Monday, July 28, 2008

The bear days of summer

You know the boom is really over when the MSM starts making sense of the spin:

First it was Canada's top 25 markets that were feeling that pain from a slowdown in housing, now it's clear the malaise has hit the entire country.

Two weeks ago statistics from the Canadian Real Estate Association showed the average sale price of a house in the country's 25 largest markets was down 0.4% last month from a year ago.

New statistics released Monday show housing across the country is now losing out to inflation. The average sale price of a home in Canada last month was $314,028, a tiny $35 increase from a year ago. For the first six months of the year, prices were up 3.6% from a year ago.

"In essence, Canada's housing market has pulled back from the record-setting pace set in 2007, but in most provinces it continues at or near sales levels set in the years before that," says Calvin Lindberg, president of CREA. "The increase in housing prices is also pulling back from the record-setting pace of last year, but we have yet to see any of the price contractions that have impacted the housing market in the United States."

CREA said there is plenty of good news in the numbers. For the fifth straight year, more than a quarter of a million units were sold in Canada. However, sales over the first six months of the year are down 13.1% from a year ago.

"Resale housing activity is cooling evenly in rural, suburban and urban markets," said Greg Klump, chief economist with CREA. He said rising fuel prices have not impacted the housing market. "There is no statistical evidence to date that shows increases in energy prices are prompting Canadians to relocate. Lifestyle factors remain the prevalent influence on homebuyer preferences." emphasis mine


If they keep this up folks, I may be written out of usefulness. I love the Klumpsters choice of spin: outside economics don't impact people's home buying habits. Sure. A decrease in sales volume is not good for homeowners the same as it's not good for Walmart. When prices aren't keeping up with inflation you are losing money in your home. Not such a good investment anymore for the short-termers eh? There goes 30% of sales across Canada. I'd wager that is a much bigger part of the local market.

UPDATE: please use html codes for creating links in comments and please don't cut and paste long articles etc.

93 comments:

boomer said...

here's a condo "haircut"

mls #242916-- small unit on academy close at beacon hill park
listed march 19 @ 290k
reduced to 270k and then 250k
sold july 24 @ 210k

---todays "lowball" offer is tomorrows sale price--

Anonymous said...

Today's "lowball" offer is DOUBLE next years' sale price...

womp said...

Wow..that's a huge cut. I'm going to keep on eye on my old condo building and see what's going on there - there is an identical unit for sale one floor above my old unit, and they're asking virtually the same as I was. They had previously listed in February at a much higher price and then took it OM...

Anonymous said...

The 2 houses that sold in my neighborhood this month both had to reduce %10 less than 2007 assessments. Both sold for 50-80 thousand less than first listing price. And these are lower priced "starter type homes" that use to be snapped up quickly.

Anonymous said...

Do bears need to care what the Association saying? No, no, no.

They always to have something to spin.

Haircut Roger, haircut boomer, haircut A, B, C…..that what we need. Show people the reality, the amount $$ has gone, wake the home owners from their dreams.

It is the people with money to buy, the people own a property to sell who control the market, not the Association.

Anonymous said...

Hey boomer,

How ridiculous was the $290K asking price in March? Was that what a one-bedroom in that area was going for at that time?

That sale is 72% of the asking price and is a huge reduction.

Chico

Nick said...

About time. I hope that we're in for a short, steep correction. I'd like to be in a new place this time next year, ideally. If prices are dropping by 50-80k, I'd have no qualms about buying a place to hang on to for the next 10 years or so.

I just wish that the media would buy in more and start feeding the panic. Sounds cruel to say, and I feel bad for friends who have just entered the market in the past couple of years, but it's long past due.

Happy Owner said...

HA ha ha..

"Today's "lowball" offer is DOUBLE next years' sale price..."


Jeez, maybe if you wait 5 years they'll pay YOU to take it off their hands.

Anonymous said...

Good point happy owner,

That's what happened in the last cycles. People were walking away from their RE investments. I remember in Toronto, condos that sold for $240K one month, could not be sold for $160K a few months later.

Mr.4AM said...

Happy Owner,

You think that's funny and imaginary, but when you look at these houses in Detroit it makes even a bear want to cry. 4 Bedroom house for $1.00 anyone?

I'm bearish, but I don't see that happening here unless global warming sends a tsunammi over the Island.

Anonymous said...

Many of those $1 or $10 homes in Detroit look like ones you see here in Fernwood or Fairfield. Doesn't bode well for us. We don't have any employment here (just the tourist and senior citizen wipe ass jobs, unless you are "entitled" to a government 'cause your mom or pop work there), 2nd rate city with no air links. A wet and soggy winter is not everything. Ask a person in Haiti where they enjoy the best climate in the world.

boomer said...

hey chico (anon 3:43)

no idea- but apparently the owner and/or the realtor thought that's what it should list for.
----and apparently someone offered 210 for it when it was listed at 250 and now owns it.

Anonymous said...

The previous sale in that building was Feb/07 for $289K. So, given the lack of recent comparables, you could argue that a list price of $290K was conservative.

That it kept getting re-listed downward shows that the market is groping around for a bottom and not finding one.

That it sold for $210K may reflect an unusual urgency on the seller's part.

Anonymous said...

Another possibility is that (given the demographics in that building) the inheritors of an estate have grown bored of trying to sell it and decided to take what they could get.

The "take the money and run" approach to selling is common among inheritors, even in good markets. But to take such a monumental kick in the n#ts shows that Joe and Jane Sixpack have figured out that real estate is a hot potato that nobody wants to be left holding.

And when I say "nobody," I don't mean it literally, in case happy h0Mo decides to chime in with his pedantry. I mean it in the sense that a seller never wants to feel like he's the last ones to pull the chute in a free fall. So the owners of this unit panic first. Then the next group of people who inherit a unit in that building see the $210K selling price and they happily take $180K.

And so on back down to the $100K those units were selling for in the mid 90s.

Anonymous said...

Happy Owner,

Show us that you can be a BIG LOSER. BE a MAN. Show that you can be a BIG LOSER that is proud of his real estate accomplishments and superior intellect. List your house and all your assignments for unbuilt condos for A PENNY! HA HA HA

Anonymous said...

I'd also like to add that the leaky condo problem is rearing its head again.

So in addition to a lack of liquidity in world financial markets, a deteriorating confidence in real estate as anything more than shelter, and a dubious job market in Victoria, we have the spectre of leaky condo hanging over us again.

It's conceivable, all these things considered, that in some buildings you will see units sell for $1 (just so the owners can get away from whatever bill their condo board is sticking them with to remediate leaky condo.

roger said...

Happy Owner,

I see you are back reading the bear blogs again. You must be getting concerned with all those newspaper articles and TV reports about the cooling market, high MLS inventory and the big drop in sales.... As I recall your mortgage is nearly paid off and you were thrilled to see the value of your house rise. Now you must be wondering what will happen to all your paper profit in the coming months and years.

Sorry to tell you this but the real estate bubble is deflating. Every day there are lots of price reductions and some sellers are getting a real haircut. In Central Victoria prices are already tanking.

As I recall you are in your house for the long term so keep smiling - be happy. Be sure to welcome all your new neighbours over the next few years. They too will be happy with the great price they will pay for their house.

Nick said...

Roger:

As I recall your mortgage is nearly paid off and you were thrilled to see the value of your house rise. Now you must be wondering what will happen to all your paper profit in the coming months and years.

Yeah, that's a pretty enviable place to be, as a would-be FTB, I can only dream of having an affordable home, let alone with a paid-off mortgage. At that point, price fluctuations would impact a lot less on your day-to-day life.

I'm looking forward to seeing your July stats, btw. :)

Anonymous said...

Here's sizable "hair cut".

Dated house on 2.2 acres on the peninsula, busy road is a big minus.
MLS#: 243979 - 1160 Benvenuto Ave
Listed april 10th @ $995,000

Reduced to $855,000
Sold in July, 97 days later! for $775,000!

A whopping $220,000 reduction. (maybe someone was trying to get that $210,000 condo above and a acreage for under a million?? haha)

That's a 22% reduction.

condohype said...

"Lifestyle factors remain the prevalent influence on homebuyer preferences."

I love how having a roof over one's head is a lifestyle factor.

Anonymous said...

Tsunami... funny you should mention that.

If I was China and making all sorts of Iranian oil deals, I would take just two nukes. One on the slopes of the Cumbre Vieja volcano on the island of La Palma in the Canary Islands, the other on range of Koolau on Oahu and knock several millions of cubic tonnes of earth into the Pacific and Atlantic oceans. Take out BOTH the east coast and the west coast of the US simultaneously with a mega-Tsunami up to 100 feet high that would travel up to ten miles inland and let the US deal with that instead of worrying about nuking my future oil supplier Iran.

Then with all coasts and coastal military bases wiped out, it would take a far less number of nukes to nuke inland major cities and military bases.

But before I did that, if I was China, exactly to the year, day, hour, and almost the very minute after the BAM Iran "earthquake" that decimated the city of Bam in Iran, I'd detonate several nukes in a nice deep ocean trench near Sumatra and send the US Gov a subtle Chinese warning.

That's what I would do if I was China. Because I'd know, as Chinese, we would have far more people and far more rural land to rebuild FIRST after any all-out nuclear conflagration with the US.

If I was Russia, I'd let China and the US go at all out MAD nuclear war, and then I'd nuke the hell out of the black glowing corpse of the US without any fear of retaliation whatsoever.

But I'm not Chinese OR Russian, so don't worry.

Waterfront property, anyone?

Yve said...

Just so you know, that condo on Academy Close that is mentioned at the top of the thread is in a "partnership" building. Similar to a co-op,(or so i gather, the realtor actually refused to explain it to me), can't get mortgages for them and you need to pay the purchase price 100% upfront, so limited market for that, unless you have $250k in your pocket. I emailed the realtor about that one months ago and got the worst run-around I have ever had from one of those so-called professionals. I have often thought of posting the email game of tag as a post for the amusement of all. Truly horrifying service. I wondered what the owners would have thought if they knew how rude and unprofessional their realtor had been. Could have sold that place to me months ago for what they were asking if that guy had responded semi-civily. Now I'm glad he didn't. Oh, yeah, it's only ~650 sq ft and needs updating and is not very "liquid" given the requirements for payment ie. no financing allowed, cash on the barrel head. So, not easy to dispose of in a hurry. Cute building tho' & nice location.

boomer said...

thanks, yve
kinda explains that one-good thing they hired a "professional" to sell the joint-presumably the same pro that priced it in the first place

then we have a "Group of 5" haircut.
5 new "live/work" lofts were apparently repriced UPWARDS to 320k from their original price (295k) in Jun/07 - then down again and recently to $257k

Still a couple available for investors to scoop up if you trot across the bridge.

MLS#217437

VicREBear said...

There's an entertaining but sad story in the TC today about a 24 year old Vancouver realtor who just collected a $3.6 million 6/49 jackpot, after waiting almost a year to do so. He sounds like a thoughtful young fellow, wanting to have taken time to consider all the ways in which that windfall will change his life. However, I couldn't help but notice his statement, "I'm going to let the money grow - it's never going to deplete. I'm a big believer in real estate." SIGH. So here's another naive nugget, fully brainwashed by the REIC he serves, who seems to be poised to put his lotto winnings into a soon-to-correct RE market, thinking that he'll keep riding the wave. He's already lost at least $100,000 in basic interest by waiting to collect the money, and has missed a year's worth of RE price gains in this final phase of the run-up. I REALLY hope he finds a good mentor, advisor or whatever to prevent him from becoming a victim of his own realtorness. It reminds me of the old joke - "How do you make a small fortune in real estate? Start with a large fortune."

Anonymous said...

The Academy Close building is not a strata, nor a leasehold suite. It is a co-operative building.

In Academy Close you own shares in the entire complex. You do not have a separate title for your suite. Consequently, banks can not give a conventional mortgage on the property as it can not seize your specific title, as one does not exsist.

Perhaps, your lender may provide a demand loan, but that would be EXPENSIVE.

The other options are to pay cash or use the equity in your home as collateral for the Academy Close property.

Re-sale market value is less than a strata property, but the value of these "share" properties closely follows the up and down percentages of "strata" condominiums.

Unlike "leasehold" condominiums where you own the improvements but not the "land" with the complex's site reverting back to the owner after X amount of years. Not a good thing to buy if the underlying land is set to go back to the landlord in say 10 years. However, if 99 years are left then the suite's resale value follows that of a strata.

Thought I would just put this out there for those who may be thinking of buying a condominium.


And for all of you RICH entreprenuers, you would approach the owners in the Academy close and buy a first option of refusal for the units. After several years you or your descendants will own all of the units and you can tear down the building and build a high rise.

Of course when you have 51% ownership. You probably could start pushing the old timers out, by escalating the monthly complex fee and not providing any maintenance. Thereby, building a huge contingency fund. Which of course will be yours when you get rid of the last of the owners.

Sorry, sometimes the evil in me comes out.


just jack

roger said...

Just Jack,

Interesting post. Here's a question:

Any idea how many over $1M homes have sold in July?

These high end home sales are what pushes up the average price from the trend line. With all the price reductions and haircuts I see the median dropping this month but am curious about the average.

roger said...

I updated the Real Estate Haircuts slideshow this morning. There are some interesting ones even in the 400K price range.

Use the pause, single step and big X buttons to control the slideshow.

Feel free to re-post or email the link: http://tinyurl.com/real-estate-haircuts1

Anonymous said...

Just Jack Said: The Academy Close building is not a strata, nor a leasehold suite. It is a co-operative building.

Thanks, that is more of an explanation of the way the building works than I was able to get out of the realtor in ~4 back and forth emails. Initially he said "I've had over 70 inquiries about this property, if you want to know more about it call me". I emailed back & told him that I have a very busy schedule, working 14 hour days and there was no way I have time to call, so I would appreciate the information in an email. He refused to put an explanation (even a basic one) into writing and insisted that I phone him, countering "It would take me hours to expain in an email, but I could explain it in a 5 minute phone call". So I wrote that he must have either very poor writing skills or there must be something highly undesireable about the property that he feels he must speak to me about personally. I told him that if he knows that he is dealing with an unusual product be it a leasehold, partnership, or a house made of turnips he should have prepared a fact sheet so he's not wasting his time or mine. I asked him what he thought he was getting a commission for. I also asked him what the owners would think if they knew that there was an interested and qualified buyer with cash who was been given the run-around. Needless to say, I never got the information & never heard from him again. Also to his insistance that I phone him, I replied that the last 3 realtors that I called about anything in Victoria (early spring 2008)only one of them got back to me. I said I guess times are good enough for you guys to be able to be rude and brush people off, but if they knew the position I was in to buy they probably would be tripping over themselves to get to me. I have had (out of the last 4 dealings)some of the poorest, laziest & borderline illiterate service I have ever come across. I am so fed up with realtors. They have become a smug & self-satisfied bunch of bandits.

yve said...

Oops, sorry the above tirade regarding Academy Close is mine. Forgot to sign in. Did I mention I have a strong dislike of realtors?

roger said...

boomer said:

here's a condo "haircut"

Here's another one that came in this morning.

1420 Beach Drive in Oak Bay with ocean view.

Started at 495K and sold for 413K after 87 days.

olives said...

Lots of good reductions lately Roger. I have shared your slideshow :)

roger said...

Olives,

That haircut slideshow was properties that sold with big price drops relative to the asking price.

I also updated the slideshow titled Victoria & Saanich price reductions. These are owners that have dropped the price in order to attract buyers. This is good news for those folks hoping to buy at a "reasonable" price sometime in the future.

Link is:
http://tinyurl.com/victoria-price-changes1

Anonymous said...

Roger, given that the BC assessment website is now open all year round, any chance you could include assessed price in your "haircuts"? Otherwise, it will be hard to destinguish between people who start out with asking prices that are somewhat aligned with reality and those that think it's still summer of 2005 and you can get away with an asking price some 20% above assessed.

I realize assessed values aren't as real as the purchase value but in this case they could hold some relevance as some kind of a threshold mark. In particular, I'd like to understand if YoY prices are actually dropping, and if so by how much?

Anonymous said...

Roger

My info shows 10 house sales over a million in July. With 387 listed for sale.

However, this info may not be what the board shows as I don't know what areas they include, what kind of properties they include or what date criteria they use. Its best to wait for the board's publication to get consistency for your data.

just jack

roger said...

Just Jack,

Thanks for the info. The VREB average price is based on Greater Victoria and does not include Shawnigan, Gulf Islands, Malahat or up island.

10 sales is about half what one often sees in any given month. Mix in all the price reductions and haircuts in July and it looks like Friday will be a great day for bears.

Thanks again - Roger

roger said...

anon said:

Roger, given that the BC assessment website is now open all year round, any chance you could include assessed price in your "haircuts"?

Thanks for the suggestion. The slideshow is actual screenshots from PCS. PCS does not include assessed value. I don't really want to start "editing" the screenshots with assessed value. It would take a fair bit of effort to do and just doing the updates on all my existing slideshows keeps me busy.

If you sign up with a RE agent using Tarasoft Matrix (new) the system will give you the initial price, sold price and assessed value in one screen.

sitting pretty said...

Roger said ...

Happy Owner,

I see you are back reading the bear blogs again. You must be getting concerned with all those newspaper articles and TV reports about the cooling market, high MLS inventory and the big drop in sales.... As I recall your mortgage is nearly paid off and you were thrilled to see the value of your house rise. Now you must be wondering what will happen to all your paper profit in the coming months and years.

Sorry to tell you this but the real estate bubble is deflating. Every day there are lots of price reductions and some sellers are getting a real haircut. In Central Victoria prices are already tanking.

As I recall you are in your house for the long term so keep smiling - be happy. Be sure to welcome all your new neighbours over the next few years. They too will be happy with the great price they will pay for their house.


Wow, you've really shown your true colors here, Roger. Your deep feelings of schadenfreude are there for everyone to see. I guess you really are a bitter renter after all!

roger said...

Thank you Sitting Pretty for your comments on my post. That is the nicest thing you have ever said about me.

Just so you know - I am not a bitter renter; just a happy one. I sold my house a year ago.

greg said...

VicREBear -

I got the impression that lotto winning Vancouver realtor wanted to know if his girlfriend liked him for who he was, and not the money, so he waited to be sure.

Just a hunch. Probably worth giving up $100,000 to find out....

greg said...

just jack -

I get around 260 million dollar plus properties on MLS. If only ten sell in July, that's 36 months of inventory!!!

Crikey, makes the 17 months of inventory from the June numbers look good!

greg said...

Whoops, make that 360 million dollar plus properties....

Muriel said...
This comment has been removed by the author.
Muriel said...

San Francisco Chronicle says,


We're in a housing a 'freefall'


"Prices are still dropping, droppping everywhere and at record rates," said Patrick Newport, U.S. economist with consulting firm Global Insight in Lexington, Mass.

Anonymous said...

Here's a little blast from the past:

"Roger said...
Here are a couple of big price droppers in Victoria/Oak Bay:

MLS# 231729 585K -> 555K 96 DAYS
MLS# 234778 649k -> 599K 27 DAYS!!
MLS# 233695 529K -> 499K 55 DAYS
MLS# 235347 629K -> 599K 15 DAYS!!

There are lots more - these are just ones I have been watching. In the condo market there are 10-30K reductions happening every day.

September 23, 2007 6:13 PM"

Glad to see you're staying the course Roger. I guess this summer is different than last.

Anonymous said...

That's actually pretty funny. We've been reading for months now that prices have been dropping " $10,000 - $30,000 overnight" yet the year over year inflation adjusted change is $35.00.

Adjust the inflation adjusted change to include the inflation adjusted change on outstanding mortgages (read it twice, it'll make sense) and we're talking 35 cents (oh, didn't mean to let that one out of the bag.) Very statistically relevant!!! LOL.

I'm sure I'd have to pay at least $8 to be this entertained downtown.

S2 said...

Remember that this is just the very, very, very beginning. Won't hit bottom for years...or sooner.

Anonymous said...

Anonymous,

Last June had a dip in prices so comparing year over year stats is not particularly useful.

Watch for the July results. My sources are telling me that we will really start to see the impact of the slowing economy.

Village said...

This is an interesting bit of financial news.

GM, Chrysler to stop leasing vehiclles.

Both companies financing seems to be controlled by Cerberus so that I guess explains the tandem move. They are also I hear heavily invested in the US real estate game.

Tightening credit strikes again.

roger said...

anon said:

Here's a little blast from the past: "Roger said...
Here are a couple of big price droppers in Victoria/Oak Bay: .......
Glad to see you're staying the course Roger. I guess this summer is different than last.


Interesting that you read the archives and found that Sept. 2007 post about PCS.

Now what happened to those MLS listings you quoted??
MLS# 231729 585K -> 555K 637 Quadra
MLS# 234778 649k -> 599K 1329 Richardson
MLS# 233695 529K -> 499K 67 San Jose
MLS# 235347 629K -> 599K 139 St. Lawrence

They were all overpriced and relisted!!
MLS# 242334 asking 525K - 637 Quadra
- not sold yet
MLS# 240733 549K - 1329 Richardson
- sold 4/6/2008 for 540K
MLS# 241149 459K - 67 San Jose
- sold 2/25/2008 for 446K
MLS# 244800 539K - 139 St. Lawrence
- sold 5/20/2008 for 525K

So one never sold and the other three didn't sell until 2008 for way under their original asking price. Yes, I am staying the course and will continue to point out properties where the sellers are out to lunch.

And this summer is different than last. There have been way more price reductions and haircuts in recent months.

Anonymous said...

Cool, Victoria becomes a trendsetter....

Vic leads the way

Anonymous said...

"Now what happened to those MLS listings you quoted??
MLS# 231729 585K -> 555K 637 Quadra
MLS# 234778 649k -> 599K 1329 Richardson
MLS# 233695 529K -> 499K 67 San Jose
MLS# 235347 629K -> 599K 139 St. Lawrence"

Actually Roger they were "your" quotes, selected at random I'm sure. LOL. Thanks for demonstrating that for us.

I understand why you would have to maintain your bias. You sold at a time when you thought the market had peaked, and feel you must prove justice in your decision. That's OK.

An average seller (trying to time the market) would have see a drop of what, $40,000, on the price of the house before he would start to break even on that decision (assuming realtor fees, closing costs, moving, storage - not sure what value I'd have to place on the stress.) Add in annual rent paid to a landlord of perhaps $12,000 and after waiting say 4 years we're at $88,000 needed in price drops to break-even getting back into the market.

Actual prices are not down in any relevant way over last year, this summer will show like all other summers with sales having dropped and inventory up, but adjusted for the fact that the market has "softened."

Just try to blow that trumpet as softly as the actual market change.

Anonymous said...

"Just try to blow that trumpet as softly as the actual market change."

Right before the charge downhill, General Custer blew that trumpet as hard as he could.

patriotz said...

Add in annual rent paid to a landlord of perhaps $12,000

You forgot (or decided not) to include continuing mortgage interest, taxes, etc. if the property had not been sold, as well as interest income on the net proceeds if sold, dummy.

greg said...

I love how anonymous includes annual rent as a cost when comparing the decision to buy or not, but neglects to include the mortgage payments on the other side of the equation.

To do this properly, you need to look at whether the difference between cost of rent and taxes/mortgage/maintenance is such that the "equity" in the buyers side of the equation outweighs the interest/stock gains or whatever else on the renter's side.

Inflation applies to both sides of this equation - you can't factor in whether it is impacting a decision to rent and invest proceeds of a previous house sale without also considering whether it was done in an era of asset inflation or not.

With asset inflation on houses, its possible to sell and then get priced out. Does anyone think that is happening now? No? Good, then we can ignore that economic fear for the time being.

Meanwhile, if prices actually drop in nominal terms, the decision to sell a year ago and buy in the future looks prescient.

Read this for a more detailed explanation.

boomer said...

anon 6:55
RE:
"this summer will show like all other summers with sales having dropped and inventory up, but adjusted for the fact that the market has "softened."

umm--what is that supposed to MEAN?

You mean like the DOW JONES (for example) is exactly the same at 11000 as it was at 14000 "adjusted for the fact that the market has softened"??

lol

hhv said...

Greg,

Keep it down... wouldn't want to burst the bubble that "True Real Estate Believers" create around themselves to justify their $3K/month mortgage for that James Bay townhouse you can rent for $1600.

vg said...

"Actual prices are not down in any relevant way over last year, this summer will show like all other summers with sales having dropped and inventory up, but adjusted for the fact that the market has "softened." "


The new numbers will tell the tale, I expect some major changes this month.

And which summer in the last 7 years have you seen $100,000 plus price reductions ? this is a summer that is totally different then any other in many moons.
Keep hoping and praying,this market is tanking before your eyes, but your blinders are still on.

vg said...

hhv,

I wonder what the response would be at your next BBQ with friends if you announced that you just bought a house with zero down and a 40 year mortgage ? somethin tells me it would be completely opposite from a year ago.


When my die hard bull relatives have changed their tune 180 degrees from last summer when I met huge resistance trying to discuss what is now happening then I know the party is over.

roger said...

I want to thank Sitting Pretty and Anonymous for their comments on my posts. It has encouraged me to do some more research on the changing market.

I have stated that there have been lots of price reductions lately. This summer is different!! Seeing is believing so here is another slideshow showing some of the reductions in the last week.

Looking for offers

Feel free to email or post the link:
http://tinyurl.com/offers-pls

hhv said...

Further sign of the times?

GE Mortgage to leave the Canadian market for growing markets in India and Poland, two of the world's newest destinations for retiring boomers and wealthy immigrants.

vg said...

screw Victoria, we're goin to Warsaw baby ! ;)

greg said...

I hear Warsaw is the new Prague.

Anonymous said...

Everybody wants to live in Warsaw. The best weather in all of Canada. And the Olympics are coming... uh, never.

olives said...

Mish today has a link and charts from the California Association of Realtors - who indicate the median price from the peak down 37.7 percent (so far).

Some areas (ie Santa Barbara) the median down approximately 55 percent.

roger said...

On several blogs I have seen unrealistic sellers claim that the reason they can't sell is that the summer is a slow time for sales. If you take a look at this chart of MLS sales in Victoria you will see that this is not the case.

The spring is the peak of the market but the summer months are also quite active. The fall and winter is when things really slow down and that is where we are heading next.

When folks say they can't sell they really mean they are not prepared to accept market value for their property.

greg said...

Roger, can't sell = won't sell not must sell......

;-)

Anonymous said...

Wonder how many (if any) folks have CRA liens on their property and don't really want to sell because as long as their house is on the market they don't have to pay their income taxes plus interest and penalties.

Could possibly explain a few of the really ridiculously unrealistic prices out there.

Metaldwarf said...

Just wondering,

Since the majority of us seem to be saving our pennies for a downpayment on a house I was wondering how many here have maxed out their RRSPs? I believe the First Time Home Buyers Grant allows you to use $15,000 ($30,000 for a couple) from your RRSP without paying taxes on it, assuming you pay it back over the next 15 years.

How many have maxed out their RRSPs?

Of those are you holding more then $15,000 in your RRSPs when you will have to pay tax to use any more as a downpayment?

Lastly, do you have unregistered investments/assets to use as a downpayment beyond the $15,000 from your RRSPs?

Metaldwarf said...

@ metaldwarf

Good question Me I think I will answer my own question to get things started.

All of my money is currently un-registered, so I can use all of it as a down payment when needed. I haven't registered the money since I don't like the idea of the government telling me when to pay back my RRSPs. I am willing to trade the tax sheltered growth for the flexibility at this point.

I have been thinking of transferring my funds into cash value in a Life Insurance policy so that it will be tax sheltered just like an RRSP but I could still draw on it at any time.

Anonymous said...

HHV,
Re: GE Mortgages going to India & Poland...

I can't speak for Poland as I've never been there, but having travelled through 8 states in India, in the past 4 years, I can tell you that India is no place for any wealthy Westerner to want to retire to. No offence to anyone who's an East Indian on here (hey, my wife is East Indian), but India is a 3rd world developing country whose largest cities each have somewhere between 8 to 20 Million in population, they are *very* poluted, very noisy (diesel rickshaws honking horns 24/7) and with extremely *poor* infrastructure. The other 80% of the country is made up mostly of farmland and little villages that when you arrive there, you think you stepped back in time some 300 years as some people still live in mud or straw huts and use cow dung pies for fuel and iron their clothes with non-electrical irons that you put hot coals inside!

Again no offence, but the place is a real *hit hole by any Western standards. There's only 2 types of people that would want to move back to India:

1) Nastolgic East Indian old timers that moved to the West late in their lives to be close with their kids and help in child rearing as grand parents.
2) People who are into spirituality (as they are the #1 country for that and the West is the shit-hole from that perspective).

That's about it.

Another way to sum this is up is as follows: When was the last time you heard of a co-worker or friend who wanted to go to India for relaxing holidays? Or why is it that East Indians are now the #1 immigrants into Canada by volume?

Anonymous said...

HHV,
Re: GE Mortgages going to India & Poland...

I can't speak for Poland as I've never been there, but having travelled through 8 states in India, in the past 4 years, I can tell you that India is no place for any wealthy Westerner to want to retire to. No offence to anyone who's an East Indian on here (hey, my wife is East Indian), but India is a 3rd world developing country whose largest cities each have somewhere between 8 to 20 Million in population, they are *very* poluted, very noisy (diesel rickshaws honking horns 24/7) and with extremely *poor* infrastructure. The other 80% of the country is made up mostly of farmland and little villages that when you arrive there, you think you stepped back in time some 300 years as some people still live in mud or straw huts and use cow dung pies for fuel and iron their clothes with non-electrical irons that you put hot coals inside!

Again no offence, but the place is a real *hit hole by any Western standards. There's only 2 types of people that would want to move back to India:

1) Nastolgic East Indian old timers that moved to the West late in their lives to be close with their kids and help in child rearing as grand parents.
2) People who are into spirituality (as they are the #1 country for that and the West is the shit-hole from that perspective).

That's about it.

Another way to sum this is up is as follows: When was the last time you heard of a co-worker or friend who wanted to go to India for relaxing holidays? Or why is it that East Indians are now the #1 immigrants into Canada by volume?

Libre Esprit said...

Metal Dwarf said:

"I have been thinking of transferring my funds into cash value in a Life Insurance policy so that it will be tax sheltered just like an RRSP but I could still draw on it at any time"

It might not be as liquid as you would like in a life insurance policy and you might need to pay interest on any withdrawals.

You would need to read the contract VERY carefully and generally speaking the contract is delivered AFTER you have placed the money in the life insurance policy (albeit with the right of rescission)- any material provided to you beforehand is for illustration purposes only.

Typically money invested in a life insurance policy is invested in mirrored funds or indexes (if in a variable or universal life policy) and you receive a rebated rate on your investment, which is also subject to administration fees and policy taxes.

Money invested in a whole life policy will have returns that are dependent on the financial health of the life insurance company in question - also money invested in a whole life policy when withdrawn is considered to be a loan and needs to be repaid (with interest).

Have you considered the new tax free savings plans announced in this year's budget?

Anonymous said...

Glad to see the "offense" is ready. I don't have time right now to answer all of the nonsense - but lets start with Partiotitz usual name-calling "dummy." I'm crushed. Don't go getting all saggy on us there Patty, just a real discussion should suffice.

Boomer: "You mean like the DOW JONES (for example) is exactly the same at 11000 as it was at 14000
lol.

Easy there, these guys want to tell us all about they have invested their surplus cash position and made a fortune in the markets while waiting out the impending bust.

What is being demonstrated is:
1. This blog is so afraid of real discussion that all it can do is sputter from its biased perspective.

2. You can spin anything you want anywhere you want depending on your needed outcome. Trying to time the RE market (in or out) while owning one property is as useful as following the cost of porcelein in deciding whether or not to replace your toilet.

Unless, of course, like some here, you need a particularily large toilet for some reason:-)

My mortgage principle drops another $40 by the time I get my next laugh on here today. I could have bought you all a beer with that, which of course I wouldn't have. Have a great day.

hhv said...

MD,

No fan of the first time homebuyers plan... rrsps are for retirement, the longer your money stays and grows the better your retirement. I don't see a home as a retirement savings like many people do, nuff said.

The TFSA is going to be well used by me for as long as it is around.

Life insurance is life insurance. It's not an investment (it performs worse than a house as an investment, but at least its underlying value is "guaranteed", nor do i see it as a good way to shelter from taxes. the only life insurance i will ever own is term. whole life, universal life etc performs better for the companies than it ever will for you.

in fact, hiding from the taxman seems more work than its worth for small net worth people (i define big as in cash millionaires, not the paper ones). capital gains tax is relatively small and there are plenty of fairly low-risk equity index funds that consistently perform better than gics etc. i'm not anticipating needing cash for a downpayment for a couple years minimum so i'm willing to take on a bit more risk at this stage.

B2B said...

This blog is so afraid of real discussion that all it can do is sputter from its biased perspective.

Not at all - stick around for some great discussions. It's just that when arguments make no sense, for example an argument that fact-based discussions mean nothing, you can "spin anything anywhere you want", and that "porcelein" (whatever that is) is not relevant to toilet replacement timing.

There's a guy on Vancouver Condo info named Krrrsh/TwoThumbsUp who posts angry diatribes filled with meaningless and bizarre metaphors - you guys should get together. We'll stick to detailed dissection of the ongoing property bust, since we get a kick out of it. Since you plainly don't enjoy the tone of this blog, you're welcome to go away and never come back. kthxbai.

B2B said...

Apologies for responding to the troll.

Regarding the RRSP question - this is one near and dear to me. I've tried to keep the RRSP totally dedicated to retirement, and kept any down payment funds in unregistered deposits. Further, I don't consider my investments to be part of a future down payment, only cash. That way, my investments stay intact for the future (after all, nearly any investment is better than property, going forward) and only cash is burned on the (eventually necessary) down payment.

Of my unregistered savings, I have a mix of about 75% savings in cash and 25% in equities, bonds and precious metals. Of the 75% in cash, there is an untouchable sum that is dedicated to acting as 6 months of living expenses in the event of job loss or worse. FWIW, I have about 10% of cash in USD and about 40% in GBP. This isn't so much a currency play as hangovers from previous savings in other currencies. But I do value the diversification.

boomer said...

anon 6:50
(got a name?)

Yup, there's some "sputtering" on this blog--from both sides if the field. And I even agree that its of limited interest for homeowners happy in their current situation.

Regardless, RE values in Victoria are trending down and aint going up for the foreseeable future, are they?--and that prediction was on this blog (and others like it) well before there was a breath of it from the MSM and from other "biased perspective"(your phrase) PUNDITS.

so --"sputter" off
and have a lovely day yer own self

Anonymous said...

Why do I like using the $20,000RRSP limit for a downpayment for first time buyers?

Because, it makes FTB's start saving and getting a tax rebate helps to pay off debt or add to the RRSP.

An RRSP may not be universally good for all people, but it is the best start for low and middle income earners to get that down payment.


A combined spousal $40,000 down payment can get a couple a $200,000starter home. A starter home, for the most part, has been an old 900 square feet rancher along a busy street like Hillside or behind Sears.

Unfortuneately, these homes are in the high 300,000 and low 400,000 range today. So, its a good time to save up while house prices stagnate and eventually fall to the level where a first time buyer can once again purchase an entry level home.


just jack

Ryan said...

I have some money in my RRSP but I'm far from maxed out. I'd say about 50% of my savings is registered, 25% is in unregistered investments and 25% is in cash.

When I buy a house, I won't touch anything in my RRSP and I'd like to leave my unregistered investments alone as well. It depends how long the market takes to bottom. The longer it takes, the more I'll be able to save.

Anonymous said...

Starting in 2009, you can put $5,000 a year into a non registered investment fund and the profits can be taken out without being taxed.

Ryan, would that change your opinion of not using your non registered fund for a down payment if the profits were not taxable?

Considering the large amount of money needed for a conventional down payment of 20 percent, I would not like to keep that amount of money in cash. Its going to take quite a few years to build up that amount. With an RRSP you can get a "catch up" loan for any of your unused RRSP portion.

While you can take as long as 15 years to pay the RRSP down payment back into your RRSP, that doesn't mean you can't do it sooner.

And if you think that real estate will rebound again, you could alway use your home equity line of credit (HELOC)to pay the RRSP back. You could also use the HELOC to add to your non registered fund. Don't forget house improvements to build on that home equity. And purchases of a new car, boat, and the children's education...

After all haven't you earned it!




And so the cycle completes itself once more.

Just Jack

B2B said...

Considering the large amount of money needed for a conventional down payment of 20 percent, I would not like to keep that amount of money in cash. Its going to take quite a few years to build up that amount.

Well, it does depend on the individual, of course, but for a $300k house, which is pretty expensive (by conventional, common-sense standards) and in line with $2000 a month rent, i.e. a respectable income, your 20% down is only $60k.

I don't think it's at all odd or unwise to have that amount in cash - I'd even suggest one should have that much in cash as a cushion before committing to major equity investments.

B2B said...

Having said that, if one is contemplating buying a house in anything like today's market, as a first-time buyer, of course the 20% down would become over $100k and I agree that's getting excessive for cash. But I would say that it is out of the question for a FTB to consider buying a house for $400k plus. That's just insane, unless you've already got $100k plus in cash.

So if we're talking about a FTB saving up their own money for a down payment on a reasonable starter home ($200kish), I would say indeed it might be wise to keep the $40k deposit in cash, and once that level is reached, divert savings to other investments.

Libre Esprit said...

Just Jack said:

"With an RRSP you can get a "catch up" loan for any of your unused RRSP portion."

Presumably to build up the RRSP in order to be able to use the HBP $20,000 per contributor.

I'd be really careful with that strategy!

If the loan is paid off when it's time to buy the house, that's not a problem, BUT if it's not, then the loan amount enters into your GDS ratio and will effect what you can qualify for.

Also, if you have ever had late or missed loan payments, the company that gave you the loan (not to be confused with the company that you have your funds invested with - although they may be one and the same) could limit access to your RRSP funds for a down payment.

Read all loan contracts carefully and consider your time horizons.

Ryan said...

"Ryan, would that change your opinion of not using your non registered fund for a down payment if the profits were not taxable?"

No, taxes have nothing to do with it. My investments are long-term, both registered and non, and I want to keep adding to them and let them grow for decades. If at all possible, I want to use other money for the down payment.

I'm not sure what the best use of the TFSA will be. Probably as a home for the bond portion of my non-registered investments.

Anonymous said...

Say that you are just starting out.

You are single, have a job that pays $45,000 a year, no debts and no savings.

Would you save cash, start an RRSP, buy life insurance, marry for money, or go to Vegas?

In otherwords, what advice would you give someone starting out that would eventually lead them to home ownership?


just jack

Anonymous said...
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Anonymous said...
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HouseHuntVictoria said...

I've removed two comments on this thread because they were far too long and duplicated themselves. I did not remove them because of content. Please use HTML codes to create links to other people's work you wish to highlight. Please do not copy and paste 1000 plus words into the comments section. See the mainpage for a how to.

Anonymous said...

IMO RRSPs are of limited use in today's tax structure and in particular on capital investments. Certainly depending on personal situations i.e. married, kids, pensioned, investment income, high net income, or simply wouldn't otherwise save, it can make some sense, but from a purely tax perspective, most investments( particularily capital -stocks, mutal funds, property) are better held outside of an RRSP.

We used the HBP in a different way. See if I can recall the details - and this might be one of those "do not try this at home" or at the very least do about 80 hours of pre-reading as I did situations. For those that are interested by the end of this story, please consider everything in brackets as a warning that you need to educate yourself in this area. Here it is:

We knew we were receiving $20,000 from family towards a home purchase and had significant RRSP carryforward contribution room. The home would close in about 7 months. ( the timing is critical in this story because there are timing issues in withdrawals.)

We borrowed $20,000 from the bank and invested for 91 days into a RRSP GIC. We received the family gift and paid off the loan. We withdrew the $20K under the HBP and immediately (the next day) reinvested in a $20,000 RRSP (you can make multiple withdrawals under certain circumstances.) We waited until the day of closure on the home and withdrew the $20,000 and added it to our down payment.

At the end of the day, we had credit for $40,000 in RRSP contributions and, given that we were a family of 4, with a net income at the time of about $65,000we received nearly 50% or $20,000 back in tax, child tax benefits, and GST credits.

We added the February tax return of about $10,000 to the $20,000 family gift plus our own funds and managed a downpayment of 20%. This saved us perhaps another $7,000 in CMHC premiums. We received another $7,500 over the next 12 months (CTB, GST) which was used to pay off the new appliances, blinds etc.

I realize this is a little bit complicated for the result, but it provided us with the ability to get into our home with 20% down and we almost entirely avoided CMHC. The combined result was an up-front savings of perhaps $20,000, which amortized over 25 years is huge savings.

I realize that there are some that might feel this is objectionable, but with a family of 4 and a somewhat low net income at the time you do what you need to to get ahead.

Our process worked and was profitable because we were a family of 4, had a large RRSP carryforward contribution room (not actual contributions) and had a net family income under $70,000.

We now owe $40,000 (actually it's been a few years, so it's quite a bit less.) to our RRSPs which we can either repay into our RRSP ove r15 years or pay the annual tax, which we consider each year depending on our circumstances.

Anonymous said...

Good God, is NASA missing one of its rocket scientists!

B2B said...


Say that you are just starting out.

You are single, have a job that pays $45,000 a year, no debts and no savings.

Would you save cash, start an RRSP, buy life insurance, marry for money, or go to Vegas?

In otherwords, what advice would you give someone starting out that would eventually lead them to home ownership?


My advice would be the same as most of the boring financial advice columns. I would advise the theoretical singleton above to firstly save 6 months of living expenses into a separate cash account to be touched only in the event of job loss. Next I would advise them to get 2-3 kinds of credit, including credit cards and lines of credit, to build their credit score for the eventual down payment (it goes without saying that they would have to use never more than 80% of the credit lines, always pay them in full and never run a balance).

Once they have the 6 months' living expenses banked in cash they are really starting again at zero savings, since the 6 months' expenses is not savings for any purpose other than emergency. If they are lucky they will keep it the rest of their life without using it.

Now that they're starting at zero, I would say they should save some cash in order to have a healthy cash cushion before making any investments. Based on their low income they should perhaps save $5000 in cash. At this point I would advise them to start making some investments in market ETFs (one of the lazy ETF portfolios that just covers the whole world's equity markets in proportion to their size), as well as buying bond ETFs, and some precious metal ETFs or perhaps CEF. They can buy these in a trickle, say $500 every time they have $500 saved up. At the same time they will need to add to their cash savings for a down payment, since they can't be sure that the ETFs will be able to be sold for a profit when the time comes. I would say they should put equal amounts into the ETF portfolio (life savings) and cash savings (down payment). Rinse and repeat for 5-10 years minimum.

Finally they should take advantage of their employer's RRSP contributions if they have a scheme. If their employer doesn't have a scheme, they should consider a new job. Given their low income (especially if our hypothetical person lives in Victoria) the central solution to their monetary constraints is to work their way up in a career so as to make far better money. There is no better way to save more money than to make more in the first place.

Anonymous said...

That is absolute bank BS. The problem with bankers is they only know the corporate line.

If your focus is on purchase, discount all comments towards investment, they will only slow you down and may lead you another 10 years down the road of renting.

If you're intent on buying in the next 3 years, your own debt and RRSPs in GICs, are pretty much your best investment options.

For starters, establish a LOC for your emergency reserve (why would you tie up your own money and pay tax on the interest?) Focus is always on paying down debt.
Next start saving for 2-3 years and build up towards a 20% downpayment. Read up on the CMHC incremental premiums - every 5% down is a significant reduction to the premium (reduce this governmental theft, it's very costly.)

When you get close to 6 months of purchase ensure that you have at least $20,000 ($40,000 for a couple) in RRSPs even if you have to borrow the money. Take the funds out under the HBP and borrow as much as you can from family to reduce the government thieves called CMHC.

Enlist the help of a mortgage broker for the best available rates - also do your own quote search with a couple banks to ensure the best possible rate / flex options.

From there I think you may get some great fire-sale opportunities in the market in the next few years as interest rates climb. If this doesn't happen, be content with the fact that you're renting for a few more years at rates uncomparable to the cost of ownership (I'm both a homeowner and a landlord, and if I only had finance to consider would sell both about 6 months ago.)

Just me.

Anonymous said...

"Good God, is NASA missing one of its rocket scientists"

Afraid of stimulating conversation or did you just fart?