Sunday, January 4, 2009

Sticker shock

I have a confession to make. I don't buy the paper, but every Friday I seek out the Future Shop ad that comes with it. I usually confine myself in a quiet place for a few minutes and I check out the prices on the tech gadgets. I'll even admit that I may just be a bit obsessive about it. I have no plans on buying anything right now, but if you were to ask Ms. HHV about this, her answer would definitely contain some nervousness, because she knows that I have difficulty resisting a deal.

I can admit it's pretty much always been that way. I have trouble walking past the take an additional 70% off rack in The Bay without seeing if that suit jacket, pants or shirt I've been eyeing is on it. Heaven help me if I'm in a bike store and something is on a "too good to be true" sale shelf. Lately the obsession has turned to televisions. I don't know why I'm watching their prices so carefully, we have a perfectly good one at home. But the idea of watching Hockey Night in HD is attractive, despite knowing that the purchase price of the TV doesn't include the extra $200 per year in cable fees or the $350 for the HD box. I've narrowed the purchase choice down to brand, picture type and size, now I'm just evaluating based on price. But I will still argue, vehemently, that I am not going to buy a TV no matter what its price is in three or four weeks because I know the manufacturers will be discounting them further, and thus the stores will be too, as the recession deepens.

Still with me? I know you're thinking "HHV, what has this got to do with real estate? Please don't tell me you're gonna start writing about politics next."

BC Assessment's database for 2009 valuations is active now. Depending on the property, two numbers are available: the July 2007 assessed value, and if the place sold in 2008, the sale price of the property. For a lot of people, I'm guessing here, there will be no sticker shock.

Regular readers and me, we've been obsessing about real estate prices together for the better part of two years now. We've been expecting prices to come down. We've been calculating, analyzing, graphing, discussing, arguing and maybe even, dare I say it?, proselytizing the great benefits of cheaper real estate for our much-loved city. But we're the minority in this town.

Most people don't give a damn about what their house is worth. They know it's worth more than they paid for it. They know they no longer have a mortgage or know they can afford the one they've got. These people are the silent majority in our real estate market, and probably number close to 50 per cent of homeowners in Victoria. They probably won't even look at their assessments for more time than it takes to shred or file them. It doesn't matter though, because what these people do does not effect the market price at all, because they aren't active in it.

For a small percentage of Victorians, I imagine the "frozen" assessments of July 2007 delivered as July 2009, may come as a surprise. These people are the active buyers. They've all heard by now that the market "ain't what it used to be." They've got REALTORS actively presenting low ball offers and encouraging sellers to accept them. Buyers out there are seeking the "good deals" the "experts" quoted in the MSM tell them are everywhere. And they don't trust inflated market values set by the industry players as they currently are. They may be looking to government assessment numbers for a baseline to calculate their requested discounts from. Could this lead to further price reductions?

Say you decide to buy a Yaris and they are on sale. You walk on the lot, kick some tires and read some stickers. You see the manufacturer's suggested retail price and then you see the dealer's discounted sale price of 7% savings. What happens if that MSRP suddenly gets rolled back to the price of a Yaris two years ago? That discount the dealer is offering you probably isn't so deep anymore is it? But you've heard the deals are a "once in a real estate cycle opportunity" and you need to act fast. The numbers just don't add up though.

You've probably already decided to buy. And you've already decided you are going to get a discount. So you're probably going to demand it. And if you are patient, you are probably going to find someone who will give it to you.

Time will tell, but I can see frozen assessment values greasing the downward price slide. Buyers may use them as the new MSRP to calculate their proposed deals off of. What's a must-sell homeowner to do? And what kind of advice do you think their REALTOR is going to give them, especially if sales have been light in the last little while?

How do you think the assessment numbers will play out in the market?

27 comments:

B2B said...

Olives, sorry for the delay. A reply to your question in the previous thread - I did indeed hear that nothing would be built on the Town and Country parkade site other than the parkade, and that the existing Wal-Mart will stay where it is. I was incredulous too, but this is from an inside source.

With regard to the sentiment expressed at the close of the last thread, that we still have a long way to go before attitudes here truly change - I couldn't agree more. But the payoff for bears will be only ever higher as the denial continues. Take heart!

sitting pretty said...

ocrenter at http://bubbletracking.blogspot.com/ is now oc-homeowner. The question is, are there any Victoria bears who will actually put their (claimed) money where thier mouth is and buy when prices drop here? Somehow I doubt it!

Art Vandelay said...

And they don't trust inflated market values set by the industry players as they currently are.

Industry players don't set market values. Buyers do.

hhv said...

You are right Art. I should have written, they don't trust inflated asking prices.

Nick said...

sp said - "The question is, are there any Victoria bears who will actually put their (claimed) money where thier(sic) mouth is and buy when prices drop here? Somehow I doubt it!"

OCRenter's criteria for buying (taken from the link you provided) were:
"--premier area with excellent schools
--proximity to work
--2000 pricing
--1997 inflation adjusted pricing
--50% off peak pricing
--must cash flow if rented"

If homes in Victoria were priced at what they were in 2000, I'm sure many of the posters on this site would have been homeowners long ago. Prices in 2000 were actually somewhat affordable.

Anonymous said...

The prices were there but the interest rates weren't and the mortgage payments themselves didn't differ much (April 2008 not included.) That's all many people ask, "what is the payment?" They need to be asking, "what is the payment should interest rates go back to 7-9% in 3-5 years?"

I guess between house prices/underwater mortgages and actual/potential monthly payments, comfort is a pretty thin line for those not willing to wait and save for a downpayment.

Anonymous said...

Sitting Pretty, I guarantee you, when they hit 50% drop, I'm in.

Even though they'll be going down even further.

Promise.

Anonymous said...

If interest rates go to 7-9% every house in the city will be for sale... By the banks.

Bring 100K cash and you will be a "Very Happy Owner".

vg said...

sitting pretty ,

why aren't the sales numbers up bigtime ? Victoria is on sale, please tell us why the masses are "saying screw that idea" ? Why are the sales numbers in the tank ? Thats the question here,not your wussy assed taunting questions.


mr 4 AM, check your mail.

Anonymous said...

And the TC write up on The House.

"Murder House back on market"

http://www.timescolonist.com/Murder+house+back+market/1140437/story.html

Oh boy, if I was the owner trying to sell I would be so pissed to see this in the TC.

I like how they try to spin it though. "It is a buyer's market".

S2

S2 said...

I don't know why I'm having a problem adding a link to articles. I'll try again. If not, you're on your own. :)

http://www.timescolonist.com/Murder+house+back+market/1140437/story.html

Anonymous said...

We were looking to buy in Vic. last April. A detour to New Zealand put that on hold and we are now looking again. We are pleased with what we are seeing from the buyers perspective. Seems we have more better options in the $625 range.

Anonymous said...

S2,

Try using www.tinyurl.com to post links

patriotz said...

I don't know why I'm having a problem adding a link to articles.

It's done like this:

[a href="http://www.timescolonist.com/Murder+house+back+market/1140437/story.html"]Murder house back on the market[/a]

But instead of the [] brackets I used you use <>.

Anonymous said...

you mean like this...

[a href="www.xyz.com"] THIS TEXT WILL BE UNDERLINED [/a]

greg said...

Thank goodness Dallas Chapple is taking on this difficult listing at this traumatic time.

Anonymous said...

Yes, Dallas is the person that can make a sale happen. Here is what she says on her website:

"My goal, as your Realtor, is to find your dream home, and ensure the decision you make stands as a wise investment over the long term."

As one of the top Realtors in Victoria, B.C., Dallas prides herself in putting people and places together. Whether you are looking for a waterfront home, a condo or anything in between, Dallas can find your perfect home.

Anonymous said...

BC Assessment has nothing to do with what the market value of the house is, only what the value of the house should be taxed at.

Rolling back the assessment helps owners who bought or were reassessed at the peak of the market from having to pay higher property taxes based on their bubble house price.

dub said...

BC Assessment has nothing to do with what the market value of the house is, only what the value of the house should be taxed at.

Rolling back the assessment helps owners who bought or were reassessed at the peak of the market from having to pay higher property taxes based on their bubble house price.


Regardless of what the intent of the assessment is and, write or wrong, people often use it to help them with the decision to buy or sell a property. How many listing do you see comparing their asking price to the assessed value? I personally see quite a few.

Anonymous said...

I thought Gordon Campbell said that Property taxes/assessments to be frozen at the July 2007 level.

Supposedly, this was doing us a favour... you know, freezing property taxes at their peak while real estate goes down in value. Thanks Gordon!

Anonymous said...

Brokers, banks, credit unions, etc. use the BC Assessments for lending purposes. Prior to this year those noted above considered that the assessments were always below market value, therefore they were "safe" to lend on the BC assessment value.

So would you be upset if someone was lending your life savings based on this trivial information and lose lending policy?

Guess what - they have been! And still are!

omc said...

another good link

omc said...

Just copy and paste it, I can't get it to work



http://www.ctvbc.ctv.ca/servlet/an/local/CTVNews/20090105/bc_real_estate_090105/20090105/?hub=BritishColumbiaHome

roger said...

The latest statistical analysis of Greater Victoria real estate is now online for viewing.

GV Stats Analysis - Dec 08

Use the controls at the top to pause and single step the slideshow. If you click the big X it will run in full screen mode.

Comments anyone??

Libre Esprit said...

New Globe and Mail housing blog - "Is it Better To Buy or Rent"

Home Turf, New G&M Housing Blog

Anonymous said...

"I thought Gordon Campbell said that Property taxes/assessments to be frozen at the July 2007 level."

The municipalities set the tax rates not the province.

There's much confusion around this and could result in a few angry provincial voters just in time for the next election and the next property tax bill. I can hear the opposition already.

Anonymous said...

I can personally say that our assessment is UP -- by $45K over last year (in Oak Bay).

So not all municipalities are freezing assessed values.