Sunday, January 20, 2008

When is an economist not really an economist?

How about when they work for the RE association?

Take this for example, under the heading on MSN as "can US fears hurt our real estate?" Which, funnily enough, gets re-named "US slowdown may boost Canada's real estate market" once you click on the link.

The prospect of a U.S. recession has some homeowners and prospective buyers nervous about the impact on the real estate market in Canada, but one economist says a slowdown could actually boost activity in Canada's housing sector.

Really? I wonder who that economist would be? (Emphasis mine)
Gregory Klump, chief economist for the Canadian Real Estate Association, said it's still an "open question" whether the U.S. slowdown will turn into a recession...

"The chances are about 40 per cent, but the U.S. Federal Reserve is expected to cut interest rates and do so very aggressively to prop up their growth and keep them out of recession,"

"So while they're heading for a soft patch of growth it's an open question whether they'll enter a recession. My own thought is no, they won't."
Which means, they'll actually keep buying in Victoria then eh Greg? News flash: recession is here. But of course, they weren't saying that in the US back in 2005 at their peak either, or were they?
"Softer growth means lower interest rates and lower interest rates are positive for the housing market," he said.
Long story short, these MSM clowns then ask the other resident "expert" they turn to, the guy who makes a living selling RE, about what the local (Toronto) market is experiencing--Greg previously stated that only towns dependent on manufacturing may face a market downturn--Toronto it appears would be different because:
"Toronto is primarily a finance-based city and our economy is doing very well, and as long as that continues, the real estate market here should continue to be healthy,"
I guess they've been too busy selling condos to pay attention to what has happened to the financial markets, and in particular to financial stocks since January 1.

They must think we're stupid.

As an aside: thanks for the great discussion this past week. We've enjoyed reading it immensely and hope it keeps up. It's why I blog. My hats off to you all. Cheers.

I've just realized that PB linked to this article already H/T. Welcome back too PB, we've missed you after 11 days.

UPDATE: Vancouver Realtor says adjust to the new reality of price reductions (they're already happening here too)

Video courtesy of VK: cheers.

155 comments:

Mr.4am said...

How about starting Monday off with the headlines in the financial news that Quebecor World, the worlds largest printing press (books, magazines, etc) company is filing for bankrupcy after it couldn't get last minute finance bail out package? Gee, that couldn't possibly have anything to do with a credit crunch could it?

Also, I wonder how many of those "28,000 international jobs" are in Canada? ouch.

I'll give you 3 guesses as to the direction of the TSX Monday morning. The first 2 guesses don't count.

hhv said...

In less than an hour, the TSX has lost almost 500 points... Black Monday anyone?

I guess the banks will be selling a lot of GICs this RRSP season...

Anonymous said...

Just in case you are wondering why you can't see what's going on in the DOW, Nasdaq, S&P, etc its because the U.S. markets are closed due to Martin Luther King Jr. national holiday, but come tomorrow, it's time to go down... and I ain't talking about downtown.

roger said...

I have a question for the Real Estate agents and bulls that read this blog:

The stock market is tanking and all the gains of the last year have been lost on the TSX. Is now the best time to invest in a solid investment like a house or a condo in Victoria?

My second question is for the investment gurus out there?

The stock market is dropping like a stone and GICs are under 4%. I have seen ads in the Times Colonist for RRSP eligible construction financing loans paying up to 11% (Fisgard). Should I put my RRSP contribution in today before this opportunity passes me by?

Nick said...

Roger

I'll take a stab at answering your questions, which I am assuming are not rhetorical.

First, there is not much of a relationship between the stock market and the housing market. For example, the housing market continued to climb during the tech stock meltdown a few years ago. Some people say that's because people bailed out of stocks and into real estate, but the housing market had been roaring since the late 90's.

There may be an incidental relationship in that inheritances have no doubt increased over the last few years due to stock market gains. Those inheritances are providing a lot of equity for real estate purchases by people who have just sufferred the death of a relative.

So to answer your first question, whether buying a house or condo in Victoria is a wise move right now has nothing to do with the state of the stock market. However, as with the stock market, if you have a long horizon for your investment, there is much less risk than if you feel you might have to sell in a few years. Also, as with the stock market, it's better to buy on a dip than at a peak. I think everyone agrees the Victoria RE market is at a peak right now, so I would wait a while for the inevitable dip.

Your second question on RRSPs and Fisgard--there is no guaranteed return on investments like Fisgard. In fact, Fisgard is a very small ($175M under management) company which could easily get wiped out in a major mortgage and real estate crisis. I wouldn't touch them with a barge pole in the current environment. If you have cash to invest, buy the TSX. If there ever was a buying opportunity, it's now when the TSX has given up 18 months of gains. Now that's a dip!

Come to think of it, perhaps those were rhetorical questions on your part!

vg said...

If The Bank of Dad is losing 10's of thousands each day the market tanks,do you think he is going to say " Son,it's time I gave you $100,000 to go buy that expensive little house down the street" ? I don't think so, The Bank of Dad has closed up the shop and is hunkered down folks.

This is it, put on your seat belts it's going to be an ugly ride.

roger said...

Nick said
If you have cash to invest, buy the TSX. If there ever was a buying opportunity, it's now when the TSX has given up 18 months of gains. Now that's a dip!

VG said
This is it, put on your seat belts it's going to be an ugly ride.


Nikkei Index in Japan drops another 4% on Tue. AM opening a few minutes ago. Australia drops another 5% on opening as well for 12 days of losses

Dow Jones Futures in overnight trading already down 500 points for tomorrow's opening.

I believe this is mostly institutional selling and programmed trading. VG called it right - derivatives and hedge funds leverage. The small retail investor has not thrown in the towel yet. This week is going to be a wild ride.

There will be some "deals" before long. Some Cdn. bank stocks are now yielding over 5% on the common shares. They will even be a better deal in a few days.

Anonymous said...

Privately some financial experts are saying that the TSE could hit 10,000 over the next few weeks. That would be a drop of nearly 45% from the peak late last year and would wipe tens if not hundreds of billions of dollars off the books.

Whether the real estate market follows suit or not has less to do with where money is placed then it does the mood of the investor/buyer. Someone who feels as though they have lost a fortune is not very likely to go out and bid up the price of a new home or condo. They will hunker down and save their money while their finances sort themselves out.

For the record the real estate market did not remain strong during the last dot com bust. The market was flat for several years and didn't really pick up until interest rates dropped substantially in 2002/2003. This time around however Joe consumer is already leveraged to the max and any credit room they had was in their home equity.

I don't know if depression is the right word or not but certainly a recession will be a "soft landing" for the US and Canadian economies.

Anonymous said...

Sorry I meant to say a drop of 4,500 points not 45%!

vg said...

A well informed financial expert I follow who has been in the trenches (and called it right the past 5 years) says if the FED doesn't drop interest rates a FULL point before the open tomorrow there will be a 1000 point drop on the DOW. I would be praying for that rate cut as no one believes Bush's game plan to hand out $600 each and is a joke.

If they do cut now then things will calm and could rally hard at least for the short term.

roger said...

vg said
A well informed financial expert I follow who has been in the trenches (and called it right the past 5 years) says if the FED doesn't drop interest rates a FULL point before the open tomorrow there will be a 1000 point drop on the DOW.

Futures for tomorrows opening are around 450 down as of 8 PM PST. If the Fed does the surprise rate cut announcement it could backfire because it shows panic on the part of the FED. Also the role of the Fed and BoC is not to support the stock market but to control inflation and to regulate the state of the economy.

I would not be surprised to see the BoC not cut tomorrow because it will go unnoticed in tomorrow's plunge. The US markets will determine tomorrows events and a BoC might wait until March and cut 50 bps.

I bet the TSE will bottom out around 11000 points which is a 3500 point drop from the peak. There had to be a correction sometime!!

hhv said...

So Roger, are you looking for a shopping cart for a few weeks from now to go on a discounted blue-chip stock buying binge?

I think I may skip the shopping cart and go straight for one of those flat trolley type things they have at warehouses, there are going to be some good deals lying around... of course, its gonna take some time to sort out what though.

Anonymous said...

I find it interesting that you would consider purchasing anything at this time in the U.S or Canadian market considering there is still further to go and the market is very volatile.

I guess you would be one of those that is about to catch a falling knife before picking it up after it hits the ground.

As well, if the bear are right about a potential housing decline in Canada this year I am pretty sure that the TSX will have further to fall if that news hits

snaptee said...

I find it interesting that you would consider purchasing anything at this time in the U.S or Canadian market considering there is still further to go and the market is very volatile.

Moi aussi.

I sold everything a few months ago except for BCE and BA.UN because I think the LBO by the Teachers and friends is still going to happen. I won't be getting back in for a while, certainly not in 3 weeks. Maybe if you want to DCA it might be an ok plan but even then, I still think there is a ways to go.

hhv said...

"for a few weeks from now" "its gonna take some time to sort out what though"

Doesn't sound like "at this time" to me.

Regardless, when I can get a tried and true financial stock like TD, RBC or BNS at 10-15% off, I like to think that's a fairly decent buy and hold for the long term. Remember these weren't particularly over-valued at this point anyway. They give great dividends and have good yields, that's what I'd be buying, not stock price appreciation.

greg said...

Nobody wants to hear it, but a Canadian Bank could go under if they over-leveraged subprime "assets".

vg said...

Well they got 3/4 of a point cut and looks like the markets in the short term are not tanking which is good to see, and the TX is up huge right now......lets hope it holds but I suspect this is the first of several scary moments ahead of us.

Looks like another 1/2 a point coming next week in the US and more here too says the BOC,what does that tell you about the state of our economies ?


Even if we stablize here the most important point in this real estate bubble we have all been calling for has now officially arrived : the change in psychology. Party time is over in Canada.

roger said...

VG said
Even if we stablize here the most important point in this real estate bubble we have all been calling for has now officially arrived : the change in psychology. Party time is over in Canada.

Good call last night. As of 9 AM Dow is still down and TSX has fallen off the peak. Keep that safety belt on. The market realizes that the underlying problems have not gone away.

VG - here is a scary thought. The RE pumpers will now be telling everyone to go variable rate after the next BoC rate cut in March. Talk about exposed: long amortization, minimun down and floating on Bank Prime.

Tim Ayres said...

Tim Ayres:

Roger,

Why is that a scary thought? All indications for the next 3-5 years are that interest rates will be targeted low to prop up falling inflation to the 2% target. And even if rates start to creep, it's not as if they're going to shoot up 2% overnight. Did you read the BoC news release this morning?

People almost always have the option to lock in their rates.


I'm happily in my Prime -0.85% variable. Most people save in the long run on 3-5 year TERM Variable mortgages.

-Tim Ayres

greg said...

Tim,

rates are not low to prop up falling inflation. Check out the price of oil.

They are low to boost consumption - a sure sign that the economy is in trouble.

Central banks don't lower rates when times are good.

Tim Ayres said...

Tim Ayres:

greg: "...rates are not low to prop up falling inflation...They are low to boost consumption..."

...Which will in turn prop up inflation...

Inflation is caused by increased aggregate demand. Hence, stimulate spending, prop up inflation.

In part, price cuts by retailers in response to the high dollar have caused inflation to slow down to 1.5%. To get the rates back to the target 2%, the bank has lowered rates.

The markets are troubled, to be sure, but all indication are that Canada will weather this storm in the US.

It will be interesting to see what happens with the 3/4% cut in rates by the Fed in the US. They haven't slashed rates by that much since 1984.

- Tim Ayres

roger said...

Tim,

I may not have been clear in my post. Variable rate loans are OK in many circumstances. I would probably take one myself right now if I was buying. That is because I have a financial cushion to fall back on.

However, they should ONLY be used if the buyer can afford to ride the wave and can afford to switch to a higher fixed rate if short term rates start to climb. If a buyer cannot afford the fixed rate NOW then they should not consider buying if variable is their only way of financing.

Unfortunately, every new financing alternative gets abused and this was the point of my post. About a third of all recent buyers are 40 year amortization because this is the only way they can afford the payments. If fixed rates climb when when they renew they are hooped because they can't increase the amortization any further. They are also paying little of the principle in the first 5 years of the mortgage.

It is very dangerous to speculate on bank rates - they can change very quickly!! The BoC and Fed are very concerned about inflation and will raise rates in a heartbeat if it passes their target, regardless of the effect on the economy. I was around in the seventies when inflation went through the roof and the BoC will not want to repeat that performance.

Now you might ask how is inflation going to increase quickly. Rising oil prices is one we all recognize. The second is the price of Chinese goods. The Chinese currency is no longer pegged to the US dollar but is in a controlled float by the Chinese governement. It rose by around 7% last year and they will continue to increase it because inflation and market growth is a problem in China. As the import price of these goods rise so will our inflation.

Stagflation could be another problem as well as increasing US national and consumer debt. In summary buyers need to take responsibility for making a sound home purchase and not overextending themselves. RE agents, morgage brokers, and banks should not pressure the buyers to get it now when it is not financially prudent.

roger said...

Tim,

I think you may be a little fuzzy on inflation and the role of the BoC.

Inflation is measured as a complex basket of goods by Stats Canada. The price of this basket is used to establish the Consumer Price Index (CPI) and is calculated monthly. Some components are food, fuel, borrowing costs, goods (domestic & imported), rents etc. Inflation can increase due to demand in a heated economy, rising oil prices, utility costs, or an increase in imported good costs, to name a few.

From the BoC site
The Bank carries out monetary policy by influencing short-term interest rates. It does this by raising and lowering the target for the overnight rate.

The overnight rate is the interest rate at which major financial institutions borrow and lend one-day (or "overnight") funds among themselves; the Bank sets a target level for that rate. This target for the overnight rate is often referred to as the Bank's key interest rate or key policy rate.

Changes in the target for the overnight rate influence other interest rates, such as those for consumer loans and mortgages. They can also affect the exchange rate of the Canadian dollar.


It is important to note that the mortgage rates referred to here are the short term or variable rates. Five year rates are set by banks based on borrowing costs and the five year bond rate.

The BoC will raise rates to cool the economy and lower inflation. Conversely rates are lowered to stimulate the economy only if inflation is below the target (which is the case right now).

Things can get tricky if inflation is above the target and the economy needs to be stimulated. Other areas of concern are the value of the dollar. Lowering rates causes the dollar to fall and vice versa unless the US does the same thing which is what happened today. The BoC lowered rates and the dollar went up due the Fed reduction.

In summary the BoC walks a tightrope and pundit predictions are usually wrong. See Predicting Interest Rates: Futile Advising real estate buyers on future interest rates is somewhat irresponsible.

Tim Ayres said...

Tim Ayres:

Roger, you make some good points, and have expanded on the meaning of inflation. You're absolutely correct about buyers who can't afford the current fixed rates. And I never knew that about the Chinese currency - interesting!

Financial responsibility is one thing that is not taught often enough in schools. I'd like to see a basic course in economics and personal finance mandatory for graduation requirements in this country. Too many people learn the hard way about credit and debt.

Thanks for the discussion once again.

-Tim Ayres

roger said...

Tim said
Financial responsibility is one thing that is not taught often enough in schools. I'd like to see a basic course in economics and personal finance mandatory for graduation requirements in this country. Too many people learn the hard way about credit and debt.

I really agree with you on this point. It is unbelievable that we don't teach basic life skills like balancing a chequbook, understanding a contract and other financial concepts and then send them out into the world to fend for themselves.

VicChick said...

Actually when I was in high school (here in Victoria) there was a course called Consumer Ed. It was mandatory to take it before you could graduate. It was a wonderful, life lesson filled course and I still remember a lot of the things I learned in it (and that was 20 years ago). I'm surprised they don't teach more of the basics like that. Kids these days need it more than I ever did since so many of them have absolutely no good role models for responsible financial behavious (their parents are clueless).

VicChick said...

Sorry, that should read responsible financial behaviour. Typing too fast.

olives said...

"...Conversely rates are lowered to stimulate the economy only if inflation is below the target (which is the case right now). "

Exactly - an unsuccessful attempt to avoid deflation during a credit crunch.

roger said...

Here is an interesting posted frm the folks at Langley Financial planning

In a move that basically puts central bank interest rates below the rate of inflation, the US Federal Reserve lowered their prime rate 75 basis points to 3.5% before markets opened this morning.

Just a reminder to everyone out there, this is exactly the stupid type of move that got us into the whole mortgage mess, housing bubble, credit crisis. Look for the next bubble to start anytime now with even more interest rate cuts left to come with the inflation beast lurking and about to be let out into the street.

Mr.4AM said...

4 Economic Forecasts Gone Wrong

1. No US Recession
2. Comodities to Rise
3. No Contagion
4. Canada to Escape

vg said...

Tim,

The word "recession" means people don't spend money on over priced items like houses in Victoria and Vancouver. They want a deal cause everything else will be on sale up to half price. 1982 and 1990 were recessions Tim and look what happened, people "stopped" buying cause people woke up that they can't "afford" it or their job gets dicey. It's not that complicated.

Did you see the Victoria Conference Boards prediction of flat/declining growth for Victoria in 2008 and said jobs in toursim and construction will be the top two jobs at risk. Aren't those the top 2 job categories here that last 5 years ?

roger said...

VG and Tim,

There is a lot of non-residential and residential construction going on now and more planned for this year that will go ahead (UVic, condos underway etc.) There will probably not be much job loss this year.

Last night on the tube several people in the local tourism industry were interviewed and they didn't see a problem!! Tourism from the US has dropped significantly but has been aided by more tourists from Asia and the rest of Canada. A recession is on the way and this will affect our tourist industry.

The other industry that does not get much press is the high tech industry. It employs a lot of well-paid professionals and this high Cdn. dollar is killing their bottom line. The publicly traded companies will start releasing their financial numbers for 2007 at the end of February. They won't be great and one of the easiest, but shortsighted, ways to cut costs is layoffs. New hiring will also get postponed by some firms.

What about car sales, appliances, furniture, electronics sales and the people employed in this industry? Christmas sales were down due to uncertainty and the spending spree is over.

Many people that live here claim that Victoria is special and they have a lot of followers. One group is the real estate believers® and it will take considerable bad news in the MSM to shake their faith that we can go up,up,up with no limits. I guess we will have to see what happens in the coming months with real estate in Victoria.

hhv said...

"The markets are troubled, to be sure, but all indication are that Canada will weather this storm in the US." Tim Ayres.
"Toronto is primarily a finance-based city and our economy is doing very well, and as long as that continues, the real estate market here should continue to be healthy," Andrew la Fleur

Both of you are REALTORS. Neither of you are economists. And neither of you provide any kind of "proof" to back up your opinions. In fact, the proof that the rest of the world has offered for the past week or two demonstrates you couldn't be farther from the truth. I will concede you this: a week or two does not an economy make.

Tim, nothing personal, but I don't know where you can honestly say, "all indication is we will weather this storm." The TSX is down 6-7% YOY. Yesterday it was down 10%. It will bounce around like a yoyo for the next several months like it has for the past 6-7. That's a characteristic of bear markets. Slow steady growth like that of the past several years is a characteristic of bull markets.

The TSX is a fairly decent democratic measurement of how people (investors) feel about the state of the Canadian economy. Seems pretty stormy to me.

The BoC interest rate cuts will show very little impact on mortgage rates. Bond yields will likely get larger, which means rates may move higher. Much of this will depend on the length and volatility of a bear market.

Now usually, when the storms hit equities, capital flees to RE and vice versa. Except that the recent cycles have seen capital hitting both markets simultaneously. The growth in the price of real estate in Victoria has been on a decline now for two years. The new RE "investors" will not be attracted to 4-6% growth this year and worse growth next year. They're out of the game. Real real estate investors, the ones that buy property to collect rents, have been out, and continue to get out, of the Victoria scene. Rents don't even come close to carry costs here anymore.

Which brings us back to affordability. And Victoria. Convince me how buying in Victoria is a good idea financially for first time buyers without sweeping emotional statements. Show me numbers. Show me specific MLS listings.

I have always maintained that if you have the money, can afford the payments, and will be happy in that particular unit of housing for the long term (8-10 years minimum) then buying is better than renting. Again, this is my opinion. Not a fact. But one fact is, from a year's worth of looking, we have only seen crap for sale in crappy neighbourhoods that we can afford and we make an above average income and likely have an above average down payment. We're just not willing to risk our futures for the emotional satisfaction of owning a sh$tbox today. There is much more to life than using your house as an ATM and retirement plan all in one.

Sad thing is, we're not seduced by granite and stainless. We just want to feel safe, have some natural light and not live in a building that either leaks now, or will likely leak tomorrow.

roger said...

HHV
Interesting comments. I posted this in the last topic but Tim did not answer. Perhaps he missed it but will take the time to reply now.

A Sooke Question for Tim Ayres
Here are some stats for Sooke and other areas in Victoria.

Sooke - 12 SFH sales in December and 119 SFH currently on MLS - ratio 9.92

Langford - 22 SFH sales in December and 94 SFH currently on MLS - ratio 4.27

Saanich East - 43 SFH sales in December and 117 SFH currently on MLS - ratio 2.72

City of Victoria - 32 SFH sales in December and 71 SFH currently on MLS - ratio 2.22

Your comments on this 9.9:1 ratio and predictions for Sooke would be interesting. How many SFH sales have taken place in Sooke so far this month??

vg said...

Hey Tim, did you watch Global TV tonite ? The largest RE agent in Vancouver Allen Angell says there is a correction happening this very moment and that houses are overvalued by $200-300,000 and that people better get with reality cause it's here right now.
Best you alter your game plan so your clients don't come back to bite you.

It was the best interview a bear could ever hope to see. The reporter asked why are you telling us this when all the real estate agents are talking it up with their "rose colored glasses" ? and thats when he said it's time for people to wake up,it's here right now,the showings are down and no one is buying. The global economy is effecting Vancouver like anywhere else.

Of course ole Pastrick would lie to his own grandmother to deny that there is anything wrong and that prices will go up this year. That guy is pathetic to listen to I almost want to puke. Him and Muir will look like Greenspan when this is all said and done.


Maybe we can hunt down that interview and HHV can archive it, it is the classic of all classics of this bubble that is now popping.Look out below.

vg said...

http://www.canada.com/globaltv/bc/video/index.html


It's 16 minutes in on the News Hour for the 22nd, it starts with the stock market stuff then flips into the RE. You can't fast forward it.

Nice to see someone tell it like it is.

vk said...

Global news real estate video clip :

video

HouseHuntVictoria said...

cheers VK.

I like how patricks debunks the myth of all the foreigners driving up prices with it's a local thing, its local buyers creating demand... these people will say anything to keep things going eh?

StargazerXL said...

FTBs! Here's the solution to your problems courtesy of the T-C. Apparently 85-90 % of you are opting for 40-year mortgages but don't worry about the long amortizaition period because "nobody goes into a 40-year mortgage with the intention of paying it off in 40 years." Yay!

http://tinyurl.com/yp4dw8

Mr. 4AM said...

Bond insurance crisis (120 billion) looms on Wall Street


Sub-prime, CODs, ABCPs, ARMs, stagflation, and now...

"Monolines are the latest entry in Wall Street's expanding lexicon of doom".

As per Olive's video posting in the previous blog thread, Mad Kramer was right.

roger said...

FTBs! Here's the solution to your problems courtesy of the T-C. Apparently 85-90 % of you are opting for 40-year mortgages but don't worry about the long amortizaition period because "nobody goes into a 40-year mortgage with the intention of paying it off in 40 years." Yay!

Well if they couldn't afford to get into the market without a 40 year amortization now how will they be able to reduce it in the future? Rates are at a low level now. Any wage increases will be eaten up by inflation.

Perhaps this is their plan
- wait for inheritance from Mom & Dad
- big winnings from lottery ticket

olives said...

Roger

There's always 100-year and multi-generational mortgages!!!

Nick said...

Considering how much wealth is held by baby boomers, waiting for them to die (as they are starting to do now in significant numbers) isn't such a bad idea! You know the old saying about death and taxes ...

VicREBear said...

"nobody goes into a 40-year mortgage with the intention of paying it off in 40 years."

There's that word. INTENTION. That word's a killer when things just don't end up going as planned.

StargazerXL said...

Yes, the article also states "[w]ith this group of [younger] buyers, frequently it is the parents who supply the down payment or co-sign loans for the new generation of homeowners." I guess they're just throwing that out there, in case you needed to figure out where to get the money.

Anonymous said...

Vicrebear,

I guess the same is said and proved by renters. Statisitcally, they do not save their so called "savings" by renting.

roger said...

anonymous 11:23 said
Vicrebear,

I guess the same is said and proved by renters. Statisitcally, they do not save their so called "savings" by renting.


I find these anonymous posts do not contribute much to the discission. They refuse to use a nickname (even a couple of letters) and often make unsubstantiated statistical comments.

It is also hard to call them out on anything because you can only tell them apart by the time of post. I suspect a number of them are real estate agents or shills.

Rant over - now for a comment. Newbie buyers are often told to buy instead of throwing their money away on rent. Do they not realize that on a 40 year mortgage their monthly payment is almost all interest (miniscule equity) during the first five years!! I would rather pay the landlord $1500 rent for a new condo than pay the bank $3000 per month in interest and hope for a capital gain in five years.

roger said...

It is disappointing to see that none of the Realtors® that read this blog have elected to comment on the local real estate statistics that I submitted above.

Here are some stats for Sooke and other areas in Victoria.

Sooke - 12 SFH sales in December and 119 SFH currently on MLS - ratio 9.92

Langford - 22 SFH sales in December and 94 SFH currently on MLS - ratio 4.27

January is marginally better than December for sales. In January 2007 there were 20 SFH sales in Sooke and in January 2006 27 sales. So a seller this month has at best a 1 in 5 chance of selling their home.

What effect will this have on the Sooke market? Will sellers hang tight or reduce their price? The number of new listings gets higher every month as we get into the spring sales season.

My vote is for price reductions. The market is softening and location, location, location becomes even more important to buyers when they get more choice and the market cools.

hhv said...

Roger, check out comments in the previous post for Tim's response

Metaldwarf said...

I have a NEWBIE mortgage question.

Traditional mortgages have you pay a large amount of interest in the early years and as time goes on you pay down interest and pay more and more principle. IE: your first mortgage payment of $1000 is $950 interest and $50 principle, last payment is $950 principle and $50 interest.

We have all seen this type of graph.
http://tinyurl.com/yqwnbm

Since its pretty easy to calculate the total interest you will pay over the period of your loan, any internet mortgage calculator will tell you. Is it possible to use the calculated total interest and divide it by the number of payments?

Example using made up numbers: You buy a house for $500,000 you calculate that you will pay $400,000 in interest over the length of your 20 year loan. Now if you pay monthly you have 240 payments. Using this example your monthly payment would be $3750. In the first few years you would pay mostly interest and in the last few years pay mostly principle as show by the graph linked above. Why can't we have each payment equal 1/240th of the principle and 1/240th of the interest?

$500,000/240 = $2083
$400,000/240 = $1667
Total is still $3750 but you build equity more quickly.

Excuse the terrible mspaint

http://tinyurl.com/2btzmy

Now the bank will be getting the same amount of money either way $400,000. They will have less growth on their investment over the period due to less funding in the early years but this could be subsidized by a higher interest rate perhaps?

Does such a thing exist? If not why not? This kind of mortgage would make WAY more sense for a 40 year mortgage as you will actually build equity from day 1.

freeguardzone said...

Realtors getting sued in the US:

http://tinyurl.com/32jxgb

The claim is "that the agent hid the information that similar homes in the neighborhood were selling for less because he feared she would back out and he would lose his $30,000 commission."

Interesting read.

roger said...

HHV said
Roger, check out comments in the previous post for Tim's response

Thanks for letting me know. The thread got so long I missed Tim's response.

My apologies to Tim. I should have checked more thoroughly before re-posting. It was a dumb mistake on my part.

Tim - your reply to my query was informative and I take your points seriously. In terms of the drive I think it is the windy road in the winter rain that may be of concern to some commuters.

Your office activity anecdotes were interesting. I guess we are all looking forward to the January stats.

roger said...

Mohican has a great set of graphs and market insight in his latest post Vancouver Real Estate Bubble Uberpost. You do not want to miss reading this one.

Perhaps Greg on the Cheap Realty blog might do the same analysis for Victoria.

Mr.4AM said...

metaldwarf,

I don't know the exact reason as to why there isn't an option to make 50/50 payments in terms of (50% of each mortgage payment goes to bank as interest and 50% goes down against principal); however, it seems obvious to me that:

1) Customer might move the mortgage: Most mortgage lock-in terms are for 1,3,5 and rarely 10 years. After that, you can move your mortgage to another bank if you wish (usually, but not always) without penalty fees. If you do move, your original bank just lost out on a whole lot of money!

2) Business Sense:Let's face it, banks are a business, and in business, you want your gains up front as quickly as possible. Pushing out gains and risking the customer goes away in the future would not make good business sense.

3) Re-selling debt is easier:Most banks re-sell your mortgage as an investment package to other institutions around the world. It's much easier to sell a package that has much higher rates of return up front (i.e. the mostly interest you pay up front), than a lower level rate of return with no guaranteed 40 year locking term.

I can't vouch for the accuracy of these statements, but I imagine that's why.

Cheers,
Mr.4AM

hhv said...

MR4am... sounds about right to me after checking in with MsHHV who is in the know so to speak. She also said regulations play a part in term lengths. Banks get paid before you do is the principle involved here.

vg said...

Housing prices to free fall in 2008 - Merrill


According to a Merrill Lynch report, home prices will drop 15 percent this year, and declines will continue in 2009.

January 23 2008: 5:24 PM EST



NEW YORK (CNNMoney.com) -- The worst housing financial crisis in decades is only going to get worse, a Merrill Lynch report said Wednesday.

The investment bank forecasted a 15 percent drop in housing prices in 2008 and a further 10 percent drop in 2009, with even more depreciation likely in 2010.


But for those who think that the worst is over, Merrill Lynch said that housing prices still remain comparatively high. The brokerage believes that home prices are still far above historical norms when compared to other measures such as rent or GDP. "By our calculations, it will take about a 20 to 30 percent decline in home prices to correct this imbalance," said the report

roger said...

Metaldwarf,

You can do what you want by having optional payment clauses in your mortgage.

The Financial Consumer Agency of Canada has a web page on How to Pay Your Mortgage Off Faster

You need to remember that the bank wants to receive interest now, at the current market rate, on your outstanding balance. That way if the loan defaults they can go after you for the full principal balance and any outstanding interest until the balance is paid back or you go bankrupt. Also if you switch institutions they will receive all interest due and the outstanding balance before they remove the mortgage on the property title.

Here is one example of a customized solution. Lets say you had a home equity loan for 100K. You can pay only the monthly interest if you wish. Lets assume 6% per annum or .5% per month on the outstanding balance which is $500 in the first month. But you decide to pay an extra $500 against the balance for a total of $1000 per month. The next month you pay the 1000 but now there is 497.50 interest and 502.50 principal payment. At the end of 12 months of 1K payments the balance is a little less than 94K; your interest payments are smaller; and your principal is being paid off faster (assuming you pay 1000 per month).

There are a lot of innovative mortgage options today. The key is to pay off your mortgage as fast as possible. Unlike the US, mortgage interest is not tax deductible in Canada (except using Smith Manouevre) and you are paying all that interest for years with after tax dollars

Nick said...

I've been looking at the Case Shiller house price index and comparing it with SFH median prices in Victoria, Saanich and Oak Bay (the Case Shiller stats only include SFH--no condos or townhouses).

The Case Shiler index takes year 2000 as the baseline "100" value in each market it covers, and tells you what the values were relative to that year in prior years and subsequent years. If we take those stats, and also compare Victoria, Saanich and Oak Bay against their 2000 median values, this is what we see.

Phoenix 2006:219, 2007:205
Los Angeles 2006:257, 2007:246
San Diego 2006:228, 2007:211
San Francisco 2006:184, 2007:177
Las Vegas 2006:228, 2007:217
Seattle 2006:169, 2007:182
Victoria 2006:192, 2007:211
Saanich 2006:177, 2007:201
Oak Bay 2006:178, 2007:189

It looks like Victoria, Saanich and Oak Bay are in the same bubble zone as those western US cities.

However, if we look at the numbers over the last 14 years instead of 7 years, so that 1993 is taken as "100" in all these cities, where are we now?

Phoenix 2006:335, 2007:313
Los Angeles 2006:334, 2007:321
San Diego 2006:331, 2007:306
San Francisco 2006:321, 2007:308
Las Vegas 2006:286, 2007:271
Seattle 2006:261, 2007:282
Victoria 2006:196, 2007:216
Saanich 2006:182, 2007:205
Oak Bay 2006:192, 2007:216

It's a significantly different picture. Bubble territory in the US is high 200's to low 300's, but Victoria, Saanich and Oak Bay are all in the low 200's.

So, over a longer (and statistically more significant) period of time, SFH prices have grown much more slowly in the Victoria area than in the US.

I can forsee the indignant retorts that "statistics can be used to prove anything." But that is actually my point. The Case Shiller stats are just that--stats, and if you change the scaling you can get different impressions of what they mean.

vg said...

Sounds like some JMK logic there,lol. My logic says we're going down,time will tell how much but 30% in two years will be about right in my mind. Within a 30% decline you can pick up some 50% deals if you are on the ball.


As a side note Shiller called Vancouver the most bubbliest of all the North American cities so adjusting those charts won't save the houses that doubled here in the last 7 years just like the USA hot spots did.

Anonymous said...

Metaldwarf,

One thing I did for one of my family members was the following:

- 150K mortgage (yes back in the good ol' 2002 days)
- Interest was around 3.5%
- Mortgage lock-in 5 years
- Mortgage term 30 years (if I recall correctly)

These numbers may be slightly off, and I'm too lazy to check them right now, but they are 85% accurate.

Anyway, my point is, the term used to be 20 years and we extended it to 30, with the intention of paying it off in about 12 years. Err "what?" you say? By pushing the mortgage term out as much as was possible back then, the monthly payments got lower and lower. I believe we managed to get it down to around $850. However, there was a clause in the contract that allowed us to make double payments each month with no penalties.

So the monthly payments we made were actually $1700, although according to the mortgage contract we were only required to pay $850. The interest to the bank is around $475 (28%) and the remaining $1225 (72%) goes against principal, and that interest continues to decline ever so slightly each month.

Lastly, there is one other advantage to this... should something go very wrong in the owners life or in the housing/economic markets, its easy to stop the auto payments of $1700 and reduce them in half to $850 without any penalties.

PS. The basment owners tentans pay $1300 in rent, so this really is a very sweet deal; regardless we're still going to sell this spring/summer because I agree the markets will turn and in a very significant way - sometime between 2008 and 2010. We'll happily throw away $35,000K or less in rent + $40K in RE fees, to keep the $300,000 appreciation gain and then just re-buy when the market dips.

Good luck.

Nick said...

vg

Within a 30% decline you can pick up some 50% deals if you are on the ball.


I checked the Victoria SFH median prices.

30% decline means early 2003 prices
50% decline means 1998 prices

I just wanted to be sure I understand what you're waiting for before you buy.

Anonymous said...

"50% decline = 1998 prices"?
My cousin's house in Victoria has more than doubled since 2002 (according to BC Assessment alone).

In other news: BoC expected to execute a 50 basis points interest rate cut by summer - from 4% down to 3.5%. And the US projected to be at 2% by end of the year.

With such low interest rates, won't this just prolong the housing bubble here in Canada too?
I'm wondering if we're now looking at 2009 before we see a decline.

Nick said...

Anon 9:28

Mea Culpa, those were Oak Bay stats. The Victoria stats are 30% = 2004, 50% = 2001, and Saanich are similar. Depends where you hope to buy as to what your assumptions viv-a-vis price declines really mean.

By the way, long-term mortgage rates don't depend much on the bank rate; they are tied more to long term bond yields. Variable rate mortgages have some sensitivity to the bank rate, but regardless of whether your interest rate is fixed or variable, when you take out a mortgage the bank has to fund that with a long-term borrowing obligation of its own.

olives said...

"50% decline means 1998 prices"

This does not seem unreasonable at all since bubbles typically overcorrect on the way down, and as many here believe we are to experience a depression.

In early 1980's prices declined (inflation-adjusted) 45 percent - so 50 percent now (or more) doesn't seem out of the range of possibilities.

olives said...

With such low interest rates, won't this just prolong the housing bubble here in Canada too?"

Due to unaffordability and/or credit crunch it eventually becomes pushing on string for both parties (lenders and borrowers)

S2 said...

From today's TC paper:

"U.S. housing slowdown has hit Canada: Dodge"

http://www.canada.com/victoriatimescolonist/news/story.html?id=5763ffd5-d8f0-489e-a1a2-c4c0761d8ebf&k=52994

vg said...

"Nick said...
vg

I just wanted to be sure I understand what you're waiting for before you buy."



Worked for me in 81 and I don't see any difference this time around, same conditions in a different decade,affordability is maxed and overspending has been rampant everywhere. Interest rates make no difference if lending rules tighten like a vice,like they will. History always repeats itself eventually.


If I don't hit the absolute bottom it won't kill me as I am buying to live in it for a very long time,but I'll take it 10% at a time. $100,000 - $200,000 is alot of cash in my world. I can wait a couple of years for that as it's the difference between holding a mortgage and no mortgage. I'll take a chance renting an extra 2 years for those kind of numbers.

Anonymous said...

I like this blog a lot, but vg, I wish you'd swallow your bile. You absolutely slam any kind of positive outlook article as spin/hype/pump, call the analysts names, and generally have a fit... and yet have no problem accepting any negative item as de facto with no further analysis, usually with a gleeful "LOOK OUT BELOW!" thrown in. I can see veins throbbing in your forehead with every post.

Lose some bitterness and gain some perspective. Even a stopped watch is right twice a day. This blog has tons of useful information but you just seem to want to poison it.

greg said...

30% decline means early 2003 prices
50% decline means 1998 prices


Nick,

a nominal decline of 30% now would equal a 50% decline in real terms - there has been rampant inflation since 2003.

Don't quote back the CPI - its rigged. Look at long term mortgage rates - they are around 6%-7% - so you can bet inflation is running in that range

The decline in the early 80s was around 35% in nominal terms - but with wages and prices going up around 10% per year at the time, after two years a nominal 35% cut was more like a 50% cut.

So now, if banks match the central bank and cut rates, when they were scared of inflation just a few months ago, inflation will go through the roof, which will either

a) lead to wage inflation, eventually making houses cheaper, or

b) lead to falling prices, to bring prices back into line with incomes, as everything else gets more expensive, cutting the disposable income available to service housing debt.

Which scenario seems likely in the next two three years in a town where wages are based on tourism (hurting), government jobs (wage controls) and construction (oops, soon to be "not booming")?

vg said...

"Lose some bitterness and gain some perspective. Even a stopped watch is right twice a day. This blog has tons of useful information but you just seem to want to poison it."


Bitterness ? Perspective ? LOL... I am a bear buddy,haven't you noticed ? and I don't like professionals RE agents and their sort BS'ing the public as they get sucked in like sheep to the slaughter so I share my opinion the way I see it. It is a public forum the last time I looked and if you don't like my style then don't read me,just pass on by.


Maybe you should post under a real handle so we can tell wether you actually contribute anything here thats usefull to read. Last time I see the world is on the verge of a recession and if you choose to keep the rose colored glasses on then thats your problem.


You could go start your own blog for your perspective cause I see on the news tonite their is more of my "negative" thinking out there telling us that 70% of our incomes our going to housing. Can you spin that into a positive here for us so we can have a balanced opinion ? thanks in advance "anonymous".

vg said...

roger,

could you please stop posting all these negative numbers and articles please ? some of the bulls are getting upset and we wouldn't want that to happen,as they didn't seem to have a problem the last few years as their paper profits soared.

Maybe we are having an influence on some potential buyers that the "anonymous's" don't seem to be too happy about. Lighten up will ya. ;)


I'm still trying to figure out which articles I have posted that are BS ? they all come from CNN and other prominent publications that have called things bang on for a long time now. Maybe I should be posting the latest VREB rose colored reports ?

Nick said...

greg

I think you are confusing yourself with all this talk of "nominal" versus "real" values and inflation.

First, inflation does not equal the mortgage rate. If it did, the banks wouldn't be making any money on their mortgages. Consumer price inflation has hovered around the 2% mark for quite some time now, while mortgages are currently 6-8%.

Second, the CPI is not rigged. But one thing it doesn't include is house prices. It may incorporate an item representing the recurring cost of housing (such as rent), but it certainly does not include resale house prices, because individual consumers don't buy houses every week or month.

Third, if house prices fall by 30% in the next 12 months, it really doesn't matter what inflation is or has been. What you could have purchased a house for 5 years ago under various inflation scenarios is really quite irrelevant. It's 30% cheaper than 12 months prior. It might seem cheaper than that to you if your boss gave you a big fat raise in that time and now you can afford a bigger mortgage, but that doesn't apply to someone who didn't get the raise.

vg said...

Sorry anonymous but I have to post another "negative" article as it came from that unreliable source the Royal Bank of Canada today.

Interesting to note that they did not start tracking the affordabiliy index til 1985 which was after the 81/82 crash.

Is the comment in here of "modest improvements " really mean house prices will be coming down ? It appears that way as how else can things improve from the ugliest times in decades ? sounds like a warning shot to me.


There is a full report out,maybe "anonymous" can post it for us.



"B.C.'s housing market moved into uncharted territory last year as
affordability deteriorated to its worst levels since we started tracking conditions back in 1985," said Derek Holt, assistant chief economist, RBC. "We expect affordability rates to see some modest improvements in 2008 as the
province's housing market reached a peak stress point late last year."

" The RBC Affordability measure for British Columbia, which captures the proportion of pretax household income needed to service the costs of owning a home in the province, deteriorated across all housing segments as the detached
bungalow moved to 67 per cent, the standard two-story home to 71 per cent, the standard townhouse to 50 per cent and the standard condo to 36 per cent."

vg said...

roger,

did you see this chart on Mohican's site ? it looks like a flag pole or hockey stick as they call it, the most dangerous chart you can ever see when tracking any market activity. Hope I am not scaring anyone,I only post factual information incase you haven't followed my posts closely.

Some don't seem to like reality but I like to know the truth about things and not bury my head in the sand so I don't stand to lose my shirt.



http://langley-financial-planning.blogspot.com/

olives said...

well I don't normally like to post negative articles...but since this one quotes a nobel-prize winning economist, maybe it will have some credibility:

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/01/24/bcnstig124.xml

vg said...

olives,

I am apalled you would post such an article. Your going to get labeled like me if you keep up this nonsense. ;)



Here is the whole article from the Globe so we can have some balance here :


"RBC expects things to calm the most in the overheated Western provinces, where affordability has hit an all-time low."

http://tinyurl.com/29gehp

hhv said...

Nick,

"Second, the CPI is not rigged. But one thing it doesn't include is house prices. It may incorporate an item representing the recurring cost of housing (such as rent), but it certainly does not include resale house prices, because individual consumers don't buy houses every week or month."

The ONLY reason for the existence of the CPI is to index public pension plans with inflation. The gov't would have to contribute more into the pension pool if the CPI indicated true inflation so over the course of its relatively short history (I think 1983 on or there abouts) it has gone from counting steak as "red meat" to counting ground beef as "red meat." The CPI doesn't count things like fresh fruits and vegetables because the prices are too "volatile": read they go up faster than the BoC is comfortable with.

Car manufacturers figured out the game a long time ago. The CPI counts a base model with no features from one year to the next. Except that model car is not available on the lot, so the CPI deducts the price of the features as if they were add ons. Say you want a Yaris with no power options. But Toyota doesn't offer one. So CPI asks Toyota what it would cost the consumer to add power brakes, steering and windows as options. Toyota makes up a price, CPI deducts it from the total and low and behold, they count a car that you and I can't buy at a price that you and I can't get it for.

These are the things CPI does to keep inflation in check. Don't even get me started on energy costs etc... inflation is significantly higher than 2%... if it isn't 6% that's because it's closer to 10%.

Mr.4AM said...

So did you guys read about the rogue derivatives trader who managed to wipe out 7 billion USD from France's 2nd largest bank. (this after the bank already lost 2 billion in USA RE related write downs).

I feel a movie sequel coming on!

PS. Thanks for that link olives, that Ambrose Evans guy seems to write some pretty decent blog/articles.

Mr.4AM said...

I also liked this blog post by Ambrose, where he goes on explaining why the Fed cut rates by 0.75% in a "panic".

Excerpts from blog:

"The trigger for the Fed action was the move on Friday by Fitch to strip the US monoline insurer AMBAC of its `AAA’ rating, with the mounting risk that the rating agencies would soon downgrade its bigger peer, MBIA.

Why does it matter? Because they have guaranteed a large part of that $2.4 trillion bond market.

The effect could easily have been – and may still be – a second lethal leg to the credit crisis, with vast losses. This could all too quickly lead to a run of bank failures.
If they lose their AAA ratings, all the bonds that they have insured will lose their ratings pari passu. This would force a large number of pension funds and institutions under strict investment rules to sell their bonds, setting off a cascade of sales with no obvious buyers in sight."

Mr 4.AM said...

In my not so distant youth, I took a $4,000 stock trading "lesson" in the tech bubble (read: I lost $, but hey I was up $12K at one point - man what a ride that was). Recently, I accidentally got lucky and bought a house shortly after the housing bubble got started and will be selling very soon, but now the question remains... What's the next bubble? Gold? or Clean Energy?, no maybe its Emerging Markets?, or perhaps you're a geek and want a .com comeback with Web 2.0?. Scratch that last one, I am way behind the times. Looks like Web 3.0 is already here.

If you're like me and are undecided, perhaps this hilarious video about "The Next bubble!" will give us all a clue. :)

VicREBear said...

"...if you don't like my style then don't read me,just pass on by."

VG - don't change a thing. I hugely appreciate your insights, opinions and point of view, as I do those of everyone who posts here. It's really a breath of fresh air to hear someone voice opinions that are backed by common sense rather than the effects of the Kool-Aid they've been drinking via the water supply in this town.

S2 said...

From today's Times-Colonist:

Check out the last 2 paragraphs. Geesh.

http://www.canada.com/victoriatimescolonist/news/business/story.html?id=5c5e6417-9b5d-4c83-94af-755e446c0986&p=1

Bulear said...

VG,

Here is one for you from CNN - Looks like California may get a kick start for their housing market

http://money.cnn.com/2008/01/25/real_estate/stimulus_plan_targets_pricy_housing/index.htm?postversion=2008012512

Bulear said...

http://tinyurl.com/2a7jev

VicREBear said...

From today's T-C article:

Realtor Jack Petrie opined, "Buyers are increasingly open to the idea of a roommate or international students to help cover mortgage costs."

I guess buyers would be open to running their house as a brothel or a meth lab as long as they keep thinking that they must buy now at any cost, personal or financial, because they believe Jack's mantra that they otherwise will be priced out forever. It's ALL psychology, and the roots of those beliefs seem to run deep in this town. I really hope that the reversing event happens soon to correct this, even if it affects me and other responsible people negatively for a while. We have to return to some semblance of normalcy here.

vg said...

vicrebear,

appreciate your comments and like your posts as well. Sometimes the reality hurts those who have profited the most and they cant handle the fact that we will get a chance to rebuy at 2000 levels while they didnt sell.

I see it in the stock market all the time,people get extremely worked up when you get a chance to buy in at a fair value while they chose not to sell at the top of the chart and ride her all the way down.

I almost compare it to those who own Apple shares, it was so overvalued and was due for a major correction and it did the past few weeks. But those who are Apple bulls are so livid about any such talk cause Apple and Steve Jobs rule the world and because of that they couldn't see the correction coming because their IPODS were in the way.

vg said...

bulear,

interesting, I giess time will tell on that one as one point difference to me may not save them if they are coming off a 3% or less mortgage and are now paying 5 % plus. If they got in by the skin of their teeth income wise that is where I see this not working.


I also saw ABC financial expert this morning predicting the worse is so far from over.

Thanks for posting that, we want to see both sides here.

greg said...

Nick -

your point about nominal prices shows you didn't even understand I was answering your observation that a 50% decline = 1998 prices.

I am not talking about how buying now equals paying less because of later inflation, I am pointing out that when people talk about "getting back to 98 prices", they are usually being too simplistic in what they compare with those prices.

If prices went nominally back to 98 prices, the cut would be even huger due to the intervening inflation.

Don't even get me started on the lost opportunity cost during the intervening years.

So, actually, a 35% decline now = 1998 prices due to the inflation that has happened in the intervening period.

In case you need a more detailed explanation of what I am talking about, read this post on my site, which is a crash comparison, in inflation adjusted terms, comparing the 80s and 90s Victoria market conditions with now.

olives said...

bulear,

What the CNN article doesn't mention - but what Vicrebear does - is that markets are driven by mass psychology. If the majority believe we are entering a bear market, then we will.

vg said...

good point olives, it is all about psychology and when that turns in the real estate arena it is very hard to suddenly turn back the opposite way very quickly.

I see the CNN article as wishful thinking right now with so many mortgages coming up for renewal as we speak and into the summer. This is supposed to be the tidal wave that will really send things reeling and not something that can be quick fixed.


The next 6 months here will tell the tale I believe in BC/Victoria real estate. I somehow cannot see new buyers flooding in here to keep the bubble alive when all around us there are danger signs never seen in 25 years. Wait til there is a run on a bank in the US,it is not out of the realm right now.

vg said...

vicrebear,

in that same article I see a serious point here that could effect the Victoria economy and that is the 25-25 year olds moving somewhere else because of housing affordability which in turn effects our economy in a big way.

I am not sure if most are aware but the BC government is on a major push for hiring as a massive amount of people are retiring in the next 5 years to the point where they are highly concerned wether they will be able to fill these jobs.
If this age segment is moving away then who will be there to be hired ? And these are not high paying jobs in the first several entry levels which start at about $18 an hour. Hardly enough to afford to rent a $900 a month place let alone thinking of buying the cheapest of condo's.



"Jane Worton, Community Social Planning Council of Greater Victoria research director, said adults, from 25 to 30, wanting to buy a home and raise a family, "are not seeing it as affordable to do in Victoria. So the consequence for our community is enormous."

Parents complain their children can't afford to live here. "There is a huge implication for people when they can not afford to settle near their families."


*A healthy community has a mix of ages, incomes and types of housing, as well as places to meet, Worton said.

Employers are struggling to find staff, she said. "It is a serious economic problem for us if we can't find enough workers to work at jobs at all levels."

greg said...

VG -

there's a simple solution to those social problems and economic troubles - lower house prices.

Vicrebear said...

"there's a simple solution to those social problems and economic troubles - lower house prices"

I agree totally; it's just common sense. However, I fear that our government will follow the lead of the US and say, "there's a simple solution to those social problems and economic troubles - tax rebates and state bailouts for all! Just keep those asset valuations high so we all stay rich!"

had enough said...

I read an article recently that they figure in 10 years 60% if not more of the Victoria population will be over 55. By then I will be over 55 but I sure would not want to live here.

That figure seems bizarre but I think we are already at the 30% figure.

Canada's version of Sun City.

vg said...

"Realtor Jack Petrie opined, "Buyers are increasingly open to the idea of a roommate or international students to help cover mortgage costs."



vicrebear,

and the bulls wonder why we slag RE agents when they insult our intelligence with this BS. Yes people,you must wrap your mind around having total strangers in your house in order to buy in this town... and get used to it will ya ? it's different this time.


I know some people can do it,and don't care about their privacy etc being invaded but most cannot. We tried it once with an international student and it was a nightmare experience we will never attempt again.

vg said...

"VG -

there's a simple solution to those social problems and economic troubles - lower house prices."


agreed Greg,it's that simple but like vicrebear said that the higher powers dont want all those paper profits to decline. And I am not even saying I want to see an outright crash,just a correction back to reality like any other city in Canada outside of Victoria and Vancouver where the average price is in the $300,000 range.

Same with all the experts on CKNW last week who have serious money involved in RE and that is the last arena they want to see a decline in,oil can correct,stocks can correct "but not our houses dammit cause I am heavily leveraged with many properties and if people are priced out then too bad so sad."

VicREBear said...

"We tried it once with an international student and it was a nightmare experience we will never attempt again."

Imagine being one of those recent buyers for whom it is now a NECESSITY to ongoingly have international students and/or tenants just so as not to default on your mortgage payments. Sounds like purgatory to me, as well as being a recipe for disaster if our local economy cools even one iota from its current white hot, boomtown state.

Yeah, and the realtors, mortgage brokers, builders, media shills and their cabal of self-interested confreres keep telling us that it's different here and current prices reflect "value". We'll see in two years.

jj said...

regarding the comments about Victoria's demographics...... this city would be toast without UVic and Camosun students. The numbers in HS are steadily declining, and with current house prices it is totally unrealistic for younger professionals to plan to live here. This city will become (even more) of a warehouse for old people.

I regularily listen to employers complain about lack of decent staff - and remind them that no one can live on $9 an hour with no benefits.

greg said...

I guarantee if house prices drop 30%-50% in nominal terms, Victoria will be overflowing with young families who have high school age kids who will happily work those jobs.

Small business owners would get cheaper rents too. They should be praying for a housing correction.

roger said...

vg said
roger,

could you please stop posting all these negative numbers and articles please ? some of the bulls are getting upset and we wouldn't want that to happen


OK - I have not posted in a few days and have given some thought to your request. I will try to post constructively in the future.

Maybe I have been looking at things in the harsh light of day and need to put on some rose coloured glasses in order to get a fresh perspective. Here are some of my thoughts with my new glasses.

1. Housing prices are not out of whack in Victoria. One just needs to use creative financing (40 year amortization, a variable rate mortgage, RRSP fund withdrawal and downpayment from parents) and a modest home is within reach. Updates and repairs can always be delayed because a quick flip is possible once a foothold is gained in the RE market.

2. The home can be made much more affordable and less stressful financially by adding a suite or having boarders. Contrary to what many folks have written this can be a great way to make new friends and if you have an international student you have the opportunity to learn about another culture. Nothing heightens the senses like an exotic aroma wafting up from downstairs.

3. If a new small condo is purchased there is always the pride of ownership that comes from having stainless steel appliances. No need to dine out when you can cook at home every night in your new home. Don't forget that 800 sq. feet with minimal storage lowers the desire to buy stuff all the time and leaves hours to read and watch TV at home.

4. Most folks in Victoria, the MSM and RE agents are real estate believers® and therefore real estate will go up for years to come. The weather here is great and with the Olympics only a few years off we are really on a roll. I recommend that one stop listening to the TV news and reading the financial news. All that negative stuff won't affect us - we live in Victoria.

In summary, real estate is a great investment and jealous, bitter renters should just jump on the bandwagon.

Don't worry, be happy - Roger

roger said...

Some positive real estate news:

Winnipeg Free Press

B.C. farmers getting richer as land values skyrocket

Victoria BC - Canada's South of France, in English

Victoria is Canada's "South of France" a temprate paradise that draws millions of visitors from the U.S. mainland as well as people from across the globe. Memories of Victoria are sure to conjure images Eurpoean living, a unique culture, and the scent of fragrant blossoms filling the air.

had enouch said...

This is the most stupid thing I have ever heard. I lived in Paris for 15 years and my mother-in-law lives in Aix en Provence. My niece lives in Aix-en-Provence. I have spent many summers and winters in Aix, Nice etc. In NO WAY - NOT EVEN CLOSE - FOR ONE SECOND IS THIS THE SOUTH OF *&6%% FRANCE.

I just can't believe someone could write this.

had enouch said...

This is the most stupid thing I have ever heard. I lived in Paris for 15 years and my mother-in-law lives in Aix en Provence. My niece lives in Aix-en-Provence. I have spent many summers and winters in Aix, Nice etc. In NO WAY - NOT EVEN CLOSE - FOR ONE SECOND IS THIS THE SOUTH OF *&6%% FRANCE.

I just can't believe someone could write this.

had enough said...

I am pretty sure I know the person who runs Prestigious Properties.

That guy has never been to Europe except for Costa Rica.

It is embarassing amd naive.

Had enough said...

I meant to say that guy has never been to Europe only Costa Rica and maybe the U.S.

What a dolt.

greg said...

had enough -

the Prestigious site is pretty bad, but I think two of the Realtors are European. If you read the copy, it seems maybe they didn't turn on spell-check.

I guess if you call it the south of France and then play up the Oak Bay angle, maybe some Brits might get bamboozled into getting on the wrong plane instead of going to Spain?

Bulear said...

To be fair - they did not call it the South of France. They called it the "South of France" for Canada. I do not see it as a comparable as I lived in the South of France. However, if you compare it's weather pattern to Canada and it's location it is the closest representation compared to any other city.

I find it very interesting how everybody tries to rip apart any potential positive information and praises negative information.

In a book that I am reading there is a quote that states:

We concentrate on things we know and time and time again we fail to take into consideration what we don't know. We are, therefore, unable to truly estimate opportunities, to vulnerable to the impulse to simplify, narrate, and categorize, and not open enough to rewarding those who can imagine the "impossible"

It also talks about how we fool ourselves to thinking we know more then we actually do. We restrict our thinking to the irrelevant and incosequential, while large events continue to suprise and shape our world.

And this was written by a mathematician...

greg said...

It also talks about how we fool ourselves to thinking we know more then we actually do. We restrict our thinking to the irrelevant and incosequential, while large events continue to suprise and shape our world.

This quote could equally apply to those with unreasonably bullish views, despite large events [that]continue to suprise and shape our world.

olives said...

Bulear,

That quote is so perfect for this blog. It is human nature to extrapolate whatever conditions are present at the time - and difficult to imagine the "impossible" for many (ie major changes to occur in the future).

geoffrey said...

I'm seriously thinking of buying my retirement home with a swimming for less than $175K in Phoenix. Guaranteed winter sunshine.

http://www.realtor.com/search/searchresults.aspx?ctid=241&ml=3&mnp=20&mxp=19&typ=11&sqft=4&pfbm=10000000&ofbm=200008

geoffrey said...

http://www.realtor.com/search/searchresults.aspx?ctid=241&ml=3&mnp=20&mxp=19&typ=11&sqft=4&pfbm=10000000&ofbm=200008

phil said...

Wow, houses in Phoenix are cheap! Aren't they hosting the superbowl next week?

I thought major sporting events were supposed to double property values...

vg said...

"We restrict our thinking to the irrelevant and incosequential"


As in ignoring the obvious signs that past history has showed us to be critical turning points of major events in the opposite direction ? Sounds to me like burying your head in the sand.


I expect a dead cat bounce in the markets for the next 2-3 weeks as the market gets another rate cut and all is good again and they keep denying a recession is happening then we will get the next move down.

vg said...

Did anyone catch 60 Minutes tonite on the subprime and forclosures ? This is so far from being over, especially in California. I don't see this new bill of the 1% lowering will save many people as the average household who got sucked in, went from $1200 a month to between $3200-4000 per month payments,they can't afford it and are simply walking away.

What really boggles the mind is that $3200- $4000 a month is accepted here as "get used to it" but down there they just hand in the keys, go figure.

Bulear said...

VG -first of all the comment reflects the mentality of looking at the whole picture.

It does not state for or against a bull or bear outlook.

I think it is your ignorance that takes clouds your judgement.

Personally, I would not wage a guess at what is happening without more facts.

If you want a conclusive answer then produce some of the following stats to add to your equation for or against a crash. What is the percentage of FTB, percentage of inhertances, number of people receive help from parents, percentage of people upgrading homes, breakdown of income demographics for WHO is buying, etc.

Do you believe that only rent/multiply and affordability based on the average home and average income come into factor?

Is it hard to think that possibly in the future only people with 200k income will be able to afford SFH and potentially everyone else will have to live in multi-family dwellings? You cannot rule it out.

As I said I do not intend to guess what the market is going to do. However, I am pretty sure that you did not buy in the past three years and missed the appreciation and now have to wait for a correction to get back in. That is a smart move on your part but missing the appreciation based on you assumptions a few years ago was you missing the boat.

Once again, people believe they know more then they do. I highly doubt you are sitting on 10's, 100's of millions of dollars. However, if you could time up and down markets I am sure you would be. However, most people get in around the middle and get out before the peak and many get burned.

olives said...

Timing is everything - but of course impossible to be exact, but as Warren Buffet (? I think) said:
Better to be a year too early than a day too late.

greg said...

How you can insult vg who is a long-time poster on a bear blog for sharing a bearish point of view, jonny come lately bulear, is pretty laughable considering you go on to make statements like:

"Once again, people believe they know more then they do. I highly doubt you are sitting on 10's, 100's of millions of dollars. However, if you could time up and down markets I am sure you would be. However, most people get in around the middle and get out before the peak and many get burned."

Ummm, maybe vg does know more than you! Duh, I mean, if you know so much, why don't you tell us what you do for a living (realtor), when you bought (recently) how leveraged you are (very) and how much your developer friends are concerned about a change of sentiment (lots).

Excuse us for taking a certain point of view, but we don't have to provide statistics to support that point of view.

And stop with the laughable insults about how people who couldn't get in 3 years ago missed out on some paper appreciation.

Are you going to be so forthright calling people fools three years from now if they bought in 2007 and the prices have dropped 30%?

If you don't like people expressing a negative sentiment on Victoria real estate, why don't you start up your own sunny blog and see how many people are interested in reading it these days.

Sorry, but the bearish point of view is quite topical, and if you want to take it down a notch and try to discredit that point of view without offering any facts of your own, prepare to have some insults dished your way as well, then.

slimtuesday said...

Bulear is shitting in her pants as she's probably got all kinds of these pre-construction deals that she cannot assign and will soon have to walk away from her deposits. Like they are doing in Florida and Phoenix. Saying that only 200k wage earners will deserve to own SFHs. What a pathetic thing to say. Name me one person in this town that makes $200K (not even the premier). This town is not HQ central (not a single bank or major enterprise is headquartered here), it is tourism, geriatrics and government. Not exactly high paying jobs. We have 90% poor people here. Man, do you see what people drive around here, cars from the 70's like gas spewing Pinto and crap like that. Not exactly a sign of wealth. I feel sorry for her.

Bulear said...

Greg,

For the record, I did not comment on if I was smarter then VG. I truly do not know how smart he is but I can tell you when you do not account for something it doesn't mean it does not exist.

As for my story here it is: I am not leveraged. I own SFH rental in lower mainland that pays for itself (long term tenant 5 years and counting). In 2003 I purchased a condo in downtown Vancouver because I was going to live there with my wife but we moved out of the country. I rented it out for a 6 months as an executive rental through a management company. They ended up taking too much off the top so my wife and I decided to rent it out ourselves. Had it rented out for a year and at that time it covered more then the mortgage (rented if fully furnished to movie production company). However, trying to maintain a furnished rental from out of the country got a bit hectic so we sold it in 2005 for a small profit.

My company paid for my housing so we took our money and played it safe and put it in some mutual funds, oil, gold but decided we would end up in Vancouver at one point so we purchased a pre-construction condo in downtown Vancouver in 2005. At the end of 2006 we were planning on coming back to B.C in mid 2007 when our place would be ready. We came back to b.c. mid 2007 but were told that I will have another oppotunity out of the country in 2008. So, I decided to sell our place downtown for a healthy profit and rent.

Both places that I purchased were to act as a primary residence. However, because of the circumstances they ended working out as investments. However, when I buy a property it is a purchase based on lifestyle and living. I do not look at a home for investment as there are too many emotional and pyschological factors that play with it's value. I just hope one day someone will buy it for more then I paid or I will have to keep it until then.

Me singling out VG is because it is the same old boring stuff that I see on this blog, Affordability, rent/multiply articles from the U.K, U.S., etc. I have actually seen that stuff for the past 3 years on various blogs as that was one way I could keep a track on housing while I was gone.

As for the insults Greg, don't really care too much. I still have my rental home in the lower mainland that pays for itself and more. I have money in the bank making money and when I go out of the country again the company will end up paying for my rent again.

By the way - you should check your comments again:

Excuse us for taking a certain point of view, but we don't have to provide statistics to support that point of view.

Sorry, but the bearish point of view is quite topical, and if you want to take it down a notch and try to discredit that point of view without offering any facts of your own, prepare to have some insults dished your way as well, then.

Interesting that I have to provide backup but you don't? Considering I didn't take a bull or bear stance on the matter not sure what facts you want me to prove?

Slimtuesday should probably not talk any more due to the fact that he/she believes that cars are a sign of wealth.

One example is Jim Walton, heir to the fortune his father Sam Walton created through Wal-Mart. He drives a 15-year-old Dodge Dakota pickup and is number 23 on this year’s billionaires list.

greg said...

Bulear -

So let me get this straight -

You don't live in Victoria.

You spent most of your time in recent years outside the country.

Yet your real estate decisions have all been golden, and therefore your advice is infallible.

Which is- don't be so negative VG. Why don't you back up your facts VG. Why don't you go mope somewhere else VG.

Etc.

You demand bears provide stats to support their bearish points of view on a bearish blog?

Show us the money - what exactly are the stats you propose to substitute that would lead anyone to a different conclusion at this point in the game?

Do you really need to quote VREB or Royal Lepage?

Do you know who Robert Shiller or Peter Schiff are? Do you think their conclusions are inapplicable to Canada?

Umm, no, so basically, you don't do what you ask others to do while stirring the pot. Classic trolling behaviour.

The point is, a bear doesn't need to provide stats to convince a bullish troll of anything, considering your lack of openness to the possibility of a downturn, to the point where you challenge people here as negative and start calling them names?

VG is a longtime valued poster and you are a newcomer without any credentials except your sunny take on real estate.

Really, why not take up the challenge and write your own blog? Then keep an open mind when we visit and trash and ridicule your overly optimistic, unsubstantiated calls on the housing market. I would love to do that.

If you want to be a bull, great, but don't come on a bear blog and criticize people based on your fluky out of country luck. Those are hardly credentials that would impress anyone who has actually been reading a newspaper in the last six months.

greg said...

Comparing Victoria to the South of France, bulear said:

I do not see it as a comparable as I lived in the South of France. However, if you compare it's weather pattern to Canada and it's location it is the closest representation compared to any other city.

I find it very interesting how everybody tries to rip apart any potential positive information and praises negative information.


Potential positive information? You pretend you lived in the South of France and then don't consider that such a statement is either ridiculous hyperbole or flat out wrong?

By the way, I was just in Spain and the south of France less than 3 months ago, and I can assure you that the "weather pattern" (climate) and location there is in no way similar to the climate in Victoria. They only place in BC with a similar "weather pattern" is Osoyoos- and that's only in the summertime.

Culturally, I mean, come on, there is absolutely no comparison. None.

Pointing that out is not ripping "potential positive information".

Believe me, if I had a choice and I lived in England, I would be in Spain or France looking for a second home right now - not in Victoria.

Brand new houses in Spain cost only a fraction of what dumps on Burnside cost - and plane tickets from England to Spain are a fraction of the cost as well.

Want recent stats? - well read this from the Times:

So, how bad is it, and will there be a crash? The outlook for the Spanish economy is darkening: unemployment is rising, inflation has hit 4.3% and the current-account deficit is the biggest in Europe. The oversupply of new flats and villas in many “sub-prime” locations, such as Duquesa, on the Costa del Sol, and Torrevieja, on the Costa Blanca, remains a problem. A quarter of all properties built in the European Union in 2006 were in Spain, and Caixa Catalunya, a Spanish savings bank, has estimated that up to 500,000 newly built properties remain unsold.

Yes, even Sunny Spain has crashed, even though its closer and its cheaper to "Europe" - heck, it's in Europe. What fantasy world are realtors living in when they think somehow Victoria is poised to be the new "South of France" for European buyers?

Yes, I can't wait to stroll the beautiful Wharf St sidewalk with its European charm. On my way to Value Village.

Anonymous said...

bulear, what kind of company hires people who can't spell. It's = it is... duh!! Are we talking about a nice government job? Tell us about your "healthy profit". Tell us too that you did declare this profit as capital gains, and paid taxes on it?

greg said...

Whoops, I can't spell, should read:

Yes, even Sunny Spain has crashed, even though it is closer and it's cheaper to "Europe" - heck, it is in Europe. What fantasy world are realtors living in when they think somehow Victoria is poised to be the new "South of France" for European buyers?

Anonymous said...

bulear, also when you are abroad and own property in Canada you have to declare your international income to the Government of Canada. Did you do that?

olives said...

Bulear,

I am in a similar circumstances - having sold property in the last two years and now renting - I'm sure many on here are the same.

The discussion is great (as long as people can be polite), but I don't understand why you would even read this blog if you think it is to "boring". Why do you think discussions of "affordability" are not relevant?

It is difficult to provide stats for something we believe is to occur in the future (and may be starting now). There are stats right now available of 15-month supply of condos in Victoria and I'm sure HHV can provide many others as well.

It is very easy to make "predictions" for things that are already occurring, but many of us looked ahead years ago and believed these changes to occur in the future.

Bulear said...

Greg, I did not compare South of France directly to Victoria. Culturally it is very different (gorgeous and rich in history). However, not everyone wants to move there and not everyone wants to move to Victoria. As for Osoyoos, not even close. South of France does not have such a drastic temperature change from Summer to Winter.

As for the Spain stats, Thank you. So it points out the market is crashing due to an oversupply of 500,000 that was intended to be purchased by destination visitors? Great, what is the oversupply here and what is demographic of people buying.

To anon, I find it interesting that you go through an entire post to find spelling mistakes on a blog to discredit a comment. As for my healthy profit, use your head (Purchased in 2005 and Sold in January of 08). Yes, this year I have to declare my capital gains and in the past I was taxed on my World Wide Income when living out of the country.

Once again, not sure why you want to attack me for making you dig deeper. I am not one to give advice as I purchased my residences for primary living and luckily it worked out for me. If you want to sit there and look at the same information to justify your point then do it, it may work out for you or it may not. If it does not just realize it wasn't because of what you know it was because of what you didn't know.

You want my stance - I think there will be a plateau and a slight decrease. My only reasoning on this is my gut. That may change if I uncover more information that I believe to be useful for either a bull or bear mentality.

As you can see, I was never against what people on this board were saying. I just believe people need to dig deeper and not just take in the information that is easiest to obtain and believe that it is the be all and end all.

Bulear said...

Olives,

I respect what you say and I enjoy some information on this board. However, I find that much of it is repetitive and trying to sway the mentality of people instead of finding out all the facts to gain a better prespective.

As for Affordability it is relevant but how can we say for sure what weight it holds in the equation?

This is an if and a big if, but what happens if the average BUYER is making more then 150k? Our stats provide that today the average INCOME (around 60k) uses up 70%.

Now if you look at that example, and if we found the information on buyers, would you not factor it into your equation of where you think the market is headed?

All I am saying is that more information is not a bad thing. I try to look for it but it is hard due to the fact that it is happening right now. With that said, I do not discredit it as that information may still exist.

olives said...

To me this blog (and others) aren't about swaying mentality, but rather more sharing info, and more importantly a place to say what you really think is happening and will happen.

Obviously, if you are really bearish on real estate, the economy, etc. it is difficult to voice your opinion to too many people in your real life - for many reasons - lack of interest, ridicule, disbelief, shock, fear, etc. Money is a very emotional subject and I don't want to get into any heated discussions unless I know other people are on the same page. (maybe I am just a wimp?)

That said, I am much more bearish than most and believe that we are heading for a deflationary depression.

Geoffrey said...

here are some FACTS. Baby boomers will flood the market.

http://www.thechronicleherald.ca/Business/1034614.html

Geoffrey said...

Another fact: "home ownership is becoming increasingly difficult for young families, many of whom could find themselves as renters for life"

http://www.hfxnews.ca/index.cfm?sid=102332&sc=89

Anonymous said...

Those young families can rent illegal basement suites.. helps owners pay the 40 year mortgage. Hell, why not just camp in Beacon Hill park, or start card board/tin metal shanty towns in and around Victoria. There's plenty of empty land around for that. I mean, that's the logical next step? Maybe that's why we have so many homeless and poor people here driving 40 year old cars and who can't afford to buy milk for their children. While some run around smarting about their "healthy profits", they do not care that others consequently suffer from their deeds, and in fact, the toll it has on many children in this town such as malnutrition (as parents pay all of their hard earned money for housing). But speculators don't care about society. They are greedy, selfish creatures who think me, me, me and who would even pull the plug on an ailing parent just to inherit more money.

greg said...

Do I need to remind you Bulear, that you are the one who precipitated this by calling VG "ignorant"?

Once again, not sure why you want to attack me for making you dig deeper.

Dig deeper? Umm, not sure why you don't start your own sunny blog with your own sunny stats and your own sunny predictions?

Really, we could all visit you there and question your sunny stats. It would be great!

roger said...

bulear

VG asked me in an earlier post to not be negative since it upsets the bulls. So my response to your comments will be as positive as possible.

I can understand as a business traveller that you have been looking on the Web for information on the BC real estate market. As I understand it your interests and property ownership has been in Vancouver and the lower mainland.

The Victoria and Vancouver real estate markets are drastically different If you look at the socioeconomic and buyer demographics you will see what I mean. Vancouver has more industry, higher incomes and the buyer expectation is lower than Victoria. For example on Vancouver TV this morning they were showing a real estate agent showing a professional woman a 1 bed 400 sq. ft. condo for 250K. Folks wouldn't even consider living in one of those shoeboxes here.

Other differences include a higher number of retireees, slower pace of life, a different attitude to work/life balance and commuting. Flipping condos through assignments has not been successful here like it has in Vancouver.

One has to live in an area in order to understand what is driving the real estate market and to get a feeling for what is reasonable value. As a resident of Victoria I have only a basic understanding of the Vancouver market and would not post my comments on a bull or bear site there because I would not know what I was talking about!!

Most posters have mentioned that this is a bear blog where we can share information of common interest. Most of us believe we are close to bursting the real estate bubble. Yes it is mostly RE market negative and if you are a real estate owner or bull some of it may be disconcerting or seem repetitious.

If you want the standard real estate market pumping info I suggest you read this RE agent blog If you want to post here I think you will not find it productive unless you are a troll just looking to stir the pot.

Bulear said...

Greg,

I take it you do not take time to let my post sink in. Not sure where you are getting that I am trying to point to a "sunny side".

All I am saying that bear or bull the more information that you have will help with a clearer picture.

Here is a helpful fact. 95% of these new pre-sale developments do not list on the MLS. Therefore when a building is not doing well the MLS stats does not count the unsold inventory. When they do well and sell out they do not count in the sold section. So, depending on how many developments are out there and how much inventory is sold vs. unsold it could also impact our supply vs. demand in a good way or a bad way. As our supply is high, mentioned by Olives, it could mean that there is even more unsold inventory.

Bulear said...

Roger - I have to live in location to understand it? I agree,then I guess the posts of what has happened in the U.S, U.K., Spain are not of relevance since many people have not lived in those areas and do not have true understanding of what went wrong.

The questions about getting people to look for more answers was a fun one. It is interesting that people can say they are making an educated guess (and are sure they are right) about a 30-50% drop just based on what is happening out of country, affordability based on the average and rent/multiply. No other issues or factors need apply.

Roger - Not really into all the RE pump info. All I am looking for are more facts and answers to relevant questions. They can either lead to the same conclusion on this board, a lower decrease, or maybe the market will keep going for another year or two.

roger said...

bulear said

Roger - I have to live in location to understand it?

Yes in order to understand why people paid what they did and their perception of value. Real estate is driven by peoples perception of value and is localized. For example, Regina prices are different than Saskatoon for the same type of house and neighbourhood. Why - I don't know - I don't live there.

I agree,then I guess the posts of what has happened in the U.S, U.K., Spain are not of relevance since many people have not lived in those areas and do not have true understanding of what went wrong.

However, one can observe history and make limited comments based on their limited understanding of an area where they don't live. For example, I have no idea why people would pay the prices that they did in Spain but I can only say that it appears to be a bubble. My comments are based on the past and it would be unreasonable for me to accurately predict what will happen in the future in Spain.

Most posters here are concerned about the future and since you have limited knowledge of the Victoria market you can only have the ability to make limited comments about the future of the Victoria RE market.

Siobhan said...

Mr. 4 AM Said:

What's the next bubble? Gold? or Clean Energy?, no maybe its Emerging Markets?,


Good question?
I know of only three things that are known as investments:

1) the stock market
2) real estate
3) fine arts

During the dot com boom, many paper billionairs were buying fine arts with their instant wealth. Southebys was posting record prices for paintings. Vintage wines were escalating and 18th century furniture hit record highs.

However, for most of the last decade the decorative arts have flatened or declined in value.

I'm thinking that many real estate millionairs may start hedging their real estate profits in the fine arts market. So this is where I think a boom could be happen.

So dig out that 1976 Star Wars poster and Saturday Night Fever mirror.

greg said...

Bulear said...

Here is a helpful fact. 95% of these new pre-sale developments do not list on the MLS. Therefore when a building is not doing well the MLS stats does not count the unsold inventory. When they do well and sell out they do not count in the sold section. So, depending on how many developments are out there and how much inventory is sold vs. unsold it could also impact our supply vs. demand in a good way or a bad way. As our supply is high, mentioned by Olives, it could mean that there is even more unsold inventory.

So what you are saying then is that the stats provided by the MLS and trumpeted by Victoria Real Estate board each month are worthless, because the market is driven by presales in buildings under construction?

How does that apply to single family homes or townhomes?

Besides, there are currently 900 condos listed on the MLS - any additional condos for sale off the MLS only increases the potential for a condo glut in the near future...

Bulear said...

Roger,

Read my posts. Please explain to me where I have made any guesses (other then my gut saying plateau/decline) on where the Victoria RE market is going to go? Thought my gut would have made you happy.

As you have seen I have only asked questions and asked for more information. Never have I pointed out that I believe via the information provided that Victoria is going to increase or decrease.

Do you truly believe that there is no merit to be given to any of the other factors that may be out there? Do they not deserve to be given some weight in the current equation?

You want to say that becuase affordability is at an all time high that the market should decrease. However, as I asked before - IF current average purchasers are making 150k or there is a significant amount of inheritances would that not skew your timeline?

Once again, I do not weigh in with a bull or bearish outlook. I just pose the question which could lead to a more conclusive outlook for better or worse. However, it seems like an open forum to explore facts for or against is not appreciated.

Yes, the market is going to crash. Please let me know when the million dollar Oak Bay home will be available for 500k.

Bulear said...

Greg,

Did I say any of the B.S. that you are spewing. All I did was provide you with some information that does point to a potential glut if the pre-sale condo's have not been sold.

Even if they have been sold to potential speculators instead of future residents that could make a glut as well.

Even though I can purchase without a crash it would still benefit me if it did. However, just from dealing with the comments on this board I hope to see it increase just so that you understand it is not about the information you know but it is about the information you so kindly do not seek.

Bulear said...

I believe I have outstayed my welcome. Never did I realize that so many people, bullish and bearish, have tunnel vision.

I wish you all the best.

vg said...

"think it is your ignorance that takes clouds your judgement"


LOL , hilarious, sorry dude, I was here before the US RE market crash calling for it's demise as the US media pumps told you to "Flip that House" and I am here calling for the same in BC based on the same reasons,it's too friggin expensive to own a home here like it did in the US.

Americans are now being asked to pay what we pay after they get their mortgage renewed and they are walking by the millions. How long can stupidity reign supreme in southern BC ?


Sorry bud but your arrogance far surpasses anything I have ever posted that you seem to call ignorance. I do due diligence, you are clinging to a wing and a prayer.


and bulear, how old were you in the 1982 crash by the way ? 3 ?

vg said...

"That is a smart move on your part but missing the appreciation based on you assumptions a few years ago was you missing the boat. "



Yeah they told us that in 1982 at the peak, thats when I sold cause I was bright enough back in my young age to see bullshit when it is in front of my eyes just like it is repeating itself once again. Just another classic statement by the young and the arrogant telling us we "missed the boat".
Well there's always a nice place in Phoenix waiting for me with a pool and a golf course for $180,000.


Do you work for the VREB by any chance bulear ? if not you should apply,they will need some excuse writers pretty soon.

vg said...

so bulear has never lived in Victoria nor even visited here by the sounds of it but he is an authority on our real estate market cause he's Mr. World Traveller and owns a rental in Vancouver and happened to time a condo deal for a couple of G's. Wow, just the guy I want to take advice from.


greg,
I have to believe the same, we have a disgruntled condo developer holding some empty Bear Mountain condos who sees the bear blogs as detrimental to his personal financial interests and is out to spread a little of the ole BS to discount the bears as their moment of glory is soon approaching.


How come we haven't seen this genius on the Vancouver RE Blogs ? you would think he would rule the roost over there but I guess he just doesn't have the time to save us all eh ? ;)

vg said...

one last thought for you bulear....when the crash of 82 started in January there was diddly squat on the market,just like today. By March prices had dropped 15% on average, I know,cause I could have sold in January of that year and got 15% more but due to circumstances had to wait 2 months,it was THAT fast,but you weren't around then so you wouldn't have a clue.


And don't let the door hit ya where the sun don't shine. ;)

hhv said...

As a "somewhat impartial" reader to the discussion in this thread I have to say that I see accuracy and hypocrisies in both sides of the bull/bear and non-RE arguments going on.

I think it is too bad that we condemn those that have a differing viewpoint or seek to raise the level of discussion and inevitably dismiss people as shills or ignorant or bitter renters or whatever. It is clear there are those that feel the bear argument is emotion-based and vice versa. Many parties in this discussion have led it downhill, in my opinion. Equally, in my opinion, it is irrelevant "who started it."

I think we've been really fortunate lately to have some new contributors come into the discussions here. Judging by the number of comments only, I'd say that's a widely-felt assessment. I will not ever censor nor will I ever require people to sign in and not post anonymously. Obviously, choosing a moniker to go by aids in the discussion, but in the interest of a self-governing discussion and openness, I'll never force that around here.

I'd ask everyone commenting to please think about this: if you chase people out of the discussion, be it through direct insults or otherwise, will this blog continue to provide venue for a lively debate? Isn't that part of the enjoyment here?

I for one miss the likes of JMK. I enjoyed his/her sometimes rational, sometimes irrational additions. I was happy when Tim Ayres showed up. I notice he's been MIA for a while. Maybe he's too busy selling houses, but more likely I'm guessing, he's figured out the difficulties that go along with being a contrarian in this environment and just simply avoiding participation; much like us bears feel outside of the bear blogging areas.

I'm not calling anyone out. I think in some measure we're all guilty of some of the insights pointed out in the 146 odd comments in this discussion. I hope this blog continues to be entertaining, informative and enjoyable for all who read it. Everyone is welcome here, if my welcome means anything to them. How you choose to conduct your discussions is up to you. I hope you share some of the sentiments I've tried rather long-windedly to express.

For the record, I think Bulear's name, which is somewhat of a "balance" of bull and bear accurately describes his/her viewpoints of the market. Aren't we realistically somewhere in between? I hope Bulear sticks around and continues to ask and provide fact-based information. We are all guilty of generalizations at times.

Anyway, I've likely said too much. Carry on.

vg said...

I guess I am the one who needs to go start their own blog.


I have a hard time understanding someone coming in out of the blue who has no idea what the Victoria market is all about yet fails to post on the Vancouver market boards from all accounts and then states I am the ignorant one and that is supposed to be balanced opinion I should welcome ?

Looks like I need another hiatus or as I said start my own bear blog,it's your blog here HHV, not mine, so I wouldn't want to chase away your potential bull traffic, like it appears I am doing.

HouseHuntVictoria said...

As I've stated before VG, all are welcome here. I'd like you to stick around.

roger said...

HHV,

This is your blog and I understand your concern about negative posts discouraging new and old posters.

Fair enough. I would like to point out something I noticed over on the Alberta blogs. Now that the market has started to turn some threads can get quite negative. One might conclude that it is bulls vs. bears. I believe it is homeowners vs bears.

When things are going up it is great to brag to friends, family and colleagues about how much your house is worth. However when the market starts to plateau, then fall, like it did in Calgary folks start looking on the internet to see what the future might hold for them. When they hit a bear blog they get upset with what they read and start arguing with the bears.

The arguments may be abusive or may start off with questions like "what are your facts" or "show me the stats". I suspect very few go through the archives and see what has been discussed before.

Last but not least, you have the cunning trolls just looking to start trouble.

In the future I am not going to bite. I like a contrarian point of view like JMK, who lived in Victoria, but why bother with people who have no interest in living or buying in Victoria?

hhv said...

Roger, fair points all around.

I don't feel like this is "my blog" even though it is. If people stop discussing my posts, or comments of there own, this would be a boring place indeed.

I hope people don't read my comment above and feel chastised or unwelcome. That was the point of my post. I don't want people to feel so chastised and so unwelcome that they feel they can't participate.

But a little calling people on their statements based on little understanding and little fact is a great thing. I hope people call me on mine, and goodness knows I've had plenty of those types of posts to be called on.

I just want this kind of discussion to continue. I may have been premature with my "chiming in." Everyone is free to ignore me. Ms. HHV recommends that most of you should, most of the time.

greg said...

hhv -

I understand your interest in being even-handed, but on the other hand, what is your audience for this blog?

Is it a niche audience or a general audience?

If you look at a highly successful bear blogger like Patrick Killelea, he took a negative position on housing valuations in Californai back in April 2005, supported it, and stuck to it, and pretty much lets the commenters on the blog sort things out among themselves, with the exception of racist hate based comments.

If you judge a blog based on the number of comments and attention it is getting, your blog is probably doing better than ever right now. I wouldn't worry too much about losing the participation of some out of touch real estate bulls in the short run. When the local market truly turns, it will be the general public visiting your blog and thanking you for the contrarian voice the blog provides.

Mind you, I guess I take a similar approach to Patrick.net and not many people read or comment on my blog, so there you go.

And for VG, not that I want to draw your attention off this blog, but you are welcome to post comments at mine if you feel like it. If Prairie Boy and HHV can get hundreds of comments on a post, it would be nice if I could get a handful at my blog too.

Bulear said...

VG - I apologize for calling you ignorant. I would hate to see you stop posting on this blog. I find on many websites people keep digging for the same information. Since they have the ability to find such detail on certain topics there is a good chance you have the ability to find out answers to other questions that relate to the market.

My comments are only here to make people dig deeper for answers that will hopefully better equip all in the future. I do believe the rent/multiply, affordability are great indicators but times do change and other factors do have weight.

I stick to my comments about finding out more information relevant to the market and the weighing each factor.

And Roger - Currently I do live in Victoria and am renting :)

If it was completely true that rent/multiply - affordability were the only factors then we would have never been skewed so much.

olives said...

Roger said:
"...I would like to point out something I noticed over on the Alberta blogs. Now that the market has started to turn some threads can get quite negative. One might conclude that it is bulls vs. bears. I believe it is homeowners vs bears. "

I have noticed this too. I think the negativity is fueled by fear. It is kinda distressing to read that stuff at times.

hhv said...

Maybe, I'll censor myself in the future :)... carry on all... disregard me altogether.

vg said...

HHV,

I totally understand poster like myself turning off new posters,and that my some of my rants may contribute to it,thus my latest hiatus.
I am not out to thwart any bulls balanced opinion but so far all the bulls can come up with is the single fact that prices haven't fallen significantly thus the arrogant tone that accompanies these "bulls". This also goes for the RE agent Tim. If he posted with an open mind like a real agent should that indeed prices could well turn down then I would have cut him a ton of slack.

As this blog has been 99% bears for as long as I can remember I was always hoping at least one agent in this town had the balls to come on here and show there is both sides to the coin and his being a real salesman would be open to change like we bears have had to endure the past 5 years as prices escalated.


I will continue to post but will pick my spots.




greg,

I do try to read your blog and enjoy your format,it seems by the time I am finished posting here or PB's blog I don't have much left in the tank but I will make more time on your site so I don't bog down HHV's. Thanks for your kind words.


bulear,

Apology accepted. I have nothing against anyone buying if they can truly afford it with a mortgage equal their rent or less. I am bothered to see young couples get hosed at the top of the market like those we are seeing daily in the US media and be screwed for many years when the value of their homes fall below the mortgage.

I also have grown up in this town and happened to own/buy/sell at both critical times in our last 2 recessions and remember it like yesterday and hearing the same lines about "missing the boat" is something that turns my stomach.

If you don't buy into the "have to get in now before you're priced out forever" then you never "missed the boat". Owning a home never has been easy to afford but there is a certain level of excess affordability that in history has "always" corrected itself and since we are at an "all time high" in the affordability index according to RBC then that confirms all my due diligence that the market is ripe for a major correction.

My "boring" calculation of the global financial system troubles that were NEVER in this bad of shape in 1982 or in 1990 is my RED FLAG of all red flags to wait at least a year to two years as the excessive greed is flushed out of the system.

I aslo find it very puzzling how someone so worldly as yourself can discount this info that all of the posters here have been posting for the last 2 years as "boring" ? These are the facts burlear,these facts are driving everything in our markets and future employment opportunities.

I have a few friends in the US who are witnessing this stuff first hand with them losing their contracts and hearing daily first hand of large contracts being cancelled due to the credit crunch,lending rules tightening that deals don't get done.
This can very well happen here before you know it burlear, even our own BC Finance Minister just repeated it a couple of days ago to "be prepared". What other evidence do I need to make my case not so "boring" ?



I rest my case and my fingers. ;)