the median price was considerably lower and remained unchanged from July at $515,000; the six-month average was $566,094.
  • nearly 20 per cent of sales of single family homes last month were under $400,000.
  • The average price for all condominiums sold in August was $298,852; the average for the last six months was $313,852. The median was again lower at $275,000.
  • The average price for townhomes last month was $395,646; the average for the last six months was $398,299. The median was $379,000.
  • There were 3,352, properties listed for sale on the MLS® system at the end of last month, virtually unchanged from the 3,345 properties in the same month a year ago.
In a nutshell, sales are up significantly, prices are a mixed bag, but generally flat in SFH and slightly down in condos and townhomes. I'm completely de-sensitized to this bad/good, depending on who you ask, news so no glum feelings for me. MLS doesn't release DOM numbers but I'm guessing where it previously took days to sell a home it now takes weeks, if not months. A house down the street from us sold for too much after 3 weeks on the market; SFHs in Saanich don't seem to have trouble getting between $500-$600K.

We're expecting condos to get ugly soon. There is a glut of product in our immediate neighbourhood about to come online. Tuscany is almost done and still not 60% sold. Richmond Gate has been "over 65% sold" now for months. I keep waiting for that sign to say 75% or 80% but I guess they don't have the money to update it? That should drive some prices down.

Any parents of college kids out there buying condos as an investment rather than making your kids try and fight for rooms in the rental pool?

As a complete aside, I started a new Monday-Friday daytime job, so posting will likely happen in the evening now. We're officially DINKS, I expect our realtor to be calling everyday as we just pre-qualed for an extra $100K. This may be fun for a while.

UPDATE: Roger has a great analysis of why this news is good for those of us who consider ourselves RE market bears.


Roger said...

Contrary to what the media is telling you VREB's statistics were good news for bears today!!

I have updated my Website Need's Analysis with new graphs and my rationale for making this statement.


HouseHuntVictoria said...

I know I've said it before Roger, but you do always find a way to make a smile or two appear around the HHV household.

JMK said...

I don't know Roger. Your 3-month running averages look to me like last year at this time, except almost 10% higher.

nofuncity said...

HHV, my wife and I definitely find your wrapup numbers useful (we're DINKS over the water in van who have to relocate to Vic for work next year).

we share your frustrations with the market...though for comparisons over here you need to add another 500K and a lot more crime and traffic for less house/land.

funny thing is that the best buys seem to be whistler (can buy newish large log-homes in primo areas for less than a shack on the westside of van), not that we can afford either

Roger said...

jmk said
I don't know Roger. Your 3-month running averages look to me like last year at this time, except almost 10% higher.

jmk - you are absolutely correct. If you had bought last September you would be up approximately 10%. This is great if you bought last year at this time and you are not a flipper.

Let's say an owner/flipper bought a 500K house last year at this time with his own money (no financing). The price with transfer tax and legal legal fees was around 508K. If it sells for 550K (10% increase) the net to the seller after real estate fees (7% on 100k, 3% on balance) is about 530K. Gross profit of 22K before taxes and any maintenance fees. Assuming 3K in taxes and 4K in maintenance results in 15K profit. So he made 3% on his money and had a place to live rent free for a year. If our flipper rented it out he would be much worse off. Not much of an investment.

However my point is this. Don't buy stocks or any investment based on last years performance!! If you want to buy a home for lifestyle, like you did, go ahead but don't make the mistake of thinking that it is an investment.

I believe the Victoria market has topped out and my stats are pointing in this direction. Anyone buying a 500K house now needs to consider that their occupancy cost (mortgage interest, taxes, utilities and maintenance) is around 3K a month assuming 100K down payment. Are they content to pay this month after month, year in year out and face the possibility that their home may not increase in value (or decrease) over the next 5-7 years?

I agree with your earlier posts about making money over the long term - 20 years or so. But the average stay in a property is around 7 years. Buyers need to face the fact that if they sell in the short term they could lose money and pay 3K a month, every month before they sell and move on.


Anonymous said...

Roger, what's most interesting to me about your central Victoria chart is that prices appear to have been falling since April. This is quite different than previous years when sales tended to be quite strong until mid-late summer, as one would expect. A falling median through months generally considered to be a strong selling season makes this years data a little different from last year at this time.

vg said...

Looks like I called it as per my post on PB's board, total sales were down and prices flat. I care not about comparisons to last August,that is so far back in history it has no bearing, its what happened last month and we are down 7.9% total sales.

If anything it tells me we have PANIC buying still but a declining amount and that means the top of any market. They can last longer then we want it too but it does come to an end right when you think "it's different this time".

As per Rogers graphs I believe too that these are good news stats and as his perspective as well we have the tail end of the lower interest pre approvals who foolishly think this is their last chance to get sucked in.

We also have the US subprime fear that never really hit home til the past couple of weeks which is little too late to effect August numbers in a big way.
I look to September to show us a continuation into the late fall as we chip away unless all hell breaks loose in the stock markets which can't be ruled out completely. Keep the faith bears,this is what we want to see.

hhv said...

Here's a couple of questions: why are people moving out of Victoria, but into the so-called suburbs?

And why were there no-less than 3 additions of Langford condos to the MLS today and quickly marked as sold above asking? It's the McConnell place development. I smell a rat. I call MLS sales stats padding if they appear, then almost instantaneously get marked as sold above asking on the PCS service we have a subscription to. Seems to me that the agent involved is practicing some unethical behavior.

Anonymous said...

Today on the mostly bull site I go on someone is looking to buy a condo for around $200,000 (will go up a bit more for the right condo) to rent it out as an investment.

When I told my DH about this he chuckled. Anyone else have any insight on if this is a foolish move now or not?


hhv said...


Buy a $200K condo with cash and rent for $1100-$1200/month and you're getting 6% return before your expenses (maintenance and taxes)... inflation at 3-4% real rate of return is closer to 2-3%.

Laws of diminishing returns apply if you have to borrow to get that money to buy.

Of course, most RE investors are buying and factoring asset appreciation. If they can hold long term, it is an OK investment. Not very liquid, but decent return.

Length of time is key in RE investing. Unless you're buying on the upside of the bubble and flipping for 20% returns like many have been able to do here over the past 3 or so years. If that's the plan, they're probably going to learn the hard way.

Anonymous said...

Thanks hhv. Makes sense.


JMK said...

6% return before your expenses (maintenance and taxes)... inflation at 3-4% real rate of return is closer to 2-3%.

Your 6% return goes up with inflation. At 2% expenses, you are looking at 4% return - and that is just the dividend. Add in capital appreciation and you'll find the return is not far off of stocks.

Buyers need to face the fact that if they sell in the short term they could lose money and pay 3K a month, every month before they sell and move on.

Thats fair enough - I wouldn't buy if I was afraid I'd have to sell in 5 or fewer years. Flippers have far more guts than I do.

Village said...

It does look like the simple buy and flip with no added 'value' guy is dead. They'll have broken even(not counting carrying costs) if they purchased in '06 and sell now.

If the trend continues with lower appreciation which I expect to. This should take the low end flippers out. Add in all the rich investors from Alberta and California(Why would they buy here?) selling their 2nd/3rd homes to cut loses at home. We should start seeing inventory climb higher.

I'm surprised it hasn't happened already. I still don't expect Victoria proper and well established area's to drop as far. But I do hope to get some nice deals in Sooke/Shawnigan Lake type area's as prices start to factor in travel/gas/vehicles etcetra.

Roger said...

Latest news on US housing market:


However, this is a US problem and will have no effect here in Canada!!

vg said...

From Michael Levy,a regular guest on the Michael Campbell show.

"However, our real estate market will be affected and no part of Canada will come away unscathed.

We have said often that those housing markets that went up the fastest will see the most volatile declines. We are already seeing some small cracks in the property market in Calgary, the nations leader in real estate growth in the past few years.

Other parts of Canada will soon be in the midst of a real estate correction that, at least in part, will have been set off by the credit crunch that spawned from the U.S. housing market."


Can't happen here ? don't bet on it, it's coming to a naighborhood near you.

StargazerXL said...

Yet another real estate price record story in the T.-C. this morning by Carla Wilson. Unsurprisingly, the tone of the article is not as bearish as the conversation here. :-)


StargazerXL said...

Holy cow! The T-C calls the Oak Bay murder-suicide house "a bargain". Will the real estate pumping ever stop? :-(


greg said...

That's sad and pathetic. I looked at an affordable townhouse in Saanich about 4 years ago. Everything loooked good, too good to be true.

At the end of the tour, the RE Agent said I have to tell you about the history of this place - it too was the site of a murder-suicide.

Couldn't imagine buying it after that, but somebody did.

Wish I could remember the name of the agent, have to give him full marks for honesty.

Anonymous said...

The TC is a total piece of ass wipe for printing that article. Who gives a rats ass wether the house is a bargain or not ?

I have a personal connection to this tradgedy and I am disgusted that they would actually stoop so low write such trash.

Anonymous said...

I would buy a place that a murder/suicide had taken place in for a good deal. That could happen anywhere. I'm more concerned with the general safety of the neighbourhood - not whether or not some whack job used to live there. Wouldn't bother me. I'm sure lots of people have died in the condo building where I rent over the years (whether from old age or something else). Doesn't bother me.

hhv said...

disgusted? yes; surprised? not so much.

vg said...

Garbage journalism, in whose eyes is the authority in the article that says it's a bargain ? where is that agents name used that makes this claim ? they even have to say it's updated and how many bedrooms ? who gives a shit,there's 5 cold bodies still laying in there and they are trying to sell the house as some deal,why don't they bring in the VREB spokesperson for his comment ?

Just like that Don Henley song,Dirty Laundry,the TC has stooped to a new level.The article goes in like 3 or 4 different directions from the price of the house to the neighbor yelling at the cops..... pathetic.

Anonymous said...

I would buy a place that a murder/suicide had taken place in for a good deal.

Cool - I have this great Hotel that needs a caretaker for the winter.
Bring the kids!!

Anonymous said...

What does a crime having been committed at some time have anything to do with the house itself or whether or not someone should buy it? I stand by my comment. I care more about safety of the neighbourhood in general than whether or not some whacko lived there once and committed a horrible act.

Anonymous said...

Why, because there will always be the stigma of this trajic event. Your friends will introduce you as the guy who bought the mass murder suicide house. How long can you, your spouse and your children accept this - before you sell.

Best to demolish the home and start new.

Think O J Simpson


Anonymous said...

My friends are true friends (I choose carefully) and would do no such thing. Still doesn't bother me. Yes, it is tragic for the family and anyone who loved them, but I see it as really nothing to do with the house. I don't want extended house guests anyways, so if people were creeped out over it then they are free to stay away.

PS - I have no plans of buying that or any other house here until things have "seriously" come down in price. I just find it odd how freaky people get over one act of a crazy person as if it has anything to do with the house itself.