Monday, November 24, 2008

Hanging ten on the boomer wave



I've been looking a lot lately at demographic stats in an effort to understand future trends. I take issue when people tell me that because real estate has "doubled every ten years" over the past while in Victoria, that it will continue to do so in the future. I ask these people why? They say, because it has. I say, you need to understand why it has in the past in order to predict what it will do in the future.

Apparently I'm not the only one subscribing to the theory that the past 30 years have been an anomoly in real estate valuation cycles. Two academics in California published a paper early this year that made some news, and created some waves.
78 million Boomers are about to enter the years when people tend to become sellers rather than buyers. And as a result, they expect "many more homes (will be) available for sale than there are buyers for them."

"The Baby Boom generation was born over a period of 18 years, and once its sell-off commences, it could dominate the housing market for up to two decades," they say.
This theory is known as an age wave in economic circles. We can't argue that this won't happen. What is up for discussion is how it will impact local real estate price trends and whether or not current immigration/migration rates will replace the demand the boomers represent and the supply boomers will create.

My own thoughts, at least at this point, are they won't. I don't see a bright, expansionary future for real estate here in Victoria. I see a return to the pre-1970s eras of logical, sustainable, inflation-equaling growth (albeit cyclical); but only after we see a correction that will at least equal the one--as far as total percentage (maybe not rate of decent)--of 1982.

To me, my house, when I buy it will be a hedge against inflation, not a retirement plan in and of itself. Which is all a house should be. If you want to get rich in real estate under those conditions, you'll have to return to cash flow positive real estate investing, which means having a downpayment and a rent that exceeds your carrying costs by at least 10%.

What do you think?

112 comments:

greg said...

I agree 110%.

Need that extra 10% to make the numbers work...

Mr.4AM said...

For those of you who want to watch a quick excellent video on The NEGATIVE impact of the baby Boomers on Real Estate, then click the link. (skip to the 10 minute mark).

If you have never seen this "Crash Course" series, I strongly suggest that anyone who has a couple of hours to spend over the course of 1 week to watch all 20 different free clips. (look at the top of the same webpage in the link above for the other chapters).

Now onto the rest of HHV's blog thread...

Yes, that is my plan too (buy real estate as an investment)... hey let's not all be competitive bidders on those $400K triplexes 2 years down the road ok? I don't want Realtors thinking this is 2004all over again. Hehe.

As for me, I hope it becomes both a hedge against inflation (by means of becoming a slumlord), as well as an (early!!!) retirement plan, but we'll see what happens.

Cheers,
Mr.4AM

Mr.4AM said...

Wanna make $100K? Just sell 1 Vancouver home! That's the bonus being offered for anyone who can sell a $3.99 Million Vancouver home AFTER it declined 22% in price in 1 year, marking the biggest decline in Vancouver in 26 years. More here from Bloomberg: on The Vancouver Housing 'Shock'

Art Vandelay said...

To me, my house, when I buy it will be a hedge against inflation, not a retirement plan in and of itself. Which is all a house should be. If you want to get rich in real estate under those conditions, you'll have to return to cash flow positive real estate investing, which means having a downpayment and a rent that exceeds your carrying costs by at least 10%.

That's exactly it in a nutshell.

By the way, the demographic effect on RE prices is not a new notion. It was explored in the '90s books, "Boom, Bust and Echo" and "The Pig and the Python."

Of course, when they were published, 2010 seemed like a long way off.

Anonymous said...

I've wondered about the issue myself. What happens, to the markets, real estate and those pesky jobs they keep complaining they can't fill when boomers start to leave the market enmasse. Any assets they have left will be picked over by family to pay off their own financial burdens.

Of course, if things get bad enough through the current turmoil. We may never really find out.

-VillageBC

Anonymous said...

In reply to real estate doubling in Victoria every ten years. There is no set rule that I have seen that implies that will or has happened. Real Estate values are based on Supply and Demand. In Victoria we live on an island and are surrounded by water, and have a limited amount of available serviced land(they do not make any more).So as demand continues in the future the long term will see higher prices in Victoria, which also drives the rest of the island. As for returning to pre 70'2 not likely, that would be devastating to us, something worse that total worldwide economic collapse, which could happen, but not to that degree. Prior to 1972 people then bought homes to own them in 25 years, the growth in real estate values came from the land increasing in vale as demand to live here steadily increased, and is likely to continue as we have some of the best weather in Canada, not to mention quality of life.
As far as seeing 10% return on a rental property on your down payment, in 35 years I have not seen that happen in the first year, rental properties are always in flux, they are not like commercial properties(which have fixed term leases for 5/10 years etc). Once again supply and demand effects rents. Residential income properties, known as multiple unit properties (Apartment Buildings) are a very conservative investment, and over time give a great income and return on investment. Mainly from the rents paying down the mortgage, appreciation and net rental income; as I refer to as three steams of income. They also qualify for depreciation (off the income as the building ages to just land value). When many of these apartment buildings were built the thought was to tear the building down after 40-50 years and have no depreciation recapture. Now many of these building are clear title and provide the owners with a great income and quality of life, not much incentive to start with a new mortgage and building, someday this will happen as the buildings outlive their life. Single family homes do poorly as a rental investment compared to a multi-family building, little leverage with your down payment. Exception: tenants paying the mortgage off and having a home clear title sometime in the future.

B2B said...

Anonymous @ 8:51 - go back and read the last year's worth of this blog before trotting out the worthless "they're not making any more land" chestnut. That was the rallying cry in the US as much as here, and has been debunked a billion times over.

To save you some time - we've also covered the "there's no subprime in Canada" BS as well.

hhv said...

B2B,

it's ok... he's already pointed out the supply vs demand truth, which only serves to further reinforce the fact that demand is rapidly diminishing and supply is increasing... so, everything anony@841 says after is moot.

patriotz said...

n Victoria we live on an island and are surrounded by water, and have a limited amount of available serviced land(they do not make any more)

They are not making any more land in California either, last time I checked. Care to figure out the amount of serviceable land per capita in California (pop 34 million) compared to Vancouver Island (pop 500K)?

Now tell me why the Island can't tank like California.

roger said...

anon said:

Residential income properties, known as multiple unit properties (Apartment Buildings) are a very conservative investment, and over time give a great income and return on investment.

These are not in demand anymore either as the real estate boom ends in BC.

BC's multi-family investment market faces repricing as global economy downshifts

VANCOUVER, Nov. 24 /CNW/ - Shaken by the global credit turmoil, BC's multi-family investment market faces a repricing of properties, according to Avison Young (Canada) Inc.'s "Fall 2008 BC Real Estate Multi-Family Investment Report", released today.

"There is now a standoff between purchasers, who in the wake of the global credit meltdown have changed their pricing expectations; and vendors, who are looking for yesterday's pricing in a much more challenging market," comments Avison Young principal, Rob Greer. "The number of listings will continue to increase until assets are re-priced and purchaser confidence returns."

According to Avison Young's survey, sales in BC's multi-family market have slowed to an almost standstill, with the total number of trades year-to-date November 2008 representing only 50% of the total number of transactions in 2007. (The number of trades during the first 11 months of 2008 totals 76, versus 153 in 2007.)


The real estate boom is over! Buyers are in the drivers seat now. Once sellers and real estate agents accept this obvious fact and lower the price they will find a buyer.

Anonymous said...

Even the developers are bailing

Anonymous said...

Over the last few years I have spoken with many mature baby boomers that have moved here.

The number one reason why they have moved to Victoria is to be close to their children and grand children.

The second reason is that at one time in the past, at least one of the couple has lived in Victoria or Vancouver and remember the cities as they were 20 or 30 years ago.

And thirdly is the weather. For those that had never lived on the West Coast the weather is disappointing. One couple mentioned to me that Victoria is not like the brochure city they were lead to believe. At first they are glad to not have to shovel snow, but the grey, wet winters become depressing to them. Asthma sufferers find relieve, however, those with arthritis dislike the wet weather. Most of this group find it difficult to make friends and find the people of Victoria stand offish. These are the ones that tend to return to where they came from after a few years in the city. As one mentioned to me "Victoria is like living in a car wash".

I think anywhere in Canada is a good place to retire. And that probably is the reason that up until this year, no where in Canada were prices falling because of a drop in population.

Tony Joe, mentioned that some 3,500people per year have been moving to Victoria. Granted most of them have been coming for the jobs in construction and will tend to leave as construction continues to grind to a halt. But some will stay.

Young families are the engine that drives local economies as the jobs dry up - they will leave the city.
Mature baby boomers tend to be savers and not spenders. So I suppose we will have expensive homes but not well paying jobs and we will have to rely on importing seniors from other cities to keep our prices stable.

For those people that feel that Victoria is the greatest city in Canada, I invite you to take a jog along Cook street some day.

roger said...

Checklist for falling RE prices in Victoria

Inventory climbs to 10 year high ✔
Sales plummet ✔
Median house price drops 6 months in a row ✔
Multiple price reductions needed to sell ✔
Buyers start lowballing and succeed ✔
REALTOR® commissions drop dramatically ✔
Government predicts recession for 2009 ✔
MSM has weekly RE downturn coverage ✔
VREB publishes full page spin ad ✔
REALTORS® visit bear blogs and post "spin" ✔

hhv said...

Roger,

You forgot to add successful spin doctor drinks too much of his own kool aid and joins the dark side to your list.

dub said...

Check out the price reductions on this condo (it's one that's been relisted with a new mls #).

408-955 DINGLEY DELL
MLS# 248750

$274,000
$259,000
$229,000
$189,900 under New MLS# 256212

DOM so far = 150.

Anonymous said...

I really could use a 3/2 Townhouse for sub-225k range. I'm thinking next fall will be when they first start showing up around 275k and allow for low ball 225k bids.

-Village

Anonymous said...

"Victoria is like living in a car wash"

LOL!

phil said...

"Tony Joe mentioned that some 3,500 people per year have been moving to Victoria."

Well 1,000 people move to Florida PER DAY and their real estate is tanking badly.

Anonymous said...

Don't forget 1,500 of those moving here are sheltered drug-addicts

Anonymous said...

Anon 8:51: Can you please expound on your comment "no more serviced land"? Is there some law I am not aware of against running hydro and water lines to your property? Don't the public utilities charge vast sums of money to do this to make money as the tax base stutters and falls?

Please illuminate the laws regarding servicing property, with the appropriate links to back it up... enquiring minds want to know.

If you can't, until the day this entire island is connected to the mainland with a tunnel and is populated per square foot like Manhattan Island, there's enough land here to support several million more people. And hundreds of thousands of suburban housing developments.

Whether the demand will be there or not remains to be seen.

dub said...

there's enough land here to support several million more people

Case in point, have a look at the retired gravel pit along Metchosin Rd bordering Colwood and Metchosin.

Or the other retired gravel pit between Metchosin Rd and Sooke Rd.

Or what about Bear mountain and Skirt mountain? Until recently, did those two hunks of land also fall into the catagory of "no more serviced land"

hhv said...

wow,

my appologies. somehow the cat got out of the bag.

oh, how i do love the myth-makers... they just keep trying and never do know when to quit do they?

Yve said...

Anon @ 851, travel to Japan, Taiwan, England etc., all islands where "they aren't making any more land" either and explain to us why real estate has tanked there too. While you area at it, compare the population densities. It gets tiresome, like beating a dead horse explaining this endlessly. You can't just regurgitate MSM spin or quaint nuggets you heard from a friend. Think for yourself & where possible back up your position with facts. If you have been reading this blog for any length of time you will know that you have to be a lot more innovative in spinning out the old real estate pumping adages, all of which have gotten very old and very tired and really seem quite ridiculous in the face of everything happening in global finance right now. All of the trends and predictions have come home to roost however tightly some of you grasp onto your denial. The unfortunate downside is super-sized economic turmoil that few saw coming and sadly even fewer still understand. Do you have any idea what is going on out there?

Anonymous said...

How about we divert some of that bail out money everyone's throwing about and increase funding to our Con Air program and ship back to wherever as many real estate agents as possible? I'm tired of the cliche lies: "it's always a good time to buy", "real estate only goes up", "buy now or you'll be priced out of the market", "Listen to me, I'm an expert"...etc, etc...

Muriel said...

Village,
There is a remediated 3/2 townhouse at 103 Gorge Rd for sale at $299k right now. It's been for sale for 168 days, with an original listing price of 329k. I bet it will sell for quite a bit less, if it sells at all.
MLS# 247841

Anonymous said...

"Think for yourself & where possible back up your position with facts." Re-read your own post and apply as necessary.

For something that is so "dead obvious," you guys and gals act like a gang of schoolyard bullys. You see what you perceive to be a weakness that you think everyone else will support you on and just go at it - which cliche was the curb kickin'? Pretty disgusting really.

Would you allow your kids to behave like this? Maybe you could take a lesson or two from them.

greg said...

Oooh, picking on an anonymous poster who posts nonsense than whines he is getting bullied when people question him.

Yeah, just like the schoolyard, alright.

patriotz said...

We don't act like a bunch of schoolyard bullies, we act like parents who find someone dealing drugs in the schoolyard. We are familiar with the BS lines used to hook people into taking on huge amounts of debt to buy overpriced RE and we are not going to put up with it.

Just say no to RE pumpers.

Anonymous said...

"Oooh, picking on an anonymous poster who posts nonsense than whines he is getting bullied when people question him.

Case in point, make that middle school. Actually I'm not the same anon, just calling em as I see them. I might even be one of the bears.

Parents teaching a drug dealer Patriotz?? I'd hardly call 8:51 a RE pumper. Interesting though: I've seen zero fact based comments since 8:51's post, just more rehtorical opinionated BS.

Oh ya, no-one wants to live in Victoria - especially not you guys, eh?

Anonymous said...

Correction, other than Roger's comments, who makes the effort, I've seen zero fact based posts since 8:51.

dub said...

"I've seen zero fact based comments since 8:51's post, just more rehtorical opinionated BS."

Some #'s after a 1 minute search on the internet:

Population Density of Vancouver island ~ 19/sq-km

Population Density of Japan ~ 337/sq-km

Japan real-estate prices
http://tinyurl.com/5dog6r

Kind of makes a statement like the following a little suspect, in my opinion...

"In Victoria we live on an island and are surrounded by water, and have a limited amount of available serviced land(they do not make any more).So as demand continues in the future the long term will see higher prices in Victoria, which also drives the rest of the island"

greg said...

Would you allow your kids to behave like this? Maybe you could take a lesson or two from them.

Actually no, I expect straightforwardness from kids, not BS and name calling, which of course was started by anonymous, who of course doesn't see it that way, and can't take a dose of sarcasm to go along with his/her saccharine sentiments.

As to facts, we get tired of posting the same old facts to refute whatever nonsense the lates realtor pumper johnny come lately who has just found the board wants to throw around, who doesn't bother to read the facts posted here, which inconveniently do not agree with their "Victoria is special" weltanschaung.

I've posted plenty of facts all over the web, feel free to find and read some.

Yes, I know, run on sentences and hyperbole, I just failed middle school creative writing. Oh well.

Anonymous said...

Yay Greg and the rest of the honest folk on here!!!

The idiocy of believing RE prices here will always go up and then making a living on that ridiculous premise is really unconscionable.

Tony Joe should be cleaning toilets for the rest of his miserable life, the toilets of the many fools he convinced to buy when all signs indicate don't buy.

Read Freakonomics. They have a great chapter equating realtors with mafia. Very good reasoning in there.

RE is going down for a loooong time ... so is a lot of stuff. Duh.

The perfect storm is here, just watch what losses the bankers reveal over the next 2 to 3 years ... the bankers are lying to you hiding their losses. Just wait ... there will be hell to pay and worse if they keep propping the losers up who by rights should go under - GM, Ford, Chrysler and who knows what other over-leveraged fools out there.

Anonymous said...

"not BS and name calling, which of course was started by anonymous,"

He started it?? LOL This just gets better and better.

Re-read 8:51's post, I see no name calling at all, just reasoned opinion (right or wrong.) Just because the popular theory on here is that the comments have been refuted doesn't make it so. I think we're at about 98% opinion on this blog.

As for my opinion, being as you asked, maybe another 10-15% drop over the next year or two and then steady for a number of years. The sentiment and resolve for us on here has been weakening, with a few bears already thinking about the Spring awakening.

Anonymous said...

Nice chart there Dub, maybe extend your search out beyond 1 minute.

Here's what appears to be fact based or at least thought provoked writing: History of Japan's housing bubble.

http://bayarearealestatebubble.blogspot.com/2006/01/history-of-japans-housing-bubble.html

A country the size of California, where at one time 32 sq' was worth $600,000. What is an apartment worth today in downtown Tokyo? Taiwan? The demographics, economics, politics and geography of Japan and Taiwan and England are incomparable to BC, let alone beautiful little Victoria.

Mr.4AM said...

Anon 5:59AM,
Sorry but the "they're not making any more land" cliche, has next to no impact on housing prices, except when realtors manage to convince foolish buyers of such a "fact" in an effort to get them to hurry up and buy something before prices go up more.

Also, just for arguement's sake, Dubai MADE more land to put housing on, and China MADE more land to create a new Airport, and Vancouver MADE more waterfront land with the new convention centre... Not only do we have TONNES of land, but even if certain areas get low, we can expand into the ocean (not that I think that's a great idea), or vertically up - the sky is the limit.

The comparison about Japan, could be made with most European countries, or any other country that has a higher population density than Canada, or if you want to get particular, Vancouver Island as a ratio of land to people.

The truth is, BC is aproximately 94% unpopulated... there's PLENTY of land! Please put that arguement away, and come back in about 500 years and we'll see if the arguement will have any better clout.

I'm starting to think we need to start up an FAQ with all the realtor cliches and place some facts against them... maybe then we'll have a better chance at our children/grandchildren avoiding a housing bubble in their generation!

Mr.4AM said...

With all the nonesense about no more land, I forgot to counter the main point... There's dozens, perhaps many dozens of 1st world countries that have much higher density populations than we do here and their real estate prices have either collapsed or are severely going down.

As for "we're different here" and it's not comparable to country XYZ... that's just more Realtor Kool-aid BS.

Of course we're different, there's no two places on Earth that are the same. Water is wet - SO WHAT? What we're talking about is the fact that there is no difference in the outcome of a housing bubble in one country or another - the end result is the same - POP!


Click here, and scroll down to the 3rd paragraph that lists over 20+ countries that are going through some phase of a housing bubble & declining real estate values. You'll note most of these countries have much less land than Canada or population ratios per sqkm of land than Vancouver Island.

Conclusion:

* WE HAVE LOTS OF LAND
* IT'S NOT DIFFERENT HERE
* WE DO HAVE A HOUSING BUBBLE
* HOUSING WILL CORRECT IN VALUE
* IT WILL NOT BE A SOFT LANDING

End of story

phil said...

Well said.

It's over folks, get used to it.

greg said...

ID = poster
anonymous = bored realtor

You decide.....

roger said...

A question for anon or any other real estate believer®:

How many more months does the median house price have to drop before you decide to accept the fact that Victoria is in a real estate downturn?

(If you are just new this blog we are at 6 in a row now)

Just Jack said...

I am trying to determine the validity of the "days-on-market" (DOM) indicator.

I spoke with one "expert" who said that if a property sold in one day then the property undersold. I disagree with this statement. To me, all this ment was that a buyer was found in one day. Conversely, if it takes a property 200 days to sell was it over bought?

However, if we look at the stats of many properties what does the DOM mean for:

Current Listings?
Sales in the last 30 days?
Sales in the last 90 days?

or the DOM of properties listed under a normal contract period (90 days) and sold during that period.

I know that agents "re-list" properties and this will tend to skew any results.

So, my thoughts have been that I should track those properties that were listed in the last 90 days (normal contract) and use the DOM of those that sold during that period. By watching this group of properties my thoughts are that a pattern may emerge where you may see price reductions occurring at say the 30 day, 45 day or 60 day mark. In a nutshell, I am trying to tease out vendor's motivation from the data.

Any thoughts out there or am I way off base on this train of thought.

dub said...

Anon 5:59

Nice chart there Dub, maybe extend your search out beyond 1 minute

I read the link you posted and fail to understand your point or how it differs from the picture of the Japan's housing collapse (except by making comparisons to the US). I also didn't see the part in there of how Japan being surrounded on all four sides by water prevented their housing collapse...


What is an apartment worth today in downtown Tokyo? Taiwan?

I'm assuming your point here is that you think prices in these places are way higher than here? Sure, but from what I would gather, it's the income vs price that tells more of the story.

According to this source, looks like real estate is far more affordable in Japan.

Price to income ratio (including Canada and Japan):
http://tinyurl.com/6jwjon


The demographics, economics, politics and geography of Japan and Taiwan and England are incomparable to BC, let alone beautiful little Victoria.

As always, using historical data and/or data from other parts of the world doesn't tell the whole story or foretell what will happen here. You're right, there are many factors to take into account. However, completely ignoring them is ridiculous.

As far as posts go containing facts; I've not seen any facts posted by you, except that Victoria is a beautiful little place. (assuming I have all of my anons lined up in a row correctly).

roger said...

Ron Neal, a local REALTOR®, had this to say about the Victoria RE market in the Realty Times.

The supply of properties for sale is up substantially to the highest level in about 10 years. Prices have fallen 10-20 percent depending on area and property type and price range from the peak of about a year ago.

I imagine there are a few more agents in town that have also realized that the boom is over.

Anonymous said...

He still had to add that it is a great time to buy.

Wait a bit longer and it will be an even better time to buy.

S2

mln said...

This should be required reading before commenting on the real estate market, IMO.

When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone.

In Flatland, which occupies the middle of the country, it's easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can't even get started.

But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions - hence "zoned" - makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles.


Article

I.E. "They're not making any more land" has it's basis in reality--but it is contrary to what most people (or REALTORs) understand it as.

Anon- not that statistics aren't interesting or useful, but complaining that people aren't using them when picking apart your argument is just childish. Especially when you didn't use any yourself.

hhv said...

funny roger, ron's the agent on the mls condo listing above that went from $270K to $190K.... apparently he's good at getting his clients to "get it"

greg said...

Ron is still using PCS, not Matrix, which allows one to see the price drops, and retain listings after they sell for comp purposes. Thanks for that Ron.

Ryan said...

I played hockey with Ron Neal. He's a good guy. Not real keen on his "Neal Estate" marketing but he's at least been around long enough to understand market cycles.

hhv said...

he charges more than most to boot...

Anonymous said...

What happened? I just went in for a light trim and I left with a real haircut. But things could have been worse. The guy next to me got a bad brushcut.

Art Vandelay said...

Anonymouse 8:51 made a decent case for multi-door real estate, but the claim that "we have a limited amount of available serviced land (they do not make any more)" is so wrong it kills his credibility entirely.

Just look at James Bay or Vic West. Where once stood deteriorating crack shacks and toxic waste, behold shimmering towers. We can build up. And up. And up.

As Min points out, zoning is the problem. Not physical lack of land.

Now that I've agreed with the mob on that point, some of you people need to see doctors because your irrational rage at people with contrary opinions is getting scary.

Try this line when you visit your mental health professional:

"Doctor, the grocery store clerk that I asked about the Granny Smith apples talked about their taste, their texture, their value for money. I remembered reading a BC Apple Growers Report that morning that said there was likely to be a shortage of Granny Smith apples this year.

"I decided to buy a crate of Granny Smiths for $1.49 a pound.

"Later that day, I had to return to the same store for some milk and I noticed the Granny Smiths had been reduced to $1.19 a pound. Turns out, the grocery store manager ordered way too many Granny Smiths, and even with my purchase, they were left with a thousand crates of apples at the end of the day. So they went on sale.

"The grocery clerk's spin caused me great financial harm. The BC Apple Growers spin cost me money. I can't believe the grocery store unloaded so many apples at $1.49 a pound on an unsuspecting public.

"I want grocery store clerks shipped to a remote island."

I'm as big a bear as anybody on this board: RE, job outlook, world economy, etc.

But I believe in free will. Which sets me apart from many of the most vocal critics here.

My RSP is down. That's not my financial advisor's fault. He advises. I make the decisions to buy and sell.

Our house is worth less today than it was six months ago. Our owners/landlords decided to reject a lowball recently. It will not be their listing realtor's fault when, a year from now, they are faced with selling it for even less. That was their decision.

While the harpies run around pointing fingers at realors, developers, builders, mortgage lenders, etc., you might want to check out a mirror. See who's really responsible. It's very empowering.

dub said...

It will not be their listing realtor's fault when, a year from now, they are faced with selling it for even less. That was their decision.

Sure, absolutely it was their decision. But don't think that when VREB (which represents realtors?) takes out a full page ad in the paper and claims that so far this year, prices have increased 5% (or whatever the claim was) might help to influence people in making those decisions? I mean, if prices have risen 5% so far this year, why would I sell for -10% over last year?

greg said...

Doctor, the realtor that I asked about the houses talked about their amenities, their locations, their value for money. I remembered reading a BCREA Report that morning that said there was likely to be a shortage of Granny Smith apples this year.

"I decided to buy a condo for $900 sq/ftt. The realtor at the open house said I can't lose in the long run, prices always go up.

"6 months later, a bunch of unsold condos were waying down the develper, and he decided to sell them all for $400 sq/ft. Turns out everyone cancelled their presales, and now the developer is underselling what I paid by $250,000. Turns out the condos were mostly built based on speculation, and the developer built way too many units. So they went on sale.

"Why didn't the realtor tell me this was going to happen? Shouldn't the realtor know what's going to happen with real estate, good or bad? The BCREA spin caused me great financial harm. I can't believe the developer unloaded the rest of the condos at $400 sq/ft on a grateful public.

Its just not fair....

Etc Etc Etc

;)

greg said...

Art -

"While the harpies run around pointing fingers at realors, developers, builders, mortgage lenders, etc., you might want to check out a mirror. See who's really responsible."

So, if instead of buying based on misinformation (but with free will) like in your example, I was warning about not buying, how does that make someone like me responsible for the scenario you outlined?

hhv said...

Art,

agreed, 100%, the spin hurts the professional credibility of the source, REALTORS who disagree with their board should, IMHO, speak out, it will improve their own credibility... that was point several posts ago.

Buyers set the market, if they don't educate themselves on what they are buying, they only have themselves to blame, except in cases of out-right fraud, which sometimes we can argue the spin seems to emulate... but that's a whole other discussion.

roger said...

Just Jack said:

I am trying to determine the validity of the "days-on-market" (DOM) indicator.

From what I have seen in the past this was just a rough indication of where the market was trending. If DOM was increasing the market was h towards a buyers market and vice versa.

However, the re-listing scam now makes this number next to useless. There is a respectable realtor in Saskatoon that publishes the re-listing activity as a % of new listings. In that city it is running around 40%.

BTW - Check out the Saskatoon site @ Norm Fisher's Blog
Great stats and that RE agent has a buyer and seller crowd that really appreciates his efforts. I wish we had someone like that in this town so that I could shut down my gallery.

roger said...

Art,

Yes folks can get a little hot under the collar when the pumper cliches appear on this blog. Most are tired of the same old argument which has been debated countless times in the past. The "boomers are coming", "no more land", "best weather in Canada" and "diverse and insulated economy" lines didn't hold up to scrutiny before and in the current falling market are laughable.

If a bull presents facts, articles or stats they will get a constructive debate. But if a bored RE bull or RE industry pumper shows up waving their arms and uttering old lines they will get jumped on. As one bear poster said a while ago don't go into a bear den with a pork chop around your neck.

Just Jack said...

Its too bad the DOM indicator has been abused by the agents. When I look back over the good and bad markets, I do notice that the bear markets have marketing periods in the 60 to 90 day range. And markets that have capitulated are in excess of 90 days.

I think if the typical home listing period goes into the 90 day range we will see low ball offers being accepted.

This market has and will be getting a lot uglier. I can see this blog morphing into one that is asking if we have hit bottom yet. Especially if rents start falling and interest rates begin rising.

mln said...

Here's an anecdote about commercial construction: I just attended a contractor's walkthrough for a small project downtown, worth maybe 1 or 1.5 million. This is the third job I've worked on in the building and for the other two about 5 or 6 companies showed up, and maybe 3 were interested in bidding. This is over the last couple years.

Today, 16 different general contractors showed up, many of them with 2 guys. There weren't even enough drawing sets to go around.

Dumb Canuck said...

mln - two similar stories heard recently.

(1) A friend renovating their house had plumbing quotes 3 or 4 months ago: 25,000. Two weeks ago: 10,000 with five full bids out of five requests

(2) Another friend said that for the first time in a long time, Don Mann sent people home early today - no work.

Anonymous said...

All this slagging of Realtors is amusing. They take a 3 month course that requires all of grade 10 education and are set to sell. And we expect them to be all that appears or is insinuated above. What can we really expect? What's with all the noise?

We are personally responsible for the signing of the contract. That much the realtors are good at pointing out.

Now the real issue: how do we get to the point of paying them what they're worth?

luckeyjeff said...

Just would like to comment on how much I enjoy reading this blog! I have been following it daily for a year now and have found the information very valuable. There seems to be a great pool of knowledge amongst the bloggers.

As a builder in this great city, I , and many of my colleges, have slowed down a little. It could be attributed to both the time of year, and the current market situation. Im sure things will get worse before they get better. As long as you are not over extended financially, you should be safe. Its the people who used their equity to start a second and third home who are going to feel the pinch.Sometimes you win with real estate, sometimes you lose....

Anonymous said...

"Sometimes you win with real estate, sometimes you lose...."

And lets not forget that the last 5 years have had the biggest "winnings" in history... Gee, I wonder what is next?

vg said...

"Sometimes you win with real estate, sometimes you lose...."

And lets not forget that the last 5 years have had the biggest "winnings" in history... Gee, I wonder what is next?"


Houston, we are preparing for re-entry to earth's atmosphere.

All good things come to an end,but as said many times, this is an entire generation who does not know what it is like to lose big, even on paper.


Thanks for andecdotes,looks like next month's so called "hot" employment numbers the industry pumps may take their first big hit. No one wants to see anyone lose their job but construction jobs in Victoria has always been a dicey place to be,a feast or a famine.

Anonymous said...

OT - Looks like a new standard of 3 bed rentals to judge the market by. Check out Uplands...
http://victoria.en.craigslist.ca/apa/934280717.html

Anonymous said...

My vote for the first foreclosure...

Sweet new house on Bare Mountain for $1950 / month (was $2495 but that is crazy talk)
http://victoria.en.craigslist.ca/apa/919694251.html
http://victoria.en.craigslist.ca/apa/904551994.html

Anonymous said...

http://victoria.en.craigslist.ca/apa/919694251.html
http://victoria.en.craigslist.ca/apa/904551994.html

These are different homes.

But yeah, renting for $3000/mo is way too much.

Anonymous said...

My vote for the first foreclosure...

Oops...my bad. Sorry they all look the same up there.

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

Oh, and another thing my Hawaii friend said (used to live in Vancouver, btw), "What's up with Vancouver? People are walking around there like there's no recession, nothing happening at all. And WHAT'S UP with the real estate prices? They're unbelievable. Do people really think that's realistic?"

victorianna said...

Sorry, mistake in last comment. Was sharing some anecdotes. Will try again.

Yesterday had lunch with friends who live in Hawaii. They were comparing their island to ours, and were wondering if islands may actually suffer more in an economic downturn. They were noting that a big car company had recently forced its Hawaiian dealers to take quotas of cars (unheard of--for this company), that they knew a mortgage broker who was now going into healthcare insurance, and the real estate market was tanking.

Other anecdotes (local): We sold our house awhile back, and the other day, the realtor who sold it called my husband at his office, and after some chitchat, announced "It's a great time to buy a house." My husband said he had a hard time not laughing out loud.

Finally, client came into husband's office the other day, announced that her house was listed at a "fair price," and that she wasn't budging. Number of showings to date? Well over 100.

patriotz said...

They were comparing their island to ours, and were wondering if islands may actually suffer more in an economic downturn.

Because neither of them produce anything of real value, and both are heavily dependent on government spending, tourism, and retirement savings?

Nah.

hhv said...

But patriotz,

don't you know wealthy retirees are immune to market collapses... sheesh, i thought everyone knew that. that's why the gov't didn't have to change the rrif legislation... oh, wait.

B2B said...

Well Patriotz, we do produce some wines and cheeses that cost double or triple what superior examples from other countries cost. Does that count? LOL

Dave said...

Because neither of them produce anything of real value, and both are heavily dependent on government spending, tourism, and retirement savings?

And how do you define ‘Value’? It isn’t so simple in economics to say that one GDP activity is more valuable than another. Rather, it’s better to simply look at the particular GDP that an activity generates and assess how it will perform in a given economic climate.

Look at the rust best which produces lots of things of ‘value’. Yet, they are struggling the most in the current economy.

Victoria has the lowest unemployment rate in Canada (for a major centre) and quite possibly North America or even the G8! Anything less than 5% is full employment. I think if you scratch the surface a little deeper who would find that the economy is more diverse than what you have assumed.

phil said...

"Victoria has the lowest unemployment rate in Canada"

And 15 years ago we were one of the highest.

Keep building those condos baby!

dub said...

Looks like 'The Strathmore in the heart of Langford' has just done a round of price reductions for their unsold units. They appear to have decreased in price by up to $70,000 from three months ago.

Here's the largest price drop that I noticed:
MLS# 250778
$379,900 down to 309,900

greg said...

dub -

that's a 19% reduction in asking price in three months, for anyone keeping score on the Strathmore.

I suppose people could go in and offer even less, I wonder what point the developer would say "no"?

Anonymous said...

""Victoria has the lowest unemployment rate in Canada"

Next poll, try including the homeless in that figure. Makes all the difference in the world.

Darn....

vg said...

"Victoria has the lowest unemployment rate in Canada"


Don't expect it to stay that way for long. This winter will deal the private sector some nasty cuts as in past recessions,no city is immune to a major global shift.

dub said...

Out of curiosity, I tallied up the total price reductions for 'The Strathmore' so far.

Total units for sale by the developer (that I'm aware of) = 18.

Total price reductions for last three months = ~$545,000.

No idea if 1/2 million dollars means a lot to a developer. But it can't be all the great to have $500,000 less than you anticipated off the start.

Just Jack said...

Doing a little Case-Schiller analysis on Westshore Condos. Condominium prices have rewound to the Q1 2007 prices. So since the peak in April, prices have rewound to what they were 20 months ago in just 9 months. Which would mean that prices are declining at a slightly higher rate than they had been increasing.

So, I would not call this a bursting bubble market, but a market that is exhibiting a substantial downward correction. However, if the unemployment rate were to spike, then all bets would be off on how fast this market would collapse and that would certainly be a burst bubble.

hhv said...

JJ, how about other areas or property types?

Anonymous said...

"Next poll, try including the homeless in that figure. Makes all the difference in the world."

The vast majority of them are not homeless, they are sheltered drug addicts. There's a difference and it's a choice.

Anonymous said...

There not homeless.

There mortgage free!

patriotz said...

This winter will deal the private sector some nasty cuts

And after the spring election we will get "Restraint - the sequel".

BTW Dave - what was the unemployment rate in San Diego or Phoenix in 2006?

Anonymous said...

""Victoria has the lowest unemployment rate in Canada"

Yes indeed. Those realtors will be happy to know that when the money dries out they can work wiping seniors' asses in those "retirement" homes all over the city, or change bedsheets at the roach motels.

No head office jobs in this city. No career opportunities for those holding university degrees. Just a place to come and die.

Anonymous said...

And so someone makes a valid comment that appears unbearish and at least twelve comments will come out to ridicule and chant. Oh ya, this blog is open to balanced discussion, eh?

Anonymous said...

"No head office jobs in this city. No career opportunities for those holding university degrees. Just a place to come and die."

And so as to all, move away if you don't like Victoria!!

hhv said...

"And so someone makes a valid comment that appears unbearish and at least twelve comments will come out to ridicule and chant. Oh ya, this blog is open to balanced discussion, eh?"

Individual commentors are free to write whatever they like here. It's too bad that "unbearish" commentors, by and large, tend to wander through and drop the odd non-relevant reason why they believe the market is what it isn't. Look, we do have a low-level of unemployment right now--as did the many US cities before their markets collapsed--one thing always happens before the other and it doesn't always work out that people loose their jobs before their homes lose their value, in fact, it is quite often the reverse.

Just because our unemployment rate is low right now, doesn't mean it will stay so as the market drops. It's called cause and effect, you can't look at either measure of economic indicator and say that they will stay static.

Perhaps if "unbearish" commentors want to join in the discussion, they'll do some things that many of the bearish commentors do here regularly, like back up their opinions with factual examples of statistics and basic economic principles, often linking to expert opinions not tied to sales teams.

Unfortunately, for the most part, "unbearish" commentors instead tend to fly through anonymously and drop garbage bombs like "the weather," "the wealthy boomers," "the Dubai elite" and any other urban myth that's been exhausted by the local sales force and proven weak a hundred times over by people, who instead of parroting blindly, actually bothered to take the time to do some digging and decide for themselves that not all is as "obvious" as it seems.

Anonymous said...

Nice try HHV, but re-read the posts leading up to it - all opinionated chest beating and nothing but fluff. It's only when someone points out some of the attributes Victoria has (and the are many) that the chanters come on stream.

Honestly, there is only two or three bloggers on here that do much more than chest beating. Kind of hard to deny black and white.

mln said...

Anon, I must be reading a different page than you. I see some discussion on price reductions for condos on the westshore and some jokes about low unemployment. I think you're getting a little defensive.

As HHV said, low unemployment and low foreclosure rates were enjoyed all over the US in 2006. Pointing at Victoria's low unemployment and saying "this is why our economy will do well" is laughable, really.

greg said...

If the blog sucks like you say and the posters are only a couple or three chest beaters, please start up the happy victoria housing blog.

I promise to only drop by anonymously once in awhile to stir the pot of all the happy homeloaners discussing their happy wine cellars in their new high priced bear mcmountain shacks.

Honestly, the happy homeloaners can dominate the discussions which will be so interesting and informative to the general public.

Bwahahahaha.

patriotz said...

It's only when someone points out some of the attributes Victoria has (and the are many) that the chanters come on stream.

What the "chanters" are on about is that "attributes" don't support house prices.

Incomes and rents do, and they are as out of whack with current prices as they ever were in just about the whole US, or anywhere else for that matter.

Oh, house prices tend to go down during major recessions, too. Victoria was a nicer place to live in 1981 than today. What did those "attributes" do for house prices then?

Anonymous said...

I agree. Anyone can start a blog (and it's free, no need to tap into your home equity). Let the RE pumpers start their own blog and talk about the beautiful sunny days we enjoy here in the winter, the environmentally conscious populace who drive refurbished 40 year old cars, and the responsible houseless visitors to our parks. Oh, and I forget, the notion that they don't make any more land too should also keep driving our property prices up.

Jake said...

WHEN WILL THE BOTTOM HIT?
I have not lived through the past real estate cycles and I was wondering for those who have experienced them, based on that, when do you suspect/estimate we will hit bottom in Victoria? Any thoughts?

Anonymous said...

This blog should be retitles "bitter junior public servant's rant board." All the bears here are bitter renters on the public payroll, and will never be able to buy a house even if price fall 50%

beagle said...

One thing that is a plus for the bull case is energy costs in Victoria. The decline in gas pump and heating costs is a major boost to the local economy. It may not stop the house price decline but it sure will slow it down. This would have been a lot crueler winter for the average person had gas stayed at 1.40ish a litre and heating oil sky high.

mln said...

Jake, probably 2 to 5 years. I think a large proportion of the decline will happen in the first few years.

patriotz said...

All the bears here are bitter renters on the public payroll, and will never be able to buy a house even if price fall 50%

Well then, prices will just have to come down some more. Who else is there to buy?

Oh right, all the rich retirees... oops, I guess they're not so rich now.

Jake, I think we'll be very close to the nominal bottom by the end of 2010.

vg said...

jake,

I feel 3-7 years depending on how long the US stays down. That will be the key, in early 80's it was all in the interest rates coming back down so fast.

Today it is the world credit system which has much farther ramifications. People back then weren't maxed out on credit cards and LOC's didn't even exist to the average person. This is a different beast and much scarier too.

vg said...

"This blog should be retitles "bitter junior public servant's rant board." All the bears here are bitter renters on the public payroll, and will never be able to buy a house even if price fall 50%."



Just another bitter paper princess who can't handle the reality of losing paper profits by the tens of thousands every week and that we were right all along.


We will all own again in a few years and then we can all start a new blog called "I survived the recession and saved myself a lifetime of mortgage payments" while you are still paying off your 40 year ball and chain.

dub said...

This blog should be retitles "bitter junior public servant's rant board." All the bears here are bitter renters on the public payroll, and will never be able to buy a house even if price fall 50%

Out of curiosity (and no disrespect intended), could you realistically afford to buy an average SFH at today's prices? That's assuming you didn't already own a house. Just given your current salary, etc...

I make 80K a year and am not a public servant. While I could probably buy one of the bottom-of-the-barrel crack-shacks, I don't think I could actually afford it. I'd probably be pretty house poor....

I don't know what the average income is in victoria, butI'm pretty sure the average income earner can't really afford a Victoria crack-shack... let alone an average SFH.

victorianna said...

Wow, is SP back? I wondered where he/she had got to.

So, more anecdotes. Today went by to pick something up from my good friend, a realtor. He was working in the sales office of a condo development (where he has been sitting every day for weeks). I walk in, it's noon, Saturday. Completely empty. As it has been, he told me, every day for weeks.

He said, "the developer's about $100k too high." I said, "What's the price?" He said, "Just under $600K, or about $600 per sq. ft." I said, "So, you think if he drops it to $500 per sq. ft., it's going to sell." "Yes," he replied. "That's what happened in 2005, the first phase sold completely out, even though they were raising the prices $5K with each unit that sold." I said, "But it's not 2005. I really don't see these selling even with $100K knocked off; they'll have to go lower." "Oh no, just take $100K off and they'll sell right out, just like before," he said.

"Of course," he said, wavering, "people have lost a lot in the stock market."

"Yes," I said. "May affect their ability to come up with a downpayment in these tighter-credit times."

Anonymous said...

Anyone who thinks Victoria real ever go down is crazy time big profits to be had always. Landlady owns five homes no problem selling to me and make big money easy time.

hhv said...

anyone have access to the digital edition of the TC today, i'd like to get my hands on a screen capture of the homebuilders' advertorial at the back of the first homes section telling us all to invest in our community.

Anonymous said...

hhv said...

"i'd like to get my hands on a screen capture of the homebuilders' advertorial at the back of the first homes section"

scan of ad

Anonymous said...

Roger, We discussed TD's SD rsp's and non-arm's length mortgages last month and I'm narrowing down some details.

For starters it is of course not as easy and flexible as believed: no LOC,s no equity take out, no fancy monthly repayments etc.

They do however allow 2nd mortgages and the 1st does not have to be with them. This is good news. Costs are: Annual fee on the SD plan $100(unless you have $25K invested not including the mortgage), $200 / yr on the RRSP mortgage. Upfront costs: $550 legal and appraisal (one time) and CMHC fees on the "entire outstanding mortgage." This is a kick in the ribs for those with a combined LTV of say 95% and a resulting CMHC fee of 3.75% (from memory) - prohibitive. However, that cost may already be paid and they may allow what amounts to a blending of the premium (still working on this.) That's as close as I've gotten so far.

Anonymous said...

Cont'd: The best opportunity for this is if someone has a minimum of say $50,000 for the SD RSP and a combined LTV of 65% or less on the home.

Anonymous said...

That builders add is priceless.

Best to have the Eagles "Desperado" playing while reading it...

hhv said...

anon at 5:56, cheers.

victorianna said...

Yes, priceless and unbelievably patronizing. So, if I wait for prices to "soften" any further I am being both stoopid and greeeeedy! Wow, I don't want to be that, for sure! I'll run right out and buy an old, unrenovated, overpriced POC house, before it's TOO LATE! I'm askeered!