Friday, January 16, 2009

The sidelines

We've seen a lot of discussion and reports of people sitting on the sidelines lately. The real estate industry wants us to believe that sitting on the sidelines is a mistake and that if you're waiting for prices to come down drastically, you're wasting valuable "equity-building time."

Last year, after the 2006 census, we learned that Canadians had reached an all-time high of home ownership. Over 68% of the 12.5 or so million Canadian households owned their own homes. I'm guessing that number continued to increase in 2007 and early 2008, if only slightly.

That leaves about 32% of Canadian households as renters. Industry is targeting this market precisely because these are the necessary components of continued market growth. There will always be players exiting the market, they must be replaced if balance is to be maintained.

In 2006, the census also told us that roughly 7% of Canadian households live below the poverty line. I think it is safe to assume they are not sitting on the sidelines waiting to buy. So our total sideline percentage is down to 25% or so. Considering that you need a minimum household income of $55-$60K to own Victoria's cheapest condos, that leaves a very small percentage left sitting on the sidelines here, if the national census numbers translate evenly to the local ones.

Annual sales are forecast to be somewhere around 170,000-180,000 across Canada in 2009, down from somewhere around 220,000 in 2008. In Victoria last year we had 5820 unit sales. For argument's sake, let's say we track the national trend of an approximate 20% decline in sales, we'll have somewhere around 4600 in 2009.

How many of these will be to new entrants? Just how big is the segment of households that are apparently just sitting on the sidelines waiting to get in?

In the time I've been blogging, I'd say at the beginning about 1 in 10 people I ever spoke with about real estate had similar bearish views to me. Now, it's probably closer to 5 of 10. 4 of those 5 don't want to talk about real estate and the 1 left usually has a property they need to divest themselves from, so they're keeping a positive outlook. My point here is you would have had to be preparing yourself over the past year, at minimum, to be a qualified sideline sitting, able-to-purchase household.

I don't think there are many prepared and adequately finance-able households to bring into the market right now. If I was to wager a guess of total households in Victoria that are currently renting and capable of buying given today's requirements/conditions I'd cautiously put the number somewhere between 500-1000. With 3800 units on the market at the end of December 2008, even if they all jumped in over the next 6 months and available listings only climbed to 4500 by mid-summer, their impact on prices will likely be negligible.

93 comments:

omc said...

Is it just me or are things picking up out there.

Picking up out there as in the pace of price drops and new listings. My PCS has been really busy since the realtors propaganda show fell on its face a couple of days ago. MLS# 257537 just came back on the market with another $100k drop, and it was already priced a lower than comparable in this neighbouhood. Still more than I think its worth, but it should lite a few fires under some people.

hhv said...

I've had four changes in my bottom end segment of pcs today. Still no sales in January though.

omc said...

8 sales so far in my range. Prices have moved MUCH faster than the lower end. All the sales were for significantly less than comparable remaining.

the thinker said...

OMC: 'Back on market' listings, and a busy PCS system do not mean that things are 'picking up.'

In fact, unsold (overpriced!!) properties plus more new listings mean bad news.

My advice to realtors who are representing brave buyers is to completely ignore asking prices when making offers on behalf of their buyers.

The astute MO is to look at the lower of the 2007 and 2008 assessments, and offer AT LEAST 10% BELOW that.

Anything but that method will prove punitive to new buyers who still have the cajones (balls) to buy now.

There will be many, many RE bargains RIGHT HERE IN VICTORIA in the next 2-3 years.

Finally, all the BS about "this time is different", or "Victoria is different", or "everybody's moving here", blah , blah, is proving to be uttered by people who suffer from delusions of grandeur.

Everybody and their dog was a contractor during the last 5 years, and quite a few will find out they were merely building castles in the air

Nick said...

Nice post HHV. I've also been reading the real estate thread over on Vibrant Victoria and never cease to be amazed by people ignoring the potential impact of the real estate market on Victoria's "vibrancy."

The diminishment of the importance of first-time buyers by some posters there really surprises me. As you point out in your post, without a steady flow of new buyers entering the market, people will find it difficult to move up to a bigger home as their family grows or downsize as they grow old.

One particular poster at VV seems determined to diminish the housing downturn, arguing that most owners still have equity in their homes, which is true, at least at currently assessed prices. But you can't extract that equity without a buyer...

omc said...

the thinker

read my post again, I think you will see that is what i am saying.

What we need is some type of a housing index in this town as the realtors will probably try to spin that prices are going up because the average is up. Mean while the houses sold are aproaching what they would have sold for in 2005.

mln said...

omc - Check out housepriceindex.ca, a new index based on repeat sales like the Case-Schiller index used in the USA.

Sadly they do not include Victoria stats, but maybe sometime soon?

the thinker said...

Omc & mln,

It's about time that bcassessments.bc.ca left their website permanently open for public viewing.

Furthermore, it should be updated every single day, with current sales info.

I feel so sorry for the innocents who keep getting brainwashed by pumpers.

The only thing that keeps me from crying when I hear about repos is that nobody held guns to buyers' heads when they bought. I kept out of the market, and have rented since 2003.

The longer I wait to buy, the cheaper I find MYSELF becoming.Now, I want 40-50% discounts, and I will not even consider a fixer-upper either, unless it is a giveaway and passes every inspection possible.

2 years ago, I would have been thrilled to save 20% on an average $500k Victoria abode, but prices kept rising, so I chickened out.

One of my fondest memories is the realtor who told me 2 summers ago that he felt SO SORRY for me, if I intended to wait for Victoria RE prices to fall, as that would NEVER HAPPEN, EVER!!!

Egg on his face.....full of sulphur, nasty-arse egg.

roger said...

omc said:

What we need is some type of a housing index in this town as the realtors will probably try to spin that prices are going up because the average is up.

The next best thing is the SFH median and the SFH average used by CMHC. The CMHC average uses VREB data but excludes waterfront, acreages, duplexes and triplexes from the calculation. There is much less variability month-to-month than the VREB average.

You can see the SFH graph here
and the whole slideshow (with explanation) here

roger said...

HHV,

The man that was the inspiration for your "helmet bear" was on Global TV last night. Here is the video clip (preceded by a commercial)

The R word

That guy sure knows how to make a long term forecast!!

Just Jack said...

Things that make you go - mmmmm

Did you know that of the 504 single family homes in the Victoria core municipalities - 65 or 13 percent of them are available for immediate occupancy!

Of the 607 condominiums for sale in the same area - 135 or 22 percent are available for immediate occupancy!

mmmmmm - I wouldn't want to try moving up the property ladder without having sold my house first.


Did you also know that since January 1st there have only been 47 sales of all types of properties in the Victoria core municipalities. 11 in the Western Communities and 12 in Saanich Penninsula.


mmmmmmm - I'm glad I'm not selling a home.

I'm glad to be a renter. It is going to be much easier to buy a home, as a renter, than to have to sell a house first.

VicREBear said...

"One of my fondest memories is the realtor who told me 2 summers ago that he felt SO SORRY for me, if I intended to wait for Victoria RE prices to fall, as that would NEVER HAPPEN, EVER!!!"

Yeah... summer '06 seems to have been the high water mark for Victoria realtor arrogance. Some of the gems I had to listen to at that time included,

"In a couple of years, this price will seem cheap!"

"Better buy whatever you can afford, because prices aren't coming down!"

"Real estate is always a great investment anywhere, and here? Well - this is Victoria!"

I just smiled, nodded and thought unprintable things, while imagining these guys' inevitable comeuppance. Nice to see it happening now, with all respect to the honourable realtors out there.

roger said...

Just Jack

Thanks for your report on the low number of sales so far this month!!

This week I have noticed that listings have been picking up. Quite a few "shop worn" listings go off the market every day but double that appear as new listings.

If sales don't go up fast in the next two weeks things will not be looking very bright for the sellers, realtors and VREB. Low December sales could be blamed on the weather and Xmas but it will be hard to come up with a spin story if January numbers are lower than December.

roger said...

Just Jack said:

Did you also know that since January 1st there have only been 47 sales of all types of properties in the Victoria core municipalities. 11 in the Western Communities and 12 in Saanich Penninsula.

Is that 47 total for all areas or 70??

Just Jack said...

47 for Victoria core municipalities. 70 for Victoria, Western Communities and the Peninsula. 77 for all areas including up island and the islands


How about the first two weeks of each year in comparison to the past years

2009 - 77
2008 - 154
2007 - 150
2006 - 175
2005 - 166
2004 - 138
2003 - 165
2002 - 158
2001 - 112
2000 - 91
1999 - 110
1998 - 109


If the current trend of low sales continue over the 2009 year, the total sales would be similar to the recession of 1982 at around 2,200 sales. Of course there are a lot more people and homes today than in 1982. So, I'm expecting a really bad sales to listings ratio. Which, you guessed it, can only mean lower home prices.

hhv said...

JJ,

Don't care how you do it, but gotta say thanks for this information. Even this bear is very surprised at those staggeringly low numbers.

roger said...

Just Jack,

Uh... Oh...

I think the buyers have slammed on the brakes.

Anonymous said...

From the sales I have looked at, it appears that the market place is changing from one of orderly liquidation to one of duress.

We are entering into a "foreclosure market". It no longer matters that you have paid your mortgage every month and have a stellar credit rating. When it comes time to sell - you have to compete with vacant properties being sold by the banks, relocations, divorces, estates and other properties under duress that are under heavy pressure to sell in 90 days. The latter will set market value

Anonymous said...

Entering a "Foreclosure Market??" Not quite. The problem with exaggeration is that is that it obscures the actual trend which is moderately downward and fully expected in this cyclical market. And yes, as quickly and high as it rose we should ordinarily expect it to drop relatively quickly and far.

Keep hanging in there, the primary drop should be over by late this fall; after that it will simply flatten off for the better part of a decade. Why bother buying then? Renting may be a better option for 5-10 years.

77 sales is a bit of a surprize to me on the high side as compared to those prior years figures.

Anonymous said...

OK I'm asking for some serious advice here folks. I'm a bull on real estate and have been following this blog for a while. Today I have finally decided along with the wife to "run for the exit" as it were.

We bought in 2004 and were assessed @ 310K in the last notice. How much below that should I price in order to actually sell? I know I'm not going to make bags of money here but I'd sure like to make a tiny bit and get out now before I'm priced in forever.

The plan is to rent and wait it out like you lot!

How's the rental market anyway? I've been looking at the amateur ads on usedvictoria and craigslist and it looks like there's lots of stuff out there. Any tips? I want to rent a whole house.

patriotz said...

One particular poster at VV seems determined to diminish the housing downturn, arguing that most owners still have equity in their homes

Even more owners had equity in their homes in 1981 (because the runup and bust was much faster), so what happened then?

This idiot cannot understand that market prices are set by the people who are buying and selling. Nobody else matters. A house will only sell for the highest price a member of the public is willing to pay for it. Period.

Anonymous said...

That's a pretty loaded question and full of "what-ifs." For starters though, it will cost you upwards of $50,000 plus significant family stress to sell and buy back in. Like my family, you've probably already missed the exit.

The rental market is tight depending on where you want to be, what you want to live in, and what your family situation is (pets, kids etc.)

For a $300,000 property (depending on what and where it is) I would stay put and keep saving money on the mortgage as you are with today's low interest rates.

hhv said...

"We bought in 2004 and were assessed @ 310K in the last notice. How much below that should I price in order to actually sell? I know I'm not going to make bags of money here but I'd sure like to make a tiny bit and get out now before I'm priced in forever."

pay $500 for a professional assessment or hire a realtor you trust.

Anonymous said...

"A house will only sell for the highest price a member of the public is willing to pay for it. Period."

It actually takes both a willing buyer AND a willing seller. Otherwise we all go home, so to speak.

hhv said...

I tend to agree with anon at 8:38... i don't think there is too much money to be made by selling now and buying back in when you think you've hit bottom. If you can afford the place you currently own, and have steady work for the foreseeable future, why would you want to go in and out?

Had you sold this time last year, you'd probably have covered your sales/purchase related costs with the already lost market value.

Dumb Canuck said...

For this week, the median SFH listed on mls has gone from 619K to 609.9K, a 1.5% drop. The listed house price distribution is shifting quite significantly and rapidly to the left (lower prices). It will be interesting to see what happens when the bulk of the listings appear in February and March.

Anonymous said...

Annon at 7:30, we have toyed with the same idea, but I *think* we have decided to stay put for various other reasons going on in our life. (Selling, moving, buying then moving again is something we would like to avoid if possible) I would be interested to hear how things go for you, though, as our place was assessed at around $330, so close to what yours was.

Also, wondering what people think of mortgage rates... predictions for where they will go in the next 6-12 months?

Anonymous said...

Just imagine how boring Economics class would have been with only a demand side. Elasticity would have been a wet noodle :-)

omc said...

anaon 7:30pm

at $310k I would assume that you are in some sort of strata/condo place. That can be real tricky as it is my impression that that market is slipping quite fast. You are going to get stung for realty fees, possible penalties for cancelling your mortgage and no longer qualify for tax exemption when you re-enter. This is actually a time you need a realtor to get an actual valuation. If you are going to do this agressive pricing is the only thing that will work.

What are your honest thoughts on the future health of the condo market? You have heard what happened in Vancouver yesterday. I would be afraid that what you could actually get for your place (not listed prices) plus all the fees and penalties might not leave you much already from your purchase price.

Anonymous said...

Thanks all I guess you're all pretty much saying I should stay. The reasons for moving in and out is because we need a bigger house. It's a half duplex situation with a suite. It'd cash flow at this point if I rented both upper and lower. I think I will talk to some realtors anyway and get a sense of what they think. Can't hurt. It was stupid of me because I knew the market was going to tank but I thought I could just wait it out. Now I realize I made a mistake because my wife doesn't want to stay in this place for more than 3-4 years.

Anonymous said...

We owe 200k on the place, bought @ 229 in 2004.

roger said...

anon 8:54,

There are no simple answers to your question. The readers of this blog don't know your situation and so we can only provide general info.

The BC gov't assessed value of your home is a number I would not place much faith in. You really need to determine what your house would fetch now on the open market. I would ask around and get the names of 3 realtors from friends or business associates. They will do a current market analysis of your home and give you a listing price. Tell them you understand what is happening in the market and that you want a realistic price. Expect about 3-5% less than this from the buyer. If you set your price too high you will just end up reducing it while becoming an old listing. You only get one chance to be a "new listing".

Other things for you to consider:

- Full service realtors will charge 6% on the first 100K and 3% on the balance. This is negotiable so try to get a better deal.
- If you rent after you sell there will be a discharge penalty on your mortgage. This is often 3 months of payments. If you buy another house you can often transfer the mortgage.
- When you buy again you will be paying land transfer tax. 1% on the first 200K and 2% on the balance.
- Legal fees to sell will be around 500 dollars if you shop around. Buying is usually a few hundred more.
- Do you and your family really want to rent? If you have pets your rental options drop dramatically.
- Current mortgage rates are around 4.7% for a five year fixed or about $500 per month for every 100K of mortgage. Given the current recession expect rates to be pretty close to this level for the next couple of years.
- You could rent your place but are you the type of person that wants to be a landlord?
- Are you and your family emotionally prepared to stay where you are and accept that the value of your home will drop in value?
- Are you comfortable with your present mortgage payment and job situation?


I hope some of this helps.

Anonymous said...

Sit on it through the year and see what you can buy then. It might make sense to own two if your interested in being a landlord.

roger said...

Anon 9:19 said:

We owe 200k on the place, bought @ 229 in 2004.

I realize that it can be unsettling to be an owner and read about the market turning down.

Here is another way of looking at things. If you paid 229K 5 years ago you are still ahead of the game even if your property drops from today's market value. With a 200K mortgage your payments are probably around $1000 a month and taxes are abou $200. You have a suite so you have some rental income to offset the mortgage. I don't think you would find a comparable house that you could rent for $1200 a month.

Perhaps you might consider riding it out for a few years. Even if the market value of your duplex dropped to what you paid in 2004 you will have more equity in a few years and you have to live somewhere. The mortgage payments are less than what you could rent something else that was comparable.

Now it hurts to see your property drop while you wait but you need to consider that a move up house will also be dropping at the same time. So even though you get less when you sell in a few years the house you want will also be that much more cheaper.

A note to my fellow bears. I am only suggesting this because he bought in 2004. Someone who bought in the last few years is in a different situation because they will soon be upside down on the mortgage. Lets all try to be helpful to former bulls if they come here seeking friendly advice.

Anonymous said...

Anon 8:40 said: "It actually takes both a willing buyer AND a willing seller. Otherwise we all go home, so to speak."

So if the willing seller becomes unwilling because the price has dropped too much does the housing market stop? Nope - the desperate sellers will still sell for whatever they can get and the market average comes down.

patriotz said...

Precisely, somebody always has to sell, but nobody ever has to buy.

This is the reason why RE prices are always determined by the most willing buyer. Always.

Anonymous said...

And again we find a willing seller and a willing buyer with the buyer making offers trying to find the seller's bottom dollar. The deal isn't one sided.

Anonymous said...

Hey all,
Does anyone have a realtor that they would recommend for the victoria market?

I don't live in Victoria but i'm looking to move there late summer (and potentially purchase something then). I'd like to have someone who could forward me listings/sales so I can start getting a feel for the market.

B2B said...

The one thing I would warn you about is the extremely common phenomenon of decent realtors hiring their kids to join the firm, then fobbing you off on these lazy kids when you came to the firm based on their reputation. I've been there!

Anonymous said...

Thanks again Roger. It's good to get some varied opinions. I did crunch some numbers last night and I agree I think it's probably best to stay put and ride this out. I just hope the extreme bears are wrong about returning to 2000 or earlier!

patriotz said...

And again we find a willing seller and a willing buyer with the buyer making offers trying to find the seller's bottom dollar. The deal isn't one sided

If someone has to sell, they have to accept the higher price offered by a buyer. The buyer determines the price, only.

Anonymous said...

Last Saturday the new "Promenade at Cadboro Bay" had an open house -- even though they are still working on the project (described as "12 luxury residences").

The sign is a bit misleading, stating that the 1 bedroom units are priced at $369k and 2BR higher.

They claim that 5 of the 12 units are already sold. Prices on their fancy brochure top out at $799k.

We toured the model unit -- not bad in terms of fit and finish, but the price of $799 for what is basically a 2 BR cracker box simply stunned me. Smuggler's Inn is right in their back yard, so at least there's no excuse to drink and drive!!

I thought that perhaps the market really had pulled back some, but given what they are charging for these units, and their apparent success in already selling 5 of their 12 units, I left quite discouraged. It's not that I want to live there, but the euphoria that was evident in the comments of the other people who were touring the unit at the time we were there, told me that there are still many fools out there with plenty of money in their pockets (unless they were all bluffing!).

hhv said...

Anon at 10:50

I wouldn't be too concerned about your experience. It's one building nearing completion in a desirable area that is 45% sold.

Two years ago it would have been nearing 100% sold by now.

Times have changed.

Just Jack said...

Anonymous 8:30


There are roughly 1,400 real estate agents serving Greater Victoria. Perhaps you could explain what you are looking for in a realtor. This may help narrow the search.

Although there is a wide spectrum of personalities in agents, I have only found that the difference in sale prices achieved between the "bad" and the "good" is just 2 to 3 percent. Which is about the same difference that out of town buyers over pay for homes in Victoria.

You should also realise that if the home is "staged" you pay 2 to 3 percent more over an non staged home. If the home has just been renovated you will pay a premium for the property. A premium that disappears in 6 months when the home is no longer "fresh" in appearance.

The housing stock in greater Victoria is not homogeneous. If your looking for a 100 year old character home - you will have to wait a long time to find one in the Western Communities. If your looking for a substantially large modern home - not so much luck in Victoria or Oak Bay.

So, for example if your looking for a large home in a new area of housing, then you may want to look for the realtors who are the most active in listing and selling homes in say Bear Mountain.

Your going to have to do your own home work here. Find the area you want to live in, cruise the neighbourhood and write down the agents names off the signs or go online with the ML system.

The type of agent that you want, may also depend on how knowledgeable in real estate you are. If your very expierenced you may want a rookie agent as they should have more time and desire to work with you. Using a rookie puts you in more control. If your a high maintenance buyer an expierence realtor may quickly get tired of helping you.

This information is given to you free and that is most likely what it's worth!

Anonymous said...

"the price of $799 for what is basically a 2 BR cracker box simply stunned me."

No kidding. That place looks fairly nice, but despite being close to the bay all you really look out over is a gas station and a Starbucks. Neither of which the new owners will be able to afford by the way!

Anonymous said...

B2B said 'The one thing I would warn you about is the extremely common phenomenon of decent realtors hiring their kids to join the firm, then fobbing you off on these lazy kids when you came to the firm based on their reputation. I've been there!'

Boy, did I ever find this out when we were looking to buy back in 2004 and early 2005, right when many realtors were starting to get immensely greedy. We started working with one realtor, only to have him cancel an appointment to see a house because (and this is nearly verbatim) he had a chance to score a triplex on Dallas Road with another client, and why would he spend his time showing us a lower end house being sold by a discount agency when he could sell a big ticket item like that. When I told him that we would happily go elsewhere, he begrudingly told me his daughter would take us through the house. Well, his daughter turned out to be a surly 19 year old bar star who basically only knew how to open the lock box. Every question we asked was answered with an eye roll and 'I dunno, have to ask my dad.' In trying to make conversation I asked how long she had been working with her dad, and if she liked it. She replied that her dad told her to join the family business as it was a cash cow, and that anyone who chose to go to school and get an education over making easy money in real estate was 'an idiot' (exact words). Needless to say that was the end of our relationship with this realtor, and when we called to tell him that we wouldnt be working with him, and in fact we had found a great home on a private deal, he hung up on us.

The amazing thing is this daughter is still in the real estate business; I can't believe she has actually made it this far.

Anon at 8:30, I could suggest a good agent or two for you, but don't know if I can post those names here? Plus, someone here will probably teat them apart anyways. There seems to be one or two posters that have a bias against ALL real estate agents.

patriotz said...

You should also realise that if the home is "staged" you pay 2 to 3 percent more over an non staged home

Well no. You pay what you are willing to pay. Some people might be willing to pay more for a "staged" house, but I think they are going to be getting pretty scarce really soon.

Prices on their fancy brochure top out at $799k.

That's just nuts. You can get a pretty nice house in Oak Bay for that, even at today's prices. Maybe they can snag someone returning from a trip to Mars who's been away for a year.

roger said...

anon 8:30 said:

Does anyone have a realtor that they would recommend for the victoria market?

Greater Victoria is a big area stretching from Sooke to Sidney. Why not tell us what area you are interested in and the type of home you are looking for (condo house, townhouse). Some agents focus on a specific area.

You could also sign up for one of the personal MLS systems that have no strings attached like this one

Anonymous said...

"So if the willing seller becomes unwilling because the price has dropped too much does the housing market stop? Nope - the desperate sellers will still sell for whatever they can get and the market average comes down."

And that's supply and demand as simple as it gets. Let's just agree that it boils down to fundamental values based on rents, eh?

roger said...

I read this article in the TC this morning and am concerned about how ugly things are going to get in the next few years.

Most Canadians expect to weather the recession

Most Canadians are tightening their belts to deal with the recession but are confident they will weather the storm without having to dip into their retirement savings, according to survey results released yesterday by a major financial firm.

"However, our research also indicates that some Canadians are unfazed by the shaky economy -- in fact they may be in denial," she added.

Nearly 70 per cent say they don't have a financial plan in place and 80 per cent feel the current economic downturn is not enough of an incentive to create one, it said.

Yet, more than 40 per cent also do not have emergency savings set aside for unexpected changes in their financial circumstances, it also noted.

vg said...

"The amazing thing is this daughter is still in the real estate business; I can't believe she has actually made it this far. "


This story only goes to show the RE agent supply needs to be seriously whittled in half and this market clearly has a long way to go down still. These types will be weeded out in the next phase in the spring.

roger said...

Looks like the bulls are finally getting their turn to see how the MSM distorts what is happening with the real estate market. Here is a letter in today's TC.

Real estate headline missed the real story

Re: "Real estate values, sales fall 30 per cent," Jan. 13.

I read with disbelief your headline that real estate values have dropped 30 per cent. This headline would lead you to believe that house prices have dropped 30 per cent. The facts are, the sales volume and the amount of the sales have dropped 30 per cent from a high that almost everyone would agree was in an overheated market.

You have to get to the seventh paragraph (and most people don't get that far) before you find that average house prices have in fact increased by 3.5 per cent in Victoria and B.C.

I work in the home-construction business, and it is hard enough convincing people that house prices are stabilizing and that they can buy or renovate a home without fear. Your doom-and-gloom headlines only perpetuate the "sky is falling" attitude that just makes things worse.

How about next time we print a headline that house prices are steady, or that we have 97 per cent employment or that there are still lots of job-wanted ads out there. Let's understand that, yes, things are going to get tougher than the last few years but all we have to do is get back to working harder and smarter.

For those of us who have seen several market downturns in the past, we realize we will come out of it a little smarter and more efficient.

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

I went back and read the article he was referring to Real estate values, sales fall 30 per cent. It was misleading and poorly written. That is the nature of the MSM. It happened on the way up and it will happen on the way down. And as regards the sky falling and "doom and gloom" it is time to wake up and face the fact that the economy and hence real estate is starting to tank.

However his own letter was incorrect as noted in bold above. Prices are not steady or stabilizing. We don't have stats on employment. And our officialunemployment rate is 3.6% and has risen .3% in a month.

Anonymous said...

"And our officialunemployment rate is 3.6% and has risen .3% in a month."

Healthy unemployment (ordinary unemployment with people moving or between jobs etc) runs at about 5-6%. Our economy has a long way to go just to retract to ordinary capacity. In the meantime we will continue to pay $15 per hour for $8 per hour effort and ability. It's overheated.

hhv said...

"Healthy unemployment (ordinary unemployment with people moving or between jobs etc) runs at about 5-6%. Our economy has a long way to go just to retract to ordinary capacity. In the meantime we will continue to pay $15 per hour for $8 per hour effort and ability. It's overheated."

I don't disagree with you regarding healthy unemployment numbers, but outside of construction, can you think of any industries paying $15/hour for $8 efforts: tourism and the service sector wages didn't grow like that. Tim's in Victoria isn't advertising wages above $10/hour.

I have lunch at the same Subway usually twice a month for the past year. This place has had the same staff working Mon-Fri day shifts for as long as I've been going there. I doubt any of these people are making even $12/hour.

I don't think the employment markets are as heated as the numbers suggest. Prov gov't has a defacto hiring freeze and are not contracting out much anymore. Fed's too. Six months from now the employment numbers will be very different--so much of what we produce here (tech etc) is farmed work from the US or the customer base is primarily US.

I know a few contractors who have laid off their crews and are swinging hammers themselves on small projects again. I know a few consultants who saved enough to get by for the next 6 months but are starting to shop resumes because they see the work drying up from their usual clients.

One thing we've learned in the past 6 or 8 months is the situation is changing faster than anyone could have foreseen.

Just Jack said...

Just Jack said:
"You should also realise that if the home is "staged" you pay 2 to 3 percent more over an non staged home

And Patriotz replied:

Well no. You pay what you are willing to pay. Some people might be willing to pay more for a "staged" house, but I think they are going to be getting pretty scarce really soon."




So tell me Patriotz when you go to sell your old car - do you clean the inside and wash the outside?
If buyers don't pay a little more - why do you do these things?

Well, of course staging goes farther than cleaning and decluttering. In the case of an vacant homes it may even include renting new furniture, art and fictious family photos. How many times have we heard storey's about boiling spices or cooking a turkey or baking bread in a home in order to sell it?

Simply speaking, it works and statistically those homes that are "professionally" staged sell for 2 to 3 percent more than those that are not. A good thing to know if your a prospective buyer looking for a deal on a home. I think that a seller that has gone to the trouble and expense to stage a home is less likely to accept a low offer. The opposite is true as well, if you find porn mags scattered on the bathroom floor - the vendor may accept a low offer. That is - if you still want the home - ewwwwww!!!

hhv said...

"The opposite is true as well, if you find porn mags scattered on the bathroom floor - the vendor may accept a low offer. That is - if you still want the home - ewwwwww!!!"

This would be considered staging in many of the condos we looked at early on in our search... lol

hhv said...

i've been playing around with PCS all morning. there's a new feature in mine that lets you view the tax info on a given property.

there's a condo for sale listed at $219K on Graham Street, which aside from the occasional gunshot, the vendor describes as quiet and treelined. the tax info suggests its 2008 assessed value is $208K, but the BC rollback let's us declare it's new value at the 2007 $190K.

To me, all offers should now be based on $190K. We've been "told" that 2007 is the new benchmark for assessed prices. So if i were to make an offer, i'd be working on some kind of discount from $190K, likely a minimum 10% off. if i were to buy, that would mean the max i'd pay for a place like this is $171K or $48K less than asking.

there's a real shift here. a REALTOR will tell me the assessed has nothing to do with market value. but i'd argue that in a falling market like we're in, with no sign of bottom, the assessed value becomes my starting point for any offers. it's the only "real" evaluation i have to go from.

phil said...

Anyone know what MLS #255226 just sold for? Thanks in advance!

omc said...

mls#255226 sold for $615. Yikes thats high.

S2 said...

Yes, still high but a tiny bit better then the original list price of $685,000.

Fooder said...

Good point of the assessment rollback HHV. I just wanted to add regarding the Graham st. condos. You have to remember to add in the discount due to the visible water stains under the windows of most of the units.
If it's the pink building, I've been watching that particular building for a long time to see what people living there will try to get and what someone will pay for a condo in a obviously dodgy building. That building is the reason for condos being a bad investment.

vg said...

"The facts are, the sales volume and the amount of the sales have dropped 30 per cent from a high that almost everyone would agree was in an overheated market."


This where Bob the Builder is wrong. Many market hypers use this "but it was an overheated market" as an excuse, but the facts were these were the numbers,high end sales or not. The money and sales were happening and we were all on the outside looking in forever and we were the fools who didn't load up.

The market has been overheated for years buddy,just because we get the overdue reality check that the last few years should never have happened and the MSM is now to blame for overblowing things ? too bad so sad, thats the way the home builder business goes.

It's getting sick listening to these whiners who most likely over extended themselves and never clued in to what is happening outside of the island bubble we live on.

Anonymous said...

What's everyone doing emergency fund wise? I've only got two months worth of expenses in the bank in cash and a few more in less liquid forms. Should I put more aside?

I'm only thirty so I've never seen a real recession as an adult. How crappy does it get in this town? I work in IT and can probably do a bunch of different IT jobs although I'm best as a developer.

Anonymous said...

anon, 3 months minimum, 6 months for cushion. Cash.

HouseHuntVictoria said...

came across a good read for those interested: olympic sized depression hitting Vancouver

roger said...

Anon 3:10 said:

What's everyone doing emergency fund wise? I've only got two months worth of expenses in the bank in cash and a few more in less liquid forms. Should I put more aside?

I'm only thirty so I've never seen a real recession as an adult. How crappy does it get in this town?


The other posters advice of having a six month cushion is good advice. It doesn't have to be in cash but in cash equivalents (high interest savings, short term deposits, cashable bonds and GIC's)The problem with stocks is that if you have to sell the paper loss becomes a real loss.

You might consider stashing some of the money in a new TFSA account where it is sheltered from tax. The best interest rate in town is at Coast Capital (2.75%) and the BC gov't is now providing unlimited deposit insurance to credit unions. Banks are CDIC insured for 100K.

I have been through several recessions and here are some things I learned.
- This isn't the time to job hop unless the place you are moving to is a very secure position and where you are now is shaky. If you get laid off your severance will be based on years with the employer.
- Pay off your credit card debt asap and stop using your cards unless you pay the balance off every month. If you start buying things with cash your spending habits will change quickly.
- Cut back on frills like Fivebucks coffee house. It is incredible how much one coffee a day adds up to in a month. Bring a thermos to work or start a communal pot with your colleagues.
- Start recording where you spend your money. This is a real eye opener after a couple of months.

I am not suggesting that you become cheap but just a prudent spender. If you cut back a little now and save things won't seem to be so diificult if you hit a rough patch. There is no downside to this approach. If you skate through the recession OK you come out the other side with a nice savings account.

As to how bad it will get - no one knows yet. One thing I can tell as a senior high tech executive is that the employees will not know about layoffs until it hits them. Management needs to keep up morale and productivity until the bitter end and employees are kept in the dark until it happens. This is crummy but that's the way it's done.

Anonymous said...

Anon 8:30- If you want or need to suite your house, you want to stay out of Broadmead. I know more than one family who tried it, were sued by the board, and sold their house at a loss just to get rid of it when they were relying on that income to make the mortgage. Neighbors are very nosy there and will report a tenant before you can collect your cleaning deposit. Not to mention most houses there are single-paned glass wall houses that cost a fortune to heat. And the ones reno'ed with small double-paned windows are destroyed esthetically and dark dungeons inside.

Metaldwarf said...

economists predict a 100% chance that BOC will cut rates by 50 Base Points next week. That will bring the Bank Rate to the lowest in well over 50 years/ever?

Deflation is here, I firmly believe it will be around for the next couple of years and as such ZIRP is here to stay for the near term.

That being said, house prices will continue to fall, I have been re running some mortgage amortization numbers with the new lower rates. I like what I see, even using a posted TD variable rate of 4.3%(which will probably drop only 25 base points) makes borrowing look mighty attractive.

That being said, what happens in 5-10 years when ZIRP is no longer an option, rates will go back up and refinancing will be a bitch. If rates go back up to the mid teens like in the 80's surely housing prices will fall again. I still plan on buying into the market in the next 2 years or so, assuming it makes sense, though i am worried about the possibility of a huge rate increase when the BOC has to start clamping down on the hyperinflation that is sure to follow.

locking into a 10 year term seems silly and expensive, i plan on going variable, and having a good buffer of what i can afford and what i am actually paying on the mortgage. That's the only insurance i can think of at the moment, underspend, and pay down the principle faster while rates are low, and then if rates skyrocket, slow things down and stay afloat.

any other strategies?

oh and if rates go to 15%, GIC's FTW.

PS: I just got my copy of "After the crash" by Garth Turner, I'm on page 16

dub said...

Real estate industry seeks jump-start
http://tinyurl.com/792kke

CREA is asking Ottawa to raise the limit on RRSP withdrawals by first-time home buyers by $5,000, to $25,000, and extend the program to anyone buying a home.

Perfect, pillage even more of your retirement fund! And don't only let FTBs pillage their RRSPs... let every who buys a house pillage theirs too!

What's sad about this is they know housing values are destined to go down, so they're looking at any way to keep the party going... regardless of the long term effects...

Anonymous said...

So, anyone have any predictions or educated guesses on where mortgage rates are going in the next year or so?

patriotz said...

Nowhere I think. But you're really not planning on buying that soon, are you?

Here's another advance on the march to reality:

1735 Emerson St, Victoria, BC

Asking 347K, July 1 2008 assessment 422K, July 1 2007 assessment 371K.

We will be back to 2006 prices by the first anniversary of the market top.

Anonymous said...

"What's everyone doing emergency fund wise? I've only got two months worth of expenses in the bank in cash and a few more in less liquid forms. Should I put more aside?"

Try a decent line of credit used only for emergency purposes - say $50,000? No interest to have it available and no cost of cash sitting around.

Assuming you have some level of debt, why would you park your own cash? Always use someone else's money only to pay tax on the miniscule income it generates?

Anonymous said...

"Assuming you have some level of debt, why would you park your own cash? Always use someone else's money only to pay tax on the miniscule income it generates?"

Sorry, I mean:

Assuming you have some level of debt, why would you park your own cash only to pay tax on the miniscule income it generates?

Always use someone else's money."

patriotz said...

Try a decent line of credit used only for emergency purposes - say $50,000?

A LOC can disappear at any time. Credit is not savings.

There is no substitute for cash or cash equivalents like CSB's or near equivalents like short term bond funds.

And now with the TFSA you can park your money without paying taxes on the interest.

Anonymous said...

Patriotz said 'Nowhere I think. But you're really not planning on buying that soon, are you?'

No, we already own, but I have been debating paying the fee for breaking our term in order to renegotiate at a decent rate. I have heard conflicting opinions on where rates are going - lending specialist says down, book I am reading says up. Just wondering what others' thoughts are on this. Luckily we can manage a higher interest rate if we must, but really, who wants to pay more money to the bank than they have to?

vg said...

For those Bob the Builder bulls bulls who think this is just another blip like all the past recessions. I don't recall massive bank bailouts world wide in either of the last 2 recessions. The lack of confidence alone will make people wait.


I also have to laugh at these reports out on Friday on the jobs/economies predictions. I am baffled where they can say things will boom right after the Olympics or maybe 2011 at the latest. They give no factual reasons other than "it will happen". Please pass me my crystal ball.




The Associated Press

January 18, 2009 at 11:12 AM EST

LONDON — The British government is preparing to guarantee billions in assets as part of a new bank bailout plan, reports said Sunday. The move could see even wider swaths of Britain's partly nationalized banking sector fall under government control.

The British Broadcasting Corp., the Sunday Times and others said the treasury was preparing to underwrite loans made by banks to shore up flagging confidence in the country's financial sector.

The BBC did not cite a figure, but the Times spoke of a “100 billion-pound ($147.5 billion U.S.) lifeline” being extended to the likes of the Royal Bank of Scotland PLC and Lloyds Banking Group PLC. The Sunday Telegraph said the figure could be as high as 200 billion pounds.

Anonymous said...

"I don't recall massive bank bailouts world wide in either of the last 2 recessions. "

The savings and loan crisis of the 1980s and 1990s (commonly referred to as the S&L crisis) was the failure of 747 savings and loan associations (S&Ls) in the United States. The ultimate cost of the crisis is estimated to have totaled around $160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government—that is, the U.S. taxpayer, either directly or through charges on their savings and loan accounts[1]—which contributed to the large budget deficits of the early 1990s.

The concomitant slowdown in the finance industry and the real estate market may have been a contributing cause of the 1990–1991 economic recession. Between 1986 and 1991, the number of new homes constructed per year dropped from 1.8 million to 1 million, the lowest rate since World War II.

http://en.wikipedia.org/wiki/Savings_and_loan_crisis

vg said...

I'm well aware of the S&L crisis but that is nowhere near what is happening now. We have a global meltdown happening with 10 times the S&L happening in the US alone. Multiply that by all the other countries and emerging countries and you have something completely different.


$160 billion versus $2.5 trillion so far with the subprime and Alt A's and it's a drop in the bucket.

Mr.4AM said...

Roger, thanks for your tip re: find a house with a mouse website.

I had called up Realtor to ask him to add me to the PCS system and he wanted to setup a meeting and discuss setting up a "package" - whatever that means. Sounded like he wanted me to commit to buying through him. I'd rather just avoid such a waste of my time. I've had other realtors simply create an account for me via email without even meeting me; however, your site tip sounds much more convenient. Gotta love technology.

patriotz said...

Also the S&L crisis was not a bailout. The S&L's failed - there was no government intervention to keep them going. The US government was required to compensate insured depositors as it had a pre-existing legal obligation to do so.

roger said...

Readers might want to drop by Mohican's site and read his latest post.

You Ain't Seen Nothing Yet

hhv said...

I read that yesterday Roger. Ms HHV and I are in Van right now and we were out in Port Moody last night... man alive, TONS for sale and not a sold sign to be seen.

If people think Victoria sales are slow, the listings versus evidence of sales in Van is a stark contrast. Walked past a west end condo open house this afternoon, Realtor outside on the steps, alone with a "please put me out of my misery" expression on his face. We checked out the listing sheet taped to the brick wall outside: 1000SF 2 bed, 2 bath $540K.

Nice neighbourhood, but considering that max rent on a place like this would be about $1500/month, I figured it was about $300K over-priced. No wonder his open house was 3.5 hours long.

We have a long way down to go yet.

hhv said...

here's the place, nice enough, but with a $300/month strata fee and $2K in property taxes, the ownership premium is just outrageous at this price.

Anonymous said...

Hey roger, love mohican's site, (ain't seen it yet) saved it in my fav's. thanks for the link!!!:)

Anonymous said...

sorry for the short notice, but I.O.U.S.A. will be on cbc news channel 20 tonight @ 10 pm. enjoy:)

Anonymous said...

sorry for the short notice, but I.O.U.S.A. will be on cbc news channel 20 tonight @ 10 pm. enjoy:)

womp said...

Just thought I'd throw this out there. Was talking to some friends today who are good friends of a couple living in Reflections in Langford. Apparently the construction is just crap.

The apartments, sorry, condos are so small that the curvy walls leave almost no place for your furniture, so it sticks out at awkward angles and eats up even more space. Apparently the elevator is broken most of the time, and they're backlogged with fixes that need doing in the units.

Langford's Tuscany Village?

vg said...

I drove past there a week ago and noticed the curvy decks that look just about useless. Was there even room for a chair and table ?

Not to mention the 20 minute traffic crawl to get 4 blocks from the highway to the mall area. Now that was the most retarded experience I have had in Victoria I think ever. There was no accident or nothing,every traffic ht was completely out of synch. How anyone endures that on a daily basis is beyond me.

vg said...

oops... "every traffic light was completely out of synch. "

Anonymous said...

Dateline 2011: Villa Madrona finally sold!

Price: 1.5 million.

Paid in gold maple leaf coins.

Muriel said...

Mayor Fortin touts suite incentives for Victoria

In today's TC - highlights below.
Although I dislike being on the same side as the VREB, I do think this is a good way to create more affordable housing. Good for Dean.

Full story here.

Victoria homeowners who create secondary suites in their houses might be eligible for grants of up to $5,000 under a program proposed by Mayor Dean Fortin....

Individual grants would amount to 25 per cent of construction costs up to a maximum of $5,000, funded through the city's Housing Trust Fund....

To be eligible, an applicant would have to be an owner/occupier of a single-family home; agree to register a housing agreement on title that the unit remain rental for 10 years; not have previously received a grant under the program; and comply with design guidelines....

In the report, Fortin notes the city loosened its restrictions on secondary suites in 2007 and in the past 14 months, 49 new suites have been created in the city....

"We've allocated enough money for 50 units," Fortin said. "Clearly, if we get a lot of take on it, in six months let's bring it back. If it isn't [popular], let's see what we have to do more of. It's not the only thing we're going to do around our housing strategy. It's just the first."

VicREBear said...

I loved this part:

"It's recognizing that we are facing a downturn in the economy; recognizing we at the municipal level have an opportunity to strategically help homeowners, the construction industry and homeowners who have actually bought a home and are now going, 'How am I going to pay this mortgage?' or homeowners who are thinking of doing it but may not," Fortin said."

"'How am I going to pay this mortgage?'" Shouldn't they have thought about that BEFORE taking on the mortgage? Shouldn't the lender have thought about that? Why should my property taxes now go to subsidizing idiots who "buy" houses and then after the fact think, 'How am I going to pay this mortgage?'

I could scream.

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