Thursday, May 21, 2009

A sure sign of spring

This spring has been predictable (even though I underestimated the volume of sales and the lack of new listings). Sales increased, both volumes and prices, as they typically do every spring. But after a dismal fourth quarter 2008 and first two months of 2009, the True Real Estate Believers™ banged the bottom drum loud.

With a little help from the Bank of Canada and the short-term-only view so prevalent in our peers, many people are buying the drum beat--both literally and figuratively. I think you'd be hard pressed to find someone not actively researching real estate who thinks prices will drop further this year, even though they're being warned by the CREA, BCREA and CMHC.

Last fall, I hardly conversed with friends about the state of the local market. Most of them own, and while few had bought in the past two years, all were not happy with the contraction in prices. I simply didn't want to awaken the anxiety they may have been feeling. Today, a totally different story, except it's friends and family doing the talking:
"See, I told you prices don't really go down, and if they do, they don't fall far."

"We will soon be returning to normal price increases, everyone wants to live in Victoria."

"You should have bought in February, you'd be up right now."

"You're missing out on the lowest interest rates in history. Why do you keep throwing money away on rent?"
These statements speak volumes about our collective inability to see the big picture and recognize just how close to the edge we first time buyers would be if we took the advice of homeowners today. Here's the single most inescapable truth about the real estate market:
  1. New entrants dictate the state of the market
This is why all of the focus is on attracting first time buyers into the market. This market needs the "green shoots" or it will wither. The trouble is, regardless of how many new bulbs it plants, this market is teetering on the edge of drought.

Last May, all was well in Victoria. Business was booming, people were earning and everywhere was hiring. Our economy was diversified and isolated at the same time. We were different, we had government and military and construction and technology. Yet prices fell. And no one, nowhere in the media, even attempted to accurately explain why. It was just that "first time buyer's were sitting on the fence."

But prices dropped because we'd reached an affordability limit for FTBers. Interest rates nearing 6% made it near-impossible for many first-timers to get into the market. But people were still employed, the outlook was still "Canada will avoid recession" and our real estate market didn't suffer the same fundamental weaknesses found around the world.

Then October happened. Stock markets crashed and the 0 down 40 year amortization mortgage disappeared in Canada. Nothing sold in November, December and January. We were told we were in the midst of a confidence crisis but our fundamentals were strong. Until they weren't, and government stopped hiring and contracting out, then started talking about 4 day work weeks, and construction starts stopped, and technology companies dependent on government contracts started worrying.

Then interest rates plunged for two months, along with inflation and consumer spending, until the attractiveness of cheap credit outweighed the realization of "I can't afford all this debt I have." Home prices had dropped (though not in the entry-level SFH segment) and first time buyers got off the fence. They bought in March and again in April. May 2009 looks like it will surpass the sales volumes of May 2008. But inventory remains stable, it's not going down. And that is a problem. Every time a house is sold, another one comes on the market. Sure, some really great homes are attracting multiple offers, but the majority of places are taking time to sell and are only selling if they were priced with a sharp pencil. And that is why prices are "stable" and not rising.

So far this year we've seen prices bounce in a range of 5% which is exactly what prices tend to do in Victoria between months. Yet some of the industry talking heads are calling bottom, usually carefully couched in a question: "with so many sales and stabilizing prices, have we hit bottom?"

Three months of sales data is usually a good indicator of a trend in real estate. May numbers will be out in just over a week's time. I suspect we will see prices increased over April along with sales being higher than May 2008. The beating of the True Real Estate Believer™ drum will be deafening. But will the trend continue into June and July?


Anonymous said...

Again I would like to point out that you could be WRONG. You along with other bears are market timing using nothing but technical analysis essentially. You are a chart drawing technical analyst you see on BNN.

I agree house prices will probably EVENTUALLY fall. It could be 10 years before that happens or it could be tomorrow. How long can you bears wait out this crap? A lot of bears have decided to just screw it and throw in the towel lately. History will probably vindicate them.

You can call me all the names you want. I'm just saying you should recognize that your PREDICTIONS could turn out to be wrong.

HouseHuntVictoria said...

From the main post "(even though I underestimated the volume of sales and the lack of new listings)"So I admitted I was wrong.

Maniac, can you please cut and paste anywhere in the current post were I made anything even remotely close to a prediction.

I'm pretty sure I asked a question.

Are you capable of reading open minded? Or are there any other words and assertions you'd like to insert into my writing.

Olives said...

Well here's my prediction: This real estate buying frenzy will continue as long as does this bear market stock rally.

Rhino said...

The flood of spring listings may not have materialized but I am noticing a LOT of rental listing for new condos. Just doing a quick count on craigslist they have about 15 never lived in units in just the last day. It looks like speculative buyers have been thrown a lifeline by these incredible interest rates and decided to hold instead of take a loss. It will be interesting to see if the spring bounce entices some more sellers out this summer.

beagle said...

"A lot of bears have decided to just screw it and throw in the towel lately."

Who? I see more of the bears holding firm than throwing in the towel. Bravo Bears!

Reid said...

HHV, to follow up on your post, over the past two years, I always make a point of asking anyone I know selling a house if:
- they they feel that their house is actually worth what they are selling it for
- would you have taken on a mortgage equal to 5x their income level to afford the house they are selling today

I have asked these questions on at least 25 occasions and the answer are always the same:
- yes my house is worth what I selling/sold it for (or they actual sold at a discount)
- No way in hell would have I bought this house with that level of debt

They generally go onto to stay that anyone taking on that level of debt is crazy and what kind of life are they going to lead.

So the sellers feel their homes are worth a fortune, but are complete out of tune with the sacrifices most FTB's are making just to buy that same house.

Buyers of 5, 10, 15 and 20 years ago would never have got into the level of debt common with today's buyers, but now we home owners expect people to pay these prices that require it.

This thing is going to come down hard once interest rates go up.

omc said...

I wouldn't bother with maniac, sitting pretty, or whom ever he/she decides to be today. He/she even tries to have a different attitude for each of the assumed names. It is kind of funny that all of the drive by's were one person though.

I am seeing some strange activity on the market lately; houses that have been on the market for a long time are selling. I figure it is because many of the newer listings are very poorly priced, they arern't selling.

Anyone notice what happened toady? The UKs credit rating got bumped down because of high debt ratio. The states has a much higher ratio so... That is what caused the mini crash today as many worry that the states is next. Want to see a real credit crisis?

Ryan said...

I feel pretty comfortable staying out of the market for as long as renting is cheaper than buying. Even if prices don't come down, I'm still ahead. Even if I don't bank the extra money, I'm able to afford a better lifestyle.

It's not rocket surgery, it's just a simple cost comparison. So long as the argument for buying relies on perpetual price appreciation I will continue to rent. I think prices will come down over the next few years, but that's tangential to my decision.

PainInThe said...

Olives, that's great news, as it appears the final gasp of the great suckers' stock rally is upon us any day now.

roger said...

Olives said:

Well here's my prediction: This real estate buying frenzy will continue as long as does this bear market stock rally.Well... Dow dropped again day to make it 3 down days in a row. TSX had a dump of 283 points and has dropped below 10K again.

Now on the 5 year bond front... Rates are rising and fixed mortgage rates have already been increased by smaller lenders..

Canadian Mortgage Trends Rate Alert..

Is the band at the real estate party playing their last set?

roger said...

Fellow bears,


omc said...

Good point Roger.

I admit I enjoy slamming our little resident troll once in a while. It's so easy, he/she was obviously not on the debate team in high school and I'm not allowed to be mean at work.

I for one am hanging on because I am now far more scared of a crash than I was last year.

HouseHuntVictoria said...

Roger, everyone's gotta eat ;-) but point taken. My bad.

Vic said...

If the USA's credit rating gets downgraded as Pimco has said then things could get ugly here....manic will have to sell his trailer with the newly painted outhouse.

HouseHuntVictoria said...

Puff piece on CBC Vancouver that specifically targets FTBer's. "They didn't have any money to invest so they didn't lose anything when the market crashed."

Great idea CBC--promote record debt as an "opportunity."

JAS2 said...


The bear's predictions could be wrong (although the facts and trends now point otherwise), however, one thing is for certain:

House prices right now are too high relative to average income.

I won't buy until I find a house that meets my needs and:

1. I can make at least 20% downpayment to.
2. Would take me 20 years or less to pay within a reasonable percentage of my monthly salary.

Otherwise, the house is beyond my means, which is what most houses are right now.

I'd rather not feed the greed that drives prices up here in Victoria.

patriotz said...

maniac: How long can you bears wait out this crap?...

Is that a trick question? Since renting is cheaper than buying, the bears can not only wait indefinitely, but the longer they wait the better off they are.

olives:This real estate buying frenzy will continue as long as does this bear market stock rally...

Historically that has not been the case. For example, the stock market bottomed in late 1981 and then went into the biggest bull market ever, while RE bottomed later and really didn't start to recover until 1987, which was a bear market year for stocks.

The stock market always recovers before any other indicator - employment, consumer spending, RE.

The bottom of the stock market during the Great Depression was in late 1932 BTW.

I'm not claiming that the stock market has hit bottom and is now in a new bull market, but on the other hand I wouldn't be surprised if it is. It did go down over 50% which was the second biggest drop ever.

Reid said...

Talked with lawyer friend on mine last night regarding house financing. He told me that five years ago every once in a while he would be shocked by the financial leverage a client was taking on when processing a real estate deal. Whereas today he says more than 50% of the deals he processes in his opinion will end up in foreclosure or bankruptcy.

He also does a lot of bankruptcy and family law and say it is amazing how many people are avoiding bankruptcy and foreclosure today because they are able to sell their houses quickly at inflated prices when things go sideways personally.

I asked him why does he not try to educate these purchasers on what they are getting into. He said they are not paying me to educate them, just process the deal.

HouseHuntVictoria said...

CBC story
""It's the rich guy that got whacked. The average two-income homeowner was simply not in the stock market. The most important demographic realization, I think, is young buyers do not have mutual funds or assets that eroded. They had no assets to lose, so they're on very stable ground and we have to pay attention to them."
This is exactly the cure for all that ails our financial system: target people with no assets, only income? This demonstrates just how out of touch with the average person the media and the talking heads have become. Anyone with a decent income either bought during the boom, or didn't because they were in the bear camp.

Olives said...

Patriotz, you misunderstood my comment - I am talking about a corrective rally within a longer term bear market. I don't think we're anywhere near a bottom - and that's my prediction.

I understand what you are saying but we are talking about two different things.

roger said...


I know you follow Mish. Here is his latest post..

Market Bottom? What Market Bottom?..

Inquiring minds keep asking "Is The Bottom In?" Of course, no one knows for sure. However, I believe it is not, and one of the reasons is the complete collapse in S&P earnings.

The S&P closed Thursday at 888. That's a richly priced PE of 31. Let's assume that earnings recover to $48. That's still a richly priced PE of 18.5. A bear market bottom might sport a PE of 10-12 but let's be generous and use 15.

15*$28.51 would put the S&P 500 at 382!
Let's be more generous and use an earnings estimate of $48. 15*$48 would put the S&P 500 at 720!
Stay tuned folks....

In February a lot of folks loaded up their RRSP with stocks and mutual funds. If the stock market takes another dump there goes consumer confidence.

victorianna said...

How long can bears wait? Oh for heaven's sake, that's just crazy talk. In Europe, many people are lifelong renters and certainly are not poor. It's a little harder here with a family because it is sometimes harder to find a decent house that one can stay in for any length of time. However, that said, I am in year seven in my Rockland home.

If I had bought this house the year I moved in, I would have had a mortgage payment more than double the amount I have paid in rent for the past six years. And that's before taxes, maintenance, repairs, etc. Since I have lived here, the owner has had to upgrade the electrical service to bring it up to code (after the horrible storm), replace part of the roof, replace a toilet, etc. etc.

And since this house is in Rockland, the value is going down, down, down....Nothing selling here folks. This is the million-plus-asking land where nothing ever sells. House on my street has been on the market for more than two years now. Haven't seen a sold sign in ages here.

Why the heck would I buy when I can rent for less than half the cost and bank the difference, which I do? And if I don't feel like banking it sometimes, we travel, or go to a restaurant, or do some of the other things most people who buy now are ruling out of their lives forever. Good lord! I am more than happy to rent as long as it takes. I don't have to own a house in Victoria, ever!

And it certainly isn't affecting my long-term financial prospects. Or, no, yes it is. I have not saddled myself with a ridiculous amount of debt, and my rent is well under 20 percent of my *net* income, so I have savings, investments, RRSPs, cash, RESPs, and can afford my four kids. They can have music lessons, travel and university. But none of this would be possible if I had bought a house in Victoria in the last eight years.

During times of real estate mania like this, the younger generation can choose. Do you want a house, or do you want a life. I choose a life, thanks. So blah blah blah you real estate pumpers. Why are you so desperate to persuade people that they need to prop up your imaginary paper wealth? Because you're SCARED, maybe?

So, if I'm a committed renter, why do I read this blog. Well, I used to be a waiting buyer. In truth, since I decided I am prepared to rent forever, if that makes the most financial sense, I have read the blogs less often. But honestly, the good analysis of Roger, Reid, HHV, etc., and the generally high level of info coming from the posters keep me coming back. Please keep it up HHV et al.

patriotz said...

Patriotz, you misunderstood my comment...

Well what I understood is that you were trying to draw a correlation between the stock market and the RE market. My point was that there is no correlation.

We may be into a new bull market in stocks but that will not save RE, any more than it did in the 80's or 30's.

Reid said...


Well said; maybe some potential FTB's can learn something from your comments before they saddle themselves for life.

Olives said...

"My point was that there is no correlation."

They are both affected by the same human psychology, although one market is a better gauge of this mood because it is instantaneous.

If I thought we were in a new bull market in stocks right now (which I don't), then I would also predict that real estate prices would not be decline drastically. Since we are at the end of a credit cycle, I believe both have a long way down to go.

patriotz said...

If I thought we were in a new bull market in stocks right now (which I don't), then I would also predict that real estate prices would not be decline drastically....]

This is where I disagree. RE pricing must stand on its own fundamentals. Stock pricing has nothing to do with it.

The stock market is up 30+% from its low in March. Unless it falls again, that's a bull market.

The stock market rose very substantially from its bottom in 1981 to its top in 1987. But in fact nominal (and much more so real) house prices fell over that period.

And they will fall this time regardless of where the stock market goes.

Nick said...

Looks like you have to read the Maple Ridge News to get some critical commentary about the real estate market.

Vic said...

"I'm not claiming that the stock market has hit bottom and is now in a new bull market, but on the other hand I wouldn't be surprised if it is. It did go down over 50% which was the second biggest drop ever."

One has to always keep an open mind when it comes to the stock market,it is not the real estate market. Two different beasts entirely.

We will have rallies and corrections over the next few years as all the garbage/credit problems gets cleaned out and that is where the smart money will be playing these spikes. The dumb money will be buying an overvalued box with the serious potential of rising interest rates that will kill prices.

PainInThe said...

Patriotz, the current stock market is not a bull market; it's a bull SHIT market.

And it's already crashing again. Wait until Tuesday.

roger said...


I found your second post on PBoys blog very well written and informative. Could you please repost it here?

We need to get an alternative message out to FTBs.

victorianna said...

Thanks, Roger. Sure, here it is. It's long, as you know. For those of you who haven't visited Victoria's Truth, lately, Prairie Boy has announced he's going to be looking to buy soon, for personal reasons. That's why I wrote this.

"Back to this blog. Of course you have to make your own decision. I just wanted to share my experience. Renting a house can be stable and freeing. I have owned three houses, and made considerable money at that game. I once bought at a peak (FTB)in Toronto, and that was a big mistake. But it was nothing, and I mean nothing like the crazy peak we have experienced here.

When my husband suggested we rent again, I wasn't thrilled. Yesterday, I told him it was the best decision we ever made. We came to Victoria for job reasons, and with four kids, of course I wanted to own. But finding that I can live in the same house for half the money, for years on end, has made me realize that when you buy is indeed crucial.

The nesting instinct is strong at the stage of life you are at, and we all want to have a place to call our own. But circumstances change, life changes, job opportunities come along (the one house loss we had was when we had to sell to take a better job).

And that's before you consider a real decline in prices, a rise in interest rates, or any of the other macro-economic factors that can bankrupt millions.

Do you really think you'll want to stay in that first house 10 years, or forever? Most people don't. The rental I'm in now, as of next year, we will have been here longer than we were in any house we've owned, and it has been the most stress-free time of my life.

If your wife really really wants to buy, try to present the other side. Later, she may be very glad you did, as I am now. I am the wife. I wanted to buy. But my husband convinced me by simply showing me the facts, over and over until I realized that with an emotional decision I might be jeopardizing our entire financial future.

Sorry for the length of these posts, but I admire what you set out to do here. I have no desire to win somebody to my side of a debate. I just am desperately hoping that some young people can be saved from committing financial suicide. I really believe that what we are witnessing here is the impoverishment of one entire generation to prop up the retirement plans of another. And bankruptcy law in Canada is not forgiving to those who have mortgages, as you know.

Best of luck. I really, really mean that."

Just Jack said...

Thanks for posting that victorianna.

I feel the same way but have never been able to say it so eloquently.

I too drove my husband crazy with wanting to buy a house after our daughter was born. He would go over the MLS site, crunch the numbers, shake his head and explain why we weren't buying yet over and over to me until I finally got it. I'm so thankful for him.


Vic said...

Seems like alot of rentals for mid month on Craiglist. Of course there are too many people still gouging thinking the average renter can pay $1500 for a one bedroom and some of the two bedroom basement suites that look like broom closets.

patriotz said...

Patriotz, the current stock market is not a bull market; it's a bull SHIT market....

Look, a 30% rise in the market from a previous low (if sustained) is a bull market. Whether you or I or anyone else thinks that the rise is justified is completely beside the point. The only thing that matters is what stocks are selling for.

Someone who bought at the bottom and sold recently has made good money. Like me.

HouseHuntVictoria said...

interesting story in the NY Times

victorianna said...

Interesting yes, but what does it mean? I must admit I'm very confused by this trend. I guess it's the mindset. Real Estate is the only god and is the only answer to all problems.

HouseHuntVictoria said...

I think it means they're gambling as much now as they did then. At least this time, someone is paying a mortgage though.

Vic said...

"I must admit I'm very confused by this trend. I guess it's the mindset. Real Estate is the only god and is the only answer to all problems."

This is the problem, but a short term one in my opinion. The masses have been sucked in by propaganda that home ownership is the be all, end all to life and this has to change.

As I have stated too many times,an entire generation has not had their ass handed to them on a platter as generations past. Few GenX'er's have lost any considerable amount of cash on real estate in the last 10 years. When this moment comes then the mindshift will come.

The most ridiculous part is that Victoria mold shacks for half a million dollars are somehow a "smart" investment and the "right thing" to do. Very soon a new generation will learn that the real estate game is not a bed of roses and that yes,major losses like in the US can happen here.

Bubble 'n Fizz(le) said...

I think it means they're gambling as much now as they did then.
Why don't you read the article and apply your own reasoning on value versus rental yield? The rental yield on these properties is more than enough to provide a very good return on investment. I guess you just can't bear the thought of a real estate purchase making sense. You are blinded by your own dogma.

roger said...

Bubble 'n Fizzle,

I agree with you that some of those Phoenix deals do make sense from an investment point of view.

Now that someone has agreed with one of your comments could you try making at least one post that is not based on attacking statements made by others? An original post with some of your own reasons for being bullish on real estate would be a refreshing change.

omc said...

That would be refreshing to hear a factual argument why real estate, here and now, is a good investment versus waiting for a bit. Go to it sitting bubble!

Had a few words with an economist buddy yesterday and RE was taken care of in 5 sec. "Buying a house with affordability based on an extremely low interest rate is a sure way to have to sell in a few years". The subject changed as there was nothing more to say. Your turn admititmaniac.

PainInThe said...

Oh, Arizona makes TONS of sense. Why, you haven't LIVED until you've suffered through a muggy 46° thunderstorm. Or two months in a row of 'em.

With the same smog as Los Angeles when it's not raining. Gotta love those scorpions and killer bees too.

Now Vegas, not anywhere near as bad, but not good either, especially if you can't resist casinos.

Please! For your own sanity! Stay on Fantasy Island until the Captain turns off the seat belt sign!

patriotz said...

I think it means they're gambling as much now as they did then....

If the houses are 50% cheaper (which they are) you're not gambling anywhere near as much.

Which of us wouldn't run out and buy a Victoria house at 50% off peak tomorrow?

PainInThe said...

"and sold recently"... being the operating words.

Then we apparently agree it is/was a bullshit run or you wouldn't have sold, and it's back to down, down, crash and burn.

Most schmucks are laboring under the delusion that happy days are here again.

Art Vandelay said...

365 days ago, RE was nearing the end of the greatest 6 months in the history of the Victoria Real Estate Board. While the ink was still drying on May deals, the phones stopped ringing. And then came June through January.

It doesn't take an economist to see that free money has pumped considerable air into first-time buyers. Heck, a guy I know already had $3600 monthly payments on heavy equipment, plus whatever he owes on 2 trucks and a motorcycle, and last week he bought a $500K house. Some days he makes $500 a day driving truck. Other days he makes $13/hr moving freight.

There is no fear right now. It's as if nobody can see the consequences of having to bail out Canada's dying industries. I honestly believe most people can't see past the end of next week.

PainInThe said...

"Which of us wouldn't run out and buy a Victoria house at 50% off peak tomorrow?"Anyone who does will STILL be doing the seller a favor, because although I would, I think the bottom will be at least 60-65% off peak.

But in Arizona? Have to be 85% off peak for that hellhole.

Rhino said...

"Why don't you read the article and apply your own reasoning on value versus rental yield? "

If you agree that value vs. rental yeilds matter, then logically wouldn't you agree Victoria's are totally out of line and in for further correction?

victorianna said...

Yes, I too have done the math and do understand the temptation, but again, I also agree that it's still a gamble, if maybe not as big a one.

One issue is that the U.S. is overhoused, much more so than Canada. So, if the economy takes a real dive, people are going to be looking for the cheapest accommodation they can find, and that may not be these Phoenix bargains. In fact, some areas may see an outflow of population to wherever they think jobs are clustering, so, will there be a guaranteed pool of tenants? I don't know, not suggesting answers here, it's just that before I would want to jump into these bargains, I'd want to have a little more of an idea of how things are going to go. I honestly don't think anyone has a clue right now, but the evidence that is out there doesn't look good.

HouseHuntVictoria said...

B&F: from the article, which I read, now three times thanks ;-)

"As CBI continues to buy, it is planning investing seminars for its tenants. “Our goal is to be able to sell them their house back,” Mr. Zielinski said. “Wouldn’t that complete the circle?”

Investors always look for an exit. This exit strategy speculates that values will go up over time or remain flat.

"“If Phoenix loses population,” Mr. Jarvis says, “then buying houses here is a bad bet.”

Phoenix is ground zero of the housing bubble in the US. With 78K+ foreclosures already, It's probably safe to assume there are many people left/leaving town.

Gotta run, I'm late for the service at the church of real estate is always a bad investment ;-)

patriotz said...

Then we apparently agree it is/was a bullshit run or you wouldn't have sold,...

I had a margin to cover and I was vulnerable to prime going up. So - I just sold the stuff I had bought at the bottom. And yes that's bearish.

But I still have a lot of exposure to stocks, almost all of which have good dividend yields. I'm not bearish enough to unload them all. If we return to the prices of a few months ago, well I'll just buy some more. And if we don't, well that's fine too.

PainInThe said...

Hope your paper can survive this, Patriotz:

USD dollar crash: Markets to plunge tomorrow?

Memorial Day Disaster

HouseHuntVictoria said...

Victoria Real Estate Board month-to-date stats: New sales: 648, new listings: 1071, total active listings: 3827

Just Janice said...

How to deal with the Victoria RE market:
1. take your index finger and your thumb,
2. place index finger on one nostril and your thumb on the other, and;
3. gently pinch to avoid the stench of the present market
4. find somewhere else for your money to 'hide out' for the time being, ideally in something that rests on some underlying value and prospect of future growth.

The present market stinks to high heaven and is wrought with downside risk. Price appreciation is not going to happen over the next 5 years and in the absence of price appreciation over the next 5 years, does it make sense to buy in a market that is as overvalued as Victoria right now? As proven by Roger and others time and time again, no. Unemployment will continue to climb in Victoria. Wages will continue to stagnate in Victoria (and for those who take the 80% work week, they will realize a 20% pay cut). Cheaper alternatives to Victoria will become more well known.

'The owners' right now in Victoria are not unlike all those who got sucked into Bre-X and then rode it all the way to the bottom. Man they could have made a killing if they sold at the'll come back after all what goes down must go up, right?????

Vic said...


maybe you should posts those doom and gloom sites over on PB's site where the tin foil hats and real estate buyers reign supreme.

From what I can see his US dollar chart is wrong,the 6 month low was at the 78 level,give or take a few increments, on December 20th which would be a major support line.

I agree the market is ripe for correction but if it does will we not see once again how this played out last time ? Oil plunges,gold plunges, and yes the US dollar spikes back up. DOW 5000 ? highly unlikely.

roger said...


Here is a graph of estimated MLS sales for Greater Victoria based on Tim Ayres last three Monday updates.

One can clearly see that sales are better than last year but down from the boom years of 2005, 2006 & 2007. And this is with the lowest mortgage rates in the last 50 years.

patriotz said...

Hope your paper can survive this, Patriotz:

USD dollar crash: Markets to plunge tomorrow?

Well the TSX is up .6% from previous close so far today. We will see what happens tomorrow.

I have no US holdings outside my RRSP.

Vic said...

Funny thing about that article pain posted. If you look back the writer wants you to buy into his "private info" club and you only have 9 hours left ! Sounds like the Home Shopping Network.

On the other hand the site has a another writer's article with no incentive to buy anything which plays the opposite side of the US dollar.

"Dollar’s Demise Greatly Exaggerated".

Hmmm...those are quite the contrarian sites you visit pain. I guess if you have to pay up it must be true. lol

Reid said...

Will be interesting to see what happens this summer. I sense that oil companies will push gas prices to $1.20 or more and this will be used to justify higher costs of other products again.

If equity markets remain at or above todays levels, people will feel better but the real cost of living will start to rise again (regardless of what the feds say inflation is). This is likely to affect the affordablity factor of buyers that we saw last Spring and Summer when gas prices hit $1.50.

If gas and other costs rise, buyers will question affordability even with these rediculously low interest rates. May help at least slow down the koolaid drinking frenzy.

womp said...

HouseHuntVictoria said...

Thanks for the graph Roger. I'd be really interested to compare the sales numbers with those of 2002-2003, the last time (rude-recollection) we had interest rates like these.

Despite these sales, listings are still staying fairly level, which while not necessarily a good sign for bears, is not a bad sign either.

Reid said...

From womp's link

"The question is how do we [encourage] Canadians to save more for their retirement.”

Now there is a joke. The government has done nothing but try to enourage people to borrow heavily over the past six months and now they want them to start to saving heavily. Something does not add up here.

I can tell you from personal experience it is a lot harder to save than borrow, so good luck Ottawa getting people to start saving.

Maybe they start by passing legislation to cap the mortgage debt level at say four times family income at least then there would be some hope people would have a little left over for retirement savings.

beagle said...

Recession suddenly humbles high-tech sectorAnother we're different here argument blown away.

High tech regions, which throughout most of 2008 were far more economically secure than the rest of the country, are now seeing unemployment, foreclosure and bankruptcy rates on par with national averages, and in some cases even higher.

Even the most optimistic high tech community leaders have had to face facts.

"We had hoped we might stay insulated from the global economic crisis, and for a long time we were," said Silicon Valley Network president Russell Hancock. "But then it caught up with us and now everyone is laying off."


"There isn't anybody who isn't laying off," he said, then draws a long breath before reciting this list: "Microsoft, Intel, Hewlett Packard, Sun, Yahoo, Apple, Google." He pauses a moment to consider that. "Google. When Google is laying off you know something is going very wrong."

roger said...

HHV said:

I'd be really interested to compare the sales numbers with those of 2002-2003, the last time (rude-recollection) we had interest rates like these...

Here is your answer..

Total MLS Sales .

May 2002 - 825
May 2003 - 789
May 2004 - 774
May 2005 - 905
May 2006 - 909
May 2007 - 963
May 2008 - 770
May 2009 - 875 (estimate)

Metaldwarf said...

Talked to a mortgage broker with TD today. He gave me some interesting information I wanted to share.

TD Posted Mortgage Rates Vs. Discount Rates Only those with good credit need apply...

TD Amortization Matrix, monthly payments per $1000 of principle not really exclusive to TD but good cheat sheet to keep around rather than using an electronic mortgage calculator.

Mmm .PNG for text

PainInThe said...

Don't say you weren't warned.

Mr.4AM said...

Vic said: "I agree the market is ripe for correction but if it does will we not see once again how this played out last time ? Oil plunges,gold plunges, and yes the US dollar spikes back up. DOW 5000 ? highly unlikely."This time it will play out as follows:

- US dollar down another 15-20% (not up! - the major difference)
- Gold breaks and holds above $1,000 for more than 3 weeks.
- Black Gold (oil) jumps above $75 for the summer.
- Consumer based inflation up.. and up.

Then at some point, yes DOW drops to 5,000 or at least some aproximation of 2:1 ratio to gold, perhaps they are saving that one for 2010, right along with a US T-bill blow up. Keep an eye on NYSE:TBT

The one sure thing is that US Congress won't sign off on any more bail outs, so going forward, it's all Geitner/Bernanke smoke & mirrors beyond even what we saw last year. Sept/Oct 2009 will be a fun roller coaster to watch in the markets, that's for sure.

Regardless of the details, the end result is a much lower standard of living for US citizens in the immediate future, and a blah (L-shaped) stock market for 5-10 years to come.


Jack said...

If it's rates people are curious about, I find the following thread at to have the most topical "dirt" on what people are getting on rates these days. the rabid "buy" mentality on the thread, info there did help me negotiate down to 3.55 for a 5 year fixed at the CIBC downtown 2 weeks ago.

But will I join PB and try and use it this summer? not sure yet...

Jack said...

Mr. 4a.m....while I'm here--how did your Swine Flu armageddon theory pan out for you?...I haven't noticed the local death toll racking up quite as high your spreadsheet calculations demonstrated a few weeks back--maybe an error in one of the calculation cells?

Mr.4AM said...

At the very least, wait till the whole US treasury thing blows up. At some point China will stop expressing concern, and then we'll have a currency event like one we haven't seen in years.

That will drop consumer sentiment to new lows, and bring the DOW and nearly everything else down with it in nominal terms... as inflation will spike for our US cousins.

What's all this got to do with Victoria Real Estate? General consumer sentiment is directly tied to puchasing confidence, and today's news that womp already posted (Flaherty warns of bigger than expected deficits) don't help the scenario.

Mr.4AM said...

Jack, please go back and read the text at the bottom. Believe it or not, details do matter. ;-)

NeedsAnalysis said...

Jack said on May 10,

Me? I'll have a huge problem buying until I know the bottom has hit--and i am pretty damn sure there is no bottom until these 5 year rates reset..

Jack said on May 25

did help me negotiate down to 3.55 for a 5 year fixed at the CIBC downtown 2 weeks ago.

But will I join PB and try and use it this summer? not sure yet...

Oh what a difference two weeks can make! Are you getting ready to capitulate already? Sounds like it if you are taking the time to apply for a mortgage.

HouseHuntVictoria said...

Roger, thanks for those numbers. Very interesting.

Can you confirm you are also NeedsAnalysis or has some slumpingmaniac stolen your identity?

patriotz said...

"The question is how do we [encourage] Canadians to save more for their retirement.” ...

The answers are obvious:

1. Require at least 10% down payment for any mortgage.
2. Raise the GST as least back to 7%, preferably 10%.
3. Drop the income tax rate for the bottom two brackets to compensate for #2.

The policies of our "Conservative" government are designed to get people to borrow, not save.

Mr.4AM said...

So Jack, according to my silly Swine Flu linear growth spreadsheet, today we should be somewhere around 2703+ cases; however, bloomberg reports only 805 confirmed cases. in Canada as of yesterday.

But that's only 1/2 the story, in another article, they suggest we may want to multiple the confirmed cases by a factor of 20, as only 1 in 20 cases are being reported.

So 20x805 =16,100.

So you see, I really a very optimistic kinda guy! haha

Better not go meet that realtor with the Puerto Vallarta tan folks... the odds are clearly against you ;-)


Vic said...

So If US dollar crashes, the loonie goes beserk,then gold becomes much cheaper in Canadaian $$'s..... so gold at $1200 is still around $1000 Canadian, which is much cheaper than what it is today.

So why buy gold unless you have no faith in any currency whatsoever ? I see no reason to own gold, I'll play the paper which in Canadian $$ will only go up in value.

But there are the tin foil hats who will be quietly lining up at the grocery store thinking they won't get mugged in a heartbeat. Sorry for this silly gold stuff again.

roger said...


Yep that was me as NeedsAnalysis. I was logged in with my other account.

BTW - Are Jack and Just Jack the same person?

Happy Owner said...

Amazing what a year makes. With some of the bears out there getting approved for a mortgage, what are the remaining bruins in the club house to do? I find it hard to believe there is still upside to house prices, but apparently there is in some local markets right now. All I can say is I'm glad I'm in and don't have to worry. This market will always take me to the up side. After all, Victoria is the best city in Canada to live in.

HouseHuntVictoria said...

"After all, Victoria is the best city in Canada to live in."
and one of the best places to take advantage of the difference between rent and ownership costs!

roger said...

B.C. Ferries cuts jobs as ridership declines..

She blamed the economic downturn and said while no further cuts are pending, it’s not necessarily out of the question.

“It’s uncertain given the economy right now. I couldn’t say whether more coming,” she said.

I can. There are more coming..

Reid said...

Caving Bears:

When the economy went into the shi**er last year, my analysis suggested that we would see a 20% to 30% decline in house prices by end of 2009 or mid 2010. I did not foresee interest rates this low, the FTB incentives, lack of government layoffs or denial in the market. So we bottomed out at a 10% reduction and now it appears to be headed up a bit as we have too many financially incompetent debt loaded buyers out there.

When I rework my analysis the fundamental problems that existed last fall still exist, but now we are setting up so many more people up for future failure. As I look at this thing harder, I now see the ultimate damage being far worse once interest rates rise. Although I cannot predict where rates will end up over the next five years, I can estimate we will see a drop in prices of between 25% and 50% over the next 2-5 years.

Problem is that these drops will not occur until rates rise or we have real unemployment in this town. So you may have to wait a number of years to see the bottom and for many that may be too long. Many people do not have that level of patience, especially after waiting a few years already. But the message I would like to deliver is that I think the long term fallout is going to be worse than if the Fed’s had not messed around with interest rates and borrowing capacities.

So if you decide to buy, make sure you use the first five years with these low interest rates to pay down as much of your mortgage as possible as this may save your butt when you renew.

Vic said...

Hate to break it to ya Happyboy but prices are out of reach excpet for da fools, so no price gains coming for a long long time. Read your CMHC report,you missed the news,you lose.

PS wait til Gordo gets his knives out,then ole Victoria will be what it used to be..the best place to collect EI and be useless til the next under-skilled job becomes available.

Vic said...

"So if you decide to buy, make sure you use the first five years with these low interest rates to pay down as much of your mortgage as possible as this may save your butt when you renew."

How is this possible if most are maxed out ? Few pay down their mortgage when they have outside debt and kids to worry about. One unexpected repair bill like a new sewer line or a roof and the extra cash is gonzoed. Been there,done that.

Reid said...

"How is this possible if most are maxed out ? Few pay down their mortgage when they have outside debt and kids to worry about. One unexpected repair bill like a new sewer line or a roof and the extra cash is gonzoed. Been there,done that."

Now there is the very definition of financial incompetence I was referring to. As I said above, these debt laden buyers are being set up for failure. It is just a matter of time.

roger said...


I suspect for many buyers there is no extra cash to pay down the mortgage with extra payments. This is evident when you see how few have saved in their RRSP during the good times. 65% of Canadians are homeowners and only 40% of eligible Canadians have an RRSP. Big disconnect there when retirement comes around.

We now live in a "monthly payment world". It is not how much does something cost but what is the payment and will you loan me the money. Furniture, cars, houses, vacations are all viewed in this light. When rates go up and all these payments increase there will be big trouble for many. In the interim the Koolaid tastes pretty good.

Reid said...

Roger, I could not agree more.

A point on the prepayment idea is that if you cannot make extra payments with these interest rates, then maybe you cannot afford the house.

As you say it will all come crashing down once payments rise.

patriotz said...

And I as well.

What people should do if they really want to buy a house now, is figure out what the payments would be for 6% 30 year amortization.

If you can afford that, then buy now with the same monthly payment and shorter amortization. Not a lower monthly payment and "I will make extra payments". If and when rates go up you can renew with a longer amortization and keep the same payments.

If you can't afford that, you can't afford to buy.

Jack said...

Just to clarify, Jack is Jack and Just Jack is well, Just Jack--2 different people who happen to share the first name (actually i don't think just jack is a jack at all, but you would have to ask him (or her--S2?).

HouseHuntVictoria said...

Surprise of the day:

"A new report by the Certified General Accountants Association of Canada (CGA-Canada) reveals that household debt has reached an all-time high of $1.3 trillion in 2008, yet Canadians perceive their financial condition to be better than it is. According to the report, Canadian families are financing consumption activity with unearned money as they increasingly reach for credit to finance day-to-day living expenses."

Vic said...

21% can't manage their debt load ? Sounds like alot of UNhappyowners.

Canadian households $1.3-trillion in debt

Canadian families are increasingly using credit to cover day-to-day living expenses, pushing national household debt to $1.3-trillion, according to the Certified General Accountants Association of Canada.

CGA-Canada warned Tuesday that many individuals are unaware of how the economic downturn has hit their financial situation, and they continue to load up their credit cards and lines of credit while skimping on savings.

According to the association's report, a consumer survey in November indicated 85 per cent of households had outstanding debt on a credit card.

And 21 per cent of Canadians who were in debt said they could no longer manage their debt load.

“Household debt has increased significantly over recent years, jeopardizing the financial security of Canadian households,” said Anthony Ariganello, president of CGA-Canada.

Vic said...

beat me to it HHV. ;)

roger said...

BCREA has released their latest BC Housing Forecast

BCREA 2009 Housing Forecast (pdf)Something for bears and bulls in this report...

womp said...

And even more great news: Jobless claims jump 10.6%.

Vic said...


hope you wasted lots of money buying into that website you live by that called for a disaster this morning on the markets. Only 9 hours left for the next big call,act fast dude ! ;)

beagle said...

According to the association's report, a consumer survey in November indicated 85 per cent of households had outstanding debt on a credit card.That seems high, it must include people that pay off the card at the end of the month in full. If it does then the stat is meaningless if they don't say how many don't pay it off each month.

Metaldwarf said...

TSX up 141 points
Dow up 206 points
USD holding steady

the end is neigh.... /sarcasm

beagle said...

Interesting chart over at Seattle Bubble site.Shows median house prices from 1940's till now. Amazing how similiar the run up was to what Victoria saw. I'm glad it's different here though and we won't see the last part of the graph, wheww!

HouseHuntVictoria said...

Household debt = approx. $36,000 per every man woman and child in Canada. Not including mortgages?

roger said...

Times Colonist - todays edition..
Campbell must halt disastrous cut plans..

Tick, tick, tick.....

If you live in British Columbia, you should be scared -- really scared -- about what might come of this economic downturn.

Senior provincial managers have been working for months on plans to gut the government. What's being proposed would make the 2001 core services review look like a walk in the park and go well beyond the austerity program of the early 1980s.

The public service went into overdrive when Premier Gordon Campbell declared in the televised debate that this year's deficit will not be more than $495 million -- the number specified in the February budget.

What the premier wants, his minions seek to deliver

mln said...

Made some graphs from Teranet HPI & Case-Shiller. On the graph which shows US & CDN, I set 2002 = 100 and shifted the data back by one year.

Navier said...

Low interest rates are the cause of much of the current sales activity. If we assume that economic growth will return sometime in the next year, then interest rates will have to rise to long term averages (or higher)to combat inflation.

I believe that even 8% mortgage rates would be enough to launch another foreclosure cycle and downward pressure on housing, never mind the rates used in the early eighties to combat inflation.

The next time mortgage rates rise it will disuade buyers temporarily and a market correction will be inevitable.

PainInThe said...

Vic, you been sleepin' or something? I got out of all paper last year long before the crash.

Stocks? You've got to be kidding.

I'm in gold. Did just fine today. Idiots paper traders slapped it down and it bounced right back.

It never ceases to amaze me how 45% of the worlds' wealth was destroyed last fall and still we have idiots saying "This ain't gonna be 1929 and 1932..."

No. It's going to be worse. Be sure to have lots of towels to wipe that dead cat splat off your face.

And be ready to hit the souplines...

Vic said...


You didn't hear the COMEX shorts are lining you suckers up for another semi-annual thrashing ? Some of you tin foil hats are slow to the process.

Why is the consumer confidence number up the highest since before Lehman collapse ? because the worst is over bud. We will have corrections for sure and I believe one is coming soon but maybe do some homework before you predict market mayhem on certain mornings. Just makes you look more stupid than you already have shown us. A homeowner bragging about his gold holdings and armegeddon,but he also wants to buy another house,what a concept !

PainInThe said...

I didn't predict market mayhem... I passed on an article where the author questioned whether or not the markets would reflect bond selling overseas.

They did not, proving irrational and quite stupidly suicidal exhuberance is the word of the day, so enjoy it WHILE IT LASTS...

And you sure make a lot of assumptions...

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

Follow up to Times Colonist story on the recession in BC...

Recession hits B.C. revenues..

VICTORIA — When Premier Gordon Campbell's new cabinet begins work in June, it will be facing the effects of revenue drops in key resource sectors since the February budget.

March 2009 saw a "dramatic drop" in energy exports of 26%, according to the latest report from B.C. Stats. That was the main factor in a 10% decline in the total value of exports for the month, along with further drops in forest, agricultural, machinery and other export products.

The value of all U.S.-bound goods was down 11.9% in March, reflecting the economic slump in B.C.'s dominant export market. During the first quarter of 2009, the value of exports fell 17% to $7 billion.

Now that the election is over the real story is coming out. Watch for big cuts in order to keep the deficit around 500 million as recently "promised" by Campbell.

I hope some of the recent spring buyers are not on the chopping block later this summer.

omc said...

So I asked my wife what she thought about buying a house this winter as we had discussed earlier in the year. I try not to overpower her with my now bearish opinions, so I haven't discussed this with her in a while. A resounding, but polite, NO was what I got back. She isn't in the slightest bit interested in selling out her kids' lives all for the sake of owning a house in this town given the present market. What is the difference with what is happening now to what happened in the states? The selling out the kid's lives is true as we would both end up working like dogs, forgo vacations and such.

Guess that is done. I don't think I will be around much for a while as we are opting out for the better part of a year (when interest rates rise we will see how things stand). A watched kettle never boils.

I'll make a prediction though. In 1 year from now housing in our price range will be down at leat another $100k and we shall have saved at least another $50k. How 'bout a gentlemans (or womans) bet bubbles? We could each give hhv something like $10 to hold, and if the market rises you win. Real estate is always a GREAT buy, right?

Vic said...


you said,

"I didn't predict market mayhem..."

but in your previous post you said :

"And it's already crashing again. Wait until Tuesday."

You need to get those meds adjusted dude,though I am not sure they can do much for sociopathism, it's usally for life.

Vic said...


Interesting BCREA report,they manage to squeak it in on CHEK for less than a minute AFTER the major negative EI report showing 6% unemployed and many people not finding work here but the TC says "prices aren't going down any further". I was curious how CHEK would present this report but it was a blip versus the negative "real" economy news.

Apparently Cameron Muir thinks the FTB is like "an oiled machine". Interesting how the "PR machine" can predict the future and also refer to those young suckers about to be fleeced beyond their wildest dreams. I think "oiled" would a be much inapropriate term or did Cameron have an underlying meaning ? hmmm

I just heard of someone pulling their place off the market after 2 months because the offers weren't good enough to offset the mortgage penalties. How many more can be doing the same and how many more will slow sales ?

greg said...

I believe that even 8% mortgage rates would be enough to launch another foreclosure cycle and downward pressure on housing, never mind the rates used in the early eighties to combat inflation.Actually, considering where rates are now, even 6% would represent a significant increase for those buying at 3.55 - almost double. If rates are around 6-7% in the next 3-5 years, you will see a catastrophic hit on the local market.

The US had teasers that re-set in 2 years, then a second wave of Alt-A. What we will have will be a rolling series of waves which, ironically or not, will hit the beaches where the highest prices lie waiting.

Umm, that's Vancouver, Victoria, Salt Spring, Kelowna etc etc.

Not sure how I can work Whistler into the analogy. You get the idea.

patriotz said...

Household debt = approx. $36,000 per every man woman and child in Canada. Not including mortgages?...

Yes that includes mortgages.

"Rock Lefebvre, the vice-president of research and standards for CGA-Canada, says the province's pricey real estate market is partly to blame for the high levels of debt in B.C. Nationally, mortgage debt makes up an estimated $900 million, or about two-thirds of the household debt."

B.C. leading Canada in household debt growthThink about it. There is simply no way Canadians could be in debt, on average, 50K per adult outside of mortgages.

But keep in mind per capita mortgage debt, and thus per capita debt in total, is way way higher in BC.

What is really stunning is that the numbers keep hammering home the message that BC is just Canada's California fiscally, while the denial just keeps growing. Well this province is in for a big reality check, soon.

PainInThe said...

The day I posted, it was crashing.

So it went up Tuesday because of greater fools like you. What goes up, WILL come down. WAY down.

In the long run, you're every bit as toast as the morons buying real estate now. Cry to us next year.