Saturday, November 29, 2008

Tony to Bob: yer turn, I think they're hearing it

Just maybe not buying it yet, me thinks...


Some "mythical" highlights, courtesy of Bob; and some debunking, courtesy of me:
  • BC's housing starts hit 39,000 units in 2007, significantly higher than our 20 year average of 30,000.
Too bad our rate of in-migration is unchanged at just under 1% per year and that in 2008, sales plummeted to a ten-year low: must suck to be a builder with units to sell right now, especially when you are overbuilding by almost 30%.
  • Home ownership in BC is high at 70%
Which means there are no first time buyers left to get into this market: must suck to be a first time owner trying to unload that crack shack/lottery ticket you thought was a "sure thing" last year.
  • BC has the lowest rate of mortgages in arrears in Canada, which already has a historically low rate. This is much different than circumstances in the US.
But not unlike the US, the debt servicing ratio is at an all-time high in BC right now; in plain language, that means more BC'ers owe more on their homes as a percentage of both their incomes and the current market value of their homes. This is a ratio that will increase, not decrease, as the market value of BC'ers homes falls leading to a higher rate of underwater homeowners, mortgages in arrears, and inevitably defaults.

Bob, your message then turns to utter bullsh$t: can someone please tell me when prices are falling at an annualized rate of 26%, how this can lead to "More potential for increased equity in the home." Bob, do you really think BC'ers are that stupid?

Now Bob, just to be fair, I do like your use of Warren Buffet's quote. Too bad it has nothing to do with real estate markets, nor is it well-timed because Warren himself always chooses to wait until everyone is "fearful" before he starts getting "greedy." He also uses easy to understand ratios of value to pick his buying opportunities: like price to earnings, or in the the land of real estate, price to rents. Considering I can rent a luxury condo or SFH in this town for less than 60% of its ownership costs, I think Warren would advise me to put the safety back on my buying gun for the time being. Clearly, you and the people you represent, and the people who sell on your behalf, are still in the "greedy" stage--though I can smell your fear starting to get stronger.

Bob, I give you an "C+" for effort, at least you got the TC to agree to run your ad without having to clearly disclose it is an advertisement.

I've purposely left a few choice garbage bombs for reader comments... have at 'er.

51 comments:

combat wombat said...

Say, there wouldn't be an election coming up soon, would there? You'd never guess from all the political brown-nosing that's going on in that piece.

patriotz said...

* BC's housing starts hit 39,000 units in 2007, significantly higher than our 20 year average of 30,000.

Kinda like the US two years ago.

* Home ownership in BC is high at 70%,

Hey that sounds like the US two years ago too.

* BC has the lowest rate of mortgages in arrears in Canada, which already has a historically low rate.

Which is also - you got it - like the US two years ago.

This is much different than circumstances in the US.

That's right Bob - because the US is two years ahead of us! Not for long though.

Anonymous said...

Warren Buffet also said "Only when the tide goes out do you discover who's been swimming naked".

Bob, the truth will come out about you.

hp

Anonymous said...

"Home ownership in BC is high at 70%"

My understanding was that home ownership in Victoria is still low at perhaps 35% (probably reflective of an even lower default rate as well); vacancy remains low near zero. Is this true that the Victoria numbers are significantly lower than the BC average?

Anonymous said...

Patriotz said (minus all the quotes):
"Kinda like the US two years ago.

Hey that sounds like the US two years ago too.

Which is also - you got it - like the US two years ago.

That's right Bob - because the US is two years ahead of us! Not for long though."

Were you trying to make a point?

vg said...

hhv,

you best wrap your mind around this one, apparently two Duncan mortgage brokers are proclaiming there is no bubble and it's all internet maniacs who hear all these fear words like "meltdown". Unreal.

------------------------------


No housing bubble to burst in Canada




The Citizen


Maria Kyle and Bente Fleurie of Dominion Lending Centres in Duncan are in the mortgage business and it's a busy sector right now.


View LargeAll the talk about an economic crisis which has sent the Internet spinning, has not been helpful to people who may not have all the information.

In an interview Thursday, both agreed that while the really high real estate prices have dropped, it was inevitable that this kind of "reality check" would occur at some point.



"People must surely have realized that the property values wouldn't continue and have expected some kind of correction," Fleurie said.

Kyle agreed.

"It's just a price adjustment. It's not a bubble about to burst. The fortunate thing with the mortgage business is that people are always shopping for a house regardless of the economy. They need money; kids are in college, they need a car, they want to do an addition as opposed to selling their house. We're very busy. The rates are very competitive and they're really low still."

All the talk about an economic crisis which has sent the Internet spinning, has not been helpful to people who may not have all the information, they say.

"Sometimes, they really just don't know," Kyle said. "The media can sensationalize it with words like 'meltdown'.


http://www.househunting.ca/buying-homes/story.html?id=12f55402-7765-44b9-9d7d-e709c4a8c5cf

-------------------------------

On the way up I swore they said "if you don't get in now you will never own a home", now is that not sensationalizing ?? what a fricking joke.

hhv said...

"My understanding was that home ownership in Victoria is still low at perhaps 35% (probably reflective of an even lower default rate as well); vacancy remains low near zero. Is this true that the Victoria numbers are significantly lower than the BC average?"

Downtown, but not the CRD. CRD homeownership numbers, I'm pretty sure I've read somewhere but can't find the link right now, are actually slightly higher than the BC avg. JJ, can you confirm?

Vacancy rates are not "nearly zero" they are under-reported because of the way they are counted. Ecpect vacancy rites to rise sharply to a reported 1.5%-2% over the next year as Condo developers turn sale units to rental units (Bear Mtn is currently doing this).

Anonymous said...

Vacancy rates are near zero and an increase of 1-2% is not going to significantly change that fact.

phil said...

Anon 8:49 said: "Were you trying to make a point?"

Um, yes, and he made it very well.

roger said...

I think Bob needs to go back to school and take Marketing 101.

When you try to sell a consumer a product never add politics or religious bias to your ad. Extolling the virtues of the BC Liberal government in an ad directed at the general public is a real blunder.

hhv said...

Anon at 10:09,

clearly you understand very little about the rental market, vacancy rates and their effect on market rents.

If I'm mistaken about your level of understanding, please enlighten us with something more substantial than "Vacancy rates are near zero and an increase of 1-2% is not going to significantly change that fact."

How are they calculated? What is counted? What impact does a 1-2% shift historically have on the ability of landlords to demand top dollar for properties?

All of this kind of information is freely available at StatsCan and CMHC.

hhv said...

Roger,

perhaps you've exposed another myth in Bobke's propoganda: maybe he's suggesting "only Liberal voters buy houses."

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

I deleted previous post due to missing text.
-----------

Tim Ayres, a Sooke real estate agent, mentioned on Womp's blog that 5 houses sold in Sooke in the first three weeks of November.

So... Did anyone see the Sunriver Estates ad for new homes in Sooke in today's TC paper?

Two new options are now available to current buyers:

1. A three year mortgage @ 3.95%

OR

2. A credit of $15,000 which can be used for upgrades or as reduction in price.

Here is a third option which was missing from the ad.

3. Don't buy now - just wait and watch the prices keep falling throughout 2009.

mln said...

Vacancy rates are near zero and an increase of 1-2% is not going to significantly change that fact.

If the reported vacancy rate is 1%, and it shifts to 2% or 3%, the number of (reported) vacant homes has doubled or tripled, right?

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...

I think we are going to hear more "pumper" stuff from Bob Gill of CHBA. Seems he was just elected according to this FP/TC story

Bob Gill, a custom home builder and project manager in Greater Victoria since 1984, was sworn in as 2009 president of Victoria's Canadian Homebuilders Association this week.

Looks like tomorrow will be Tony Joe's last post as president of VREB. Chris Markham will be the new VREB 2009 president. But don't expect too much change in the spin as it is probably written by the Manager of Communications & Business Conduct at VREB.

patriotz said...

Were you trying to make a point?

Never mind Anon, just go out and buy a house like Bob says.

roger said...

anon 11:00 AM,

Thanks for posting the details on the self-directed mortgages at TD. They are an option for some folks.

It was interesting to hear that a 2nd mortgage can also be set up as well. The CMHC insurance is a bit steep though.

Anonymous said...

Yes the CMHC could make it a no go; however, if someone has say 65% LTV including the SDRSP then the CMHC fee is more like .5% (again on the entire outstanding balance.)

Say you owe $300k on a $550k house then your CMHC fee is about $1,500. This works if you starting with say $50,000 in the SDRSP.

roger said...

A few weeks ago posters on this blog were debating the BC Liberals decision to freeze property assessments at 2007 levels. Well it seems the government had to make amendments to the legislation.

NDP protests property assessment move

Property assessment notices arriving in mailboxes across B.C. in January will show the value assigned to homes this year as well as last year, but taxes will be based on whichever value is lower.

Small Business and Revenue Minister Kevin Krueger expects that in most cases, the 2007 assessments will be used, because this year's values were assigned in July at the peak of a hot real estate market. That market has since cooled rapidly with this fall's economic turmoil, resulting in what Krueger says would amount to an average 10 per cent over-valuation of B.C. residential properties, and more than 20 per cent for business properties.

Anonymous said...

Does it make any difference which property values they use when the rate is simply adjusted by the municipality according to their budget requirements?

Anonymous said...

other than when they're allowing a choice between two years of course.

They could drop all BCAA values by 50% (like 2010) and still assess the same property tax against the property, they just change the mil rate.

roger said...

It won't be too long before we see an article like this in the TC...

Welcome to the new realty reality Toronto Star

"A year ago properties weren't staying on the market for long enough so we never did that (entice buyers) with any frequency," says Mary Di Felice, a broker with ReMax 2000 Realty Inc. "But these are certainly different times."

roger said...

Over at the Real Estate Talks forum there is a poll and discussion titled:

Should there be a bailout package for Realtors?

No vote is currently in the lead!

Anonymous said...

Now I have to learn how to spell Ridilulous!

Anonymous said...

Ridilulous damn typos:
Ridiculous

patriotz said...

Does it make any difference which property values they use when the rate is simply adjusted by the municipality according to their budget requirements?

Quiet! The children will hear you!

Anonymous said...

Mish predicts 3-5 years to US housing bottom, that puts us at about 5-7 years to bottom.

http://tinyurl.com/5db3jk

womp said...

Assuming that we track them forever at 2 years lag. Considering how fast we seem to be starting the downslope, if it continues like this I wouldn't be surprised if we caught up to them.

Anonymous said...

Cab driving Anon here,

Have some family friends that are actively involved in property development around the Greater Victoria area. In recent years they have been focusing on townhomes/ condos. They just put the brakes on 3 projects ( one in Esquimalt, two in Langford) Previous dwellings bulldozed....now just empty pieces of property. Work for 300 trades people over the course of the projects...poof...not anticipating on starting these projects for another 3-5 years. This is not TC newsworthy as "Bare" Mountain...but more hard evidence at with which momentum the downturn ball is rolling.

Also, the goalkeeper for my sports team is training to be a metal fabricator. I was talking with him yesterday...He went from earning $27/hr as a first year apprentice to $9.75/hr at a local grocery store b/c of the lack of work available. Also, all his buddies that went to the Oil Sands in the search of $$$, are slowly returning as work is getting harder and harder to find out there.

Soon, we will again be able to enjoy "somewhat" quality service at our local fast food restaurants..as long as the workers are not too bitter about the losing the "good old days of irrational exuberance"

dub said...

I noticed a house in my area that is clearly a flip. Right on Shelbourne. Kind of a funny looking house.

4304 Shelbourne St, Victoria

I can't quite remember when it sold, but I think it was last spring... maybe later. Noticed a lot of work activity going on around the house, so suspected it was a flip.

Well, now I see that it's back up for sale with erealty.ca for $625,000!!

http://tinyurl.com/5nt98t
MLS#: V743730

Can anyone find out what it sold for last and exactly when?? I'm interested to see how the flip does :)

Anonymous said...

A friend visited over the weekend from Calgary. He couldn't believe how bad the weather here is with the constant fog and all. He also said that people in his (oil co. headquarter) office, if they were buying second homes, it was in Phoenix, Las Vegas and Palm Springs not BC. He said that the consensus at the office is that BC is way overpriced and that winter weather is terrible. People want a nice break in the winter with warm temperatures and sunny days, plus a cheap house to boot. So Phoenix, Las Vegas, etc definitely have the upper hand for Alberta investors.

mln said...

dub, I like this part: This room underwent a huge change we put in the skylight to allow head room for the shower where you now feel like your showing among the stars but the heated floors will keep you here on earth.

$600K for 1300 sq.ft... ouch.

Anonymous said...

Low ball offers are working:

3345 University Woods, MLS 252737 BC Assessment: $872,000

Listed Sept. 16: $1,189,000
Oct. 6/08: $1,095,000
Sold Nov. 28: $905,000

This price is $190,000 under the last list price! It is in a great location, well-built (1987)and recent major rennovations were probably not accounted for in the last BC Assessment.

Interesting, the current owners bought it only a couple of years ago.

hp

dub said...

mln,

Do you wonder if the spelling and grammer in their listing is any indication of the work done on the home? :) Not that I'm an English major, but I think I would have proof-read my ad before trying to sell something for $625K!

patriotz said...

if it continues like this I wouldn't be surprised if we caught up to them.

We will catch up to them at the bottom. Both local and US markets are going to see a flat bottom for years.

But we will lag behind them if and when markets start going up again.

Anonymous said...

Although our number of sales are dramatically down from this same time period last year, some 270 people did purchase property last month.

Why?

If you have access to TV or the newspaper, it would be difficult for anyone of the above to use ignorance of the market as a reason for having bought.


Even more perplexing for me is why did a quarter to a third of them buy a condominium? given that there is over a year supply of them on the market. And why, in general, are they paying close to list price!

Do we hate our children that much that we would give them a downpayment for a condo using our line of credit on our home! Just to get them out of our house!

While we are are on condos. Why are the Bare Mountain condominiums not in bankruptcy. How many of these air boxes have sold in the last six month? In the last year? In the last two years? Less than a dozen or two?

What about reflections? Is the rumour that a corner of the building being not on sound foundation - true? If your thinking of buying one of them - should the developer disclose this to you? Would you be pissed if he/she didn't?


In consideration of the above, would the current sales activity reflect a basic demand level for homes. Or could the number of sales drop further! If the current low level of sales were to continue for the next year. Our sales will be at 1982 levels of around 2200 annual sales. Since our population has increased 25 percent or more since 1982, our per capita sales would indicate the worst real estate market EVER.


Now for the good news.....

You can still get a cup of coffee for $1.75 in Fernwood if you bring your own cup. $1.25 if you chat up one of the gay ones.

"Not that there is anything wrong with that".

J. Seinfield

Anonymous said...

And why, in general, are they paying close to list price!

I think this is the one that gets me the most. Sometimes, I figure people are just insane - buying a $300K, 1970 condo for 5K under the asking price in this market...

But, to each their own.

dub said...

VREB has posted the Nov stats.

Looking pretty good (or bad, if you look at it that way). What surprises me the post is the lack of spin, IMO, put on by Tony this month...

Anonymous said...

Diamonds are believed to be rare while potable water is abundant. Hence, diamonds are expensive and water cheap.

Not everyone needs diamonds, yet everyone needs water.

So price is determined by scarcity and not needs.

Therefore, the needs of a buyer are not relevant.

However, sellers can elect to list or not list a home, thereby affecting scarcity and therby driving prices up as long as the number of listings does not overly out weigh buyers who need housing.

But even then, not all homes are relevant to all buyers. Hence, 3 years supply of million dollar homes are not affecting the first time buyers decision. There has to be an "over supply" of listings in the buyers subset market like 2 bedroom condominiums under $250,000. So, if there is a shortage in these subsets, then you will find offers close to list price.

dub said...

oops, post = most.

womp said...

November stats:

SFH median: 500,000 (up from $495,000)
SFH average: 524,128 (down from 565,741)

Condo median: 258,450 (down from $280,000)
Condo average: 273,890 (down from 323,028)

Townhouse median: 372,250 (up from 369,500)
Townhouse average: 447,370 (up from 389,731)

Damn I hate townhouses in this town. The news release notes that there were two big townhouse sales - one for $775k and one for over $950k.

womp said...

If you take out the two biggest townhouse sales, the average is 401,244. Still totally useless numbers though given there was only 20 sales.

greg said...

Hence, 3 years supply of million dollar homes are not affecting the first time buyers decision. There has to be an "over supply" of listings in the buyers subset market like 2 bedroom condominiums under $250,000.

In the short to medium term, I would agree. Int the medium to long term, an overabundance of overpriced listings will cause a cascade of falling prices, as the most expensive homes are reduced and start to compete with homes in lower brackets, all the way down the line.

This eventually should lead to more property available at lower prices, right down to first time buyer levels.

For example, if there are a few $400,000 houses in my area, but a lot of $500,000 houses, if the half million dollar houses are not selling and start to drop, obviously as a first time buyer I have more choice.

And so the downward cascade continues, until the number of buyers is enough to support prices all the way up the pyramid.

Since 3/4 of Victoria properties of all types are listed above the median prices for the various property types, it's obvious there is plenty of room for this scenario to unfold.

You need to see significant buying at the higher levels to prevent this from happening, and based on sales so far in 2008 compared to 2007, that's just not happening.

BTW, I also agree Tony Joe avoided the spin. Maybe he got tired of being mocked on the bear blogs for his idiotic pronouncements previously. If so, good for Tony, at least this month.

mln said...

Diamonds are believed to be rare while potable water is abundant. Hence, diamonds are expensive and water cheap.

It's a good thing the housing market is also monopolized by a single cartel of suppliers, otherwise your sobering analogy of comparing houses to diamonds might not work.

roger said...

November 2008 Statistics - Monthly Analysis

October 2008 shown in ()

MLS Sales - 268 (316)
MLS listings - 4459 (4,680)

SFH Average - 524.1K (565.7K)
SFH 6 mo. Avg. - 562.8K (574.8K)
SFH Median - 500K (495K)
All SFH Sales - 153 (184)

Condo Average - 273.9K (323K)
Condo Median - 258.5K (280K)
All Condo Sales - 77 (76)

Town Average - 447.4K (389.7K)
Town Median - 372.3K (369.5K)
All Town Sales - 20 (26)

Year-over-Year Analysis

GV - Greater Victoria
November 2007 shown in ()

MLS Sales - 268 (623) - Down 57%
MLS listings - 4459 (3196) - Up 40%

GV SFH Average - 524.1K (596.5K) - Down 12%
GV SFH Median - 500K (510K) - Down 2.0%
GV SFH Sales - 126 (310) - Down 61%

GV Condo Average - 273.9K (313.6K) - Down 13%
GV Condo Median - 258.5K (293.5K) - Down 12%
GV Condo Sales - 77 (177) - Down 56%

GV Town Average - 461.0K (474.2K) - Down 2.8%
GV Town Median - 382.5K (421.0K) - Down 9.1%
Town Sales - 19 (62) Down 69%

Just Jack said...

I hate town homes to Womp. So, why do you break them out from condominiums? They are both strata properties with monthly fees and I believe that someone looking at purchasing a condominium would also consider a town home. Furthermore, the listing agents have a difficult time distinguishing the diffence between the two as you find condos mixed in with town homes and vice versa.

If you think town homes are tough -try half duplexes. Half duplexes are the ugly daughters of the real estate market, especially when they are "linked" to 1950's starters.

G said...

Something from the monthly report:

". November’s sales were the lowest monthly sales since December, 1999."

I can't beleive they included this statement!

Just Jack said...

I'm seeing that the million dollar homes are having the larger drop from list price, while starter homes are selling closer to their ask price. Although, poorly located starters are not selling at all.

Having said that, I believe that we may be in for a cascade in prices as Greg says. And we should see this as the agents re-adjust the list prices of homes in the spring. Those people who have de-listed their million dollar home for the winter, are not going to be happy come this spring when their property will have to be listed below a million just to entice a showing.

Well, at least our market isn't tanking as hard as Vancouver, so there is still time for the over extended seller to get out. And that's pretty much most of the new housing market in Langford and Colwood.

Anonymous said...

geez, what is it with this blog...is it you and realtors or you and everybody?

try counsellng....you'll feel much better