Wednesday, December 5, 2007

Patience




Like any boy-band marketing worldwide, last months RE stats scream of manipulation. As does any rationale of why the F@%& the BoC would lower rates this week. Insanity. I don't understand why so many scientists are coming out against the IPCC and UN-led global warming hysteria these days yet very few economists are coming out against the ridiculous monetary policy emanating out of central banks all over. My guess is things are really bad. They just haven't hit yet. Look out.

Anyway. Patience bears, patience. We looked at a property this week. Even with our connections in the development world, a pre-approved mortgage, an agreed upon subdivision from one 36,000SF lot into three massive 12,000SF lots, one with a house on it, we couldn't make it economic. And we weren't the only ones as the previous bidder walked away too. This is going to get ugly. Anything worth developing is already priced as if it were.

When I see VREB stats and feel sad, I look at sales at Tuscany Village, Richmond Gate and the Pearl on Hillside, not to mention the Julia... I suddenly feel better. While their competition on the lower mainland sells out in 8 hours, our products, in the "land everyone wants to live on" can't hit 80% sold in 16 months.

I believe we are witnessing the dead cat bounce.

25 comments:

Aleks said...

The thing you have to remember about the Bank of Canada is that they're in Ontario and they don't care about BC. They may not even be aware. All they care about is that the Ontario/Quebec manufacturing industry is in the toilet.

olives said...

The rate drop is due to the tightening global credit conditions - obviously not good, but not at full panic yet apparently in canada (YET). It will be interesting to see how much the rate is cut down south since some are suggesting 100 points. (PANIC)

Anonymous said...

hhv, I just noticed the changes in the "about us" section. Congratulations and much happiness to you and Ms. hhv.

homewardbound

hhv said...

cheers,

that happened back in October.

roger said...

A number of bears were disappointed in this months VREB numbers. VREB uses average price numbers in their historical SFH graph and they can be misleading. Here are my median and average graphs for Greater Victoria. The first thing you notice is the big swings in average sales price (up to 75K) which is due to the sale of multimillion dollar homes in a given month. This is what happened with the November average sales price number. Many real estate boards (Calgary & Edmonton) use median numbers which is a better way to show market trends. These numbers do not bounce around much on a month-by-month basis.

Statisticians often use rolling averages to "smooth" the data, which reveals short and long-term trends. The current month and several preceding months numbers are used to calculate a "rolling average". This graph shows 3, 6 and 12 month averaging. Vancouver Island REB uses 12 months and VREB uses 6 months but they don't publish the graph. 12 months is too long and 3 is a bit short (but shows useful trending). 6 months seems like a reasonable choice.

When you look at the Central Victoria rolling average graph you can definitely see a flattening of average and median prices.

roger said...

More comments for the bears.

This is the graph for townhouses and condos published by VREB. Townhouses, like SFD's had an increase (49k median, 61K average) but condos definitely had a drop in average sales price of 24K but the median increased by 2K. The median is what we should focus on for trends.

The number of Active listings remains historically high and the number of new
listings
in November was higher than November 2006. I am seeing a lot of new listing activity this week and we are now in the month with the lowest sales of the year.

olives said...

Patience, yes:

From Don Coxe, Chief Investment Officer of Harris Bank, Chicago, a wholly-owned subsidiary of Bank of Montreal:

"Lowered Expectations"


“One big caveat: The housing bubbles in other parts of the world, including Britain, Ireland and Spain, and parts of Canada, are far more extreme than the US has experienced. If it should turn out that there have been comparable breakdowns in appraisal and lending practices in those countries, then they could experience house price collapses even greater than the US has just begun to suffer.”



- Don Coxe - November 2007

vg said...

Don Coxe is someone to not take lightly, he knows his stuff.

olives said...

Troubled Insurers Control CIBC's fate:

http://www.theglobeandmail.com/servlet/story/RTGAM.20071207.WBstreetwise20071207094511/WBStory/WBstreetwise/

oh please said...

Y'all want a little cheering up, take a look at the front page of the Vancouver Sun today.

Screaming front page headline: FRASER VALLEY HOUSE PRICES AT 8-MONTH LOW

And of course the realtors all saying it's just seasonal.

vg said...

Typical industry BS lines, "two months is not a trend", yeah it isn't but when was the last time it happened ? 7 years ago ?

You know you will get the seasonal crap too... but I love the CMHC sticking to its 10% rise call,how these guys can be so stupid blows my mind. I can see them saying 3% but 10 ?

And White Rock dropping 16% ? is this not like Oak Bay dropping 16% ? that could be very substantial in my books.

Toss in a decline in Vancouver Island numbers by 3% and Victoria is still extremely overvalued which means when it reality hits it will be very nasty as it plays catch up with the other declining areas.

hhv said...

But we just don't make anymore land here. Unlike White Rock.

roger said...

VG

I saw this graph and knew that it would make your day.

Any readers care to comment on where we are on the curve??

roger said...

Here is a recent news release from the UK concerning the effect of subprime in that country:
One in three faces big mortgage increases

In the bleakest prediction yet about the effect of the lending squeeze on British homeowners, Mintel, the consumer research group, said that 5.5 million people would be hit by higher monthly outgoings from rises in the cost of mortgages.

A quarter of borrowers are already struggling with unmanageable debt, while 12 per cent have missed loan repayments in the past six months, according to a separate report by uSwitch, the price comparison website.

Mintel found that nearly 1.5 million borrowers had been dragged into the sub-prime trap after falling behind on monthly mortgage repayments. The report said that “unconventional” borrowers, including the self-employed or recently divorced, were the most likely victims of the mortgage cull because they posed more risk to lenders.

Toby Clark, senior finance analyst at Mintel, said: “Sub-prime borrowers are only the tip of the iceberg. With lenders becoming increasingly cautious, many more mortgage-holders will be offered less than favourable terms when they come to remortgage. As many may not be able to absorb any increases in costs, we could see millions of people suffer.”


Remember subprime is only a US and UK problem. The Canadian banks and other mortgage lenders are OK because they have very conservative loan practices.

In particular, BC is immune to these effects. We have a strong economy, the 2010 Olympics and everyone wants to move to the best place on earth®

HADENOUGH said...

Roger

I remember the last crash in London. I was living in Paris at the time. Early 90s I believe. Every second house in Kensington (one of the most sought after neighbourhoods in London as you probably know) had a For Sale sign on it. A friend lost his flat in Eaton Square. I so wanted to vulture in and buy a flat. At the time property was high in Paris (most Parisians don't own their own home - it is a very anglo thing) and we could have sold our Paris flat and bought something in London.

People made and do make huge money in the City as London is the banking capital of the world and still many lost their homes in a downturn.

Anonymous said...

Roger:

Yes - subprime in reality is only a problem in the US, UK, Spain, Australia, New Zealand and the rest of Canada. It is not a problem in Victoria and Vancouver- SPECIFICALLY Victoria and Vancouver - because we have all those good things you mentioned. Prices will keep going up 10 percent annually forever here. 'Cause we're different. Canada's California. Yep. Ask CMHC. Or a realtor. They'll tell ya.

HADENOUGH said...

Olives,

My husband, who is in the financial markets and has a very analytical mind has the "I told you so" look on his face. He is very smug at the moment.

I have been bugging him for the last 3 years for a larger house (we are the ones with too many kids and too many animals) and he flat out refused to put any more money in Victoria Real Estate as he thinks it would be a terrible investment and we could loose our shirts. We do own but to put another big whack of change was something he was not prepared to do.

We are all living top of each other and have had a few fights about this.

I am very humble at this moment.

HADENOUGH said...

I must also say I was on Oak Bay Avenue and when I saw the headlines about the Fraser Valley in one of those newspaper dispensers I said out-loud - "Long Time coming' - the guy beside me smiled and said "F**king Right!"

We laughed and walked our separate ways.

roger said...

HHV

On November 15th you wrote about the Juliet advertising that they were selling the remaining units below market value.

At that time there were 8 units left. Today, I opened the paper and was absolutely amazed to see that they had 8 units still left. What is happening here? I still can't believe that these were not snapped up by boomers and out-of-towners at these reduced prices.

roger said...

HHV,

Correction - it is the Julia that still has 8 units left (under market value) that you can move into today. . The Juliet is still under construction.

olives said...

hadenough,

two years ago we sold our house with the intention of buying another. The more I read, however, made me pretty convinced that it would be wiser for us to rent for at least a few years and see what happened since OBVIOUSLY things could not continue as they were. It was pretty easy to convince "hubby".

It has been fascinating watching it all play out - first the U.S. real estate markets,the problems spreading globally, watching the mortgage implode-o-meter, then on to huge bank losses, bank runs, now massive losses due to those holding the asset-backed commercial paper and similar, the credit crunch which began last July and is now heating up again.

I suppose that will get worse and worse, with eventually the stock markets taking a big dive.

I've said it before - It's a like a Jerry Bruckheimer movie for nerds.

HADENOUGH said...

Olives,

I would love to sell tomorrow and rent but the problem is "who would rent to us?". I would not rent to us.

4 kids, 4 cats and a dog.

Friends just moved back from Vancouver and are looking to buy. They are renting and want to continue to do so until this thing falls apart. They are so wise.

vg said...

great chart roger, thanks !

vg said...

hadenough,

too funny....and such language for Oak Bay'ers... LOL

mark said...

Great article on the real estate happenings, I really enjoy reading your posts. Just for your information, Donald Trump is in big trouble right now with his real estate empire. I hope everyone can pull through this slump!!

Elmo

Real Estate Professional