Wednesday, January 21, 2009

Craigslist is not the market

Interesting story in the TC today about my second neighbourhood (Vancouver West End) and market rent increases. Apparently a real estate investment firm wants to up rents on some of its properties by over 50%. They cite examples of market rents on Craigslist as evidence that:
the increase is representative of rental rates for comparable units in the area
This presents an interesting quandary for the BC government's residential tenancy branch. Tsur Sommerville of UBC's Sauder School used a flawed (IMHO) Craigslist survey of market rents last year to conclude that Vancouver real estate was only 11% over-valued based on "market rents." Since that study was published, Vancouver prices have fallen 19% and show no signs of slowing down--and yet people aren't flocking to purchase rental units because they are suddenly cash-flow positive for the first time in half a decade.

Craigslist is not, and cannot ever be, a good source of statistical information. Institutional real estate investors are not, nor can they ever be, like individual condo owners who seek to cover their costs for their condo investment. Which is precisely why CMHC does not count individually owned rental units--the economy of scale is nowhere even remotely relative to what is actually happening in the rental market.

An apartment is not a condominium. Gordon Nelson Investments did not pay condo-equivalent market prices for their real estate investment purchases in the West End last summer. They bought apartment buildings, not condo developments. They knew the income the rents bring in and they knew the price they were paying for the building. If their numbers didn't add up to a good ROI, why did they buy? I'm guessing the numbers did add up to a healthy ROI. I'm also guessing this is part of a wider trend by investors and developers to argue that prices are indeed supported by rents and thus keep up the artificially inflated valuations of their properties; I am not suggesting this is a coordinated effort.

CMHC states that average rents for Vancouver two-bed apartments are $1124 per month. In the downtown region, they give numbers for condo rentals and apartment rentals at $1604 and $1075 per month respectively. They also indicate a year-over-year reduction in rental prices by 0.3%.

I'd like to say I'm confident that the BC residential tenancy branch will reject this Craigslist market-based claim for the nonsense that it is, but I'm not. It remains clear to me though, this is a case of someone trying to argue apples are oranges, and that "someone read somewhere" that oranges were selling for 50% more than they actually are, and the market for each should be the same despite the fact that it's not. I'm keeping my fingers crossed that wisdom and quality research prevails. The precedent setting nature of government decision making tribunals could be troubling for renters all over the province.

89 comments:

Anonymous said...

If it's not market rent then the landlords will lose a lot of tenants and the units will sit empty.

Anonymous said...

These are asking rents - not market rents. If you want current market rents for condominiums and apartments then canvas property management companies for rents realised.

For example, suppose you go look at a reflections condominium asking $1,500 per month. While your there the landlord says he will reduce it to $1,300 per month if you sign a year lease.

Good old Tsur, used the $1,500 as market rent, when he should have used the $1,300. This demonstrates a fundamental lack of knowledge of market value. And this dude teaches this stuff!

womp said...

I hope this issue is dealt with quickly, publicly, and with resounding prejudice (in the legal sense).

Craigslist has become an almost useless resource for renters because of the scams, one line descriptions with no pictures, and utterly ridiculous asking prices of many landlords.

Allowing the pricing nonsense to continue will harm everyone and be another postponement to economic recovery.

Nick said...

Step 1 - Buy overpriced properties
Step 2 - Spam Craiglist with fake properties in the neighbourhood for rent at ridiculous prices
Step 3 - Appeal for rent increase based on fake posts
Step 4 - Profit!

Anonymous said...

Craigslist rental listing prices are porn for landlords.

Masturbatory fantasy porn... nothing more.

Anyone who thinks those numbers are reality and any more useful than the "rant and raves" section would be woefully mistaken.

Anonymous said...

Folks, there's an easy solution to Craigslist unreality... form a flagging team (doesn't take more than 4-5 people) and keep flagging the landlord pornographers.

It's your civic DUTY!

Anonymous said...

What will you flag them for, asking price?

Good luck with that and good luck to the poor renters that you frustrate even further.

Dumb Canuck said...

This one is easy. The new apartment owner bought high with an optimistic pro forma income expectation based on rising rents. This was the business plan. Too bad the market for housing tanked before the owner could flip the whole building. If they don't get the increases, they likely go broke. Which they should.

Anonymous said...

It is sort of funny that many, many comments talk about how the rental market is becoming more open, less 'tight', and use the sheer volume of rentals on Craigslist as validation... but heaven forbid Craigslist shows them something they don't like. Then all of a sudden everyone is scoffing at it, suggesting that it is not to be taken seriously, just landlorn porn, right?

For what it's worth, I could care less whether it is a valid source or not, I'm just pointing out a little contradiction here.

Anonymous said...

8:20 pm, i agree with you.
some people here just listen what they want to listen. seometimes they seems childish.

however, there are some good and realistic analysis. that what i am looking for and why i read this blog.

Anonymous said...

This is where Patriots can come in with his Cap rates (fundamental value) etc. They likely purchased for a good price based on low rents and cash flow, have no expectation of actually doubling the rents, and will do very well if they get a 50% increase. Then they may sell.

Apartments that have very low rents (and therefore zero turnover)coming into this decade and include heat and hotwater, water and sewer, and garbage etc cannot hope to catch up to the increasing costs including property taxes without some kind of a one-time increase.

The clause in the RTA is important for situations where property tax and operating costs are becoming at times over 50% of the rents. Not that I agree with increasing a $1,200 rent to $2,400, this would be a crime.

An option for the landord is to renovate and empty the place out.

patriotz said...

For what it's worth, I could care less whether it is a valid source or not, I'm just pointing out a little contradiction here.

It's not a contradiction. Craigslist is a valid source (not the only source of course) for how many properties are for rent, assuming the listings aren't outright bogus.

Craigslist is not a valid source of market rental prices, one because the prices given are asking rents not necessarily actual rents, and two because the properties available on Craigslist are not representative of all properties - i.e. the more expensive ones are much more likely to be up for rent at any given time.

patriotz said...

An option for the landord is to renovate and empty the place out.

With the glut of high end condos now hitting the rental market, that is no longer an option. The high end is getting too crowded.

IMHO the purchaser had been hoping to either flip the property as is, or do a reno and charge high end rental rates. Both these options have been kiboshed by the market.

So he wants to get the rent controls lifted because he paid an excessive purchase price. Well tough beans.

mln said...

Re: Craigslist contradiction

Here are two statements:

"Wow, there are a lot more rental postings on Craigslist these days. 6 months ago, you only saw 10-20 posts per day, now it's up around 200. Maybe the rental market isn't so tight after all."

"A landlord can't possibly use Craigslist pie-in-the-sky asking rents as evidence that they are charging too little. That is ludicrous."

Can you spot the contradiction? Neither can I.

Anonymous said...

Patriotz 11:24... will you PLEASE stop talking sense to greedy landlords?

Poor cattle, they'll never understand, it only upsets them, and it spoils the meat.

As far as Craigslist flagging goes, by all means, flag all asking prices you think are ridiculous. If enough people do it, landlords will start listing for what they will be willing to take, not some ridiculous dreamland starting point, and it saves time for everyone all around, as well as injecting a bit of necessary reality into an out of control situation.

Who needs to barter? Leave the bartering to Tijuana.

Anonymous said...

Reading some of the other articles on there, it appears that the owner (and others like them) are buying up poorly performing properties (in this case in a high- end area) and cleaning up the rental rates.

I'm disappointed with you Patriotz. I thought you would have pointed out that this is instituational property and not subject to the same emotional market mania that we have experienced. These properties are valued based on the cash flow, cap rates (return on investment) and inherent value (ie whether they are at their highest and best use.) It would appear that this building is at it's highest use for the foreseeable future.

They are not buying a 40+ unit building to flip in the same sense that you see discussed here and I'll guarantee you the are not disappointed in their well considered decision (assuming that's the building behind the landlords in the article.)

They are also not asking that rent controls be lifted. They are asking that the RTA be applied as written in that the landlord can make a request to increase rents based on market where the current rents are significantly below market value. This is their right under the act. Whether they get it or not will remain to be seen as the process is Arbitration and by its very nature the results can be arbitrary.

There is plenty of room in the Vancouver market and the Victoria market to empty out a building that is significantly under-market rents, renovate it, and re-rent at the market levels. And in fact now is a great time to do just that with construction finally slowing down and building and labour costs coming uner control.

As for Craig's List, the renters and landlords are repeatedly asking spammers and trolls to stop making ranting comments on there or to otherwise interfere and let it be what it is intended: a place to advertise your rental property to people that want to rent it. If you don't like the price, don't make the phone call.

Anonymous said...

"Leave the bartering to Tijuana."

Amen to that. It's enough of a pita to sort through landlords cryptic descriptions trying to extract pertinent information without also having to sort which of the dreamers is actually willing to come down to a reasonable price. You're renting your suite, not selling your Auntie May's sofa.

Anonymous said...

Last year around Christmas there were 500 to 700 rental listings on Craiglist Vancouver.

This year there were 1100+.

hhv said...

"There is plenty of room in the Vancouver market and the Victoria market to empty out a building that is significantly under-market rents, renovate it, and re-rent at the market levels."

The building the article is discussing isn't rented at below market rates. It is right around the CMHC average rents for the area. The RE investor is trying to use a listing service to establish a new level of market rent. We have no idea what the developer paid, but I seem to recall news stories last summer about falling apartment block prices, so I'm guessing the investor didn't get too bad a deal and is getting a decent ROI.

I don't fault them for trying to raise their rents, but I do make the claim that their attempts to are based on flawed analysis, which I bet they understand is flawed, but they are making the case and will likely use Sommerville's study as support for it.

For the people who think there is a contradiction between using Craigslist to support a "more rentals available" position and then making the claim that Craigslist asking prices aren't indicative of market rents, I have this to say:

MLS gives us total listings and asking prices. We use MLS to establish 90% plus of total inventory. We don't use asking prices to establish what the current market price of properties are, we use sales prices.

If Craigslist was indicative of 90% plus of the total available rentals, and if Craigslist reported rental agreement prices, then it would be a good source of data. But since we have no way of knowing what the units listed on Craigslist represent to the rental market and no way of knowing whether or not the units actually rent for the asking prices, it is an incomplete source of data.

We can still make the observation that there are more listings available on Craigslist this month, and therefore there may be more rentals available--it could be as simple as more people are using Craigslist to rent their units though, and not an increased number of total listings in the rental market. We have no way of calculating this.

A better source of data for market rent is CMHC, even though they don't include many of the available properties: but the ones they do include are longterm rental properties. Condos tend to be short term rentals (couple of years before owner occupied or flipped etc).

We don't have a perfect system for calculating market rents and vacancy rates. But we do know that the CMHC data is better than what someone makes up out of reviewing Craigslist listings.

Anonymous said...

TC article. Shall we discuss?

"Rate cut might help real estate market

Insiders say lower mortgage costs will improve entry-level affordability"

http://www.timescolonist.com/Homes/Rate+might+help+Victoria+real+estate+market/1205392/story.html

S2

roger said...

More wishful thinking in today's TC.

Rate cut might help real estate market

The Bank of Canada's recent rate reduction could provide a kickstart to the Victoria real estate market this year, according to industry insiders.

"It certainly can't hurt because what happens every time you get a quarter point drop [is] the mortgage qualifications go up by $10,000," said veteran agent and broker Pat Parker of Century 21 Royal Victoria Realty.

Parker said that could be enough to convince people who are currently renting and facing the prospect of paying between $1,800 and $2,400 per month to jump into the market and buy.

"Assuming they are able to come up with a down payment, they might have the choice of either paying off their mortgage or somebody else's," he said.

----------------------
Hmmm... How many renters are paying $1800 to $2400 per month and sitting on a downpayment?

With today's minimum downpayment of 5% this works out to 20K on a 400K property. Add 5K for property tax and 1K for legal fees and the buyer needs 26K. If they use a cashback mortgage to get the money they pay a high interest rate. If they look at an RRSP withdrawal they probably find 30-50% less money than last summer. If they ask Mom & Dad for a loan they will probably get a no because they lost money in the stock market and they know the RE market is tanking.
-----------------------
Chris Markham, president of the Victoria Real Estate Board, noted the rate cut might have been what the market was waiting for.

"It improves affordability -- at the entry level right now they have been waiting for some softening and I think it all helps," he said.

-----------------------------
No Chris - What the market is waiting for is much lower prices. Real estate is just not affordable for the typical buyer and the pressure to buy now has evaporated.
----------------------------------
Parker added there is likely pent-up demand on both sides of the market, with buyers and sellers waiting out the uncertainty caused by the global economic downturn.

"But to be honest, I don't see any logical reason why the volume of sales has gone down as much as it has. There doesn't seem to be any logic to it -- it's all emotional," he said, noting while the rate cut won't lead to a rise in selling prices, it should eventually lead to an increase in selling volumes.

--------------------
There is plenty of logic to it.
- We had a bubble and prices rose to the level where the supply of greater fools was considerably diminished.
- Canada is in recession and people are concerned for their economic safety.
- Only a few buyers are willing to catch a falling knife.
- Buyers know property will be cheaper in a few months and so they are waiting.
- Many buyers, especially retirees have paper or actual losses due to the stock market meltdown.
- Banks are now forced to require 5% downpayments or charge higher interest rates on cashback mortgages. This has resulted in a much smaller pool of FTB's

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

Further to the last post...

Parker added there is likely pent-up demand on both sides of the market, with buyers and sellers waiting out the uncertainty caused by the global economic downturn.

Pat is right about buyers. There is pent-up demand by buyers but it is for lower prices and they are patiently waiting.

He is wrong about current and future sellers. Hopeful sellers won't be waiting out the global economic uncertainty. There is plenty of demand by nervous owners to sell now (flippers, speculators, job loss, divorce, old age home etc.). And then there are those who will be only waiting a few weeks or months hoping to sell in the spring. These folks will be in for a shock when they find inventory at record highs and few buyers. Those willing to buy will be looking for significant price reductions.

Anonymous said...

Ants are coming out to spin a speeding train again.

Vancouver has RE 20-40% price drop on sale. In Victoria RE is cheaper than last year, it will be getting cheaper in the coming years.

Does anyone want to catch a falling knife? go ahead if you want, i will not.

roger said...

S2,

Nice to see you posting again. I have been following your thread on KIV. It would be interesting to know if readers there find that the recent CMHC 5% downpayment has restricted their ability to buy a property?

Anonymous said...

US has lower rate than us, are there more buyers there because of it? No.

But we are different here, right?
How about Vancouver? Oh, yea, we are different again.

Actually, each person is different, they want to fool those fools. i am sure they will catch one or two.

vg said...

"But to be honest, I don't see any logical reason why the volume of sales has gone down as much as it has. There doesn't seem to be any logic to it -- it's all emotional," he said"



Nothing logical ? just like there was no logic buying homes with a 60% affordability index where most "logical" people are shut out of the market but no complaints there right ? total MSM bullshit.

The Logicals are using LOGIC knowing we are heading into the nastiest recession in many decades and this tool says there is no LOGIC ? VREB stoops to new levels of insulting peoples intelligence.

vg said...

"Pat is right about buyers. There is pent-up demand by buyers but it is for lower prices and they are patiently waiting."


Why do they never say where this "pent up demand" is actually coming from ? If I was a professional and told my colleagues that there is pent up demand for my product, I had better produce some stats or facts to back it up or I would be laughed out of the board room.

Why do these clowns continually get away with this garbage ? The stats show there is NO demand with sales fallen off a cliff.

Anonymous said...

Pent up buyer? Yes, millions of them.

But billions of pent up lay off come out first, BC Ferry, IBM, even teachers at collage.

Little ant, harder and harder to spin the train.

hhv said...

Pent up demand when we have the highest level of homeownership in Canada ever?

There is pent up demand for lower prices, and then you'll see maybe 0.1% of those of us who have been longtime bears hop in with big cash plays... but if they think a 1% rate cut by banks is going to somehow lead the banks to qualify a bunch of low-paid FTBers to overspend on depreciating assets they obviously think the banks are stupider than they are.

The only people getting a good deal on mortgages right now are current homeowners on variable rate mortgages.

Anonymous said...

Retail sales fall most in 11 years


Canadian retail sales registered their steepest monthly drop in 11 years in November, dropping 2.4 per cent to $34.9-billion on a seasonally adjusted basis, Statistics Canada said Thursday.

Little ant said" it is a good sign. people are saving for the downpayment." Let's spinnnnnnnnnn...

roger said...

HHV said,

but if they think a 1% rate cut by banks is going to somehow lead the banks to qualify a bunch of low-paid FTBers to overspend on depreciating assets they obviously think the banks are stupider than they are.

That approximately 1% rate cut by the major banks this week was for the posted fixed rates which no one ever pays. The discounted fixed rate only dropped by .2% to 4.49% for a five year fixed mortgage.

The variable rate dropped by .5% to match the BOC rate cut. Most new customers will pay 4% for a 5 year variable closed mortgage. Heaven help them 3 years from now when we start to pull out of the recession. The BOC will raise the bank rate like mad to contain inflation.

Anonymous said...

Apparently you can get 4% 5 year fixed at some institutions right now. But I agree this will not impact sales much at all if any.

hhv said...

Roger,

It's crazy. High prices and low interest rates are a recipe for household economic disaster. Why anyone would agree to leverage themselves over 35 years to buy an over-priced house in a time of recession is beyond me.

I had a conversation with someone the other day who wants to buy a house. Says they can afford it no problem. I ask them "will you be able to afford it if your fixed rate jumps from 4.5% to 6.5% in 5 years?"

Person looks at me with a confused look.

I say: "Interest rates are lower now than they have been in 50 years. If they creep back up to something approaching normal in 5 years time, you'll have to renew at a higher rate. You won't have paid down much principle in those first five years, so your payment won't go down, it will go up, and if it's a 2% increase in interest, it could be substantial, like $600-$1000 more per month depending on how much you've borrowed."

Says the person: "I hadn't thought of that. I wonder why my mortgage broker didn't tell me that?"

roger said...

HHV,

I agree with you. I hate to see folks get in over their head. S2 has an interesting thread going on over at KIV. Seems like the 5% down payment, which is still too low IMHO, is preventing folks from entering the market.

Here is something I have been thinking about lately. How many owners that have bought in the last two years are unable to sell even if they wanted to? If they bought a place with zero or 5% down they are now upside down on their mortgage. If they tried to sell they would owe the bank money especially when realtor fees are added. But they don't have any savings or they would have put it down on the house at the beginning or as extra payments. So even if they got a buyer they can't close because the bank won't discharge the mortgage without getting the balance due.

So what happens? They are trapped watching the market value drop while they struggle to make payments. The only way out is bankruptcy. This is another toxic problem with putting little down when you buy.

Comments or anecdotal stories anyone?

olives said...

Can you imagine being "trapped" with another person (friend or ex) in a 500 square foot condo (that you can't rent out) for the next 10 years or more? yikes.

Anonymous said...

I love how our govt is dropping rates and buying up the MBS garbage from the banks all at the same time.

The taxpayer exposure to this mess is criminal!

Anonymous said...

Thanks Roger

What I took from the conversation on KIV is that prices are still too high even with the rate cut and the 5% down payment is a hinderance.

What I have also taken from there, based on the small amount of posts, is that there are not a lot of first time buyers left. :-)

S2

Art Vandelay said...

First-time buyers still physically exist, but their mentality has flipped from, "we need to buy now or we'll never be able to afford a house," to "what's the rush; prices keep going down."
The paradox of housing and the stock market is that people can't get enough when prices are skyrocketing, but they can't run away fast enough when prices are falling. If they bought groceries, cars or gasoline the same way, everyone would call them crazy. But when they treat houses and stocks this way, the media falls over itself to help people congratulate themselves on what geniuses they are.

omc said...

It appears to me that the vested interests (realors and such) are trying to put a little pressure with inferences that things are picking up etc. Funny how this timed with an interest rate drop. There is of course no proof, and every single thing I have read points the other way even allowing a further interest drop. MY PCS has never been busier with new listings and price drops, but I have never seen so few sales.

The recession is world wide and the real estate bubble is world wide too. 1 in 6 works in construction in this town, lets see how that pans out after the big projects are finished this spring.

Anonymous said...

You want to see a market thats going to get slaughtered. Look at Sidney's condominiums. Especially the ones with age restrictions.

No one wants to live there.

roger said...

OMC said,

It appears to me that the vested interests (realors and such) are trying to put a little pressure with inferences that things are picking up etc. Funny how this timed with an interest rate drop.

You bet!! Here is the latest ad in the Real Estate Victoria newspaper by the REALTORS® of Greater Victoria.

No time like the present to buy a home (pdf)

If you are tired of renting and have always wanted a home of your own, now is an excellent time to take the home ownership plunge. Attractive mortgage interest rates, government incentive programs and an excellent supply of homes for sale are making the dream of home ownership possible for more would-be buyers.

They go onto tell you how to raid your RRSP. But they are right about one thing. A buyer right now is taking a plunge.

olives said...

One big difference at KIV is that there is absolutely no argument anymore over the issue. Some posters have completely disappeared. On the other hand the real estate blogs have gotten a lot busier :)

Anonymous said...

"You want to see a market thats going to get slaughtered. Look at Sidney's condominiums. Especially the ones with age restrictions.

No one wants to live there."

It's statements like this that ruin the integrity of this entire site. Or were you joking??

Has anyone noticed the relative quiet around the change in bank Prime? I tried to find it on CBC today and nothing. I looked on CIBC's site and it shows 3%, no Fan Fare?

Anyway, we were discussing our "Prime + 0" line of credit with BMOP today. It is based on Prime; well no, actually and apparently, it's based on some "Other" bank rate that sets the rate equal to Prime. Apparently they are adjusting this "Other" bank rate by 1.5%. The end result it would appear is that we will now pay Prime plus 1.5% on our LOC. Corporate Theft anyone? It's short term money perhaps now borrowed at 1%, what gives??

I am planning my escape and will not stop until I have 2 of everything in my boat. Anyone in?

roger said...

anon said:

Anyway, we were discussing our "Prime + 0" line of credit with BMOP today.... The end result it would appear is that we will now pay Prime plus 1.5% on our LOC. Corporate Theft anyone?

BMO is using the fine print to raise the interest rate on your line of credit. You are not the only one complaining about it.

BMO LOC Discussion

Anonymous said...

I find it very disgusting and will not stop until everything I hold at BMO is gone. I will also tell everyone I know what crooks they are. Did I tell you the Bank of Montreal is trying to steal from their clients?

mln said...

All over a point on your LOC?

Anonymous said...

1) This was both a credit and housing bubble. Over the last few years lenders have been running very lean spreads. This period is over so get used to it.

2) If someone can't come up with a 5% down payment they have no business owning a home.

Anonymous said...

If someone can't come up with a 75% down payment they have no business owning a home.

And soon, that's what it's going to take to get a loan.

And higher.

Anonymous said...

75%? Get real. Or did you mean to type 25% (which I can identify with, since it is the figure I have in mind that I would like for a down payment)?

Chickinvic

Anonymous said...

What is Kiv

Anonymous said...

google "kiv" and it is the first site - kids in victoria

Anonymous said...

"All over a point on your LOC?"

No, the dollars are miniscule. It's the fact that the Bank of Montreal lured me over with a Prime LOC, which I accepted in good faith, and they are now attempting to steal my money. I find that distasteful and am fully mobile. This is the only way we can maintain some level of control and fairness.

BMO is raiding the economy with this cash-grab and I have no intention of sitting back being a part of it.

Anonymous said...

anon 8:46 said:

It's the fact that the Bank of Montreal lured me over with a Prime LOC, which I accepted in good faith, and they are now attempting to steal my money.

If you read your line of credit contract you would have seen that they had the option to change the interest rate with sufficient notice. They are in business to make money just like all the other banks. If you go somewhere else you will get the same type of contract with the same interest rate adjustment clause on a LOC.

Anonymous said...

I get that and understand that it's in the fine print. They worked fairly hard to get my business a little under a year ago and were all open arms.

This is just a precurser to what's going to happen to mortgages in 3-5 years. Regardless of BOC prime it will be BOHICA at every turn with the banks once they think you're in the cuffs. I intend to be long gone from the BMO thieves by then.

Sorry, I'll stop my rant there and let you get back to this glorious RE market.

Anonymous said...

When you borrow money you are paying the bank for a service. This is not thievery it's a productive business that employs people and provides a service. Do you consider grocery stores to be thieves because they make money on the food you buy from them?

patriotz said...

This is just a precurser to what's going to happen to mortgages in 3-5 years.

When you take out a mortgage with a 5 year (or whatever) term, the entire principal balance becomes due and payable at the end of the term. The bank can ask whatever interest rate it wants to renew, or you can pay off the mortgage (or any part of it) without penalty, or you can get a new mortgage somewhere else.

If you have a problem with this, pay cash when you a buy a house. Nobody has any duty to loan you money.

Anonymous said...

ChickinVic: You weren't alive in the 1930's, were you?

That's why they're already calling the near future the GreatEST Depression.

Anonymous said...

Soon folks will have no choice. If they won't be able to afford cash for a place, they certainly won't get a loan for a more expensive place either.

It's not called a Depression for nothing.

Anonymous said...

That's an interesting thought Patriots and it reminds me, noone ever has to borrow money, it's only the lenders that have to lend.

I do what I have to to not give the banks one cent more than I have to. That is my obligation.

Anonymous said...

I believe that one of the major causes of the credit crunch has been the extensive use of lines of credit. If the market had just been confined to home sales and home prices we would not be facing such a massive credit crunch. These lines of credit were not correctly assessd for risk with the interest rate too low. Because of the low interest rate, people tapped into their global limits with just a phone call, allowing large purchases with very little thought or financial advise. Second homes, home improvements, cars, boats, vacations became impulse purchases.

The banks are now re-assessing the risk of these credit lines. I expect that the banks will lower the global limit on lines of credit, continue to raise the line of credit interest rate, and make it more difficult to qualify for a line of credit.

Anonymous said...

The banks see that peple are strapped into their LOC, they believe that demand for LOC is easily met with interest rates of 4% plus and are going for the cash grab. That's all there is to it.

Anonymous said...

I've often wondered if it would even be detrimental to society to only pay cash for houses - cut banks out completely. Homes would cost only what people could realistically save up - sure you wouldn't get rich selling one, but you wouldn't spend your whole life paying it and the interest off either.
It all kind of evens out in the end except BMO and RBC etc don't make their billions.

dub said...

An article with some interesting numbers.

Do your part for the economy: Stay home
http://tinyurl.com/dlx8qk

Average Canadian household debt rose to $90,700 in 2008. Total household debt now amounts to 140 per cent of disposable income. That ratio is at a record high. In 1990, before the last recession, the figure was 91 per cent.

Consumer and mortgage debt last year equalled 127 per cent of disposable income in the average family. This is about the same as the U.S. rate in 2006 "just before the bubble burst," the report notes. "The recession will likely push many more Canadians over the edge."



IMHO, it's simple numbers like these that should make overly optimistic "it's different here" people and "RE only ever goes up" people stop wonder where things might go...

beagle said...

I know there is a credit crunch but if I didn't read the news I would never know it. In the last year my line of credit interest rate has gone down 3% and the limit increased 30%. Both my credit card limits have been increased and one of them keeps sending me 1.99% offers for 6 months.
Also the price of energy and most things I buy except food has been going down. I bet this is what a lot of Victorians are seeing. I think it's a temporary thing till the recession digs in here but it may give real estate sales a bounce in the coming months.

Dave said...

I think it's a temporary thing till the recession digs in here but it may give real estate sales a bounce in the coming months.

It just might. I can tell you that some homes are still getting multiple offers and selling for over asking. And it's not even spring yet.

Future buyers shouldn't assume that the whole market is going to move in lock-step. There will always be high demand for certain segments of the market. If you wait for the market bottom and recovery, then it may be too late to get into that segment.

Anonymous said...

Dave, can you provide mls numbers to back up the claim "I can tell you that some homes are still getting multiple offers and selling for over asking."??

Given the low amount of sales and relatively high amount of inventory, I'd like to take a look at the listing.

thanks.

hhv said...

Dave, if people wait for the market bottom and then recovery, they would be wasting their time.

I think many people are just waiting for a product they like at a price that makes sense for them.

Anonymous said...

"some homes are still getting multiple offers and selling for over asking"

Dave, please spin with numbers, not jus "I can tell..."

where is the sale, how much, what is the over price, which segment do you refer to? thanks.

roger said...

beagle said:

I know there is a credit crunch but if I didn't read the news I would never know it.

That is probably because you are only directly exposed to consumer credit. If you have a good credit record there is credit available to you and in some cases it will be offered to to you without asking for it. Marginal credit history customers will get higher interest rates and a lowering of their credit limits.

The real credit crunch is in business loans. Banks are tightening up because they know some businesses may go under and they will be left holding the bag. Auto dealers, real estate developers, large furniture stores, manufacturers and many other companies are scrambling for financing.

Dave said...

It's not hard to find that info. For example, you can see a couple sales over list in North Vancouver in the past week:

http://www.nvhomes.ca/aPage.jsp?aPageId=8

dub said...

It's not hard to find that info. For example, you can see a couple sales over list in North Vancouver in the past week:

http://www.nvhomes.ca/aPage.jsp?aPageId=8


you're joking right? First of all, two, 1% over-lists vs all of the -14% to -23% under-list sales looks like a joke to me.

Second, you still haven't shown all of those multiple offer situations you were talking about.

Third, lets see some MLS numbers.

Till then, you're clearly blowing a lot of hot air out yer bum.

Anonymous said...

Dave, Dave, Dave

Are you one of those kids that were always getting beat up on the playground! This is Bear territory, you come back with North Vancouver sales and your going to get hit big time.

boomer said...

""I've often wondered if it would even be detrimental to society to only pay cash for houses - cut banks out completely. Homes would cost only what people could realistically save up""

sure- also have a 100% Estate tax and issue everyone a gun at the age of 12 to get them started..
sounds promising

lol

roger said...

Dave said:

I can tell you that some homes are still getting multiple offers and selling for over asking. And it's not even spring yet.

Future buyers shouldn't assume that the whole market is going to move in lock-step. There will always be high demand for certain segments of the market.


There will always be a few good properties that are highly attractive from a location and quality perspective. If they come on to the market realistically priced they will attract interest and perhaps multiple offers that may result in a selling price that exceeds the list price. Emotional buyers will often compete to "win". However, in the current market conditions , these sales will be a rare occurrence .

Dave - If you want to have any credibility you have to come up with some facts, not "arm waving" anecdotal stories. I back up ny predictions based on publicly available charts, stats and online articles. You need to do the same if you want bears to believe you. Otherwise it is just more old, tired RE market spin.

Please provide the MLS numbers and details. What market segments are you referring to that are in high demand?

I for one am eagerly waiting for your answers....

roger said...

Dave said:

It's not hard to find that info. For example, you can see a couple sales over list in North Vancouver in the past week:

This is a Victoria housing blog Dave. Local details please.

Still waiting......

beagle said...

Roger , I know the credit crunch is affecting business loans. What I'm trying to point out is for the average person in Vic with a decent job and decent credit, times have been getting better recently due to lower interest rates , commodity deflation and even lower taxes. My personal opinion is this won't last but I see a dead cat bounce as a possibility. With all the extra pumping that will come as spring approaches and the governments turning on the money hoses, some greater fools could be lured into buying.

Anonymous said...

Baby ant D, let's talk about Vancouver then.

Now there are RE of 20-40% price drop for sale. Are people buy this year too late?

By the end of this year, people buy now maybe too early.

Don't try to spin the train any more.

Dave said...

Roger, multiple offers aren't recorded by MLS.

I am not going to point you to any particular MLS numbers where I know of multiple offers. It wouldn't be ethical to make such details public. Why would you expect this for my gaining credibility?

Anonymous said...

"Soon folks will have no choice. If they won't be able to afford cash for a place, they certainly won't get a loan for a more expensive place either.

It's not called a Depression for nothing."

January 23, 2009 3:35 AM

For the anonymous poster at 3:35AM:

This is Chickinvic,

No, I wasn't alive in the 1930s - were you?
I don't think your prediction of needing to pay cash for a house in Victoria, or needing a 75% down payment is realistic at all. I'm a huge bear on this market, and believe prices should only be about 1/2 what they are currently, but I don't for one second think they will ever get to the point where most sales will be happening with 75% down payments.

PS - If things get as bad as you seem to think, owning a house will probably be the least of my worries.

Anonymous said...

I am not going to point you to any particular MLS numbers where I know of multiple offers. It wouldn't be ethical to make such details public. Why would you expect this for my gaining credibility?

Dave, you're so full of shite - how is referencing MLS#s that show properties that sold for more than asking (presumably from all those multiple offers you speak of), unethical?

Assuming you're the same Dave that posts on PaulB's blog, this attempt at hand-waving was pretty weak.

roger said...

Dave said,

Roger, multiple offers aren't recorded by MLS.

I am not going to point you to any particular MLS numbers where I know of multiple offers. It wouldn't be ethical to make such details public. Why would you expect this for my gaining credibility?


I agree multiple offers are not recorded by MLS. Readers would like to see the listing(s) to:

- verify that we are talking about properties in Victoria.
- see what segment and price range you are talking about.
- see what type of property people will pay over the asking price

If it is an MLS sale the data is publicly available at the land records office or on PCS/Matrix by anyone with an account for that area.

I can understand your ethical concerns but here is why most agents have little or no credibility here. They show up here periodically with unsubstantiated, anecdotal stories to reinforce their biased view of the market. When pressed they offer no details just statements like the following:

- I am a professional in the market with years of experience.
- I am out there day to day and know what is happening in the market.
- Sales are still happening if the property is realistically priced.
This is a misleading comment that has the same meaning as The streets get wet when it rains
- Sales will pick up in the spring. This is true but at lower levels than in the last five years and with higher inventories.

In summary Dave, real estate agents have no credibility on this blog unless they have facts and stats to back up their claims. Agents like Paul Boenisch in Vancouver and Norm Fisher in Saskatoon publish the stats and have credibility. The others that tell "spin stories" and "arm wave" with unsubstantiated anecdotes will get no respect here. They should save them for their uninformed clients.

Roger Need

Anonymous said...

Dave, Dave, Dave

For the love of God, will you please leave the playground!

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

Beagle,

You raise some valid points. Anyone with a secure job (dentist, doctor) has benefited from lower interest rates and deflationary prices. Those with typical jobs (construction, retail, service industry) are living on the edge and may end up with a pink slip sometime in the future.

Regarding a spring bounce. Sure the interest rates are down but that 5% downpayment is a big stumbling block for many. How many buyers are left with a downpayment, no house to sell and a secure job? And then there is the MLS inventory which is at 90's levels and climbing every day? Wait till the budget comes out next week and the full economic picture is made clear to everyone.

2008 sales were much lower than 2007 and inventory this year will be much higher than last year. Sure there will be sales but not enough to drive up prices - too much competition. This bounce ain't gonna happen and then prices will drop faster as those that have to sell head for the exits.

olives said...

Beagle and Roger,

Even with a secure depression-proof job, there is also the carnage, or at the very least the psychological impact of falling stock markets

dub said...

Wow - correct me if I'm wrong, but it appears that there's 50+ units for sale at the Reflections building alone. I believe there's only 114 units in all in the building.

Who thinks the Langford condo market is in a bit of trouble?

Dave, are there multiple offers / bidding wars currently going on for any of the Reflections units??

dub said...

PS - I should add that I also believe some (all?) owners are currently able to move in. Not sure if the building is complete done or not, though.

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