Sunday, March 15, 2009

Condo Floption

I wonder if the sales team and developers at Reflections in Langford are feeling a little gloomy this morning? Yesterday was supposed to be their MAC Marketing MomentTM. They were supposed to be beating the competition to drop units off the graph of available inventory (thanks for these great graphs Roger!):

They were supposed to be quickly liquidating the remaining forty units of inventory in their building and going after the presale buyers for damages. Word on the street is 15 units were snapped up. 15 of 40. That's 37.5%. Not a good outcome for a one-day only liquidation auction that admittedly the sales team had hoped would move 20-30 units.

"From our perspective, we would be very happy to sell 20 to 30 units," says Khoo.

And that may be just the right medicine for a developer looking for money and buyers looking for a good deal.

Turns out the snake oil wasn't medicine at all. CTV, after fawning all over the auction on Friday, ran this piece of real news on Saturday, questioning the true "deal" that was offered:

Tsur Somerville of the Sauder School of Business had some reservations about the so-called auction.

"What if they were 20 per cent above the market and now they're just gotten down to where the market was?" he said.

Brilliant. Now you ask. After 15 buyers took the bait and clearly overpaid for the units they bought, you have to wonder why, if the deals were too good to be true and all that, in a city that typically sees over 100 condo sales every month, only 15 buyers jumped on this great opportunity to "save" themselves $100K? The answer is simple really: even with the discounts, these units still are overpriced compared to the market.

Reflections isn't the only condo development offering these "insane" price drops either. The buildings up at Bear Mountain are "deeply discounted," so are a few other condo developments in the Goldstream/Jacklin neighbourhood advertising "cheaper than rent" financing options. The trouble with these marketing strategies lies with the grade 4 math needed to debunk them.

I'm encouraged by this bit of bad news really. I had completely expected the unsuspecting first time buyers, who we are told are propping up this market, to snatch up these deals. Maybe they're smarter than the media after all?

We can likely take three positives from this weekend's failed experiment:
  1. Maybe mortgage lenders are making it harder for people to get pre-approved for condos right now,
  2. Maybe the first time buyers are finally starting to see the light in the condo market, and
  3. Maybe the media is starting to question this whole sad affair a bit more quickly.
Now if only the FTBers would start realizing that a fixer-upper home with a suite listed for $400K is overpriced, we can finally see the last card knocked over in this precarious market.

123 comments:

vg said...

I think this miscalculation by Reflections tells us that Langford is not Nirvana like the media wanted us to believe and no one wants to live on the bumper to bumper main drag of Mullet Drive.

hhv said...

Imagine the strata council meetings in these buildings. How would you like to face off with the people who paid $100K less for a nicer unit than you all within a matter of months when you're talking about adding to the monthly assessment to start building a contingency fund for all the unforeseen?

Anonymous said...

I came upon a waterfront open house yesterday and decided to see it. I asked the realtor what the price was - and he was honest enuf to say that it was difficult to determine a price given the low sales of recent months. The renoed house across the road (not waterfront) seemed to no longer be on the market - so I asked what it had gone for. He told me that they had taken it off the MLS when his listing came on - as the sellers of the other house were asking some $500k more than the waterfront listing (that wasn't getting much interest either I might add). Then an elderly neighbour came in and was asking about how the sale was going - I said prices were still falling and she (of course) said 'but not waterfront'. Again, the realtor surprised me by saying that the price would be what someone was willing to pay!

hhv said...

You've seen the graphs of printing money on HHV before. But now you get to see the video.

Dumb Canuck said...

Let's wait and see if there are 15 or more condo sales for Langford in the March VREB report, and if the median makes sense for the Reflections sales. My bet is that a bunch of these buyers can't or won't follow through with their 'purchase'. Either that or the 15 is mis-stated.

hhv said...

DC, these sales aren't MLS. There's no way to verify them at all... consider them off book.

womp said...

Just Jack - any idea on what the sale numbers look like for March so far?

patriotz said...

DC, these sales aren't MLS. There's no way to verify them at all...

They will of course show up on land titles, which someone with a BC Stats account can access.

hhv said...

Tim Ayers provided these numbers on Twitter: Month to date stats for Victoria Real Estate Board: 256 new sales, 615 new listings, 3853 total active listings.

Anonymous said...

I've noticed on MLS a lot more listings are saying back on market deal fell through or financing collapsed.

S2

hhv said...

Quick calcs based on above numbers:

Sales to new listing ratio: 41.6%

Sales to active listings ratio: 5.6%

Entirely expected at this stage. Expect more sales to happen over the last 15 days of the month than the first 15, but will they exceed the 600 mark set in February? Or will the VREB and TC have to report that March was less busy than Feb? If so, that's not a good sign for a spring bounce.

I suspect we will see sales hit around 650, listings will likely top 1000. A sales to new listing ratio of over 60% will make this bear less optimistic of seeing sustained negative price pressure between March and May.

DroolingForBucks said...

I think what we're seeing here is a large scale increase in sales and prices in the coming year. I was taking a dump this morning and the evidence presented itself to me. Given this solid evidence I have decided to buy.

Joe Dirt said...

I'm not seeing nearly as many price reductions lately. Either the homes are coming out priced where the sellers actually expect to sell or they are waiting through the next couple months to see what happens.

I expect prices to drop somewhat again starting after about the end of June, but new listings will drop off and the choice will diminish. Just my opinion.

Nick said...

S2: Anecdotally, I have heard the same thing, A lot of offers falling through because the financing falls through. If people can't get financing or barely qualify at these interest rates, what happens when their rates go up? No Canadian sub-primes indeed...

patriotz said...

Just wait for the public service cutbacks after the election. That's when the sellers will really get the fear in them.

Joe Dirt said...

You would think that people that are out shopping and making offers would be pre-qualified. Are people use the finance as a back- out option?

Could the banks be requiring appraisals or doing something else that's stopping the financing?

dub said...

The 'pre-qualification' doesn't mean you're qualified at all... it's just a guideline to what the bank may lend you.

The actual qualification comes after you've chosen a property and have to provide all the proof to your 'pre-qualification' information that you gave them...

Joe Dirt said...

That's quite true, but why would someone offer the bank info up-front that they couldn't prove? It would seem a waste of everyone's time.

Maybe they are signing up for more than the pre-qualified amount hoping the bank will increase.

Metaldwarf said...

"Now if only the FTBers would start realizing that a fixer-upper home with a suite listed for $400K is overpriced, we can finally see the last card knocked over in this precarious market."

This is what I want.

HHV and others, what would you say is a "fair" price for the WW2 stucco box, 2 bed 1 bath up, basement suite down, in a decent area (Fernwood, Oak Bay, James Bay, nicer areas of Saanich East)?

Personally my metrics put the entry level, no suite, detached home at a fair price when it reaches $300,000. Add the basement suite and revenue potential and that price increases to about $325,000 give or take based on area (I would pay more for Oak Bay over, Fernwood for example.), street, interest rates etc.

What say you bears?

Anonymous said...

Really, do you actually expect to buy a home in a decent area of Victoria on a decent lot for $300,000?

Add in a $1,000 per month revenue suite for $25,000. Sorry, but that will never happen, IMO.

olives said...

I think it will happen Metaldwarf.

I'm curious as to how many of the 15 units (of the 40) sold at Reflections this past weekend won't complete due to financing issues....

Anonymous said...

"Sorry, but that will never happen, IMO."

This sounds really familiar. Where have I seen this before?

I think you will get this too Metaldwarf but then again I am one of the true believers.

S2

DroolingForBucks said...

Well my wife flushed the toilet and my evidence is now gone. Trust me it was pretty solid evidence. Anyway I'm off to see my realtor maybe he has some solid evidence from this morning. It's all anecdotal until we see the pictures though right?

msr said...

$300,000 for a house? Yeah, sounds about right given the income stats for Victoria. Weren't people prediction $350,000 for a house before the financial mess roared over the horizon?

$25,000 for a Saanich special rental accommodation is probably more than generous. Given that your suite can be shut down by:
-Bank for violating your mortgage agreement
-Insurance company for violating your agreement.
-By the city for
--Not following the building code.
--Not getting approval before your suite went in.
--For running a brothel (it's happened recently)


More to the point, the usual illegal suite in the city exposes the owner to huge liability. If your tenant is injured directly due to you not following the building code you are liable. If your tenant injury is exacerbated by your negligence you will be liable.

Here's a simple example. Your suite has a ceiling which is not up to code(too low). A fire occurs in your building and your tenant tries to get out but hits his head on the low ceiling, and is injured by the fire. He could sue you for damages on the basis that he could have escaped the building if your ceiling was of the proper height.

This is why these illegal suites have at best marginal value in the grand scheme of things.

Joe Dirt said...

Illegal dumps excluded, the value in the suites is really up to the buyer. Someone that wants or needs the revenue will place a higher value on the home and it easily sell for $100,000 more because it is decently suited. If it is not decently suited and has perhaps a dirt floor (these actually exist) or 5 foot ceilings it will only attact problems and not worth paying for (in fact has probably been abused.)

Most of the hypothetical potential issues mentioned are highly unlikely at best. That being said I would personally only buy a house that has a legal suite and I would be willing to pay based on the revenue it generates. $25,000? Ya that would be nice.

talus said...

What will I pay?

2.5 - 3 times my gross annual salary (or combined for a working couple). When we hit that -- game on.

Anonymous said...

Doorlingforbucks,

I too think to buy now (it is a good time to buy, sounds familiar).
But when i went to see my realtor, their office closed, and the realtor comes to this blog to spin.

Do you know him?

NanHousing said...

Here is a reader comment on a real estate ad disguised as a news story on Nanaimo Daily News' website:

"Come on Darrell (author of piece) enough of the free advertising for remax. It's wearing a little thin. The fact is prices remain unaffordable in Nanaimo and like the above writer suggests 20 % lower is more in line. Any ways it's time to put the car in reverse. how about TREEMAX MORE TREES LESS REALTORS."

Kudos to the moderator for letting it be posted.

talus said...

I might be late to the game (I often am) but has anyone else seen this...

The Daily Show with Jon Stewart : Cramer vs. Not Cramer

phil said...

"Really, do you actually expect to buy a home in a decent area of Victoria on a decent lot for $300,000?"

Why not? You could 7 years ago and NOTHING HAS CHANGED except interest rates and hype. Wages are also the same and besides, you can rent it for $1600/mo.

Tulip-mania.

Anonymous said...

Garth and his followers discuss the madness.

Holy Crap

Comments??

Anonymous said...

You said it yourself, that was 7 (seven) years ago. That was the end of a very long flat market.

It was due for a serious adjustment upwards. Prices and rents have finally adjusted for inflation and have of course overshot.

phil said...

"Prices and rents have finally adjusted for inflation"

Rents maybe, not prices. Prices in Victoria pretty much doubled between 2001 and 2007. Why? Ask Alan Greenspan about the "global interest rate experiment" as Mish calls it.

But of course it's different here.

olives said...

And now house prices (and rents for that matter, wages, etc.) will adjust for deflation.

Art Vandelay said...

The latest version of the MLS that VREB unleashed on realtors last summer is a mess. If I was a conspiracy theorists, I'd say it was intentionally designed to obscure when sales happen. I wouldn't put much faith in the numbers they're pumping out right now.

patriotz said...

Why not? You could 7 years ago and NOTHING HAS CHANGED except interest rates and hype.

Another thing has changed - people are WAY more in debt than they used to be. That's negative for house prices of course.

Anonymous said...

VERY dead cat bounce. Landed on a superball; so what?

The smart will wait it out; the greatest fools of all will get sucked in. And deserve to lose everything they lose.

Joe Dirt said...

"And now house prices (and rents for that matter, wages, etc.) will adjust for deflation."

Neither are adjusting for deflation. There is no deflation. House prices are adjusting because it is a cyclical market. They will not come back to 7 years ago and we all know it.

While the $2,000 / month condos may sit empty, average rents will also not come down. In the past 7 years property tax has soared, oil and gas has skyrocketed, and all the rest of it. Where average rents have gone, up it is largely due to direct costs (at the affordable level.)

DroolingForBucks said...

I think what we're seeing here is a continuing build up. This is a clear recovery formation or what's known as the dancing swan formation in TA. When you see the dancing swan you buy it's that simple because if you don't you'll be priced out forever.

Anonymous said...

"average rents will also not come down."

Rents are coming down in the US "bubble cities" (San Diego, Phoenix, Miami, Vegas, etc.) Victoria is next. Just another byproduct of a bursting bubble and the recession it causes.

olives said...

For anyone who didn't catch it in the "Garth" link above:

FSA to Cap Mortgage Borrowing (at three times salary)!

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/4995778/FSA-to-cap-mortgage-borrowing.html

Anonymous said...

DroolingforBucks said: "When you see the dancing swan you buy it's that simple because if you don't you'll be priced out forever."

Unless of course it's a black swan. ;-)

Anonymous said...

DroolingforBucks,

This must be what you mean. The Technical Analysis sure points at a new bull market eh? LOL!

hhv said...

local real estate blogs finally make the news in victoria

B2B said...

Olives,

Interesting on the 3 times salary proposal from the FSA! That metric would make your average $80k or so household in Victoria able to afford an average $240k house. Some sanity for once.

Interestingly, the "Together" mortgage they always mention as one of Northern Rock's giant missteps was the mortgage I had in the UK. Only for 105%, mind you. :) Then again, we only borrowed about 60% of what they would lend us. Most importantly, we sold in early 2007.

olives said...

Hey B2B

I thought the average Victoria household income was closer to $60,000? (and apparently dropping).

I imagine in the U.K. that will bring the property prices down pretty quickly so much for being "sticky" on the way down.

Wally said...

Victoria blog sites get Times Colonist coverage.

Condo auction misses goal

If it didn't create many sales, the auction did stir up a lot of buzz on local real estate blogs.

Bloggers weighed in heavily with opinions ranging from a belief the auction provided a good opportunity to get in on what has become a buyer's market to those who thought selling via auction was more of a gimmick to kickstart poor sales. Others maintained the discounted prices were still too high.

On a blog called Victoriastruth.blogspot.com, "Wally" posted a note saying he bought at Reflections a few weeks previous and was unhappy when he found out the units were to be auctioned at a discount. "Today, I opened the newspaper and see that the developer is going to unload the remaining units at tens of thousands off the previous prices. I can't begin to express how I feel," he wrote.

On Vibrantvictoria.com, an online conversation bubbled over some of the workmanship on the building with one person suggesting any chatter over the quality of work could hurt their investment. That prompted this response from "Newlywednotnearlydead": "I think the developer auctioning units for $100,000 less than the pre-sale price is 'affecting your investment' more than allegations of shoddy workmanship."

dub said...

hhv,

Is that a link? If so, it doesn't seem to work...

Anonymous said...

This is the part of the article I found the most intersting.

. "If we don't sell it we will have to look at other alternatives like maybe a rental pool."

S2

patriotz said...

"I think the developer auctioning units for $100,000 less than the pre-sale price is 'affecting your investment' more than allegations of shoddy workmanship."

Yet another person who doesn't understand that the buyer determines market price, not the seller. If you want to sell, you have to accept the highest price a member of the public is willing to pay. And this seller - the developer - like many others, does not have to option not to sell.

It's the unwillingness of the public to keep paying 2008 prices that's affecting their investment, not anything the developer did. If they were selling rather than the developer, they would get the same price.

hhv said...

this is "wally's" complete quote from VT:

"A few weeks ago I posted about the great deal I was going to get on a new condo. I had my doubts but Fred convinced me that I was making the right decision. So I put down my deposit and signed on the dotted line. I am going to be taking possession in a couple of weeks. I was thrilled the day I signed the papers and was looking forward to my new flat. I could hardly wait to go for dinner at the well known pizza restaurant in the neighbourhood.

Today, I opened the newspaper and see that the developer is going to unload the remaining units at tens of thousands off the previous prices. I can't begin to express how I feel. I guess I should have listened to the bears on this blog instead of someone who was going to make a commission off my purchase.

This will be my last post. I just can't talk about it anymore."


Makes you wonder if Andrew even read the post or what? Am I the only one that sees the tongue in cheek/sarcasm in this comment? Look at what they chose to clip (in bold above). It's not even real.

patriotz said...

I thought the average Victoria household income was closer to $60,000? (and apparently dropping)

What matters is the median household income of people who own houses, not the median income of all households. The former is higher than the latter for a number of good reasons. The median house should be 3-4x the former.

This figure has been skewed by the bubble, so it would be better to look at the figure for 2001 and adjust it for wage inflation. That's what I would expect prices to adjust to. In other words the same households who could buy in 2001 should be able to buy again.

Nick said...

Deep thoughts from the TC

The problem is that in financial matters, scary predictions are self-fulfilling. Investors act on those reports, and the panic they generate.

Certainly we need the facts. Sticking our head in the sand won't help.

But neither will over-reacting. Banking idiocies and toxic loans may have started this crisis, but irresponsible speculation is keeping it going.


Nothing to see here folks, we're insulated. Keep shopping, citizens...

olives said...

Patriotz sez:"What matters is the median household income of people who own houses, not the median income of all households. "


Isn't it the median household income of those who are attempting to purchase houses or refinance, not specifically the income of those who already own them? LOL

DroolingForBucks said...

Well there you go now looks like the MSM are going to start resorting to trolling comment sections on real estate blogs for content. It's a sure sign of a bull market rally in real estate! This is the signal I was waiting for!!!!! Thanks TC for your wonderful, investigative, hard hitting journalism. When that telemarketer calls tonight I'll be sure to sign up for your cage liner special.

Wally said...

HHV - Thanks for quoting my complete post. If readers are interested in the whole saga they can read it here on PrairieBoy's blog.

Wally & Fred

I am a bit surprised that you found my sad story to be tongue in cheek/sarcasm. I leave it to the readers of your blog to come to their own conclusion.

omc said...

So last year we has about 700 sales for march, and now we are at 256. Yikes, that is a lot of stupid people. The MSM will have a field day with that.

On another note I am still not seeing much movement in the mid to upper range. MLS# 257811 just sold for a staggering $350K, In Oak Bay on a 7000sqft lot. It's a POS in not the best area, but that is getting close to fernwood prices.

Anonymous said...

"but irresponsible speculation is keeping it going."

I thought irresponsible speculation is what got us into this mess in the first place.

S2

Joe dirt said...

"So last year we has about 700 sales for march, and now we are at 256. Yikes, that is a lot of stupid people. The MSM will have a field day with that."

We're already over 1/3 for the month? This really surpises me.

patriotz said...

Isn't it the median household income of those who are attempting to purchase houses or refinance, not specifically the income of those who already own them?

Not at all. Read what you just wrote. A first time buyer does not already own a house, for starters. Nor do the majority of those who already own refinance.

Stock and flow in markets are two different things. All owners and buyers/sellers are not the same people at all.

Anonymous said...

Joe Dirt,

There are 22 business days in March. 256 sales in 10 business days or 26 per day. Assuming a slight pickup for the balance of the month there will be about 600 for the month compared to 707 sales last March.

Yes the MSM will have a field day because they don't look at stats with any depth but just repeat the VREB spin.

JD said...

Isn't 600+ sales a lot compared to the past few months, even as compared to last year? Or am I missing something?

Anonymous said...

JD - Sales always increase considerably month over month in the period from Jan to May. The important point is that even though they are up from last month they are down about 20% from what they have been in March in recent years. This is not good news but VREB will hype it as though things are great.

Why not look at Rogers gallery stuff. Its all shown in pictures.

Anonymous said...

So I log in here this morning expecting this place to be abuzz with what is on the front page, above the fold. of the Vancouver Sun and full front page of the Province.

Can anyone link pictures of the actual front pages?

S2

Anonymous said...

S2,

As requested.

Vancouver Sun

Province

Anonymous said...

Thanks.

I'm just blown away that they put that on the front page.

I've checked the TC online and can't find anything.

S2

Anonymous said...

Oh.. My... God... A BC newspaper has used the "S" word!

Anonymous said...

Rosy outlook from Harper and Carney 'unrealistic,'

OTTAWA — Canada and the world are facing a long and deep recession that will fundamentally alter the nature of capitalism, former Bank of Canada governor David Dodge said in an exclusive interview a year after he left the bank.

Recovery “is not going to be as quick as everybody thinks,” he said on Tuesday. “I think anybody would be dreaming in Technicolor to think that you're going to get through this by the third quarter of this year.”

NanHousing said...

I am noticing something very interesting looking at the sold listings on PCS. A lot of the recent solds were only on the market 2 or 3 weeks (or days) and got asking price or close to it. Lingering properties that had been sharply reduced are getting close to asking as well.

Properties lingering on the market without reducing are getting lowballed or are not selling.

This indicates sellers are finally cluing in that they need to price properties to reflect market conditions and houses are perhaps getting sold quicker and cheaper.

People aren't jumping in at places listed 2-3 months with no reductions and paying close to list which indicates that prices aren't going up anytime soon.

vg said...

"Oh.. My... God... A BC newspaper has used the "S" word!"




But they all said "Not in Canada,especially Victoria, are you out of your mind ? ". Man what was I thinkin ?

hhv said...

watch the national tonite.

Anonymous said...

CHEK news had a segment on subprime on the island tonight. (after 30 sec commercial)

CHEK news

Anonymous said...

Cool... now we need to see the "C" word on the front page.

C - R - A - S - H

Nick said...

Does anyone else feel like there has been a tipping point these last couple of days where the media is really piling on negative real estate news? It feels like bizarro world compared to last spring.

karl said...

you know you're in trouble when the MSM starts agreeing with you--but surely it's far too soon for this to be a contrarion indicator...

omc said...

It does seemthat the mid to upper sellers are getting it, at least a fair number of them. I am seeing the same houses that were taken off the market in Dec to wait until spring when the market recovers. I guess it didn't because the serious ones are asking 100K less. Some idiots showing up with only a 20K reduction on their over priced shacks though.

vg said...

Bear Mountain discounts of 40% ? say it aint so Len. ;)

Or are the prices really just back to where they should be in the first place ? or are they under a little financial pressure to keep the bankers happy ?

Anonymous said...

The media may be piling on the bad news but I just heard from co-workers today that Victoria is insulated, everyone wants to live here and the Canadian banks were more dilligent then the US lenders.

They still ain't getting it.

Dumb Canuck said...

My favourite flip (1134 Dallas Rd) update:

MLS®: 258338 (used to be 250314):
~ 1 million 1.5 yrs ago (bought)
250-300K reno cost
95 K carrying cost (5%/yr)
45 K agent fee (assuming 1.5M sale)
20 K staging cost
1,410,000 Total Cost

~1,790,000 list in the summer
1,675,000 (first week of Oct).
1,595,000 (list shown Nov. )
Jan. 1/09 - taken off market, lock box on door
1,495,000 Feb. 6/09 re-listed (same agent)
1,395,000 Mar. 18/09 price drop

??? sales price
22.15% list price drop
??? % drop to sales price
weekly open houses, some lookers, stopped late October. movers brought in furniture early November. now staged, lights on in evening, etc. Lock box on door for whole of January. ~Mar. 1/09 Sign reads "trade welcome"

Anyone know the assessment on this one?

Any guesses what it will sell for?

dub said...

Hey DC, The 2009 assessment is $1,173,000.

norwester said...

An interesting tidbit I heard last night. A couple in Nanaimo recently went to renew their mortgage and learned that the bank would only lend (based on a current appraisal) an amount that is 100k short of what they originally got and currently need.

I'm curious whether it is common practice for banks to now require appraisals on high margin renewals. I've not seen appraisals on renewals, but I never borrowed more than 75%. Needless to say, the couple are in a bind. Is this going to be an accelerant on top of rising unemployment and bankruptcies?

Anonymous said...

Dumb Canuck, that lovely little witches hat roofed Tsunami future floathome?

Hmmm... if it's still there, it will sell in 2011 for what most 1911 houses are worth... $120,000 TOPS.

And that would be a fool purchaser.

omc said...

norwester,

Yup, that is the norm. Another thing the banks can do is call you up if your house is worth less than the mortgage and demand some cash. If the mortgage is for 95% of the worth of the house and prices have dropped by 15%, you could get the old 72hrs to come up with 10% cash. They would only do this if you were at risk (job, other debts) and in a falling market.

Their home will be on the market, and the port alberni couple from the news report for the same thing (thought they had a subprime) so I guess this will add to the fall. I have also heard that some people are now getting the call for more money locally.

Anonymous said...

What triggers the call? Do banks go through their books looking for underwater homeowners?

omc said...

I am not sure what triggers the call. I do know the dropping prices and your likelyhood of being able to pay goes in to it. They give you the call so the place can be sold, if need be, before further loss is my understanding. Kind of like people in California getting thier credit card limits rolled back.

Nick said...

OMC said: "Yup, that is the norm. Another thing the banks can do is call you up if your house is worth less than the mortgage and demand some cash. If the mortgage is for 95% of the worth of the house and prices have dropped by 15%, you could get the old 72hrs to come up with 10% cash. They would only do this if you were at risk (job, other debts) and in a falling market."

Clearly I don't know as much about this as I should. Can they do this at any time during the mortgage, or only at renewal?

norwester said...

omc,

Interesting. I had heard that use of the home as an ATM in the States was partly encouraged by banks actually soliciting loans from existing clients based on the rising real estate market. This use of appraisals on renewal would appear to be the flip side of the same coin.

On another front, I seem to recall that you had an interest in the upper end of the sfh market here, especially Oak Bay. What do you think we can expect?

I'm thinking that discounts are overdue, but that it's going to take the spring to take whatever spring vendors still have out of their step. Will we see 25% off peak by say July?

Anonymous said...

Something to think about when you take on a mortgage..

Mortgage renewal

Anonymous said...

Earlier this week Bear Mountain had an open Web site where you could see all the properties listed for sale and the discount for each one.

Today the site is closed to the public unless you register with all your personal details.

Bear Mountain

Who wants to give out all this info before they even know if they are interested? Here are direct links to the pricing and #sales for the curious who don't want to register.

St. Andrews Walk

Finlayson Reach

You will note most of these deals are not 40% off but under 30%.

omc said...

I don't know if I would call what my wife and I are after as being the upper end, I would only call it reasonable. we aren't looking at the shacks and 40s wrecks that frequent this place. I don't even know if we are looking at Oak Bay to buy, we live there and I have watched the market for the last few years. Thats why I have a feel for it.

Where we are going? I don't know; there is still far too many dummies running around buying rat shacks at the low end. What I do know is that there is a missing tooth in Oak bay; the retirees paying anything to be here. they are the ones that fueled this for the last few years, I don't think the FTBs will be so frequent come the layoffs when the big projects are finished.

patriotz said...

Can they do this at any time during the mortgage, or only at renewal?

The principal of a mortgage becomes due and payable at renewal time and the lender always has the option of asking for their money back or renewing the loan.

The lender cannot ask for their money back during the term of a loan as long as the borrower is meeting his contractual obligation of making payments.

IMHO lenders are not going to ask for their money back at renewal time for CMHC-insured loans, regardless of property value, if the borrower has been making payments. Banks make money on the mortgage payments - they lose money on foreclosures, even if insured. On insured mortgages they are guaranteed to get their principal back no matter what, so they have an incentive to just keep the borrower making payments as long as possible.

Anonymous said...

Langford developments slash prices

With 25 units left to sell, the reduced prices — ranging from $199,900 to $400,000 — continue on a first-come-first-served basis, Khoo said.

As they sell, the developer plans to try and recover the difference in sale prices from the original purchaser through the courts due to a breach of contract.

“Basically it’s going to be a lawsuit,” he said.

Joe Dirt said...

It's interesting (but less each day) as we go along watching the market. It is easily predictable that the prices will come off a total of 20% from peak. But that peak (apr 08) was the peak of oblivion - those prices had over-shot themselves by at least 10%. People buying last April were truly the last greatest fools.

I'm not bearish on this market, but I'm certainly not bullish either. I've expected for a year now that prices were going to come back down "maybe" a total of 20% (we're almost there) but after that it's a long flat winter for perhaps 6 years. IMO

It's history folks, move along, nothing to see here.

Sorry but it's just too quiet on here.

hhv said...

Joe, flat prices for 6 years is, by the effects of inflation, another loss equal to the inflation rate compounded over 6 years, say 3-4% or 25-30% compounded. Which would bring us close to a 40% decline from the peak. Sounds about right to me. thanks for pointing that out.

SlumpingChangeFromFools said...

I really don't understand the fluffy flat bottom theory. For what possible reason could Victoria only see a 20% decline and then just sit there like a lump on a log when every other market in the world has tanked and tanked badly. You can buy a better home in Honolulu for less money than you can here. I'm serious.

Joe Dirt said...

I thoroughly agree with you HHV. However, it also rings the fact that with interest rates as low as they will ever be and poised to start back up in the not too distant future (IMO) the time is getting very right for many buyers.

Not that I'm suggesting that any of us could afford a $500,000 mortgage (I'm not suggesting this), but if a person is prepared to buy in now (and can afford to) and rides increasing interest and inflation for 5 years he may actually come out ahead in real terms.

norwester said...

omc,

The missing tooth has got to be a worry for some. While demographics would suggest that there will continue to be an influx, is that stream going to be slower and shallower? And how wide will those wallets be? I'm not convinced that 20% will be it, especially not at the 1m plus end.

The out-of-towners are getting hit hard where it counts (RE and stocks). Perhaps coming from Vancouver or Toronto the market here won't seem quite so inflated. However, it definitely will to Albertans. It certainly looks as though inventory is going to continue to pile up. People are thinking twice about so much money in a residence and there are bargains down south.

If the stock markets decline further, which I'm thinking they will, 20% followed by a flatline ain't going to cut it. Besides, people here have yet to feel the brunt of this crash. There are more shocks to come and confidence is going to be a scarce commodity.

I was on Bainbridge Island last week. Nice place, great views of Seattle. One very nice waterfront house, bought for 1.3m two years ago, now listed for 795 (I'm told the price is firm :)). Is our RE bubble really so different from all the other bubbles around the world?

hhv said...

"Not that I'm suggesting that any of us could afford a $500,000 mortgage (I'm not suggesting this), but if a person is prepared to buy in now (and can afford to) and rides increasing interest and inflation for 5 years he may actually come out ahead in real terms."

Low interest rates trick people into thinking they can afford a $500K mortgage. the banks and brokers aren't calculating 6% or 7% interest rates when they are approving 5% down 25 year amortizations at 3% right now.

"While demographics would suggest that there will continue to be an influx, is that stream going to be slower and shallower?"

The "influx" has been fairly steady at just under 1%/year for almost 20 years. There has been NO demographic "bump" in migration to Victoria yet.

patriotz said...

I've expected for a year now that prices were going to come back down "maybe" a total of 20% (we're almost there) but after that it's a long flat winter for perhaps 6 years. IMO

You think just 10 months into the local RE bust, and 5 months into a global financial crisis and recession, nominal prices have hit bottom? With ownership costs still far exceeding rents?

Dream on fella. Can you give me one good reason why Victoria should be more expensive than, say, Ottawa? Or Seattle?

Another 20% to go, at least.

Anonymous said...

Do you actually call the correction that we have seen a RE bust, Fella? Give me one good reason why Victoria shouldn't be more expensive than Ottawa.

I've got plenty of good reasons why I'll never leave the Island.

JD

Anonymous said...

You won't be able to afford to.

Anonymous said...

I was watching the news on the bare mountain fire sale and could not stop laughing. The developers excuse for selling the reduced condos was they wanted to finish the other golf course. It had nothing to do with the housing bubble....more spin (just a flesh wound)

vg said...

"It's history folks, move along, nothing to see here.

Sorry but it's just too quiet on here."


Then why waste time here posting if this is what you believe is going happen in your crystal bowl ? I would be out there buying a shack if this was my train of thought. You are buying right now aren't you JD ? Why wait if inflation is kicking in ? your losing every day correct ? Lots of $400,000 crack shacks out there for your bidding.


When the herd predicts anything they are usually wrong.I don't see inflation going ballistic based on the laws of the herd.

Seems to me a year ago everyone and their dog including Soros predicted the imminent demise of the US dollar and paid the price is spades. What happened since then ? Not to say it may not go down but do you want your cash in Russian rubles or maybe some Yen ?

vg said...

Did anyone catch those "Victoria is different cause we got a diverse economy based on jobs in government,high tech and tourism" radio commercials on 100.3 The Q this week ? It was put out there by The Q it said but came off like a bad TC article with the real estate industry written all over it.

I was quite nauseated when I heard this and reeked of desperation to save a sinking ship. This "We are immune" mantra is such a joke when a radio station pumps out this crap,the must be hard up for advertising dollars.

vg said...

"I've got plenty of good reasons why I'll never leave the Island.

JD"


One more winter like this past one and I will be leaving for 6 months a year. We may be in a new weather cycle that may last many years,not good for the islands image as the place to live to get away from the snow and cold.

Anonymous said...

"I would be out there buying a shack if this was my train of thought. You are buying right now aren't you JD ?"

Many bears are already out there buying. I already own my own home, but am "contemplating" a further long-term purchase some time in the next 6-8 months, just not quite yet.

I think the summer or fall might present buying opportunities as the prices make their last slow decent, but I'm afraid interest rates may go back up by then.

A 1% interest hike on $400,000 over 5 years is $20,000, if rates go back to 5% that's at least $40,000 on the same money.

That's a lot to consider.
JD

vg said...

A 1% interest hike on $400,000 over 5 years is $20,000, if rates go back to 5% that's at least $40,000 on the same money.

That's a lot to consider.
JD"



But what if the economy continues to tank and the house goes down by another $100,000 ? Of course you say "aint gonna happen" but anything is possible and it has in past recessions with far less systemic problems.

Were you an owner in 80/82 JD ? If not, how long have you owned ?

Anonymous said...

So.... Reflections is going to sue the guys who backed out of their pre-sale.

Here is an article in todays TC on the perils of being a pre-sale buyer.

Pre-sale condominium market has its pitfalls

Now on the downside, however, a growing number of buyers are finding themselves compelled to honour the contracts they signed to complete purchases of units that have fallen in value, with few options to get out of deals even if they can no longer secure mortgage financing.

Walking away from deals isn't easy, as buyers in an increasing number of cases are finding.

They are being sued by developers, and risk losing not only the deposits they paid to secure units, but the difference between the current, and lower market price, and the price they agreed to pay the developer in their contracts.


I hope the developers win these cases. The pre-sale buyers were speculators and their involvement in the market drove up prices for everybody.

They gambled and lost - pay up!!

Anonymous said...

Canada’s about to face a mortgage tsunami.

Garth describes it well in his latest blog post.

Canadian roulette

The perfect storm for a mortgage crisis is brewing in Canada. Here’s why.

Unlike in the US, where resetting mortgages are an oddity, in Canada they’re routine. In the States, most homeowners have a 30-year home loan with a fixed rate for the entire time. In Canada, we play interest rate roulette. The normal fixed-rate mortgage term here is five years, and increasingly borrowers have opted for shorter periods of time, gambling that interest rates will be lower when the loan comes due.

But, no more.

The Bank of Canada rate is now at the lowest point in history – one half of one per cent. Bank prime rates are sitting at just 2.5%, and mortgages are being loaned out at a paltry 3%. It might be possible for rates to decline by another quarter point over the next few months, but already we’ve created the same situation here that existed for Americans taking subprime loans.

Rates can only move in one direction. Up. Over the course of the next five years, possibly way up. In fact, I’d say it’s a certainty.

patriotz said...

Do you actually call the correction that we have seen a RE bust, Fella?

Yes. That's a faster decline than any US city. Isn't that good enough?

Give me one good reason why Victoria shouldn't be more expensive than Ottawa.

Um, maybe because household income in Ottawa is a lot higher? Or it's about four times the size of Victoria? That's two. Will that do for starters?

Oh BTW, if a year ago you expected that prices were going to go down 20%, did you let us on the blog know that? It seems not. I'll take the predictions of people who saw it coming and said so over people who just claim to have seen it, any day.

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

Thanks Patriotz

;-)

phil said...

"a further long-term purchase some time in the next 6-8 months"

Please do! I love all the buying going on right now. It's sucking the money out of the system and means fewer bidders on the courthouse steps in '13.

Anonymous said...

So you are anticipating rising interest rates through to 2013 as well? We'll be ready:-)

Anonymous said...

One more winter like the last one and we'll be able to walk to the mainland...

Anonymous said...

vg and anonymous 5:03 - the weather from this winter was due to the vertical pacific oscillation - an event where cold deep water in the middle of pacific comes to the surface and modifies weather patterns. It occurs every 10-12 years - the weather this winter was expected.

Anonymous said...

"It occurs every 10-12 years - the weather this winter was expected."

Sounds like it follows the housing market!

DanBlather said...

Chorus media is running ads on the Fox as well. Isn't the fox owned by chorus? This smells rather foul.

Anonymous said...

anonymous 7:16 -

I could run a correlation analysis...

Mr.4AM said...

When Mr.4AM plans to buy a house in Victoria

It never ceases to amaze me that people keep thinking that getting into debt now (i.e. sign up for a mortgage), of all times, is a good idea.

Victorians don't seem to be factoring in the state of the macro-economy, the deepening financial crisis and the trickel-down (or perhaps tsunami-down) effect to small businesses and specifically to joe6pak and the accelerating unemployment rates. Yeah Victoria is still under 5%, but watch what happens by this time next year. If we're only at 8%, we'll be laughing. Plus don't forget these unemployment figures are fudged. So add in another 5 to 10% to get the real picture.

In case you haven't been paying attention this past week, the United States Treasury and the Federal Reserve have nearly run out of conventional economic "tools" to stimulate the economy, and the rest of the world by proxy.

The latest move was for the Fed to buy $300,000,000,000 (BILLION) worth of Treasury notes with purely printed money backed up by ZILCH!

There's countless things wrong with this picture!
1) US citizens can no longer buy US Treasuries fast enough to prop up the US Government bail out spending.
2) Part of the problem is the Yield on US Treasuries is ridiculously low, and will stay that way for a while yet.
3) Foreign nations (SWFs - Sovereign Wealth Funds) have signficantly slowed down buying US debt (T-bills)
4) Which translates into the US needing *somebody* to buy these bonds so that the Government can spend, er.. bail out, their way out of debt.
5) The Treasury is out of bucks, so the Fed steps up to the plate and prints a few hundred billion.

Problem solved right? No! This is the equivalent of financial insanity!!! It's like authorizing counterfitting in the BILLIONS... no make that upwards of 3 TRILLION! This is due to the fractional reserve system. Take 300 Billion x10 (a conservative multiplier) when that money finally hits the streets 1 to 2 years from now and is loaned out over and over again untill 300 Billion = ~ 3 trillion.

Not only that, but 300 BILLION is peanuts compared to the size of the problem. Even though they are printing like madmen, they are GREATLY underestimating the size of the problem. While Bernanke thinks that he is right in quickly reacting to market dynamics to avoid the slow-reaction by the Fed that (in part) led to the great depression of the 1930's, some respectable economists are estimating that the size of the problem is about 20 to 25 times bigger than the bail outs. So don't be surprised if a year from now, the Fed will be printing 1/2 Trillion to 1 Trillion per quarter.

All the Fed knows how to do is print money. Deflation is the sworn enemy of a Keynesian economy, and inflation by any means (even by counterfeiting your own currency) is the perceived salvation.


There will come a point in the not too distant future when foreign nations will lose faith in the stability of the US economy due to the massive printing of the US dollars, but also due the Fed/Treasury/Obama's failure to halt the deflationary forces, and then we'll have a TSHF scenario.

What does any of this have to do with Victoria Real Estate? Everything! What happens in the US, affects Canada greatly.

There will come a time when buying real estate will make huge sense. That moment is somewhere around the time frame when the deflationary forces actually stop (because eventually enough TRILLIONS will re-flate the economy) and when the inflationary forces become unquestionably evident.

During this period interest rates will still be relatively low, and housing prices will be much lower than now. That's when I plan to buy a house in Victoria. My ETA at present is sometime in 2011/2012. My goal is primarily to buy a house at the bottom of the market.

Your thoughts?

Mr.4AM

patriotz said...

Deflation is the sworn enemy of a Keynesian economy

The pre-Keynesian economy didn't cope too well with deflation, either.

Like in 1929-1933.

omc said...

Mr. 4am,

Your timing sounds about right to get the bottom. We are all a little unrealistic on shorter times and impatient waiting, but it is best. I don't think I will be so lucky and my hand will be forced this fall/winter. We will probably do OK as my wife has very good judgement and we will be low balling in the mid to upper range (one of the very few according to my PCS) with no house to sell.

Inflation is coming that is for sure, what isn't for sure is how this will affect home prices. The simplistic view is that higher interest rates mean lower prices, but that ignores the effects on assets. Cash will be devalueing and assets appreciating and this does in fact drive the market. This happened in the late 70s. My economist friends won't make any predictions for the inflationary period.

My opinion
Waiting is good for now.
Don't even think of a condo.

vg said...

"Inflation is coming that is for sure, what isn't for sure is how this will affect home prices. The simplistic view is that higher interest rates mean lower prices, but that ignores the effects on assets. Cash will be devalueing and assets appreciating and this does in fact drive the market. This happened in the late 70s."


As long as prices stay in this idiot price range there will be no inflation of house prices cause if no one can afford to barely buy now then how are prices supposed to replicate the late 70's bull move when prices doubled from "realistic" levels equivalent to 2000-2001 prices ? If joe average loses his job now or even has the threat of it then who is supposed to buy to create this massive price rise the inflationists are predicting ?

The job losses in the late 70's bull cycle didn't hit til the early 80's at the top of the market of prices doubling,exactly where we are now sitting.