Sunday, September 30, 2007

Saturday Open Houses

We went out a house hunting yesterday, more to check out the feel of the market than to actually look for a place. Which is a good thing because we didn't come across too many open houses.

The one that we did come across, at The Amana on North Dairy was good. For two reasons. First it was DEAD in there. And second, I was impressed by the place.

Let's deal with the first issue. When we go out to "buy" anything of value I always subscribe to the Bill Cosby as Dr. Huxtable school of thought on monetary purchases: Always hide the fact you have money. So I go looking like a shrub. Ms. HHV can make a track suit look good on her so it kind of defeats the purpose, but I look like a shrub none-the-less. Why do I do this? I want the salesperson to ignore me until I have a question and I want the price negotiation to seem like I'm stretching all my finances to get into the product. Has this been a good strategy for me? Who knows.

Anyway, the Realtor yesterday, incidentally selling a $400,000K condo, was over-joyed that we walked in his door. He was a good guy. Left us alone, answered our questions, didn't talk too much and asked us the questions he needed to for his marketing--where did you read about the place, the open house etc. I liked him enough that if I was in need of a Realtor to sell my place, I'd interview him.

But he made no attempts at qualifying us as buyers. No, what do you do questions or anything like that. No, who does your financing. It was almost as if two youngish people looking at a $400K place with no potential rental income was normal. And that I find very scary. But we were there 20 minutes of a 2-hour showing and no one else came or went.

The place was actually very nice. It was a 1-bed 2 full bathrooms with a loft master bedroom. So really it was 2-bed 2-bath. For its 1000SF it felt huge. Really high ceilings (14'+), nice layout, skylights, full size appliances including washer and dryer (not stacked). It even came with two parking stalls. It wasn't luxury, like they claim, as I don't consider melamine cabinetry, arborite counter tops and black appliances luxury, but that is irrelevant. Most places don't live up to their luxury billing anyway. So whatever.

It was a nice place. Somewhere we'd be happy and proud to call home. Somewhere where we could live for an extended period of time. But at $400K, which is only about $2500/month mortgage payments, that place would suck up fully 50% of our income to live in. No thanks.

The place was "staged" fairly well. As we were leaving, Realtor says, if you're thinking of making an offer, think about keeping the furniture that's in here, I'm fairly certain the developer doesn't want to move it out. I had a good laugh at that. And not jokingly stated, "Will you take $350 inclusive?" Silence. So we left.

Roger had an interesting comment earlier this week. If the market corrects, will it start with condos? That would seem to make sense to me in that there are more condos being built than houses. So if we are to get some build up of listings, then we should see price reductions there first. And in our experience we are. Tuscany, Richmond Gate, The Julia, The Amana, The Pearl on Hillside, all of these places are in neighbourhoods that we wouldn't mind living in.

But none of these are close to selling out. And the funny thing is it's the most expensive units that are still left. Those units have one target audience: the downsizing boomer. I don't believe the down-sizing boomer is a reality. Many boomers are moving up in the market. Drive up Bear Mt. How many people who don't fit the boomer generation do you know that can afford to buy those $800K monster homes?

The Songhees condos, and others like them around town, are being marketed heavily in Alberta and Ontario as vacation/retirement properties. We think the downsizing boomer isn't looking to live in any one particular town. They may buy a place here for use a few months of the year, but they will likely maintain a property in their "hometown" too. Who knows. But I don't see a condo on Quadra at Hillside as being a product that competes with a condo on Bear Mountain or the Songhees.

Unfortunately people my age do. They think that retirees from Gordon Head will sell their $550K houses and downsize into $250K condos. We think they're dreaming. And it will likely be a nightmare that wakes them up sooner than later.

As a complete anecdote, I spoke with my friend who lives in a great condo on Chatham and Government. I love that unit. She paid $200K 3 years ago. She was shocked to learn a similar unit just sold in her building for $230K. "Is that it?" she said, "I thought this market was supposed to be hot? Shouldn't it be closer to $300K by now? I would barely have made a dime by the time I pay the sales-related costs."

26 comments:

Anonymous said...

I heard through the grapevine that many Americans that bought in the Songhees are trying to get their deposit back or walk away from their deposits as they bought when the $ was in a different position.. Now it is not as interesting and affordable.

Anonymous said...

I think now that things are different in Alberta, they sure won't be coming. As an ex Torontonian I have to say people from Ontario want warmth and sun during the winter. They don't want rain. I bet the ratio of people from Ontario moving here is pretty small.

vg said...

Thanks for the update HHV.

Maybe the Americans are reading the latest Goldman Sachs change to the bear camp. Wouldn't that be another black eye for Victoria if Americans pulling out snowballed ?


Goldman Sachs tiptoeing into the bear camp

Goldman Sachs has abandoned its ultra-bullish view of the world economy, warning of a likely recession in Japan and mounting risks that US property slump could spread to parts of Europe.

In a new report, "The Global Economy Hits a Crunch", the US investment bank said it was no longer sure that Asia and Europe would be able to pick up the growth baton as America stumbled. It fears that turmoil is spreading beyond the debt markets to the factory floor




http://tinyurl.com/yv62be

Roger said...

hhv

I also believe that boomers will not be selling their homes and moving into the condo apartments that are currently being built in Victoria.

I have spent several years renting older condos in Ottawa and Victoria. However, as a boomer I would not even consider one of the new units that are being built and offered for sale under 600K. Here are my reasons:

Square footage is too small.
One bedroom units under 700 sq. ft. and two bedrooms under 1000 sq. ft. don't come close to meeting the needs of retirees. No room for hobbies, storage and traditional furniture. Some bedrooms are som small you can't even accomodate a queen size bed and two night tables.

Not enough rooms
The condos I have lived in were 2 bedroom + den. This allows both spouses to have a room for their hobbies or for a guest room (for grandchildren or friends) and den. 2Bed + den are rare in Victoria but common in other cities like Toronto. A BIG mistake by developers trying to squeeze the maximum profit per floor.

Not good value
Why would anyone downsize to one of these units when they can get a townhouse or garden patio home for the same or less money.

Sterile environment
Retired boomers, in general, enjoy being part of a community for social and safety reasons. Living in a concrete tower and passing a few words with strangers in the elevator is not great.

Poor location
Many of the condos currently being built are located downtown and in Songhees with their attendant drug problems and homelessness. Is this how a retiring boomer wants to spend their retirement. Scared and saddened on a daily basis by the misery around them?

Anonymous said...

My mother-in-law who lives in France was thinking of moving here a couple of years ago. She is in her 80s and wanted to be close to us. Anyway, she would have had to give up most of her cherished furntiure because the condos were so small and she thought she would go nuts. She already lives in an apartment and has downsized considerably but she was amazed how small they were. She is now moving but into a retirement facility.

olives said...

My parents are renting a house right now and would also love to buy either a condo or townhouse, but for under $500,000 either they are too small, or the townhouses are all more than one level - obviously not designed for older people.

Little tiny condos and three-level townhouses are designed for young people.

I heard recently that the million-dollar condos at the end of Beacon Drive have been finished for many months now and more than half are remain unsold. Can anyone substantiate this and provide more info?

Roger said...

So who has been buying these units? There are several candidates:

The affluent buyer that enjoys having a second or third real estate unit for vacations or seasonal residence. They may offer the friends/family occasional use of the place

The speculator that puts down a deposit and hopes to sell the unit prior to completion. These folks are going to get burned badly, especially on units not scheduled for completion until 2009.

Misinformed investors, usually out-of-towners, who think they are making a smart investment in the booming Victoria real estate market. However, when they try to sell their unit to a local buyer, without the developer's marketing budget, they are usually disappointed. Renting the unit is not great either. Who wants to rent for 2000-4000 per month? Shutters is one example that comes to mind.

Not yet retired boomers that are afraid of being left behind so they purchase a condo as an entry point to Vancouver Island real estate. They do not have firm retirement plans and have not considered what it would be like to spend 24/7 in their new condo box.

The rising Cdn. dollar, weakening U.S. dollar, will result in the exodus of the foreign buyer from our real estate market.. We are no longer a "cheap investment" for Americans and even European buyers will lose interest as evidenced by the downturn in Spanish real estate.

Alberta buyers are now seeing price reductions and a slowing market in Calagary and Edmonton and this will influence their buying decisions. The oil patch is slowing down and the growth forecast for Alberta shows a reduction over the next couple of years.

The US real estate market is in real trouble. Sales are down and prices are falling dramatically in many areas. Canadians see this every nighht on the news and many are wondering when it will happen in Canada even though the pundits say that we will be OK.

Stay tuned folks. Times they are a changin'

Anonymous said...

HHV,
Re: Staging of Amara on North Dairy. I hear yuh.

You are right in that they SEEM roomy and airy, because of tall ceilings, etc.

But, for that price, the quality of finishing is pathetic, or actually, non-existent. Cheaply built.

I found them cute too, but IMHO, only a hermit who owns very few possessions could possibly live there comfortably.

Did you realize that the washer/dryer are inside a closet in the master BR? Also, that the so-called dining room was perfectly outfitted with the tiniest round table-4-2 stuck into a corner, and yes, with TWO chairs?

AND, that the living room had 1 or 2 LOVESEATS, as there was NO room for a SOFA?

And, that when you opened a closet in the bedroom, you were hitting the night table as it was so cramped in there?

And, finally, if/when you and Mrs HHV decide to start a family, the poor baby would have to live outside on the balcony, or upstairs alone in the loft, as there's no chance in hell that a crib could fit anywhere in that bedroom?

YOU BETTA KEEP ON KEEPIN ON LOOKIN.

The Amara AIN'T the place for you. The reason it is empty is that it looks best empty. 'Nuff said!

Village said...

I might be incorrect. But I believe history has shown that generally in booms Condo's(Townhouses?) following SFH's up. Then lead on the way back down. Which would make sense, they offer the least value and are not land restricted. You can always build up.

greg said...

Condos will be first and farthest down. That's what happened in the 80s and again in the 90s. My sister was stuck with a one bedroom in Fernwood for more than 10 years, before prices recovered close to what she paid. That doesn't even count the cost of the assessment for building envelope failure.

After 10 years she sold and got out with a small loss in nominal terms. That was in 2004.

Village said...

I'd like to point out the DOW today. WTH? 60% lower revenue on earnings losses to Subprime meltdown to Citi (US largest bank?) Most news out is almost bad news across the board. But the market is up 200pts.

I'm no expert but it strikes me as seriously weird. Weak dollar policy at play? Kool-Aid that I really wish they'd share?

MSM seems to be chalking it up to additional rate cut speculation, and that the subprime woes are over. Both idea's are causing a division by 0 error in my head. Just can't compute.

Anonymous said...

It's odd that the very same people who admit to losing money in the 1980s and 1990s downturn are now adamant that:

"This time it's different."

"Everybody wants to live here."

"They aren't making any more land."

"Victoria prices are only now catching up. The value is there, and will NEVER go down."

Yet, when further questioned, and this goes for only the ones old enough to have been property owners back then, plus old enough to have a good memory.......they ADMIT they lost big-time. These are ordinary folks, not developers.

One lady had to sit out the market for 12 years before she could afford to get back in around 1999. She had lost all her money and more on 3 previous Victoria homes back then, all separate times, ONE at a time.

Another guy immigrated here in 1979 (or so), bought a lot in GH for $80k, built a house on it costing another $80k, then was forced to sell it for a TOTAL of $80k in early 1980s. Yet........"it'lll never happen here again. These are different times.....blah, yawn...."

renter said...

it's true that most condos are very small for what you're paying for, but i feel like small spaces are getting a bad rap here. in north america we're used to having far more space than most other places in the world, and we're just unprepared to deal with more space efficient apartments. now, i'm not trying to say that these new tiny condos aren't rip offs, but, if they're well designed, they can make incredibly good use of a small space, theoretically decreasing the impact of your environmental footprint. there is something to be said for well designed, smart small spaces.

vg said...

renter,

my experience living in several apartments the past 7 years is the small ones that are 600 sq ft are just too small to live in without making it uncomfortable to have a social life and not feel claustraphobic especially in winter. There's a fine line as the ones that are 800 sq ft or so are manageable for one person.Maybe the Asians coming here are used to the small space but I could not function or have any guests over for dinner cause 4 people at a table doesnt work in 600 sq ft and I couldn't even open the bedroom door without it hitting the frame and this was a high end place.

vg said...

Been busy today and just noticed the numbers out and sales and median price are DOWN ! Time to crack a cool one. :)

Anonymous said...

Posted this at PB's site, but I need some input:

PLEASE correct me if I'm wrong, and I wish I were, but the median in August was $515,000 versus $520,000 for September.

vg said...

yes you are correct, I was going by this statement and I misunderstood it to mean the change from last month,sorry bout that but sales are down and that is huge.

"although the median price was considerably lower at $520,000.

hhv said...

Anon at 10:06 pm,

The Amana isn't empty, it has one unit left to sell. We both thought that while overpriced, the unit was well layed out and appropriate in size for us, our lifestyle and our stuff. Is it perfect, no. But as far as being compared to other new 2-bed 2-bath units we've seen, this one is the best.

We've only seen the one unit. This one had the laundry closet in the bathroom off the kitchen which we thought was a great idea. I could come off my bike on a wet winter day and not get the floor grubby as I can go straight into the bathroom, have a shower and do my laundry. Works for me.

I also think small spaces get a bad rap. We don't want and don't need anything big. But I'm not willing to pay a premium for tiny. If a 1300 SF townhome was $250K today in a decent neighbourhood, we buy in a heartbeat.

Anonymous said...

Renter: I agree with you completely, we are going to be dealing with density and footprint issues a lot more now. And some people are just going to refuse to accept change. Most of the world marvels at the space we have, and with some, seem to demand. Entitlement?!?

HHV: 1300 sq feet? That's great, but less doesn't work for you at this time? Go back 50 years, more children, smaller houses. A lot of adults from large families look back on those days as something to cherish, not alter. This obsession with BIG is being sold to us, and most buy in gleefully. There's other things that matter a lot more than how many can fit in your dining room.

renter said...

my partner and i lived in a 600sqft one bedroom apartment in toronto a few years ago, and it really was ok for two people. we just had to be smart about how we set the place up, and it was good because we didn't end up buying any more than what we needed since there wasn't anywhere to put it. the layout of the apartment has to be good, of course, which is up to the developer/architect and not you, but it is possible to adapt to a small space. again, i'm not trying to say that in the victoria market people should be rushing out to buy tiny condos for $250k, but just that if these tiny new condos were actually reasonably priced, they aren't necessarily a bad thing in and of themselves.

Sam said...

I can sympathise with the space arguments as well. We just moved back from the UK (southeast) this summer, and our house, which we sold in the spring, was 400 sq ft. Coming from Canada, I'd never even heard of a house that small. It had the living room and galley kitchen on the main floor, and the bedroom and bathroom upstairs. Sure it was small, but two adults and a cat managed just fine. We did have some wicked arguments when we were renovating, because then it was really frustrating since all the furniture had to be stacked in the middle of the living room. But honestly - most of our grandparents had to deal with a lot more hardship and would rightfully laugh at us complaining about our house.

Further perspective is gained when you consider that the downtown Victoria half-duplex I grew up in is only about 650 sq ft plus a basement. In the 1930s when it was built, that was considered a modest but respectable city house.

The modern North American obsession with 2000+ sq-ft houses does seem to be both unhealthy and unrealistic, and will go a long way to explain the real estate boom and bust when it is all over in both countries.

Anonymous said...

I live in a (rented) condo that's about 1000sf, 2 bed/2 bath. That's me, my husband and 14 year old daughter. The bedrooms are large (the master especially with a huge walk-in closet too), nice sized living/dining rooms. I honestly don't know why we would need any more space. Why do people think they can't survive in anything but mansions these days? All our furniture (which is full sized sofas, etc.) fits easily.

Anonymous said...

Well said, Renter and Sam

Anonymous said...

I have heard directly from developers in Victoria that up to 70% of the new condo "sales" are in jeopardy. Developers "sold" their units with the minimum down-payment in order to get financing from the bank for the project. Many people were buying 2-3 or more units entirely on spec for relatively small deposits.

Now that the economy in the US is on the brink and condo prices here have been flat for the past few months, large numbers of people are walking away.

Face it, the rate of new condo development over the past 4-5 years has been 5x or more the rate of population growth. There is now at least 8-10 years of supply on the market.

Like every other market in the past, we are in ffor a huge correction.

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