Wednesday, May 14, 2008

Bull Psychology

Psychology in the market place is a funny thing.

I still haven’t found a way to quantify it. Pollsters will ask “intent to buy” questions of consumers and then real estate boards and marketing companies will spin it in the media to mean “majority of people between reader A and reader B think real estate is a great investment” etc. Who doesn't want to be part of the majority?

In a recent exchange in another web-place, as a response to some stats I used to back up my bear assertions, a poster had this to say: “many people have total confidence in the market here and that alone makes it unlikely prices will drop.”

I haven’t believed that confidence in the market matters much in the big scheme of market psychology. Because confidence, like all psychological factors in the market place, waxes and wanes.

I’ve found myself drawn back to this exchange frequently over the past few days. I tend to get a train of thought stuck in my head and until I’ve worked it out it nags at me like my mother did when my room was messy; I learned the only way to get rid of the nagging was to get down and do the work.

My neighbours recently bought a home. It was on the market for only a few hours just around the corner from where they currently live. They walked through it and made an offer to the owners to pay their asking price if they agreed to a deal subject to an inspection—I’m not sure if they made the deal subject to the sale of their own home or not. It doesn’t really matter, because they have confidence in this market.

This purchase was specific. They were looking for a particular house that fit a particular need at a particular price. It popped up and they pounced. They’re happy with their decision and that is really what matters to them, because they are buying a home and not an investment—future price gains were not the determining factor in their buying decision. But how much does the fact that they pounced influence their confidence in this market?

When it came to pricing their own place, they didn’t quite see eye-to-eye with their agent. They wanted a slightly higher asking price (and I should state that in this case we’re talking about literally one percent of the total price). Their agent wanted slightly less for whatever reason their agent gave them. Ask me my thoughts on their house and I would tell you that I think their home is in a very good neighbourhood, offers many income opportunities to help with the mortgage, has good bones and requires no work to make it livable, but lots of work to make it like all the newer updated places with hardwoods, granite and stainless.

I can see more upside to buying it than down, especially long-term, but in this market, with these conditions (more competition for less buyers), it may not sell as quick as they’d like or for as much as they’d like. I’ve seen so much insanity lately that I won’t be surprised in the least if it sells very soon or even in two months time. For them, I hope it's soon.

A while back I wrote a post about a Realtor respecting their client’s wishes. I thought they had good reasoning behind their decision and felt the agent should have respected this. Conversely, many others felt that selling then buying was the less risky venture. I was definitely in the minority about the right or wrong behind this family’s decision to buy before selling and I can see the why in that reasoning now. Important lesson learned for me.

This family is confident in the market. And that confidence led to this decision and this risk: they may have to carry two mortgages for a time or accept an offer they would otherwise reject due to financial pressure. I wonder how many other families are in this same situation right now in Victoria? I wonder how many young professionals who have bought re-sale condos with the intent of updating them and selling them for profit can’t carry them for long if they can’t sell them fast? I wonder how many of those same purchases are secondary properties and not primary residences, and thus doubling up the risk? I know of one handy man who sells cars for a living and rents the condo he lives in on Bear Mountain (because he can’t afford to buy it) who has flipped no less than 3 re-sale condos in the past 16 months. What kind of pressure is he under to sell his next (or current) project? How many of the available listings in Victoria do these kinds of scenarios represent? Twenty per cent? Thirty? More?

All of these anecdotal examples of potential situations are borne of confidence in this market. I can understand the rationale; after all we’ve witnessed the longest, most sustained upward pressure on real estate valuations in Victoria’s history; you’d have to be crazy not to get on the gravy train. I can see why some people—especially the ones who are too busy making money in the market to do market research—believe that we’ve reached a new pricing trend paradigm.

I was a geek in grade school, didn’t have much confidence because many other kids didn’t hold me in high esteem. I’m still a geek, but I’m much more confident because I’ve learned to value myself (and because Mrs. HHV thinks geeks are hot). Perhaps the most important lesson I learned, and learned the hard way, was too much confidence can be a bad thing.

Confidence in the market? Analyzing it rationally is a bit much for me. I think I’ll stick to things I can quantify. Like price to rent and sales to listings ratios, investment fundamentals and liquidity, and, above all else, making sure that if I’m wrong I learn from my mistakes and still be able to provide Mrs. HHV and me a decent future.

83 comments:

Anonymous said...

1. US foreclosure filings surge 65 per cent in April, home values slide

http://www.news1130.com/news/business/article.jsp?content=b051445A

2.Five new condos in Parksville will be auctioned off

http://www.news1130
.com/news/local/article.jsp?content=20080514_112133_3712

The first one is a reminder, anything can happen.
The second is a test or you can see as a sign of change directly.

roger said...

I wonder how real estate confidence will be when folks read MLS listings reach record high (CBC)

New figures out Wednesday show MLS listings were at an all-time high in April, pointing to further cooling in Canada's housing market.

The were were 67,554 newly listed properties in Canada's major markets last month — 17.7 per cent higher than a year earlier.

"New listings are forecast to rise further as sales activity continues retreating from the peak last year," said CREA chief economist Grogory Klump in a release.

More listings means more choice for buyers and more pressure on sellers to lower prices. So it comes as no surprise that price gains are cooling off nationally.

roger said...

But wait... there's more:

CREA reports record number of new MLS residential listing in April

But it also said its latest housing market survey shows that new listings rose by more than sales activity, resulting in a more balanced resale housing market in April than in any other month in the past nine years, making it much more of a buyer's market.

"It also means more competition among home sellers, so presentation factors such as prudent pricing are necessary for faster sale."

So far this year, said Porter, according to BMO Capital Market figures national home sales are down 11 per cent year over year, and prices are up a moderate 4.8 per cent.

Prices actually fell from a year ago in both Calgary and Edmonton, as well as Windsor and St. Catharines, he said.

Vancouver, said Porter, also saw "price increases dip into single-digit terrain," joining Toronto and Ottawa.

"The sales drop and the modest price gain are well down from years of double-digit increases, and further confirmation that the boom days are over," he said.

Porter said the association's observation that " 'presentation factors such as prudent pricing are necessary for a faster sale,' are a polite way of saying: If you're looking for double-digit price gains, dream on."

Anonymous said...

Home buyers in Phoenix, Las Vegas, Tampa Bay, San Diego and Miami all had supreme confidence in real estate. Prices fell. So people are "confident" here. So what, it's irrelevant. Actually, I take that back; it's not irrelevant -- it's confidence that led to the boom, making the bust inevitable. So, in fact, confidence actually causes price meltdowns.

Aleks said...

Your elementary school anecdote reminds me of one of my own. The teacher made a statement and we had to put up our hands if we thought the statement was true or not. I was the only person to put their hand up for the correct answer. At the time I could feel the other kids thinking "what the hell is wrong with you?" and afterward, they resented me for being right.

There is a lot of pressure to conform in society, and it's one of the things that leads to market manias. People would rather go along with everyone else than be right, and they would really rather that you go along than be different and right.

Bulls may think that if everyone just keeps selling houses to each other at more and more outrageous prices, the party can go on forever. It can't. Eventually buyer fatigue sets in and the bubble collapses. And the more it ran up the worse the crash will be.

As Garth Turner likes to say, your ability to sell in this market relies on finding a greater fool (which, incidentally, is just a paraphrase of Al Bundy's bigger idiot theory of garage sales on Married With Children). When you run out of greater fools, the fools who bought last are left holding the bag.

greg said...

Like a lot of people, I'm keeping a close eye on the market. Spoke to a realtor on the weekend who basically said, right now, around 50-60% of listings don't sell. Why?

Desperate salespeople take the listing at whatever price the seller wants - and now these prices have separated from what is reasonable or comparable, so they sit and don't sell. Which leads to lowering of prices, pulling from the market or relisting down the road.

So basically, right now half the houses on the market are listed too high too be competitive. And of course, the buyers are gravitating to the other, more competitive listings.

Looking at Months of Inventory here, and you'll see what I mean. The more expensive the property, the more inventory is available.

Anecdotally, that tells me it's over, prices on individual houses may go up, but for the market as a whole, they have already started down.

Which of course feeds back into a further undercutting of current prices.

The only thing preventing this from being more obvious is the cluelessness of sellers. When they start to catch on, a lot of unrealistic fishing expeditions will disappear from the market, and median and average prices will start to fall with the remaining properties which, for whatever reason, must be priced competitively and sold.

I've been saying for awhile this should be obvious by the fall. Let's see if that's what happens.

vg said...

Yep, real confidence when oil is at $125 and Calgary listings are hitting all time highs. It's called panic selling and it's coming here in due time. The remaining sheep have the spring fling thing and that will be over anytime now.

boomer said...

""I’m not sure if they made the deal subject to the sale of their own home or not. It doesn’t really matter, because they have confidence in this market.""

with respect, HHV--Are you kidding? Doesnt matter? The "subject" on the purchase (or not) makes all the difference between this being perhaps a rational move or plain stupidity.. Believe me, (from experience) the last thing anyone wants is to be long two homes , and trying to sell one to pay for the other---- especially in a market with increasing inventories and falling prices. Forgive me, but if there is no "subject to sale" on their purchase, sleepless nights, and mental self flagalation awaits your friends unless they get real lucky,real fast. Been there-done that-Never F'ing doing it again, under any circumstances I can imagine.

hhv said...

Boomer,

That was meant tongue in cheek my friend.

boomer said...

aaaah-tooo subtle for me



still -dont buy 'for ya sell, stooopids

hhv said...

In defence of my neighbours, I don't know about their subject to's. It could well be that there is a subject to sale.

hhv said...

Wow. I'm just checking out PCS. In my segment for SFH (price under $425K with a suite or easily suited, in Langford, Colwood, VR, Esq. the 2 Saan, Vic, Oak bay) there have been 12 new listings in the last week and nothing has sold since April 22. The market has shifted folks. SFH in this segment are usually gone in 10 days or so for the last year.

talus said...
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talus said...

This radio program "This American Life" just did a review of the recent history of the ongoing credit crisis, and the housing crisis it spawned, and the overall stinky economy following on its heels. This is the best plain language, easily understandable account of what has transpired that I have heard to date. It was put together by a pair of reporters, one a financial correspondent for NPR, and the other a regular from This American Life. So it puts together accurate financial reporting with a human outlook and good story telling. If you think "yeah, I know there is a credit crisis but I don't really know what just happened" then this is a worthwhile listen. It puts it in very human terms as well - via the experience of a lot of people who participated in it.

http://www.thislife.org/Radio_Episode.aspx?episode=355

These podcasts are only available as a free download for a week, starting this past sunday. So get it now or pay later.

talus said...

Oh ya - if you didn't guess, the above is American based and of course will *NEVER* happen to us here in Canada.

Anonymous said...

Wow. I'm just checking out PCS. In my segment for SFH (price under $425K with a suite or easily suited, in Langford, Colwood, VR, Esq. the 2 Saan, Vic, Oak bay) there have been 12 new listings in the last week and nothing has sold since April 22. The market has shifted folks. SFH in this segment are usually gone in 10 days or so for the last year.

Noticing the same on my PCS listing which is suite only. At the end of April, a good portion of available inventory was sold. But since then, it's been at a stand still.

If this keeps up, something might actually pencil out financialy for decent housing.

beagle said...

Cracks appear in the real estate market

Scotiabank, looking at the resale market, reported that home resales – having fallen for four consecutive months – are running about 15 per cent below last summer's historic peak.

“Average annual home price appreciation has eased back into the mid single digits, as overall market conditions come into better balance,” according to the Scotiabank report.

“Adjusted for inflation, the average resale home price in Canada registered its first quarterly decline in seven years in the first quarter of 2008,” the bank said.


I was up in Campbell River the last few days and noticed for sale signs everywhere. Also the amount of new SFHing construction is astounding, especially in the southern region of town.

boomer said...

Talked to a private "investor" the other day who has a condo suite for sale privately at $290k.
I assumed the suite was in some way different from 2 other suites in the same building that are now listed on mls at 210k.
Nope-only difference is that they are on the 2nd floor rather than his which is on the 6th.
He told me he had paid 250k for it a year ago and would possibly "consider" an offer at that price.
Actually, I dont have any interest in any of the suites (too small) but I thought it was interesting to get a $40k reduction at first contact and then the " but I paid X$ for it" mindset.

roger said...

In January 2008 Peter Schiff (a bear)in the US locked horns with a real estate agent on Fox News who said it was a good time to buy. You all know what has happened in the last four months.

Bears might get a laugh out of this video. Peter just keeps talking about numbers and gets accused of not "helping people" who want a home.

greg said...

Peter Schiff is way more entertaining than Jim Cramer, and he's actually gut the guts to make a credible call whether the Realtors like it or not.

Right on Peter Schiff.

Billy TwoBaulz said...

The G&M article posted by Beagle above is really quite significant, I think. As we only have one real newspaper in this country (at the risk of offending NP readers, but really, though its writing is usually of better quality, it seems to shrink by the day), it constitutes the MSM almost by itself. I think "Cracks appear in the housing market" marks a sea change in Canadian MSM coverage. We have furthermore moved decidedly into "soft landing" rhetoric, which also means the corner has been turned.

Read the comments section on that article for the usual mix of 80% semi-retarded and 20% intelligent comment, which happens to be about 70% bearish by the looks of it, and 30% wounded bull.

Aleks said...

"Peter Schiff is way more entertaining than Jim Cramer, and he's actually gut the guts to make a credible call whether the Realtors like it or not."

I was kind of disappointed with Peter there when the realtor said "Why didn't more people listent to you?" he missed the obvious opportunity to say "Why aren't you listening to me now?"

Anonymous said...

It appears that the bulls on KIV are getting just a tad testy.

When do we all get to go for that beer that HHV promised us?

S2

roger said...

S2 said:

It appears that the bulls on KIV are getting just a tad testy.

I admire your (and Olives) tenacity in keeping the folks informed on that blog. Folks will get even more testy when the downturn in Victoria gets rolling. You are bursting the bubble of the happy owners. However, you are probably convincing a few who will thank you in a year or so.

I took a drive by KIV and saw that you have been posting a lot of full articles. Why not just start a Real Estate Article thread and post the links and selected excerpts instead of the full article? That way the thread will keep getting bumped and it will be harder to find fault with the volume of posts.

That beer that HHV was talking about doesn't sound that far off any more.

roger said...

These MSM "cooling articles" are appearing with more frequency now:

Housing market is cooling, but by how much?

Toronto to be hot spot in cooling housing market

Cracks appear in the real estate market

Red-hot housing market loses its heat

Anonymous said...

I know, I know. I will post just the links to most articles but post full length for the real estate ones.

I know on KIV if they are real estate ones people only read them if they are right there in front of their eyes. They won't click on the links.

I've had a few people on KIV thank me for posting real estate stuff and that they are learning and waiting too.

S2

roger said...

S2,

Just thought I would mention that posting the full article, other than a press release, is a copyright violation. The KIV admin may censor your posts if he/she feels any legal heat or suggestions from bulls to that effect.

That is why I only post excerpts which is OK under "fair use".

Anonymous said...

There has been a whole discussion on KIV at one time on copyright and things so I'm guessing KIV admin is dealing with it as they see fit.

S2

Anonymous said...

Meant to add thanks for the info. on copyright and I'll start just linking.

S2

Mr.4AM said...

Canada: Sucker Nationa, part 3

I thought some of you might be interested in the above linked article, because it begins to explain why there's so many rich foreigners that buy condos in Canada and never end up living in them.

Apparently, believe it or not, this has a lot to do with Immigration abuse. If they fix immigration laws, this may come to a halt... but don't hold your breath as it is likely not to change very soon. Still, I was not aware of how this was all happening.

Interesting read.
Mr. 4AM

patriotz said...

This radio program "This American Life" just did a review of the recent history of the ongoing credit crisis, and the housing crisis it spawned

It's the other way around. The housing "crisis" spawned the credit crisis.

Financial markets got into trouble because house prices were falling, leaving houses worth less than the mortgages that were made to buy them. The subprime meltdown happened in March 2007, well over a year after the first US markets started falling.

Oh BTW it's only a housing "crisis" for the idiot buyers, speculators, banks, RE industry, and other parasites who created the RE bubble. For everyone else its pest control.

beagle said...

Vancouver is really starting to look bearish. listings are going parabolic and sales are dropping fast. How can buyers in Victoria ignore that, surely they can't come up with it's different here than Van! or maybe..
We won't be effected because we're the Capital City!!

olives said...

"pest control" heehee

I wish we here in Victoria had some bearish realtor posters willing to share inside info as to the market here (like Jeff on the Chipman blog or Paul on the North Vancouver blog).

Anonymous said...

What do the “house economists” call the Calgary market? Balanced; more choice for buyers, instead of price drop.

What are they trying to use for a crash? Soft landing.

Why is supply going up and sales going down but price will go up next year according to them? They want to fool the sellers to slow down, don’t increase the inventory anymore. They want to fool the buyers to buy quickly, the price will go up.

How many potential buyers are fooled by them? Less and less.

I know one thing is sure: more and more people are thinking that the real estate market will have a big change in the near future. Rush out to sell and wait to buy.

Eddie Peaslee said...

I love your story about your neighbor. That's really what it's all about. If you're looking to buy a home and you've found it and the price is right then go for it. I'm sick of hearing about whether or not we're at the bottom. That shouldn't matter if your buying right. If you're interested in investing now is a great time as well because of the huge amounts of foreclosures and discounted properties across the nation. PropertyMaps has a great Google Maps mashup that lists Chicago real estate as well as properties across the nation.

greg said...

Eddie,

fwiw, prices have barely begun sliding here, it's all in the future, so don't get too sick of people speculating on a bottom, it's going to continue for a few more years for sure.

roger said...

Many of the regular posters are familiar with Mohican's Financial Planning Site. His latest post is REBGV Area Officially in Bear Mode and it makes for interesting reading. Months of Inventory has now reached 6 months as inventory rises and sales drop.

Some of Mohican's data comes from an excellent stats site run by Paul Boenisch a Vancouver realtor. Here is his graph showing rapidly rising inventory You can also see the detailed weekly stats and daily stats for Vancouver. Take a look at the rising inventory and the dropping sales/new listings ratio.

So what does this have to do with Victoria? We are also up 10% in our listings in just two weeks. When the MSM TV stations in Vancouver (CTV, Global) start releasing these stats in a few weeks it will give sellers on the Island heartburn and prospective buyers will become more nervous. The BC is immune myth will go the way of the decoupled economy line we heard last fall.

A "soft landing" for Vancouver & Victoria real estate prices will soon be viewed as wishful thinking.

greg said...

Roger -

thanks for keeping the focus on the numbers, hope someone bumps into you in a couple years and thanks you profusely for saving them a couple hundred gs....

;)

beagle said...

Check out the adjusted inventory graph for Vancouver on this page at bc real estate talks. It's near the bottom of the page.

Listings Inventory in Vancouver-Wow? thread

The latest listings count form paulb's site are 16,999, wow!

olives said...

I am wondering if Victoria has a less, greater or similar ratio of listings-to-population ratio as Vancouver, since the bears seem so excited about it over there.

Roger? Is this something you can graph to see if we are ahead of them or behind?

roger said...

Olives said :
Roger? Is this something you can graph to see if we are ahead of them or behind?

The demographics, population density and economic factors are so different that it would not be a reasonable comparison.

What both have in common is that inventory is rising rapidly as it is all over Canada.

roger said...

THe folks in Alberta get another real estate infomercial called Snow-weary Canadians enjoy 'paradise'. The author Gerald Vander Pyl writes these buy now articles for the Calgary Herald on a regular basis.

About a month ago, when Calgarians were battling through yet another late blast of winter, Victoria realtor Lorne Meyer was out for a bike ride on Vancouver Island. "(In other parts of Canada) when it's snowing like crazy and even zero, people don't go out."

The local real estate market has finally started to slow down from the frenzied pace of sales and price increases experienced in recent years, says Meyer.

Sales for April were 707 properties, down from 898 during the same month last year -- even as the number of properties for sale rose to 3,859, up from 3,305 a year ago, say the latest MLS statistics from the Victoria Real Estate Board.

While the market is slowing, no one is anticipating any price decreases, only a lessening of the steep climb that saw average prices rise up to 20 per cent some years, says Meyer.

Real estate prices are forecast to rise about four to six per cent in 2008 -- which, combined with a wider choice of properties, is good news for buyers, he says.

"Because of the demographic shift, more and more folks my age are retiring and wanting to move to paradise," he says. Many of them are choosing to buy in one of the numerous new condominium projects that have been springing up across the city, he says.

"The trend is also for the high end (condominiums) to be a bit bigger than we're used to seeing," he says. "(Developers) found that the standard 1,000-square-foot, two-bedroom condo was not what a lot of people want, so now we're seeing more in the 1,400- to 1,800-square-foot range."


Guess Lorne has never heard of Garth Turner, met a cautious buyer or read a bear blog.

Boomers are moving to paradise to buy a condo? So why do developers keep building the under 1000 sq. ft. shoeboxes and where exactly are all these 1400 to 1800 sq. ft. condos that are up for sale?

beagle said...

I always laugh when it's made out like Victoria has such balmy weather.
Sure it's milder than many places during the winter, but it's still windy, damp and cold. And there are many days when back east the temps are much nicer than here. Many times it's sunny and 24c in Calgary while its 13c and drizzle here. The pumpers make out like it's Hawaii here. Must be a disappointment to buy that million dollar condo downtown on the harbour and need a patio heater turned on most of the year to sit outside.

roger said...

Beagle said:

I always laugh when it's made out like Victoria has such balmy weather.

Keep laughing because owning a condo at Bear Mountain is Living the Dream

"Many of us put aside savings and time to go away to places where we dream to be," says Chris Doray,.... "But a vacation can only take you away for two or three weeks. What Capella is about is trying to fill that dream and bring it to a place where you live all the time."

The reason he chose southern Vancouver Island for Capella was the superb location at Bear Mountain.

Victoria's temperate climate, where people can golf year-round, is another strong draw.

It's just a 15-minute drive from downtown Victoria and 15 minutes from Victoria International Airport, at a site offering all the amenities of an urban centre plus the outdoor lifestyle activities people are looking for.

Capella is ideally suited for the Alberta market, says Quigg. "It's very close to the airport," he says. "It gives them the conveniences of the City of Victoria, but it's a lifestyle setting they really appreciate."


I better get a new car - it takes me 45 minutes to get to the airport from Langford and half an hour to get downtown.

boomer said...

"it takes me 45 minutes to get to the airport from Langford and half an hour to get downtown."

yeah, me too.
Quigg must be buckling into a rocket sled

hhv said...

Silly people, didn't you know that all these uber rich Calgarians take private helicopters to the airport from the 18th green. What r u people thinking, that these people actually drive on roads with us common folk?

patriotz said...

Quigg must be buckling into a rocket sled

Nah, he just leaves at 3 am.

Anonymous said...

Man I hope they build all those towers... What a testament to the bubble when they all sit empty in 5 years!

talus said...

At least Google Maps has a decent estimate for the drive from Bear Mountain to the Airport.


Patriotz said... Financial markets got into trouble because house prices were falling, leaving houses worth less than the mortgages that were made to buy them. The subprime meltdown happened in March 2007, well over a year after the first US markets started falling.

If you listen to the presentation you'll hear the ultimate reason given as the low lending rates instituted by the US Federal Reserve following the tech crash (I'm oversimplifying).

This was followed by Wall Street looking for a better return and buying up mortgages.

Everyone selling mortgages saw dollar signs and hopped on the bandwagon to sell -- including lowing the lending standards.

The narrators and interviewees go on say that the first to notice the impending problem were Wall Street (all those AAA rated securities just might not be so AAA).

Wall Street shut off the tap. Mortgage brokers, lenders, and Banks couldn't finance any more loans. The loans that were out were so bad that people were (and are) defaulting - some without ever even making a payment (the closing costs killing them).

Of course I'm paraphrasing this all - the audio is much more interesting and I was probably more wrong to say that "the housing crisis spawned the credit crisis" than vice-versa.

Maybe I should have said that low interest rates started a run on housing, greed took over and lending practices got sloppy, followed by a shortage in housing supply which lead to an unsustainable run up in house prices. The lax lending eventually led to defaults followed by house price reductions, and a tightening of credit --- I typed that quickly so don't hold me to the exact order of events.

In the end it doesn't matter. Just listen to the audio before they delete it. It's good.

talus said...

BTW - one of the best parts of that NPR audio is where the (20 something?) broker says that he felt something was wrong when he only made $25,000 in a month ---- he was used to making $100K a month.

Priceless.

roger said...

I keep an eye on the area north of Nanaimo because I used to live there. There is an RE agent in Comox who has been in business for years and he calls the market as he sees it - good or bad. Here is his report for April 2008 for the Comox Valley.

Huge increases in inventory this month are the predominant theme to our market right now. Most specifically, the $300,000 to $ 500,000 price range has 38% more competition than it did last month. There is a 6.6 month supply of listings in the $300,000 to$399,999 range. Unless you are below $330,000 you better be the best value home in your category. As of May 1st just in single family detached there are 505 listings. It will climb higher until July 1st, when it normally starts to recede

You can read the full report here.

Too bad we don't have a Realtor® like this south of the Malahat.

olives said...

That's a great report Roger. I am particularly interested as one of my most "bullish" friends owns a condo on the golf course in comox which I believe he is hoping to flip in the next while. Looks like condos aren't doing so well with the average price down 11 percent.

vg said...

As homes foreclose in U.S., squatters move in

http://uk.reuters.com/article/newsOne/idUKN2849018120080519

patriotz said...

This is another indication of the utter incompetence of the US banking industry.

The whole point of foreclosing a property is for the lender to get his money back. Once the title is in the hands of the lender, they should just price the property to sell quickly - whatever it takes - and get their money. Instead they just let the houses sit empty and let the value fall from both continuing market decline and damage due to squatters, vandals, and the elements.

Absurd.

boomer said...

A fairly significant difference in foreclosure law between the USA and Canada is, that in most (not all) states the lender apparently can only come after you for your mortgaged home-and thats the end of it. Jose Canseco has let the bank foreclose on his mansion because the mortgage is larger than what the joint is worth and we assume he has sufficient $ to make the payments if he wanted to.
In Canada, however, you still are liable to the bank even after foreclosure.
This would seem to mean that us Canuckians would probably have to be in more desperate shape before letting the bank take over their homes (or RE investments)than our Yankee pals.....

vg said...

"This would seem to mean that us Canuckians would probably have to be in more desperate shape before letting the bank take over their homes (or RE investments)than our Yankee pals....."


boomer,

what I have always seen as the major pre-crash indicator to forclosure and emergency sales here is the fact the 5 year mortgage rate bottomed at 4% in 2004 and in 2009 they will all be up for renewal. How many will be able to handle the increase of 2% or more depending upon credit tightening rules ? Maybe some have abused their LOC's and may not get the discounts they dole out to the best clients.

What if your job is still the same and you may have gotten a meagre 2% standard pay increases ? will you be able to afford several hundred dollar or more increase if you were already maxed out the last 5 years ? most in this position have to be clueing in on this fact which will only continue to inflate the inventory numbers for at least another 2 years.

This is still in the first inning, just look at Vancouver listings barely breaking 12,000 a couple months ago now breaking 17,000, last week,that is one major spike that will no tbe absorbed anytime soon. Look out below.

roger said...

With the rising inventory and lower sales across BC (and Canada) the real estate pundits are calling for a "soft landing." However, this assumption is based on the premise that buyer and seller psychology will not change.

Here is my question for FTB's in Victoria:

If prices were flat for several years like the period 1995-2001 would you still be interested in paying 3K per month mortgage (i.e. 10% down) for a 550K house in Victoria?

My guess is that many would rather rent and some owners would sell because there is minimal capital appreciation in the near future. Once the goes up every year story fades away it is harder to accept a lifetime of big monthly payments.

In my opinion prices will not go flat this time or have a soft landing because the RE market in Victoria is built on expectations for ever increasing prices and when that stops the buyer and seller psychology will change drastically. The result will be a multi-year drop in prices until the traditional cycle can start all over again.

phil said...

Soft landing!

That's EXACTLY what economists were saying in California 2 years ago... Check this out:

http://tinyurl.com/6ly4w8

Notice how they predict no meltdown because "fundamentals are strong" or something to that effect. Unbelievable.

Anonymous said...

That is great Phil!

Does anyone have a comparable link for the Victoria, BC or Canadian Market --- especially one quoting some Canadian Real Estate association???

Anonymous said...

Here is a New Zealand story of "soft landing"...

http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10485691&ref=rss

phil said...

OK guys, here's some more fun from Florida going back two years. Again, the quotes are eerily similar to what we are hearing now!

http://tinyurl.com/4luphn

Anonymous said...

Relisting at a lower price -- I caught one that's still listed:

207 - 1514 Church (The Julia)
MLS#245347
Realtor: Robert Whyte (VIP Realty)

Originally listed $409,900 (Feb 2008), withdrawn end of April, relisted early May, now listed at $379,900. A $30,000 drop, and counting.

Is it just a coincidence that the properties with the biggest drops in asking price are being relisted?

- awum

boomer said...

Now its "Soft Landing"?
The common thread amongst all the “feel good” real estate stories in the MSM is that they are always based on off-the-cuff theories, biased opinions, or unsubstantiated claims by industry “experts” and NEVER contain any numerical data or actual technical analysis to back up their views.
This is especially odd when the rosy opinions voiced are from Economists (mainly tied to the RE industry or banks)--- because Economics is (or is considered to be) a “numbers” game- not a spin job..
Talk to a realtor about statistics and you’ll get a blank stare followed by a stream of non-sequiturs...

Anonymous said...

The fact is, few economists, fewer banks and developers, and even fewer realtors, have a sound theoretical basis on which to base their opinions about the shape and direction of the real estate market. They can recognize where a market is at, but rarely where it's going. In that kind of intellectual environment, the thoughts they express are dressed up as expert opinions, but they are not anchored in anything more substantial than their own interests, biases, and wishes.

- awum

Tony Danza said...

Jose Canseco has let the bank foreclose on his mansion because the mortgage is larger than what the joint is worth and we assume he has sufficient $ to make the payments if he wanted to.

Boomer, Canseco is dead broke, most likely bankrupt. If you Google him you'll find a couple of excellent, if not scandalous, articles about this bozo and his complete incompetence.

Pro athletes aren't the best money managers around, look at Len Barrie, that guy's going to flame out big time. At least he's doing it with a bang though.

Anonymous said...

The whole point of foreclosing a property is for the lender to get his money back. Once the title is in the hands of the lender, they should just price the property to sell quickly - whatever it takes - and get their money. Instead they just let the houses sit empty and let the value fall from both continuing market decline and damage due to squatters, vandals, and the elements.

Absurd.:


That's the entire point. There are NO buyers, at ANY price. There is such an incredible glut of inventory, most of these houses were trashed and ruined, possibly forever, when the angry foreclosed on folks moved out, that NO ONE, anywhere, is willing to buy, at any price. Remember those Detroit houses posted on Garth's site awhile back for less than $20? They can't PAY folks to live in those hovels, in those neighborhoods. What has kept similar ancient hovels in Vic pricey is speculation neighborhoods that have been 100% occupied and kept up; that's about to change.

The entire market in the US is either petrified, waiting for the bottom which hasn't hit yet, or simply evaporated as a great majority of it was purely speculation. Or both.

As for banks pricing things so they'll sell at enormous losses, greed dies hard, and they don't yet realize how long this depression will last.

The future for these housing developments, as more and more people are surrounded by empty crack houses, is going to be razing to the ground as everyone eventually leaves their worthless suburban slum. The ones that own outright and held on the longest will be the ones to suffer the most.

phil said...

And finally here's one from Phoenix in 2006, where "In spite of any other factors, the housing landing will be hard, and the culprit will be inventory."

The replies are interesting too - the old "then sellers will just wait".

Deja vu all over again as John Fogerty says.

http://tinyurl.com/6owwn3

Anonymous said...

Nobody will care about RE or RE prices when the BIG ONE strikes?

Anonymous said...

Who can wait longer: A seller, with an enormous portion of wealth, debt, maintenance and borrowing costs locked into an asset whose value is threatened, or a buyer, saving money every month theat they pay rent instead of buying?

Hmm?

- awum

Billy TwoBaulz said...

Hey all,

I'm going to have to move to a new rental, and could use some of the moral support/advice that often gets doled out by this good group when one of us is in the frustrating position of finding a new rental in Vic.

I'm looking at a new 3-bed house on a nice street in one of the newer Bare Mountain-esque Craftsman subdivisions out in Colwood. It's really nice inside, and will presumably be less in bills for heat etc than my current house. Anyhow it's $2100 which seems a bit pricey, especially compared to our current East Sooke rent of $1600 for a 3-bed. But it is way closer to town and shops. Thoughts on $2100? Of course it's way less than a mortgage on the same house would be. And it's harder and harder to find full houses, and rent is going up - do you think I'd be insane to take it? How many of you all are renting 3-bed full houses, and how much are you paying, if you don't mind my asking?

Anonymous said...

I pay 1920 for a 3 bed 11/2 bath in Oak Bay.

But my heating oil bill for last year was $4200!!!

S2 said...

Hey, if the 10% drop happens this summer we may want to find a bar with a deck for the beers HHV is going to buy us. Does the Bengal have a deck?

Anonymous said...

Hey, if the 10% drop happens this summer we may want to find a bar with a nice, outside deck for the beers that HHV is going to buy us. Does the Bengal have a deck?

S2 (too warm to log in)

patriotz said...

That's the entire point. There are NO buyers, at ANY price

Baloney. Houses are still selling in every market in the US, and at prices still well above pre-bubble levels (well maybe not places like central Detroit, but in every place that people actually want to live in).

Drop the price of a house enough and it will sell.

greg said...

patriotz -

I agree. The irony is, once prices crater and the smoke clears, the unit sales should increase tremendously. These absurd prices have choked a lot of the activity that would normally be seen in this market.

olives said...

Billy2, I rent a 3 bed, 2 bath house in the Mt. Tolmie area for $1,300. Try looking at the various property managers' web sites (Brown Bros., Pemberton Holmes, Duttons, etc.)

My parents were renting a 3 bed rancher last year in Oak Bay for $2,000 (not much cheaper, but at least closer than Colwood).

Both these houses were found via property managers and both allowed pets (if that is important).

mommy said...

Anon said"The ones that own outright and held on the longest will be the ones to suffer the most.

May 20, 2008 11:45 AM"


DEAD WRONG! If anon is referring to long-time owners who have no mortgages, there's NO WAY they could lose money, no matter how bad the crash is.

E.G. My 85 year-old neighbour bought her house in 1953. NO MATTER how much was paid then, (and I'm sure it was $12k or so), it's WIN-WIN.

The only stupidity involved is that these oldsters could have unloaded their mouldy old houses for big moula , and moved to better, more comfy surroundings to live out their final years in style.

The real sufferers will be everyone who bought during the last 3-4 years, and who HAS TO SELL

Anonymous said...

DEAD WRONG, Mommy. When your 85 year old neighbor is surrounded by empty crack houses and their squatter occupants and can't go out to get her paper or mail without fear of getting hit over the head with a baseball bat, and she won't be able to find a single soul willing to buy her house at ANY price, believe me she will wish she sold her shack at the peak of the market.

That's losing, and losing bigtime. Talk to anyone stuck in the inner city slums in the '70's. The only difference now is it will be suburbia that is hit, and will end up looking like "the projects".

In Detroit they can't GIVE houses away.

Billy TwoBaulz said...

Hey Olives and anon, thanks for the feedback. Olives - if your 3 bed 2 bath is a full house, good on you. Hang onto it. I'm finding full houses *extremely* difficult to find - most are advertised as houses but are actually suites. A surprising number have the landlord living in the basement - I guess this is the latest "affordability" ruse. What a horrible way to live, and with a massive debt anchor to boot.

Anyhow I am looking at probably having to pay $2k or slightly over to get a full house that's nicely renovated...maybe there will be better deals next year, but for now I'm reasonably happy. These houses for $2k and over would cost a lot more to rent from the bank.

Anonymous said...

"Baloney. Houses are still selling in every market in the US, and at prices still well above pre-bubble levels (well maybe not places like central Detroit, but in every place that people actually want to live in).

Drop the price of a house enough and it will sell."


Tell that to the folks stuck in the inner city in the 60's.

Once ANY neighborhood OR hi-rise, no matter how fine, becomes 50% vacant, it's only a short time before it becomes 90% vacant as everyone else flees. And the trashed houses left behind are unsellable AT ANY PRICE.

Because NO ONE wants to live in a neighborhood full of crackhouses full of squatters. And high-rise slums like the Projects.

You think Victoria is immune to that future just because it hasn't happened sooner? Think again. And better factor in the greed of banks pricing properties just out of reach of a crashing economy.

You'll have the same exact situation you have today, people won't be buying because they can't afford and they can't get credit, only a lot more vacant houses in neighborhoods that have become slums. Once the bottom is in, it takes decades to recover, and some communities, neighborhoods, and projects never do.

Art Vandelay said...

Too bad we don't have a Realtor® like this south of the Malahat.

What is it you'd like to know?