Monday, March 30, 2009

March predictions

Victoria's Truth has a good analysis of what to expect in March 2009 sales numbers.

Here are my thoughts, some of which repeat Prairie Boy's:
  1. SFH average and median sales price and volume numbers will be up month over month
  2. Condo average and median sales price and volume numbers will be up month over month
  3. SFH average and median sales price and volume numbers will be down year over year
  4. Condo average and median sales price and volume numbers will be down year over year
  5. The VREB and the TC will have a "frank" public discussion about how this spring is demonstrating that Victoria is different, that we are insulated, and that first time buyers are taking advantage of the combination of never-before-seen interest rates and the considerable price "discounts" from last year to get into the market.
If PB's prediction of an increase in median price to $515K comes true, then maybe it is the FTBer frenzy that is propping up this market; after all, when a FTBer buys an entry level property, it allows the previous owner to move up into the next level, which is considerably cheaper and could represent good value to those buyers who are still having success unloading their over-priced crap onto those who should know better. If there's been an increase in sales in the $600K plus range, in my mind at least, this is because there is still strong sales volume in the $450K-$600K range.

Regardless of whatever happens this week, the longterm downward price trend will return this year, and we'll see the inevitable correction to the inflation trend line and beyond, as we always have in every other market correction in Victoria real estate history.

67 comments:

greg said...

I agree somewhat with the analysis here and by PB - however, as someone caught up in the FTBer frenzy, but unwilling to succumb so far to the charms of anything I've been shown, I think the median is going to be down on sfh and on condos this month.

The condos moving in places like Reflections are not going to help the VREB stats, and pulled some of the demand out of the resale side of the VREB market. And what I see in PCS is still reflecting a sub $500k theme for single family homes.

I think for the very reason that prices are down, combined with lower interest rates, we are seeing the entry into the market of some FTBers who couldn't participate in recent years - so the sales volume should be higher than maybe expected. And these FTBers are obviously chomping at the bit and tired of waiting. I base this hypothesis on the very slow growth in inventory numbers this spring compared to previous years.

If the sales performance is good, I think more sellers will start to jump into the market in April and May - and we shall see what that means for prices this summer and fall.

I agree with you HHV, we should see a return to month over month declines in another 3 months or so, and year over year, we won't see increases in prices at any point this year.

Not so sure if the market will seize up or plunge into a freefall. The market has proved far more resilient than any of my expectations at any point led me to believe - will those expectations ever prove accurate? We should know soon about that, too.

Reid said...

Greg, my recollection last year was the new listings for SFH's came on much later than I expected as well. In March 2008 listings were poor, but they came on hard in mid April and climbed all the way into the fall.

I belive that SFH listing were about 1,050 on April 1 last year (today were are over 1,200) and pushed way over 1,500 by September.

So we may still see the 2009 listing rush.

As far as buyers go, you can write off buying this Spring as logic is gone and we are now into an emotional situation. Only when the reality of this recession presents itself in Victoria (which is still a long ways off) will we see these FTB's step back and question what they are doing.

By summer, the buying freezing at the low end should slow down and this will slow the entire market again.

patriotz said...

The condos moving in places like Reflections are not going to help the VREB stats

Are they going to be in the stats at all? They are not being sold on the MLS, are they?

As for when to expect a freefall, wait under Gordo "discovers" the real economic picture for BC after the election.

Reid said...

More Bad foreclosure news in US.

US foreclosures rise

greg said...

Patriotz -

the point is, just like the Onni and MAC auctions in Vancouver, if a bunch of buyers jump into condos sold by developers that they previously couldn't afford, it sucks demand out of the resale market - which will hurt the VREB stats.

Reid -

I agree, inventory is starting much higher this spring - but it is also not growing as fast as previous years. This may just be a delayed effect - it may also demonstrate that sellers are emotional about the prices they will list for - if realtors and the market are telling them their wishing prices are unrealistic, they may be staying on the sidelines, expecting a quick bounce back to acceptable price levels. If that happens, they reappear and inventory shoots up. If it doesn't happen, how long until they accept the new reality and sell for the lower prices?

The answer to that question will determine where inventory goes this year. I was a lot more bearish a few months ago about that. Until I start to see inventory increasing again (like it did in Vancouver last spring), the final ingredient for a further price correction will remain missing.

Reid said...

Greg, I still think we are going to exceed 1,500 SFH's for sale later this year (maybe not until summer or even fall). At the begining of the year I thought we may go as high as 1,800 but even at 1,500 homes that should drive down prices as long as these FTB's get a dose of reality.

The problem I see is that the level of inventory at the lower end ($500k and less) still supports a sellers market (less than 3 MOI) and that is why I think a slowdown in buying for the lower priced homes is also required to drive down pricing. A slowdown at the lower end will drive down expectations at all levels.

greg said...

I agree with your assessment on the low end of the market Reid, but the only way that inventory is going to increase is if say the $500k+ homes start getting forced down into the lower bracket. There is a lot of inventory sitting above the medians - at least three times as much as below. Once that falls more towards a balance, the situation at the low end of the market will start to change. Unfortunately, the near term increases are more likely to reflect wishing prices. The amazing thing to me is the number of stale listings above the average. There must be hundreds and hundreds of listings that have been on the market, on and off, since last spring.

I keep waiting for some of those sellers to crack and start a downward cascade - most of them have been stubborn for a year, will they hold on for another year?

If interest rates start back up again, I think you will see a collapse. Fourtunately or unfortunately, depending on your point of view, I don't think that will happen until the fall.

Dave said...

I keep waiting for some of those sellers to crack and start a downward cascade - most of them have been stubborn for a year, will they hold on for another year?

Your logic might be circular here. The reason those units might not be selling is because the venders aren't very motivated and have relatively high prices. If they aren't motivated, then I wouldn't put them into the 'must sell' camp.

Dave said...

Greg, are you really expecting high interest rates come Fall? I think we have a long ways to go before rates started going up again. If anything, there will continue downwards as the Bank of Canada has yet to start quantitative easing.

Reid said...

Greg, you are right on. If interest rates start to rise, you will initially get a surge of buyers with their 90 day pre-approvals buying and then it will die off. My job has me focused on the global economy every day and unfortunately I do not see this situation improving soon (despite last few weeks of equity gains). Consequently I sense that interest rates will stay low at least through the fall and likely into next year. So you have to be patient if you are waiting for interest rates to rise.

We should see some more serious sellers with people getting themselves in finanical trouble (this will happen and accelerate), estate sales (this always happens) foreclosures (this will start slowly but should increase this fall and into 2010) and as long tersm sellers finally get impatient. But again this is going to take time.

So in my opinion to see short term price drops we need to see the FTB's back off. I believe this will happen only if the FTB's get scared. We are a ways from this. If Campbell (I assume he will get re-elected) hacks more government jobs after the summer budget this may wake up the FTB's.

It would be great if more mid priced sellers lowered price expectations, but you need to put yourself in their shoes. They are seeing lots of crap selling at $450k to $550k. These overvalued sales are encouraging them to hold off lowering pricing unless they are desperate.

greg said...

Dave,

I understand your argument, but look at it this way - the top of the market has been frozen for more than a year. While some if not many of these people don't need to sell, it would assume a lot to conclude none of them need to sell. The question is, does sitting on the market for years put any pressure on these sellers?

I'd suggest with all the losses in the stock market in the last 8 months, there is bound to be some effect on sellers with multiple non-revenue producing properties (think ski condo, or condo in songhees etc).

I expect more of these sellers to be motivated than last year, I'm just surprised its taking this long.

As far as interest rates are concerned, I'm of the personal opinion they won't raise at all this year.

Having said that, the earliest I think it could happen would be this fall. These type of macro-economic moves can happen quickly and without warning.

After Greenspan blew up the housing bubble with unreasonably low rates for a long time, do you think the economic planners will want another even bigger bubble?

If these "experts" are calling for recovery in late 2009 or early 2010, that's probably when interest rates will start going up again...

I might be wrong but I don't think anyone should count on low interest rates for anything more than braking the crash. They aren't going to be a springboard to higher prices, not this time...

Metaldwarf said...

Interest rates will be near zero for years to come. Markets got hammered today. Chrysler is probably going under with GM close behind. The fallout from that collapse will shock Ontario big time, BC not so much. Still it will be felt. If the liberals get reelected and decide to cut, or if the conservatives get in this election, there will be a lot fewer cushy govt jobs. Especially here in victoria. Fewer jobs, less tourism, more uncertanty will lead to less purchases. People are drunk on cheap money again, nothing more. The beer goggles will soon wear off and they will wake up to a POS house they can't afford and can't sell.

Anonymous said...

When discussing interest rates one needs to differentiate between the Bank of Canada rate and the 5 year Government of Canada rate. The former is used to set variable rate loans (i.e. prime rate) and the latter is used to set five year fixed mortgage rates.

The Bank of Canada only sets the Bank Rate. The financial market sets the five year fixed rate via trading in the marketplace. I fully anticipate the BOC bank rate and hence the major banks prime rate to stay the same or .25% lower well into next year. However the 5 Year GOC bond could rise later this year as business conditions improve and the end of the recession can be seen.

So what will homeowners and buyers do when they see low variable rates and rising fixed rates? I suspect they will elect to lock into fixed terms.

Anonymous said...

What is going to happen to tourism in Victoria this summer?

I was watching American TV on the weekend. The US government is now running ads telling Americans that they need a passport or citizenship card in order to visit Canada after June 1st, 2009. For a family this can add up to hundreds of dollars.

Do Victorians really think Americans will continue to visit Canada if they need to spend all this extra money, take photographs and fill in US government forms? Maybe if they are business or international travellers but what if Canada is the only foreign country they ever visit?

VicREBear said...

Anon. said:

"However the 5 Year GOC bond could rise later this year as business conditions improve and the end of the recession can be seen."

Wait until Carney initiates quantitative easing and starts creating digital dough out of thin air and using it to buy long Canadian bonds in order to drive down their yields. He'll do whatever Bernanke tells him to do, and Bernanke is manipulating mortgage rates via the bond market.

Really - I want to strangle these guys.

Metaldwarf said...

What is going to happen to tourism in Victoria this summer?

Americans are feeling the pinch. They simply will not travel as much, even if our dollar is cheaper than theirs.

Last year tourism sucked because of the CAN dollar being high. This year it will suck because of frugality. How many downtown businesses who thrive on the high margin tourist season can survive two down years in a row?

omc said...

I am still not seeing many mid prices and up sales. Are many of the lower end sales coming from the rental/investment pool.

Victoria's housing market pricing isn't driven by locals, but by the wealthy retiree moving here. Not seeing many of them these days. up Island and the Okanagon have tanked price wise. If you had a choice to retire would you take out a mortgage to move here as you retire?

greg said...

US tourism has been down every year since 2006, when their housing markets (ie ATMs) started tanking.

I walk around downtown and it is quite amazing how many shops are empty.

My theory is skyrocketing property values created the perception that lease rates should also skyrocket - well, turns out revenue for business has been contracting, no way it could provide the dough for a lot of businesses to pay top dollar for areas that service the declining tourist trade.

Landlords may have to renogotiate when they realize they can't find other tenants willing to absorb the top dollar lease rates.

Either that, or places like Timothys World Coffee, James Bay Traders etc will sit empty for even longer...

Dave said...

Metaldwarf, the Conservatives don't have a Provincial party in BC. We will either get the Liberals or the NDP.

Dave said...

I'd suggest with all the losses in the stock market in the last 8 months, there is bound to be some effect on sellers with multiple non-revenue producing properties (think ski condo, or condo in songhees etc).

The economy is definitely interconnected and a change in one area can affect another area.

It's hard to say what the effect of the stock market crash will do. For example, the crash after 2000 didn't effect real estate at the time.

It's pretty hard to gauge this effect. Without any data to back up your expectation, I would suggest its mostly wishful thinking.

Metaldwarf said...

well lookie at what just popped up on CBC.ca what a coincidence. Tourism Slump.

http://www.cbc.ca/consumer/story/2009/03/30/tourist-slump.html

Dave said...

Metaldwarf, the Conservatives don't have a Provincial party in BC. We will either get the Liberals or the NDP.


Dang, now who am I gonna vote for...

Just Janice said...

'For example, the crash after 2000 didn't effect real estate at the time.' --hmmm, I'd have to disagree. I think the tech crash combined with 9/11 drove a perception that 'real estate' was somehow a safe investment. I'd say the impact was indirect, those burned by equities turned to real estate and then the low interest climate in the wake of 9/11 just blew air into the bubble.

Sell this spring, or hold on for dear life for the next decade. The next 2 years are going to be harsh for RE in Victoria and the 5 years after are going to be flat...

Anonymous said...

BC Conservatives

greg said...

Dave -

looking more carefully, you'll note I wasted as much time researching my comments and supporting them with statistics as you did. So if you're going to dismiss my comments with a charge of "wishful thinking", perhaps that cuts both ways?

omc said...

Dave,

The stock market crash of 2000 is commonly known as the "tech bust". This was the monster that started all of our present problems. With the 911 attacks the US government lowered interest rates to the super low to combat the finabcial malaise, causing home prices skyrocket.

This crash has so far removed the wealthy retiree relocating here. My co-workers, 3 of them, who were due to retire from very choice high paying positions are delaying retirement. This is even if they can afford to wait for thier portfolios to recover because they are afraid of what could happen to thier grown children.

Anonymous said...

Why were so many people so close to retirement so heavily weighted in equities? This is a BIG lesson for all of you out there to balance those portfolios over time based on your retirement plans.

BLowingCash said...

Anyone here actually believe these "stimulus packages" will do anything but be the source of endless political scandals for decades to come?

Anonymous said...

Alberta buyers are staying home...

No summer place in the cards for many

Art Vandelay said...

A temporary blip up in prices isn't that much of a surprise.

Even on the way up, prices sometimes dipped when comparing one month to the next. So the graph of average prices look like a jagged mountaintop leading to the peak.

Same thing on the way down. It's not just a straight line downhill.

Anonymous said...

No, it's that ski jump you have to worry about...

Relax, just joshin, there's no ski jump any time soon :-)

Anonymous said...

Anonymous Said:

"Why were so many people so close to retirement so heavily weighted in equities? This is a BIG lesson for all of you out there to balance those portfolios over time based on your retirement plans."



This is something that I have noticed about the baby boom generation. They seem to be desperately looking for something to make them rich. As they get closer to retirement they should be moving their investments into a low risk portfolio. But, the boomers seem to be doing the opposite and going the high risk way and when things look bad, quickly jump from one investment to another.

My thought, is that very few of the boomers have saved enough in their investments. Right now, in Victoria, the boomers seem to be just a "little" uneasy about real estate. Unlike in the USA where the boomers are having a panic attack.

In a month or two, I think you will see the panic come to Victoria and the boomers will be trying to get out of real estate. The goverment has given the boomers more than enough warning and have extended this real estate cycle for the boomers to sell.

If we want this economy to revive, then it is necessary to de-leverage assets. By bringing the cost of durable and semi-durable goods down to a level where one can pay off a house in LESS than 25 years or buy a car for cash. Which means that starter homes can not remain at half a million dollars and cars at $50,000.

I'd be interested to know what the politicians are doing with their real estate investments? That would be a really good indicator to me. If they are selling their real estate and sending the money to offshore bank accounts. That might tell us what really is going to be happening here.


Just Jack

Metaldwarf said...

I know first hand many boomers do not have enough saved for retirement. No where near enough.

Lets assume a boomer couple is going to retire this year, both at age 65. They both worked, and earned an average family income for Victoria BC of $76,750 (2006 census). Lets assume that they both earned half the income or $38,375 each. They pay off thier home on their 65th birthday, and retire on the same day. They own their home outright, no car or other loans, they have some savings and think they are on easy street for retirement.

At retirement (age 65) they each receive:
- $8,885/y in CPP (taxable)
- $6,203/y in OAS (taxable)

Total gross family income before taxes from Govt. Benefits
- $30,178/y

The general rule of thumb is that in retirement you need 70% of your gross pre-retirement income. In this case 70% of $76,750 = $53,725

So our hypothetical boomer couple gets $30,178 from the government but require $53,725 to maintain their lifestyle. They have a shortfall of $23,547 per year.

Next, lets look at what kind of savings they would need to produce that income.

Assuming they earn a 5% rate of return for the rest of their lives, and live to average age expectancies (male 84, female 87) this couple needs $326,806 in their RRSP, just to die broke.

$326,806

No where near enough.

olives said...

Re the RRSP shortfall - which is exactly why many retirees feel the need to earn extra income through "investments". These low interest rates are killing most seniors and forcing them to take risks they shouldn't be taking.

Metaldwarf said...

Some notes for the scenario above.

This hypothetical couple is better off than most, they have no debt, most people will still have Lines of Credit, HELOC's, car payments, credit cards etc.

Most families do not earn a balanced income, often women will take a significant amount of time off work to care for children, this reduces their CPP benefit. Not sexists simply reality.

5% earnings on all their money forever is unlikely, especially as they get older and they require a guaranteed income as their safety net shrinks. After age 75, 2% or an annuity would be a better assumption.

If either of them outlive the average age, they will run out of money.

Assumes they will "die broke" their estate will be nil, except for their home.

Assumes taxes stay constant, after all the "stimulus" going on I can only see taxes rising.

Assumes CPP remains constant.

Assumes no private or Govt. pensions.

Assumes they don't win the lottery ;)


Lots and lots of assumptions... and lots of places where things can go wrong.

Many Many people will be forced to downsize, or destroy their "house as retirement plan" with a reverse mortgage or some other horrible scheme.

I see a lot of catfood in Victoria's future.

Anonymous said...

Then the vultures move in and offer the couple a reverse mortgage, which they invest with a guy name Bernie who promises them an 11 percent return.

Not everyone can be millionairs. Don't have enough for retirement! Just chant your new mantra:


Would you like fries with that
Would you like fries with that

Metaldwarf said...

Welcome to Wal-Mart

patriotz said...

Let's keep in mind that many boomers, who had nearly paid off their houses, traded up during the bubble to more expensive houses, and took on new mortgages with amortizations stretching well into retirement. With the hope of hitting the jackpot when they retire.

These people have not only sunk their own retirements, they have created a drag on the RE market that will last for decades as they unload their palaces for living expenses.

And this pent-up supply is not found in the statistics.

Metaldwarf said...

Pent up supply, in boomers who will need to sell to finance their retirement. They will downsize to condos or townhomes. The same condo's and townhomes their children are living in.

In a perfect world, for each boomer downsizing, there will be a gen-XYZ'er moving up to a SFH. The trade in property value will equal the trade in cash. Everyone will be happy.

But I seriously don't think that's going to be possible. The boomers will all demand a hefty price for their homes, because they know they need all they can get for their retirement. Many will hold on for years and years, overextending themselves in the early years of retirement, to the detriment of the later years. The boomers will probably go another decade or so before they run into a position where they NEED to sell. By that time, maybe the younger generations will have the financial ability to pay the prices the boomers want, maybe not. (Patriotz, I know how you will react to this, the boomers get what the buyer is willing to pay etc.)

The boomers are an interesting group, never before has a generation created so much wealth and prosperity, and never before has a generation relied so much on their offspring to pay for them. The younger generations will be paying for the boomers social security and medical care, until we retire and need our children to pay for us. Boomer retirements will be financed by their children buying the family home from their parents.

The boomer have more wealth and power than any group ever in history, but they need the rest of us, to maintain it. So far we are playing our part. It will be interesting to see what happens when/if we decide we don't want to play anymore.
The ability of the younger generations to buy up will determine the fate of the boomer generation. Affordability has already been taken to the breaking point, I am constantly amazed at how much people are willing to spend, and how much debt they are willing to take on, and for how long.

I think we are at that point now with this recession. The boomers are trying to keep their wealth propped up with stimulus, bailouts, new laws, low rates, every financial trick in the book, to keep passing the buck.

It is good to see some of us, like those here on the bear blogs, and other places online, with some financial savvy and understanding. There has been some talk lately about how the echo generation, of which I am a member, identify more strongly with our grandparents, than with out parents(the boomers). There are those of us who are frugal, cautious, hard workers willing to save and earn our keep. Willing to live within our means.

Then again there is also Paris Hilton, Britney Spears, et al. Yeah were screwed.

Metaldwarf said...

Yeah, slow day at work for me...

dub said...

Craigslist: Aria Condo - I wasn't intending to flip it... really, I wasn't.


Somehow, I find it hard to believe that this guy really wasn't intending to flip this condo. The ad is kind of funny that is makes a big point that this wasn't his intention.

How things have changed.

greg said...

dub -

interestingly, there is a 1 bedroom plus den for sale on the same floor at the Aria for about $375,000 less than the 2 bedroom you mentioned. Sounds like a bad decision to buy two years ago, if that's the going rate now.

greg said...

Just an fyi to metaldwarf -

Regarding statement that ...Most families do not earn a balanced income, often women will take a significant amount of time off work to care for children, this reduces their CPP benefit. Not sexists simply reality.

For CPP, it's possible to get an adjustment made to the calculations done for the benefit rate, that take account of the time spent rearing young children under 7, and adjust the CPP rate upwards. Here's a link, if anyone's curious.

Metaldwarf said...

Greg, good link. I am aware of that provision.

"CPP does not count the years when you were raising your children under the age of seven when calculating the amount of your benefit."

CPP removes those 7 years from its calculation, improving the CPP benefit, but a full CPP benefit this does not make.


There are a huge number of additional things to consider and a great number of things that could be done to improve someone situation beyond what I have theorized.

I do need to brush up on some of the new homebuyers/renovation tax credits though. Anyone got some good info on that?

Anonymous said...

Has anyone else seen the home equity article in the TC online. It is under the Business/Money section.

"A savvy way to manage money

Home equity puts new perspective on financing options"

It popped my eyes open.

S2

Anonymous said...

Many boomers refinanced their own homes to help their kids buy a condo or townhouse because, according to them, real estate is always a sure win. It never goes down.

Also, there aren't enough people coming up behind the boomers to buy up all the real estate that will be coming onstream when they downsize or...die.

S2

Anonymous said...

RE: Aria condo: Good luck, Buddy. Anyone with three quarters of a million to spend on that box is going to be smart and cheap enough to wait until it sells for less than a quarter of a mil.

Anonymous said...

Aria Condo....

OMG this guy is on crack! it's a bloody apartment in downtown sleepy town dude!

He bought waaaaaay to high wanting to flip it (don't believe for a minute that wasn't his intent) and now he is trying to get what he OVERpaid for it 2 years ago?????

He even posted a nice pic of himself so we can all laugh out loud when we see him in public.

Scumbag flippers were a big part of this mess and now they want us to feel sorry for them. This unit might fetch 300 - 400k maybe in the next year if someone is crazy/stupid enough to pay that much.

2 years its going for 250k or less when all the oblivious idiots FINALLY realize this party is over!

You can buy that same unit in Florida for a third of the price FURNISHED! let me see now ....Victoria or Florida?

Ya I rest my case.....this guy is gonna lose a bundle and I don't feel any remorse or empathy for him or any other flippers that are gonna get skewered in the next months to a year.

Anonymous said...

Anon 2:05

Right on!

bear_dude said...

http://consumerist.com/252491/snl-skit-dont-buy-stuff-you-cant-afford

Joe Dirt said...

Metaldwarf: I do need to brush up on some of the new homebuyers/renovation tax credits though. Anyone got some good info on that?

I can probably speak to this a little. For starters, I don't believe it will just "help" the economy as advertised (our Conservative G is alive and well.) What it will also do is provide access to receipts (through personal tax returns) from which to reduce tax and EI fraud. Contractor earnings will have to be reported that may have otherwise gone in the pocket. (undergound economy.) This is OK IMO.

It will also increase GST receipts as the work is now reported and is often done by GST registered contractors.

Hypothetical net result of $10,000 work: $3,000 in taxes, $500 in GST, perhaps $2,500 in reduced EI benefits (guessing), less the $1,350 paid to the homeowner. Net direct result $4,650 savings for the Feds. This ignores that the $10,000 cycles through the economy and returns all but about $250 of the original $10,000 paid by the homeowner to the government - do they still teach the "multiplier K theory" in economics? Sorry, just a little cynical :-)

Howeowners will actually benefit. Here's a few of the relevant highlights to consider: cannot be used on a property that is used as a rental (a home you live in, qualifies as a principle residence, and has a suite can be OK but only for work done specifically in your own area or shared pro-rata on shared areas such as a roof (you can read more about this.)

As vague as government announcements are, the wording is usually very specific: expenditures between $1,000 and $10,000. Clearly this excludes purchases under $1,000 and I think it may also exclude purchases over $10,000. Not sure about this just yet but that's the wording. If I was doing significant renovations (>$10K), I might negotiate 2 contracts: one for somewhere under $10,000 and another for the balance. Not fraud, just simply contract specific identifiable parts of the work separately (one bill for cabinet work, one for flooring, probably 2 different suppliers anyway.)

For those living with a parent in a suite, each "family" can claim the credit. You claim one with your spouse and the parent in the suite claims their own (assuming they are taxable.

If you are considering a reno, read the details carefully on CRA's public Web (www.cra.ca? - it's all there and it's not hard to fall within (or without) the parameters.

Anonymous said...

Sorry, my hypothetical example ignores materials cost which may be 50% of overall cost and reduces direct income tax, but you get the idea.

JD

patriotz said...

The boomer have more wealth and power than any group ever in history

Actually apart from their houses, the net worth of the boomers is SFA. They have not been lifetime savers like their parents, rather lifetime borrowers, and in particular they have been way short in saving for retirement.

And we all know what is happening to the value of their houses.

hhv said...

Joe,

I'm almost positive that the application of tax credit is on the the $9000 between $1000 and $10,000. In other words, spend less than $1K, SOL, spend more than $10K, you'll receive a maximum credit of $1350.

Can you imagine the negative PR associated with a "you can not spend more than $10K and receive a credit" message? The PR around this, and it's a PR move only (because the accountants in the DoF don't do your kind of math), is precisely about "spend, spend, spend in your community, it's your civic duty."

Joe Dirt said...

Here's the link: http://www.cra-arc.gc.ca/gncy/bdgt/2009/fqhmrnvtn-eng.html#q6

You could be right HHV, but here's the wording from the CRA site:

"The credit will only be available for the 2009 tax year and applies to eligible expenditures of more than $1,000, but not more than $10,000, resulting in a maximum credit of $1,350 ($9,000 x 15%)."

If the max credit is based on 15% of $9,000 why does it say "expenditure of not more than $10,000?" Why not just say over $1,000 or up to $9,000? The program is not intended to give $1,350 to someone building a house; I think $10,000 is their cut-off.

The government does do this kind of math; don't underestimate them and don't forget the Conservatives didn't want to spend anything. They have accomplished this with the homeowners credit. This isn't about the DOF, it's politics. And yes the outcry will be significant if this is in fact the result.

I'd be happily corrected on this one as I plan a fairly large reno myself later this year. In the meantime, I'll make sure one of my expenditures is greater than $9,000 but not more than $10,000.

Anonymous said...

Here's a paragraph from a Jan 29 CBC article
"But since the federal government revealed the Home Renovation Tax Credit in its budget on Jan. 27, 2009, you're starting to think that maybe you might be able to manage a couple of small jobs. After all, if you keep the renovation budget to $10,000, you'll get $1,350 back — a saving of 13.5 per cent.

The tax credit kicks in on expenditures over $1,000, and you won't get any tax relief for what you spend over $10,000. So your tax savings on a $20,000 job will still be $1,350 — or a saving of 6.75 per cent."

CBC would also appear to disagree with me, time will tell.

JD

VicREBear said...

Wow. Today's T/C "coverage" of the mortgage market aimed at clueless FTBs seems designed to backstop tomorrow's glowing report from VREB on the "robust and stable" Vic housing market. It warmed the cockles of my heart to read about the 42 year old Calgary dumbass wiping a tear from his eye as he signed on the dotted line to become a $400,000 homedebtor until the age of 77. Someone needs to develop a vaccine against stupidity.

Anonymous said...

Vancouver numbers out for March. Detached price drops in March. Sales down YOY.

Yatters Real Estate Report

hhv said...

602 sales in March 2009, 631 in March 2008. Yep. Not good for over-eager bears... seems the positive communications campaign by industry/media is working.

Anonymous said...

HHV,

Your post must have been an April Fools joke!!

VREB total MLS sales as of last Sunday 557. So there will be around 620 sales for March 2009. March 2008 was 707; March 2007 was 833 and March 2006 was 843. Not much to get excited about by bulls!!

Actual stats will be out in a couple of hours...

Ryan said...

"Actually apart from their houses, the net worth of the boomers is SFA. They have not been lifetime savers like their parents, rather lifetime borrowers, and in particular they have been way short in saving for retirement."

Sure their per capita savings are pitiful or even negative, but they make it up in volume!

Anonymous said...

I know a baby boomer who just received an inheritance who bought a brand spanking new SFH as an investment property.

They are still buying with found money.

S2

KoolAid Man said...

I want to thank you bears for giving me a new money making idea. This summer I will be coming out with a new video game for First Time Buyers (FTB's). Details of game play are under wraps right now but it will be done retro style and available from Victoria realtors, mortgage brokers and banks. Here is the ad:

FTB Video Game

Anonymous said...

Anon 12:48... good, good, good. Once the maintenance bleeds them dry, they'll add to the ranks of desperate sellers at the bottom.

womp said...

Stats are out. Not as bad (good?) as PrarieBoy predicted. Loving the new comparisons to the 1995-2001 market.

Anonymous said...

"If the max credit is based on 15% of $9,000 why does it say "expenditure of not more than $10,000?" Why not just say over $1,000 or up to $9,000? The program is not intended to give $1,350 to someone building a house; I think $10,000 is their cut-off."

I think I may have an answer to my own post. It may be that whatever you spend, the first $1,000 is deducted beofre the renovation credit is calculated. Therefore, you have to spend $10,000 to get the full $1,350 (which is 15% of $9,000.) Maybe :-)

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