Monday, April 27, 2009

Interest rates and prices

The peak of our market was April 2008. Back then, 5 year fixed mortgage rates were approaching 6%. It was also a time when everyone believed the escalating price party was a permanent part of the local real estate market.

And then, like an energetic toddler running forward in the schoolyard while looking backward, we hit the affordability wall;


no one saw it coming--well almost no one anyway (H/T to all you regular readers here).

Sure there were warning signs. But Victoria was insulated. Sure prices were high. But wealthy boomers were coming. Sure the length of the run up and the newfangled mortgage products encouraged FTBers to buy sooner than ever, robbing the market of new entrants years in advance. But buying still made more sense than renting.

And then all of a sudden it didn't. Prices dropped 15% in 9 months. All the while industry told us they couldn't. And when they did, industry told us they wouldn't last at that price long. And then the recession hit Canada, but industry told us Victoria was insulated, that this was a once in a lifetime opportunity that only fools would choose to miss.

Ontario's pain, it would be told, creates a magical, even mystical, opportunity for buyers to take advantage of plummeting interest rates and reduced prices to finally own that home they'd been craving for so long. And oh! how Victorians did buy.

January 2009 was the worst month that anyone could remember for sales in the city. But February, sweet February, how the buyers did return to the triumphant ringing of real estate church bells. And then March, gracious March, your gift of stable prices led to the realization that this time it truly is different. This time, by your grace, prices would not fall off the Cliffs of Insanity to crash hard at the soft, sandy beach of true affordability.

Which brings us to April, and 50-year low interest rates. And the myth of affordability. As if average homes selling for 7.8 times average yearly incomes somehow creates a new benchmark of affordability when the historical trend has been 4 times income.

I wrote comments in Reid's first post here a couple of weeks ago about the effects of interest rates on monthly payments:

$500K @ 4% over 35 years = $2200/month
$500K @ 5% over 35 years = $2500/month
$500K @ 6% over 35 years = $2825/month
$500K @ 7% over 35 years = $3160/month

Difference between now and 10 months ago: $960/month.

If you've been watching the market for any length of time, or have done some digging into how this whole mess got started in the first place, you'll recognize that the ingredients today are very similar to 2002.

In 2002, we were just getting over the dot com collapse and the 9/11 effects. The world's money elite, in their infinite wisdom, spurred a buying frenzy in real estate with artificially low interest rates. Get out and shop. Consumers are the savior!

In 2009, in the beginning stages of a global economic event not seen since the Great Depression, caused by an addiction to debt, the world's money elite, in their infinite wisdom, spurred a local buying frenzy in real estate with artificially low interest rates.

Remember that affordability issues, caused by high home prices, caused the local market to correct. A 15% correction thus far still left Victoria 18% over-valued according to TD Economics research. Buyers buying on monthly payments alone, often in places they don't plan to stay in for longer than a few years, are propping up the bottom of the market. Everything else is languishing unsold. Few people think now is a good time to sell, so they are waiting to list their properties. Interest rates can only go up--causing the fog of affordability to be pierced by the true blinding light: falling prices.

Reid has an excellent predictive graph on the effects of interest rate changes on median single family home prices in Victoria.


The BoC has taken the unprecedented step of telling us interest rates will remain unchanged until late 2010. Will prices drop further between now and then, or will the monthly payment addicted True Real Estate Believers™ continue to prop up the Victoria market?

121 comments:

HouseHuntVictoria said...

From Reid, in previous post comments:

"Medium and lower priced homes in Victoria are selling and all indications are that it is still a sellers market at these price levels especially in the nicer locations. Many of these buyers look at Victoria as some sort of paradise and are willing to pay huge money for crap houses as long as they can access the debt. So as long as interest rates stay low and credit remains available I have to assume the buyers will be there.

For the buyers to back off they have to feel threatened about their financial security. I travelled this weekend to a town which has been hammered by the recession. It was ugly and people there are scared and stressed. This town is 100% the opposite of what I see in Victoria. There is NO recession in Victoria yet; nothing has really changed. So as long as people are not concerned about their jobs, why not buy a place in “paradise” when interest rates are so low?

I know their purchase decisions are stupid because I spend the time to study it and understand the longer term financial implications. But I am sure these FTB’s look at their friends and family who have bought homes in the past 20 years (exception being last two) and created financial security through this decision, it appears logical to follow in their footsteps.

If long term mortgage rates rise above 6% we will have created a sub-prime crisis in Canada and those who heavily leveraged themselves will likely suffer the same fate as many we have witnessed in the US over the past two years. Salaries and wages are crappy in Victoria and are likely to stay that way, so income growth will not pull these people out of their dilemma.

But it takes knowledge and patience to stay out of the market when you have an opportunity to own a house in “paradise”. I do not think those attributes exists amongst most FTB’s of SFH’s in Victoria. So given the low long-term interest rates (which BoC is trying to push even lower) bears will have to wait a lot longer before we will see a real buyers market on entry level homes. But once that buyers market exists, prices will come off hard.

(I do not share the "paradise" view of Victoria. It is a beuatiful city, but there are a lot of other places in BC which are as nice to live in as Victoria)"

greg said...

HHV -

no matter how tight the sfh market appears in the central locations, I tend to the slightly more optimistic bers point of view. Reasons are:

1) Despite the uptick in sales, actual volume of sales is still lower than previous 4 springs, in all property brackets. This includes the so called entry level sfh.

2) Sales volumes have been goosed somewhat by slashing of prices on condos. More condos are selling than might be expected - I think this is where some of the kool-aid drunk ftbs are concentrated, not in sfhs.

3) Prices are still trending down, albeit slowly.

4) What's propped this all up? Much lower increase in inventory than the past few springs. Does this mean less people want to sell? Yes and no, there are probably sellers out of the market, waiting for an uptrend to return. Only question is, when does this shadow inventory come back on the market? Either when prices start going up, or when external circumstances start to force the hands of the reluctant sellers.

I think we are going to see a resumption of downward momentum by the late summer.

As far as the Olympics and 2010, with the downward spiral in the Vancouver markets, which Victoria has so far avoided the brunt of, the worst is yet to come.

Nice post, keep 'em coming.

Anonymous said...

Great post. I think you have nailed what is going on. In my view to see prices drop and/or inventories climb we need:
- the recession to finally hit Victoria resulting in job losses;
- banks to pull back on credit like they did in the US; or
- interest rates rise as discussed here

Once one or more of these things occur we should see fewer buyers and more sellers which will finally get us a buyers market at the entry priced homes.

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

In 2009, in the beginning stages of a global economic event not seen since the Great Depression, caused by an addiction to debt, the world's money elite, in their infinite wisdom, spurred a local buying frenzy in real estate with artificially low interest rates....

Are you trying to say that the world's central banks are setting their monetary policies to support the Victoria RE market or does it just sound that way?

The reason interest rates are so low now is because we are experiencing deflation. The real rate, which is the nominal rate minus inflation, is not artificially low. The less money is worth when a loan is paid back the higher interest rates must be, and the more money is worth when it's paid back the lower rates must be.

The "buying frenzy" in Victoria and Vancouver has a lot more to do with the massive "best place on earth" delusion of this province than low interest rates. There are low interest rates south of the border too and nobody is kidding themselves that the market is at bottom, even though it's been falling for two years longer.

Reid said...

A major reason that the US real estate prices have continually dropped since late 2006 is that only the most credit worth citizens have been able to get reasonable mortgages.

To get a jumbo mortgage in the US (<$478k) is extremely hard, yet here in BC we hand out such large mortgages to people only a few years out of school.

People here are clearly drinking the "best place or earth" crap, but they are able to back up their dreams with cheap and available debt.

Anonymous said...

The house buying fever is spreading. All because of low interest rates locked in for up to 5 years (most cases). Yet we laughed at the Americans for taking sub prime mortgages.

Anonymous said...

To many people Victoria, Vancouver and areas of the lower mainland lower mainland are the only places to live. As a indo-canadian I would never live in Calgary or Edmonton or any other praire town. The main reason is because of the cold weather, but on a deeper more personal level, it is because of the level of intolerance and racism that exists in these places. I just would not feel welcome in these cities. I know that many other people share my point of view. In Victoria and Vancouver I feel accepted. As a healthcare professionl this is main reason why I would choose to live in Victoria. What value is a cheap house if it is in a cold intolerant place?

Anonymous said...

In BC we also hand out large mortgages to people who are still in school. They buy a house with a suite but they still get the financing to buy a house.

S2

Rhino said...

"The "buying frenzy" in Victoria and Vancouver has a lot more to do with the massive "best place on earth" delusion of this province than low interest rates."

I agree with Patriotz, its psychology that's keeping this alive. But I am fairly sure this spring will be the last stand for buyers before capitulation. RE Bubbles usually have a symmetry to them (like the mini-bubbles in '82 and '93). This bubble will probably take almost as long to deflate as it did to form. If the run up was '03-'08, I wouldn't expect to see a bottom until 2012. But maybe "it will be different this time"...

Reid said...

Forgot to mention in my earlier comment that during my visit to the recession hit town on the weekend that there are very few offers on real estate today. People there could care less about the low interest rates, but rather will I have a job. The few offers that are coming are serious low balls. You only sell your house if you have to becuase you are going to get hammered. There are still a bunch of dreamers there like Victoria, but they do not even get a showing.

A total contrast to Victoria.

hhv said...

Patriotz, I was attempting some humour, which apparently wasn't too funny. I get that rates aren't artificially low, but from a local perspective they would seem to be no? It will take time, but eventually things will catch up, and then our rates will seem to be more in line with our reality.

patriotz said...

Sorry hhv, things have been so nutty for so long that sometimes it's hard to tell whether someone is trying to be funny or not . :-)

I agree that once the deflationary pressures have abated interest rates will return to normal very, very quickly.

To many people Victoria, Vancouver and areas of the lower mainland lower mainland are the only places to live....

If a place is seen as especially desirable that should be reflected in both rents and prices. It is not a justification for rents to be out of whack with prices. That's a bubble, period.

Anonymous said...

Rents are catching up ($1,200-$1,500 for a 2 bd?) and RE prices are declining albeit very slowly. They will meet somewhere in the middle by perhaps mid-summer next year.

greg said...

What planet are you on? Rents will not "catch up". Rents are paid from income and nothing else. Either people are forced to live together, move away or go home, or rents drop, in a situation where there is a big jump in unemployment, combined with a lot of desperate homeloaners who need suite income to pay the mortgage freight, on what dream planet are rents going to catch up "somewhere in the middle" by next summer?

greg said...

Answer: not this planet or this island.

Anonymous said...

And to top it off it sounds like the xenophobia is in reverse here when it comes to Calgary. Look yourself in the mirror buddy.

Rhino said...

"Rents are catching up ($1,200-$1,500 for a 2 bd?) and RE prices are declining albeit very slowly. They will meet somewhere in the middle by perhaps mid-summer next year."

Really? Have you seen craigslist lately. I have seen this same rental for a couple of months now:
http://victoria.en.craigslist.ca/apa/1142663333.html

Even if they got that price its still very cash flow negative. If anything rents will be down or flat by next summer. Also, BC has rent increase caps, and given the large rent/price disconnect I don't see how your statement could be accurate without large price drops.

womp said...

Agree with Rhino. We've been watching Craiglist (note: Craigslist is not the market, only a delusional one) for several months and it appears that rents on there have peaked.

We're starting to see incentives being thrown in with rental ads.

My lease is up next month, I'll be renegotiating a lower rent with our landlord.

Anonymous said...

As more and more people die from the pandemic, rents will be going down. WAY down.

And that "mortgage helper"? Boarders don't look so attractive after a pandemic. The LAST thing anyone is going to want to buy is a large house with a suite.

Or God help you, TWO or more.

Ryan said...

When I was looking, I saw a lot of ridiculous rents on Craigslist. But I also saw the same ads reposted, month after month. The place I eventually got had been posted in October and November. When I saw it in December, I called. I eventually got them to knock it down to $1000 a month. So no, $1200-1500 for a 2 BR is not the new market rent.

Anonymous said...

"Also, BC has rent increase caps, and given the large rent/price disconnect I don't see how your statement could be accurate without large price drops."

BC does not have rent caps. There is a maximum statutory increase set annually - something like inflation plus 2%, but anytime the place is vacant the landlord can hike as high as he figures the market will Bear.

Further to that if the rents are way out of wack with the market he can apply for an additional rent increase that can be hundreds per month if neccessary.

$1,200 per month for a 2 bedroom that can be purchased for $225,000 plus. Mortgage cost $950 plus taxes etc. It would seem that the rent / price floor has already been reached at some levels, and it will never be equitable as a landlord to rent an entire house.

Oh ya, scare everyone with the Swine Flu, good one. Is that what some are counting on here - a large die-off of friends and family to relieve the housing burden? I'll take high prices thanks.

patriotz said...

$1,200 per month for a 2 bedroom that can be purchased for $225,000 plus. Mortgage cost $950 plus taxes etc....

That "etc" can get really big for a condo. Also mortgage rates are as low as they are going to get and can only go up in the future.

Condos are not worth more than 100x monthly rent.

Anonymous said...

Condos are worth what people are willing to pay for them, interest rates aren't changing anytime soon, and the "etc" is largely maintenance and operation cost - depending typically on the amenities available.

Property tax and strata fees will largely make up the difference between the $1,200 rent and the mortgage. Pretty basic stuff really.

Anonymous said...

I forgot to mention about $250 of the mortgage payment goes to principle, therefore your mortgage cost is closer to $700 per month.

IC4 said...

"And to top it off it sounds like the xenophobia is in reverse here when it comes to Calgary. Look yourself in the mirror buddy."

Sometimes discrimination can be so subtle that others around who are more friendly would never notice. I live in a place where I am considered somewhat "exotic," and find there is ever-increasing intolerance. The little stuff is a daily occurrence. Once in a while there is outright hostility---a couple of years ago a young fellow stood outside my car and screamed obsenities at me about my appearance, then when he heard my accent told me to go back to America (all Canadians are assumed to be the hated American). My children have been told to "go back to America" by other children in front of my face. After almost 20 years of this bs I am more than ready to move to a place where I will be accepted. Does this attitude make me xenophobic? I mean, I lived 10 years in Richmond and at the time would have struggled to describe its "charms," but one thing I felt there was ACCEPTANCE. Don't feel that here when I am out and about in public. So Victoria looks like a haven to us. At the moment we can't afford to move back. And it could be a case of "it's different there." Oh boy, that's a mindset that can be applied to all sorts of situations lol.

Oh and the swine flu is fortunately not airborne, it seems. "Normal" flu kills many, many people every year but no one panics about that? But some people like their disaster scenarios which probably keep their minds off all the other stuff going down.

patriotz said...

Condos are worth what people are willing to pay for them...


That's what they are worth to the seller. What they are worth to the buyer is the net rental value, i.e. the market rent minus all expenses. That's what a condo or any other property is worth to someone who buys and never sells.

If you buy a property at more than this value you need someone to sell it to for even more (the greater fool) to break even.

"Price is what you pay, value is what you get."

Warren Buffett

Reid said...

Even if renting costs were equal to the cost of ownership you should not buy a place today. You would only buy if you felt prices were going to rise over time.

Anyone who actually thinks that real estate will be more valuable three years from now has choosen to ignore the facts. House prices track very closely with interest rates because buyers are always short term focused.

If interest rates are still at current levels in 3-5 years, then it most likely means we are in a depression and your house will be worth a fraction of its current value.

If the economy does improve, then as Patriotz says interest rates have no where to go but up and relatively to todays levels they could rise substantially. Yes interest rates will stay low for one or possibly two years, but then the party is over. When people start renewing their 3.7% rates for 6.5% or higher it will be no different than the US sub-prime resets.

Three to five years from now there will be lots of people in Victoria (and elsewhere in Canada) asking themselves "why the hell did I buy this stupid house."

I would not buy a place today unless ownership costs were far less than rental costs. There has to be some reward for all the risk I would be taking on. Because of low downpayments, real estate is a high leverage game with lots of financial risk. Today we ignored or discount that risk likely because there have been lots of winners, myself included in this real estate game as we witnessed an unprecidented drop in interest rates over the past 20 years.

But unfortunately the rates cannot get much lower; maybe a five year rate at 3%, but that is it. Assuming we will recover from this recession watch the carnage as interest rates rise. It will be ugly but it will unfold slowly.

patriotz said...

If you want to see how ridiculous condo prices are in Victoria compare with this Ottawa property:

91 Anderson St $219,900This is not a condo. Owner has full control of both units. Price/rent is 142.

Even with 10% DP, 6% interest, and 25 year amort mortgage is less than rent.

And no I don't think that's a good buy. Price/rent should be about 125. The market doesn't think so either, because it's been listed for some time.

Rhino said...

"$1,200 per month for a 2 bedroom that can be purchased for $225,000 plus. Mortgage cost $950 plus taxes etc. It would seem that the rent / price floor has already been reached at some levels"

I would buy 10 of them..seems like a phenomenal investment for victoria's up and coming financial elite.

Anonymous said...

"And no I don't think that's a good buy. Price/rent should be about 125. The market doesn't think so either, because it's been listed for some time."

You should actually look at that listing. I'm thinking Esquimalt "base" property at best, maybe compares to downtown South Nanaimo, except Nanaimo wouldn't gross $1,550 in rent and the price would be another $100,000.

I was looking at some Ottawa property a few weeks back, high vacancy S.hole from what I could see.

Anonymous said...

Rhino- then by all means, put your money where your mouth is, and report back to us.

So we can howl when you lose your shirt like the rest of the idiots.

vg said...

Rents are dropping slowly on all those gouge suites the owners thought were going to pay their mortgage. I have seen several in the past weeks on Craiglist dropping their prices in $50-$100 at a time.

Nice places,but just way out of reality for what they are. People with money to pay that for a basement suite will rent a condo with all the frills for the same price.

patriotz said...

You should actually look at that listing. I'm thinking Esquimalt "base" property at best, maybe compares to downtown South Nanaimo...


NFW. That's the west side of downtown Ottawa (the good side), walking distance to Parliament Hill. Look at the map on the listing.

I know it doesn't look like much, but you know what they say - location, location, location.

Rhino said...

"Rhino- then by all means, put your money where your mouth is, and report back to us.

So we can howl when you lose your shirt like the rest of the idiots."

Sorry, I should have added the "sarcasm" tag...

Anonymous said...

It's obvious that people CAN afford to buy and that is why people continue to do so. I really don't understand the superiority complex you FoRenters have. How can you possibly think you're better than a homeowner when you rent?

Anonymous said...

How can you think you're better than a renter when you buy?

Reid said...

The bears on this blog simply understand that there is a strong possibility that house prices will drop and have deferred their purchases. Most bears have been ABLE to buy a house for some time, but choose not to.

Today many people who could NOT afford a year or two ago can because the banks are willing to lend them large amounts money (5x their income) because of the incredibly low interest rates. From my perspective, these loans are sub-prime in nature. If you make your purchase decision soley on what the bank is willing to lend you and not the fundamentals of the asset you are buying you may be in for a big surprise. You CAN afford it, but you are an idiot if you proceed with the purchase.

FoRenting is the smart thing to be doing today regardless of wether you can afford to buy a house or not.

Metaldwarf said...
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Metaldwarf said...
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Metaldwarf said...

National Post article on Quantitative Easing

The Bank of Canada would have to acquire roughly $24-billion of government bonds just to engineer the equivalent of a 25-basis-point cut in borrowing costs – making so-called quantitative easing unlikely in the Canadian marketplace, says an analysis from TD Securities.

So much for that idea. The only way I see that happening now is if the greenback shits bricks, and we have to flush the Loonie down the toilet to keep up.

PS: Argh damn you blogger formatting, sorry for the deleted posts.

greg said...

I've been able to buy since mid 2007 at 2007 prices - but didn't. Why? Not because I prefer renting, though I do rent a nice townhouse at a very affordable rate.

No, the reason I haven't bought is I didn't want to vaporize my equity. Think how long it takes to save up a downpayment, and how small a proportion of these purchase prices most downpayments are, and how little prices need to go down to vaporize all those savings.

Its called leverage, and it works both ways. By waiting longer when a clear downtrend has been established, while continuing to save, these so called "forenters" are actually acting in a fiscally conservative and sensible fashion.

I couldn't care less if whiners like Ian Watt want to criticize potential buyers for not stepping up and paying him a commission. I couldn't care less what happens to Ian Watt's real estate career. He either deals with the current market realities, or he gets out of the business, what's so hard to understand about that for realtors and homeloaners?

When I buy, now, next month or next year, it will be a cheaper (dare I say shrewd) offer below list, and I will be able to handle payments on a 25 year amortization at 7%. The fact I am paying less interest is a big bonus, but I'd rather pay less than have a lower interest rate now and pay more for the house.

Reid's right, this is setting up as Canada's own version of subprime - watch what happens to prices in around 6 years - they are going to get pummeled for the next decade.

So why not wait a little while now and pay less later.

Seems like a no-brainer.

And considering bears who are smart enough to figure that out and disciplined enough to be guided by these principles regardless of the RE industry hype, what makes realtors or other RE bulls think coming on here and insulting "forenters" is going to change any of that?

Sheesh.

Metaldwarf said...

Really good post on Housing Analysis

Anonymous said...

Rhino, sorry I didn't get it. I almost got it, but I figured the message would reach its intended target, even if it wasn't you and was your target as well!

Anonymous said...

Anon 12:03 said with a straight face:

"It's obvious that people CAN afford to buy and that is why people continue to do so. I really don't understand the superiority complex you FoRenters have. How can you possibly think you're better than a homeowner when you rent?"Uh.. could it be because you're going to lose half your net worth tied up in a crashing house and we're going to actually make money in investments not spent on taxes, upkeep, repairs, realtor fees, remodeling, and impressing the neighbors, by NOT buying now and waiting for the market bottom?

What a tool. You make Ian Watt look like Albert Einstein.

hhv said...

Heads up: IW wants you to mention his name. It's why his message is controversial/inflammatory. When you write about him here, you're actually catering to his desires.

Just Janice said...

The unfolding swine flu is very interesting. In the context, none of the economic forecasts have anticipated an economic shock, such as pandemic flu. KPMG did a study a couple years ago (March 2006) on the economic impact of pandemic flu on BC and estimated that it would cost between 1.9% and 4.4% of GDP. Given that we're already at Zero Interest Rate Policy (ZIRP), the Bank of Canada really has no room to 'play' to mitigate the economic impact. In the context of pandemic, tourism will be hit even harder than it already was, and transportation and trade become more difficult. Swine flu might just turn this severe recession into a 'near depression'...

With all the uncertainity why take the risk on real estate right now?

greg said...

HHV -

I understand the "there is no such thing as bad publicity" school of thought, when it comes to marketing, however, calling someone an idiot, then others linking to that comment and or piling on doesn't seem like the best policy for a "professional". I understand you can probably figure out if IW is making anonymous inflammatory comments here via the site log, but I wouldn't really worry about it. the dude has too much time on his hands, an inflated sense of his own self-importance and a deluded idea that his media broadsides are going to build his business.

I would take the opposite point of view - the more hype and self-promotion, the quicker the public will tire of the schtick.

Since as far as I know, Ian coined the term "forenter" that is now being bandied around these blogs, it makes sense to me to mention his name when using the terminology - credit where credit is due, wot?

But in the best interest of this blog, I will conform to the IW code from this point forward...

Mr.4AM said...

Just Janice,

FYI:
Globe & Mail's World Bank Financial Predictions of Swine Flu Impact:1) Worst Case Scenario: I.e. 1918-19 Spanish Flu outbreak = 71 Million Deaths = 3.1 Trillion USD & dent in *GLOBAL* GDP of 4.8%

2) Mild Outbreak = 1.4 Million World Wide Deaths. Global GDP would fall by 0.7% (calculations based on 1968/69 Honk Kong Flu outbreak)

Time to start poppin' vitamins... W.H.O. just raised alert level from 4 to 5 - aka. PANDEMIC LEVEL.

Anonymous said...

NFW. That's the west side of downtown Ottawa (the good side), walking distance to Parliament Hill. Look at the map on the listing.Moron, you've never been there. That area is full of prostitutes, crack addicts and drunks. You certainly do get what you pay for.

Nick said...

Millions of people are not going to die from this swine flu outbreak, so far it doesn't look like a particularly severe flu virus. Even at ground zero in Mexico, the Mexican health authorities just downgraded the number of confirmed deaths directly from swine flu down to 7...

Anonymous said...

"In the context of pandemic, tourism will be hit even harder than it already was, and transportation and trade become more difficult. Swine flu might just turn this severe recession into a 'near depression'..."

Interesting I was thinking the opposite. We have a tourism trading deficit in most years. I heard today that several ships won't even be stopping in Mexico this year but will increase their visits to Victoria. Further to that where will all those tourzits go that won't be booking to Mexico this year - Victoria?

Reid said...

Just updated my April inventory listings. Total SFH inventory levels were almost identical those at the end of March. Interestingly SFH's listed under $650k were down 7% while homes listed over $650k were up over 15%.

Looks like inventory turns at the lower level will get even faster than March continuing to demonstrate a strong sellers market. Converserly at the high end we could see an even stronger buyers market than March (will depend on final sales numbers).

Further support that the financially illiterate first time home buyers are taking all the banks are offering in terms of debt and snapping up the low end houses.

msr said...

Anon,

They'll probably go to Cuba now that it's legal for Americans to travel there. Further, I think people who would have gone to Mexico will go to other Central American destinations rather than Victoria.

Zep said...

What's this Just Janice?--after weeks of what seemed to be rationale financial analysis, you stoop to fear-mongering on swine flu?

Anyone with half a brain would 'short' H1N1 right now (I'm sure there's a way to do it...) As per usual MSM has gone way overboard on a very non-lethal outbreak--but look how it brings the gold bugs out--hi Mr 4 a.m! Just surprised to see JJ join the fray.

Or let me put it this way--when swine flu fizzles as a news story by mid May, shall we discuss on this thread what a great positive indicator it is for the housing market?

As in, "omg, looks like we're not all going to die after all, let's sell our gold and buy a house!"

patriotz said...

They'll probably go to Cuba now that it's legal for Americans to travel there....

It's not. They're just letting Cuban Americans visit their families once a year instead of every 3 years, or something like that.

Anonymous said...

Question:

Will a house that is currently listed at 600 - 650 - up at Bear Mtn. for ex, with a suite, (there are some nice ones by look of it) go for around 450 in the next 18 months - 2yrs?

Thoughts?

Just Janice said...

The flu can be very mild (ie. mortality wise), and can still have significant negative impacts on the economy. Expect a further decline in the price of oil, increases in consumer staples (producers of canned good), increases in pharmaceuticals. I'm sorry if it sounded like fear mongering, but potentially 20% of the population taking 5 days off sick, isn't good for the economy...unless you happen to manufacture cold/flu remedies. Mexico is shutting itself down for 5 days... something I'm sure it doesn't do in the 'normal flu' season. If anything the MSM is underplaying things in this case.

I'm just saying that there will be an impact, it will be negatice, it will add to the uncertainty.

Personally, I would likely avoid anything that involves a plane with people from who knows where....

roger said...

Zep,

I notice your posts focus on criticizing the comments made by others. Why not try posting some original stuff of your own? Or are you just a troll?

boomer said...

Well, as a proud little piggy from a long line of distinguished swine, Im just happy that the W.H.O. has decreed that henceforth the epidemic (pandemic, whatever)will no longer be referred to as the "Swine Flu' but rather the "influenza A (H1N1)OINK"

(OINK optional)

booyah!

Anonymous said...

The swine flu that "fizzles in late May" (which is debatable at this point given how fast it's spreading) will mutate and come back around in fall once kids hit the schools and bite you on the ass.

Read up on the history of the Spanish Flu pandemic, Genius.

How apropos that a real estate bull would ALSO have his clueless ignorant head in the sand regarding pandemics AS WELL.

boomer said...

Paranoia strikes deep. Into your life it will creep. It starts when you're always afraid. Step out of line, The Man comes and takes you away.

Zep said...

Roger,

...and I notice you're not very tolerant of criticism. Why don't you suck it up for a change and let 'Just Janice' defend her comments--at which she has already made a decent stab.

Anonymous said...

"Boomer":

Stephen Stills notwithstanding, the govs of both the US and Canada (indeed, the rest of the planet) are stocking up the body bags while you sing tired old classics about riots on Sunset Strip.

Stephen Stills would be the first to tell you that whatever the gov tells you are lies and situations are always far worse than they let on.

AL-WAYS.

Just Janice said...

Zep - feel free to short A H1N1, while you're at it buy a house, and all the stocks (preferably in oil) that you can and repeat the mantra 'it's different here' and 'there's no way it can happen again'. I'd rather be a bear/vulture than an ostrich in the circumstances.

Reality is that A H1N1 makes an already bad economic situation worse. Make an informed decision, read up on history (see 1918-1919 Spanish Flu, 1958 Asian Flu, 1968 Hong Kong Flu, 1929-1937 Great Depression, Debt Deflation, recession of 1981/82, recession of 1990/91, recession of 2001/02, asset bubbles, and financial crises). Compare present events to those that occurred in the past and make up your mind for yourself whether or not the present circumstances are better or worse and ask yourself why the present circumstances are better or worse.

You can come to your own conclusions, but if you are going to criticize the conclusions of others than you should resort to evidence, instead of just name calling.

greg said...

And anonymous commentators are "Al-ways" more authoritative than numerous health professionals from all over the world, who dare to put their names and reputations on the line, giving public health advice.

Stop with the body bag fearmongering, please. If you're right, that's crass. If you're wrong, that's irresponsible.

Leave it to good old "anonymous" to whip up the fear factor.

Nick said...

Keep in mind that in 1918, nobody truly understood what a virus was, how they spread or how to stop them. We have things like Tamiflu now, not to mention effective treatments for respiratory distress and other dangerous side effects of the influenza virus. Our medical knowledge is light years ahead of what was known even in the 50s and 60s, let alone 1918. This is a bad flu bug, but it's hardly going to be a rerun of the Black Death like the media furor would indicate.

Anonymous said...

People travel 1000 times faster than they did in the Middle Ages, and our "on-the-ball" "modern" health departments refuse to close borders, and quarantine in a pandemic is "unworkable", so of course a rerun of the Black Death or 1918 is not merely probable, but sooner or later absolutely inevitable.

Whether or not this is "the big one" or not will be clear by the end of September.

Soon enough.

boomer said...

"Whether or not this is "the big one" or not will be clear by the end of September."

Well in that case,we may as well enjoy a lovely summer.
(could be our last)

Nick said...

My guess is that the gold bugs are still hoping for the end of civilization and have seized on the flu bug as their next great hope. I bet that 10 times more people have died in car crashes this week than have died as a result of swine flu.

boomer said...

shhhhhh.

"influenza A (H1N1)"

NOT "swine flu"

thats anti-porcineism!

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

Zep said,

Roger... and I notice you're not very tolerant of criticism. Why don't you suck it up for a change--

I am tolerant of criticism and have had lots of it in the past. I just don't feel like sucking it up from someone who does nothing but give negative feedback on the posts of others. We have enough trolls on here already.

As I said before post some original comments for a change.

Anonymous said...

Swine Flu - is it as serious as all that?

WHO knows...(snicker)

Look at where we get our info. Housing crisis - even I knew around 2005 the financial system was going to collapse and i don't know much. But, I didn't see it on the media until it just crept in a bit in Spring 2007 and one day in 2007 or 08 or so the President of the US said - oh, the entire economy will collapse if we don't bail out this company?? Huh? That is pretty serious news - but didn't hear much about it, not much alarm, forewarning - nothing. Why - I think media and advertising dollars - they made those who knew it was coming sound like 'Dr. Doom'. Jim Rogers, Schiff, Faber, Buffet, they were all saying it was going to happen - but your average guy was investing in Canadian banks after a 6 yr high and still thought (and in Victoria still thinks for some reason) that real estate is a good buy.

Now we have the reverse. We have a situation where the media can make back some of those lost ad dollars on new ad dollars - advertising/ selling pharmaceuticals and the like. It is perfect - just when they were sinking - this miraculous - "tune in now - it could save your life" event happens and it is all we are talking about.

I am not saying this thing isn't serious - but the info providers have a vested interest in keeping the alarm bells ringing so, I will take it (and the flu vaccines) with a grain of...well, just tap water will be ok for now.

And, I know about the Spanish flu and that we are due for a big one, and one will undoutedly come - how can it not - history repeats itself time again - just not convinced this one is "the one".

Metaldwarf said...

So how 'bout that local real estate market eh?

Mr.4AM said...

For whatever it's worth, I put together some quick amateur calculations on how fast swine flu could spread in Canada given a 20% increase in infection rates daily (so far we've exceeded 50%), and potential (though unlikely) resulting mortality rate, assuming a 0.5% kill rate of infected.

Be sure to read my commentary at the bottom of the above link before commenting here (or anywhere).

How this is related to Victoria real estate is that it isn't, until it is. In other words, if infection rates grow at 50% less than they have done in the past few days, by the end of May we'll have a full out shutdown of public events across the country... so nevermind open houses.

Cheerios,
Mr.4AM

Zep said...

that's awesome Mr 4a.m. a fine bit of research there.

See roger? no need for me to be "original", guys like 4 a.m. have got that covered in spades.

Again--this is how a good bear blog goes bad--just head on over to prairie boy's to see the very unfortunate erosion of common sense first hand.

Anonymous said...

No one is saying that this is "the one"; only the precursor to it.

Just like 1918.

I for one am alarmed that the gov "is on it", but doing relatively nothing beyond telling people to stay home, wash their hands, and cover their mouths.

Mr.4AM said...

Zep,

1. Go re-read my comments in that link. Which part of self-admitted amateur analysis did you not understand?

2. Don't compare my quickly thrown together (bored out of my tree tonight) analysis about swine flu against Roger's well founded, researched, clear, organized & next to unbiased Victoria Real Estate commentaries.

3. You want to comment on something I post? See my next post below.

Mr.4AM said...

One of my favorite macro-economic analysis site itulip.com, just put out another 15+ page report on the upcoming market trends, of which Part 1 is free to read "Everyone is Wrong, again - 1981 in Reverse: The Great Divide". Excluding of course any unforeseen black-swan events such as Swine Flu Pandemic, Planet X, Nuclear War...

The conclusion can be summarized in 1 sentence:

********************************
CONCLUSION: "RISING INFLATION NO LATER THAN Q1 2010"********************************

Which for Victoria Real Estate I would translate as: Expect rising interest rates to START no later than Q2 2010 and rise as fast as they came down, if not faster. This will translate to an accelerated real estate market downturn by 2012 as Victoria mortgages reset into much larger interest rates 1980-style (at the very least in nominal terms, if not worse)





============================
In a few more paragraphs, the above is dissected and justified as follows:============================

There's 9 tail-winds now pushing toward an upcoming inflationary environment:

1) The global credit-money gap will be closed by massive debt monetization English: Fed continues to print even more USD against thin air (for bail outs, stimulus, etc) and after success in "stabilizing" the economy (in nominal terms - not real), they won't/can't pull it back fast enough in order to keep inflation in the 2 to 3% target rate again. That (false) "stabilization" period could be right around now. Some major trends appear to be reversing.

2) Credit crunch induced supply shockEnglish: 2. Global supply of goods and services has been damaged at least as severely as their global demand .Lack of credit availability to businesses resulted in many going bankrupt. This will continue for a while yet, but ultimately only the strong (solvent) will survive. This means that we will continue to see floods of cheap inventory (i.e. cars, imported goods, etc) so long as the deflationary business collapse continues, but once it ends, there will be: a) Far less competitors in each sector = higher prices b) Reduced manufacturing = higher cost of production c) excess inventories at cheap prices get eventually fully absorbed by consumers, meaning an eventual reversal of supply & demand = higher prices.

Example: You will see restaurants fail, until most have failed. Then the survivors will charge you much higher prices. In other words, the deflationary party will be over soon.

3) Bankruptcies induced industrial concentrationEnglish: A surge in corporate bankruptcies and fears of business failures will foster greater industrial concentration .Already explained in 2) above. Less competitors + reduced manufacturing = higher price of consumable goods.

4) Rising economic nationalism and deglobalizationEnglish: National economic objectives will restrict global trade opportunities . As governments try to minimize recession/depression fears, "protectionary" actions are taken (despite media propaganda of the opposite). Deglobalization occurs. Foreign nations do the same & pretty soon import costs soar & cheap Chinese crap all of a sudden isn't so cheap.


5) Higher nominal profit rates required to rebuild the global product supply chain English: The outsourcing of manufacturing & service sector only functions so long as those offshore orgs can get credit to run their businesses. Once that party ends, the global supply chain breaks. Also protectionist reforms also put pressure on the global supply chain (Global Supply Chain = Resources from the Americas & Africa, Build it China, Assemble it in Mexico, Support it in India). If credit crunch threatens to bankrupt parts of the supply chain, only one way to survive - charge more. Charge more at every level = higher prices for end products.

6) Inflationary public sector goods and services provisioning +English: As governments bail out private sector, they end up owning more and more of previously private sector run companies. Governments are inefficient at doing so, so cost of operations goes up = cost of goods produced by government managed corps goes up.

7) Weakening [US] dollar and cost, push inflation from energy importsEnglish: I've written several posts on the future collapse of the US dollar. What % it will collapse and when exactly is still up in the air, but a 30-40% collapse is not out of the question. Trigger will be a lack of confidence in US to pay back its national debt to the likes of CHina, Saudi Arabia and anybody who bought US bond/T-bills. Once the US dollar goes through yet another devaluation round, energy prices (aka. Oil) priced in USD will rise dramatically. This may or may not be an issue for Canada, but a huge issue for Americans consumers when this happens.


8) Delayed inflationary impact of excessive money growthEnglish: Remember all those hundreds of billions or few trillions (I've stopped keeping track), of Fed printed dollars & consumer bail out $ that were injected into a multitude of US banks so that they would survive and not cause an economic meltdown? Hypothetically speaking, if the number is $1 Trillion, when the surviving US banks finally decide to start lending again, the "Fractional Reserve" system kicks in, and at a ratio of 1:12, within the span of 2 years or less you've got $12 TRILLION of brand new money floating around the economy. That dilutes & devalues the USD even further, and cost of goods priced in USD goes up.

9) Inflationary Institutional Policy BiasEnglish: The US Fed & Treasury has been trying like mad for some 18 months now to first avoid a US recession, and then a Global Recession, and while they failed, failed and failed again (13 times in a row), because of their seemingly limitless powers (and printing presses) as they carry on the grand experiment but on an even grander scale, eventually if you print and hand out enough money a (false) recovery is immanent. But then we'll have a new problem, run away inflation!

Mr.4AM

Metaldwarf said...

inflation != higher interest rates

The govt has screwed over the taxpayer to the tune of hundreds of billions, BoC has abandoned its normally prudent operations and guaranteed low rates till June 2010. At this point I can easily see rates staying low far too long and inflation eating our savings as a hidden tax.

If you don't spend, inflation will destroy the value of your savings, so what are you waiting for? Get out there and spend!

Just Janice said...

The mess we're in is strictly deflationary - at least over the next 1 to 2 years. It will be particularly deflationary with respect to housing. Inflation was not a problem in the 30's, not even a problem in the 40's (even with the world's largest fiscal stimulus program in place)...nope it took a good long while for inflation to be a problem. It will take a good long while for inflation to be a problem this time.

In terms of economics this was a category 4 hurricane, that appears to now be forecasted to move to a category 5 hurricane.

And in deflations, at an individual level, it is best to pay down whatever debt you can as quickly as possible, as that debt becomes relatively more expensive with time. Concurrently, it is best to save as much as possible to enable yourself to buy more later. (Of course both debt repayment and savings at the aggregate level does make for some pretty ugly economic results - in that demand is lower than it could be).

Both inflation and deflation are self-reinforcing. If given a choice, I'd rather we were dealing with inflation, as that is a beast that is very well understood in a policy context.

Demographically RE is a bad play right now.

Financially RE is a bad play right now.

Economically RE is a bad play right now.

Dave said...

Janice: Demographically RE is a bad play right now.

Financially RE is a bad play right now.

Economically RE is a bad play right now.
If only life were that simple.

RE: Demographics... have a look at our population growth. The echo generation is almost as big as the boomers. They are much bigger in aggregate terms than the boomers were 30 years ago due to population growth. http://en.wikipedia.org/wiki/File:Demographics_Canada.png

RE: Financials... Affordability has improved significantly year over year.

RE: Economics... The unemployment rate in Victoria. The economy is doing well despite the global recession.

hhv said...

vreb sales numbers 747 sales, 1260 new listings and 3861 listings total.

sales to new listings ratio = 59%
sales to listings ratio = 19%

I'm thinking we'll see little movement in prices.

Anonymous said...

Actually at the moment your savings are growing and growing quite fast due to deflation. Spending now is foolish. Buying a major thing like a house or a car is downright idiotic right now. This is a deflationary spiral. Wait on the side lines and watch the vortex.

Anonymous said...

Anyone that truly believes this virus is controllable is seriously out to lunch. If it we were able to control this thing Mexico city wouldn't be on lock down right now.

Just Janice said...

Demographics - there's an echo generation, but it's smaller, and more importantly much poorer than it's parents (student loans, high cost of childcare). In terms of in-migration to victoria it's been holding at around 1%. I anticipate that it's going to drop - after all why Victoria when Arizona, California, Nevada, Hawaii are all now very competitive.

Financially - see deflation - why in the world would anybody want to get themselves into serious debt right now when it appears that they can get more for less later? Furthermore, with the risk of unemployment rising, and the risk of wage cuts rising, it's quite possible that meeting those debt obligations will be more difficult in the future. Bankruptcy in BC is already up significantly year over year.

Economically - the three month moving average of unemployment for Vancouver Island and Coast for March of 2009 was up 30.8% (6.8%) compared to March 2008 (5.2%). And I suspect that that's a generous YOY comparison. Oh and lets not forget that we're dealing with a very large, very serious, macro-economic situation that is entirely beyond this little island's control.

Somebody's still in the bubble...and his name is Dave.

vg said...

Leave it to good old "anonymous" to whip up the fear factor."


greg,

you'd at least think they would number themselves to seperate the gold wingnuts to the end of time/armegeddon version to the occasional bear.

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

HHV said,

vreb sales numbers 747 sales, 1260 new listings and 3861 listings total.--

Those numbers came from a realtor on Twitter. The same realtor tweeted Monday (4 days ago) that there were 602 sales. Are we to believe 145 more sold in 4 days? Which figure is wrong - today or Monday?

I am looking forward to the official numbers later today.

(Previous post deleted due to blogger HTML error)

vg said...

"My guess is that the gold bugs are still hoping for the end of civilization and have seized on the flu bug as their next great hope. "



Nick,

I agree,and once again it appears it is not working in their favour and they are running out of excuses.

Mr.4AM said...

Just Janice said:
"The mess we're in is strictly deflationary - at least over the next 1 to 2 years."I'm going to call you on that one. BTW, my definition of inflation above was simply related to day to day goods from the perspective of consumers.


"It will be particularly deflationary with respect to housing."Yes, I agree with you here. But the continuing falling prices will be accelerated by consumer based inflation as per my above post, and the accompanying interest rates that will come with that.


"Inflation was not a problem in the 30's, not even a problem in the 40's (even with the world's largest fiscal stimulus program in place)..."In the 30's and 40's we had the gold standard. The US was also a net exporter, not debtor nation like they are today. The world's largest fiscal stimulous was not in the 30's or 40's, it is right now.



"nope it took a good long while for inflation to be a problem."Yes it did, it's called printing money, investment loop-holes & lax lending rules.


"It will take a good long while for inflation to be a problem this time."I'm willing to bet money on that, but then again, by the time I'm proven right, the fiat will be worthless. Statements like this suggest you think the government+fed+treasury won't be successful in ending deflation, and while they've failed so many times in the past 1.5 years, believe me, they WILL be successful. Market forces are NO match for governments. For one, they can change the rules about how the markets work so fast it will leave your head spinning. My concern is with over stimulous and their inability to retract trillions of $ in bail-outs, loans, etc fast enough to land back safely in the Keynesian heaven of a 2% CPI target.

"In terms of economics this was a category 4 hurricane, that appears to now be forecasted to move to a category 5 hurricane."The key concern of governments and economists for that matter, is that we dont end up in a deflationary spiral. There's already signs we're starting to surface again. The category 5 will be when things spiral in the oppsite direction - inflation. And for the other poster that said that inflation doesn't come with high interest rates, I will also call them out on that bet. The consumer inflation we're going to see will be phenomenal.


"And in deflations, at an individual level, it is best to pay down whatever debt you can as quickly as possible, as that debt becomes relatively more expensive with time." Janice, with comments like this, I'm tempted to ask where you got your degree in economics. The reason delfations are a great time to pay back debt as fast as possible is because deflationary environments don't last in a world wide economic system whose entire foundation relies on 2-3% inflation and positive GDP growth to exist into infinity. So yes pay back your debts as fast as you can now, because these interest rates ain't gonna be around forever - or at least not so long as Keynesian economics remain the type of global economic system we have. Further, you make no mention of inflation, but you say that in a delfationary environment debt becomes more expensive with time. Assuming a fixed income, and decreasing variable interest rates, the speed of debt growth declines not accelerates. That said, because variable interest rate loans are still in positive territory (and always will be), obviously debt does increase... but at a much reduced rate in a deflationary environment. Again, I still urge debts to be paid back fast, because it is practically guaranteed these interest rates will not be around for much longer as per the 9 reasons in my other post above.


"Concurrently, it is best to save as much as possible to enable yourself to buy more later."That's true assuming a long term deflationary environment, or even a flat one from here on out.

"Both inflation and deflation are self-reinforcing. If given a choice, I'd rather we were dealing with inflation, as that is a beast that is very well understood in a policy context. Spoken like a true graduate from a Keyneasian school of economics. Tell me, did they ever show you the hockey stick charts of perpetual positive GDP growth world wide into infinity? Infinity sure as heck isn't many years away, eh? It's mathematical madness where even a grade 8 student can understand the physical impossbility of such a concept... yet, it's exactly the type of system we have in place. It was only a question of time before it started blowing up.



"Demographically RE is a bad play right now.
Financially RE is a bad play right now.
Economically RE is a bad play right now."
I agree with your conclusions, but not their foundations.

Mr.4AM

Anonymous said...

Goldbugs don't have to hope for the end of the world. Anyone who doesn't already realize we live in a vastly different and declining world than the world of a year ago is an idiot.

How far it will go is anyone's guess. Deflation or inflation, long-term gold holders will always beat out paper wasps. Which is why they sting so much, even though it is fatal to do so.

And then they die, leaving their entrails behind. While the rest of us hose away their paper nests.

roger said...

VREB has released their stats package. Click HERE--

April 2009 Statistics - Monthly Analysis--

March 2009 shown in ()

MLS Sales - 747 (602)
MLS listings - 3861 (3859)

SFH Average - 550.7K (534.7K)
SFH 6 mo. Avg. - 540.2K (540.2K)
SFH Median - 515K (503.8K)
All SFH Sales - 421 (343)

Condo Average - 292.3K (294.3K)
Condo Median - 274K ( 266.5K)
All Condo Sales - 204 (163)

Town Average - 400.7K (405K)
Town Median - 390K (356.5K)
All Town Sales - 74 (64)

Year-over-Year Analysis--

GV - Greater Victoria
April 2008 shown in ()

MLS Sales - 747 (768) - Down 2.7%
MLS listings - 3861 (3859) - Flat

GV SFH Average - 550.7K (630.3K) - Down 13%
GV SFH Median - 515K (558K) - Down 7.7%
GV SFH Sales - 400 (395) - Up 1.3%

GV Condo Average - 292.3K (326K) - Down 10%
GV Condo Median - 274K (294.9K) - Down 7.1%
GV Condo Sales - 204 (235) - Down 13%

GV Town Average - 403.4K (420.7K) - Down 4.1%
GV Town Median - 395K (407.5K) - Down 3.1%
GV Town Sales - 72 (80) Down 10%

Just Janice said...

Mr. 4AM, where did you get your economics degree?

Economists can come from a variety of schools of thought, and can hold varied opinions. Not unlike a number of other professions. Greenspan's point of view is very different from Krugman's, they are both economists, they are both respected.

My point being, that your shot is cheap and I'd put the view point of anybody who has studied the subject matter for 6 or more years ahead of an armchair enthusiast. Both the Chicago school and the Keynesian school have their strengths and weaknesses.

greg said...

Again we have "gold bugs" coming on here with their paranoid apocalyptic warnings, calling anyone who disagrees with them "idiots".

These same gold bugs have been popping up now with their predictions of doom for the last couple of years. As bad as things are, they still haven't been right about the collapse of any currencies. Last time I checked, people were still not paying for things with gold and silver coins, schools and churches were stll open and Cubans had not invaded the mainland.

And again, who here cares about what is going on with the US dollar? It has nothing to do with the future value of the Canadian dollar, since the 4exchange rate between the two floats freely. If the US dollar tanks, it will be the US government defending the US dollar, not the other way around.

The US dollar could collapse just like the Peso, if that happens, it will just end up being consolidated and reissued later in "new dollars" somewhere down the line, at which point it will resume its usual relationship to the Canadian dollar.

Did the Canadian dollar collapse with the Mexican Peso, Thai Baht or Korean Won in the late 1990s? No, it did not.

As the US dollar has dropped in value, has the Canadian dollar dropped in value? No, quite the opposite, the Canadian dollar has increased in value. Check out the exchange rate with the British pound, if you don't believe that the currency is moving independently.

For the love of god, start your own blog where you can rail against the fiat system and stop polluting this blog.

Nobody here gives a damn about gold, get it through your thick skulls. But what is the real reason you are here anyway? If you started a blog, would even one person waste there time going there to read your paranoid "commentaries"? Somehow I doubt it, its bad enough having to read snippets of it here.

Of course, you don't shut up, not because you actually have thick skulls. No, it's because you have some other agenda which requires fear mongering.

There's enough fear in this world. get back in your bunker and turn off your internet connection, we don't want to hear anything more from you today, next week or next year, unless it is ON TOPIC.

Feel free to respond with vitriol and (un)justified righteous indignation. It's all you're useful for around here, if you call making panicky pronouncements over and over and over and over again useful. I don't.

You may be "anonymouses", but yes, I am talking to you.

Peace.

greg said...

By the way anonymous, wasps can sting multiple times without dying, its the bumble bee that suffers death after stinging.

Just Janice said...

Mr. 4AM -
Debt becomes relatively more expensive over time in deflationary environments because each dollar you earn takes longer to earn and buys more (definition of deflation). You pay it off as fast as you can because your income is falling and your ability to pay it is falling in a deflationary environment. The nominal value of the debt stays the same, while the real value (what it buys) grows. IF you anticipate that we are heading into the mother of all inflations, you keep your debt where it is and get a long term fixed rate nowing that inflation will eat away at it. You may also save a separate pile of money to enable yourself to 'pull the trigger' when the interest climbs.

There is a difference between real and nominal. In deflations REAL debt becomes larger, when in nominal terms it remains the same. In inflations REAL debt becomes smaller, when in nominal terms it remains the same.

Just Janice said...

I must apologize for my earlier comment re: swine flu, had I known it would have brought out the gold bugs and degraded the level of conversation, I would not have made it.

Mr. 4AM believes in extreme inflation. In the context, I believe we're facing an extended period of deflation. We have different opinions, and those opinions are based on different premises.

If you believe extreme inflation is coming - MAX OUT everything at low fixed rates, because in real terms your debt will shrink.

If you believe deflation is the norm for the next little bit - PAY OFF AND SAVE, because in real terms those low rates aren't so low.

I'm firmly in category two, and Fort Knox need not worry I have no need for a shiny metal that I cannot eat, that will not shelter me.

Looking forward to the official VREB numbers! - Active bottom with dead top is my guess...

vg said...

Looks like there are more sheep than I thought being led to the slaughter. Amazing but it is only April,wait til July.

LookingForAHouse said...

I thought this blog was about the local Victoria Real Estate market? Seriously, saying the swine flu will finally drive the market down is like predicting the big earthquake will happen next week (and in turn, drive prices down). I don’t want to live my life in that level of paranoia… you could get hit by a car next week, and still live in a crappy rental basement suite.

We are real buyers (not first time) looking for our second house in Victoria. The first will be kept as a rental – and we have more than 25% to put down. Like I’m sure most buyers are contemplating right now (First time or otherwise) – is the ability to afford way more than they could before (due to low interest rates) but at the same time knowing how stupid it would be to max one’s spending capabilities. What’s frustrating is the lack of options in this current market, people still (in our opinions) have unrealistic expectations on what their houses are worth. And, some people out there are willing to pay it!

I suppose if realtor fees weren’t so insanely high, then maybe prices would be more realistic???

Many people here have the philosophy that renting is better than owning in this current market. I see where you’re coming from – but (regardless of financial well-being one way or the other) its simply nicer to own than rent. If you want a decent home, in the right neighbourhood that is big enough for your family or future needs then buying is best. No worries about bad landlords, or being removed from your home – or your kids from their schools! So no matter what, there will also be a demand for single family homes in Victoria (especially seen as we have limited space here). Perhaps future condo and townhouse construction will help ease the pressure…. But a townhouse will never compete with your single family home in the right location.

Metaldwarf said...

by NOT buying the average SFH a year ago I just saved $43,000! If I were to buy the same average house today.

Best investment I never made.

Anonymous said...

Today I got the it's better to pay your own mortgage then your landlord's.

I bit my tongue, I bit my tongue, I bit my tongue.

S2

greg said...

Lookinforahouse said:

If you want a decent home, in the right neighbourhood that is big enough for your family or future needs then buying is best.What if you can't afford any home in the right neighbourhood? What if the home you can afford isn't big enough? What if you rent in that neighbourhood, your kids are in school in that neighbourhood, and buying would literally mean moving at least 10 miles into the suburbs, or settling for a crappy inner city neighbourhood? What if you rent in that neighbourhood for less than half the cost of buying? What if prices drop all year, and you can buy a house in the neighbourhood you like for less next year?

Are you suggesting it makes sense to pay too much to live in an area you don't really like, so that you can avoid landlords and "being removed from your home", whatever that means?

Lower prices make more sense, wait for them, then buy where you want. Homeloaning is not the be all and end all at this point in the housing cycle.

Anonymous said...

Greg, calm down. No need to post 56 lines of straw man arguments and insults to refute a 10 line post.

We get it.. you're insecure about your paper and your livelihood, and even your health. You should be.

LookingForAHouse said...

I guess that's the reality then. That LOTS of people can afford those houses (close to town) & in their preferred neighbourhoods... and they aren't paying 5-10% down. They're paying 25% - 50% down. This is why housing prices aren't dropping fast enough for many on this forum.

I don't think owning is better than renting - but it is different. Depending on your situation it could be beneficial for personal (or financial) reasons.

Anonymous said...

Anonymous said...
Anon said "Greg, calm down. No need to post 56 lines of straw man arguments and insults to refute a 10 line post.

We get it.. you're insecure about your paper and your livelihood, and even your health. You should be."

Please stop feeding the anonymous trolls.

S2

greg said...

Hey S2 -

while there is a common fallacy that suggests "not feeding the trolls" will make them go away, from my point of view, I'd rather challenge their idiotic statements once in awhile rather than issuing a free pass.

Personally, if trolls are disrupting an on-line community, there is some onus on the blog owner to take care of the problem by either a) blocking or deleting troll posts or b) blocking or deleting my posts.

Take your pick.

Otherwise, what you have is a blog overrun with crazy comments by wingnuts. How is that better than a blog with a lot of flames and arguments? Depends what your prefer.

Really, in this case, its up to HHV to look after the situation. If like PB he won't, well, it is what it is...

Anonymous said...

Why should he bother, when you're the self-appointed blog Mountie here? Most people find your virulent tedious lengthy replies infinitely more annoying than the occasional (usually brief) goldbug jab.

Let's face it; if gold didn't threaten you so much, you'd be quiet.

greg said...

Keep 'em coming, you're a real original.

Anonymous said...

Okay, I understand. They are here to stay and add some interest (like watching a train wreck) to the site.

How about if we answer them when they have something interesting and worthwhile to say about RE and ignore the personal insults.

I know. My husband asks me what colour is the sky in my world.

It just feels like someone (cough, ahem, realtor?) is trying to break this blog.

S2

greg said...

But they're so good at insults, and have so little to say...

Anonymous said...

Greg, just for your info: For every post I make about gold, I post at least 10 bearish on real estate that make no mention of gold whatsoever.

That's why I'm still here.

Anonymous said...

I'm assuming you are being sarcastic greg because they are not good at insults.

S2

greg said...

Greg, just for your info: For every post I make about gold, I post at least 10 bearish on real estate that make no mention of gold whatsoever.

That's why I'm still here.
No its not, and you can't take credit for posts written by other people, and don't try to say u rote them posts, u kan't pruve that.

Hey S2, check out this sarcasm.

There are lots of posters here like sitting pretty, happy owner and bearcredentials - nowlemmetellyouwhyyagottabuy - whythrowawayyourmoneyawayonrentguy, those are some quality bear credentials, anonymous guys *sarcasm detector on high alert Your posts are so helpful, keep posting that anonymous *&%^, er, cr@p.

That's all, folks...

PainInThe said...

Greg, hhv knows exactly what posts I've written from my ip number, long before I was forced to get this stupid ID, so stuff it. You look like even more of an ass when you insist you know something you know absolutely nothing about.

PainInThe said...

That said and done, everyone please help flag the realtor spam off craigslist... it's getting bad again.

My criteria... any ad that doesn't list an actual property or looking for an actual property.

Ignore it, and soon those ads outnumber all listings put together.

http://victoria.en.craigslist.ca/rea/Thanks.

greg said...

Greg, hhv knows exactly what posts I've written from my ip number, long before I was forced to get this stupid ID, so stuff it.

Yeah, you claimed to write posts ten to 1 that were focused on real estate.

Let's start counting and see how much you contribute from this point on, shall we?

And let's see how much you contribute that doesn't degenerate into infantile insults and nonsense...

Not much so far....

PainInThe said...

Greg, the shitting contest between me and you is in your head. I'll post when I have something to say.

I'm also slowing down, here, because it's a real pain in the ass to have to sign in each time.

greg said...

Nope, you got nuthin'. Lovin' the sound of silence, that 10 RE to 1 hype thing is really panning out...

BTW, you really hurt my feelings...

;(

PainInThe said...

Like I said, been spending most of my time over at Prairie's blog with the usual anon posts, because it's easier to post.

Besides, with all the back and forth on here lately, everyone else is saying everything that needs to be said. I can hardly read 'em all.