Monday, June 1, 2009

VREB stats


Month end Victoria Real Estate Board stats:

New sales: 879

New listings: 1362

Total active listings: 3789

Full release on later.

H/T to Tim Ayres for stats posted on Twitter

I'll add to this post once the full release is out. No surprises. Won't be seeing any price reductions this month or next. Inventory down slightly from last month.

UPDATE: Release is out. Here's the price data:
The average price for single family homes sold in Greater Victoria last month was $573,442, up from $550,736 in April. The median price also rose to $525,000. The six-month average was $550,756. The overall average price for condominiums was $306,971 last month, up from $292,252 in April. The average for the last six months was $292,766. The median price for condominiums rose in May to $279,500. The average price of all townhomes sold last month was $400,788, virtually unchanged from $400,695 in April. The median price dropped slightly to $375,000. The six month average was $397,224.


Roger said...

VREB has released their stats package. Click HERE--

May 2009 Statistics - Monthly Analysis--

April 2009 shown in ()

MLS Sales - 879 (747)
MLS listings - 3789 (3861)

SFH Average - 573.4K (550.7K)
SFH 6 mo. Avg. - 550.8K (540.2K)
SFH Median - 525K (515K)
All SFH Sales - 514 (421)

Condo Average - 307K (292.3K)
Condo Median - 279.5K ( 274K)
All Condo Sales - 223 (204)

Town Average - 400.8K (400.7K)
Town Median - 375K (390K)
All Town Sales - 88 (74 )

Year-over-Year Analysis--

GV - Greater Victoria
May 2008 shown in ()

MLS Sales - 879 (770) - Up 14%
MLS listings - 3789 (4332) - Down 13%

GV SFH Average - 573.4K (601.9K) - Down 4.8%
GV SFH Median - 525K (545K) - Down 3.7%
GV SFH Sales - 475 (441) - Up 7.7%

GV Condo Average - 307K (336.2K) - Down 8.7%
GV Condo Median - 279.5K (295.5K) - Down 5.4%
GV Condo Sales - 223 (168) - Up 25%

GV Town Average - 401.9K (434.8K) - Down 7.6%
GV Town Median - 375K (394.9K) - Down 5.0%
GV Town Sales - 87 (69) Up 26%

Roger said...

After observing the strong increase in condo and town sales I calculated the following breakdown by category:

May 2009.
GV residential sales - 785
Houses - 475 - 61%
Condos - 223 - 28%
Towns - 87 - 11%

April 2009.
GV residential sales - 676
Houses - 400 - 59%
Condos - 204 - 30%
Towns - 72 - 11%

May 2008.
GV residential sales - 678
Houses - 441 - 65%
Condos - 168 - 25%
Towns - 69 - 10%

One can see the market is slightly shifting from house sales to condos & townhouses even though prices are down YOY and mortgage rates have dropped.

HouseHuntVictoria said...

Why do you think that is Roger? More people coming out of the woodwork to buy rental properties thinking that prices are headed up again?

Roger said...


I think there are several reasons for the increase in sales and condos from last year and the slight shift away from houses in 2009.

- FTBs are stretching to the max with 5% deposits and cashback mortgages. Even with the low rates only condos and townhouses are within their reach

- More women are buying as noted in
this article and will be buying with one income.

- There have been several aggressive marketing campaigns to attract condo and townhouse buyers (Reflections, Juliet, Bear Mountain)

I think these low rates, hype and marketing campaigns are draining the FTB pool. One wonders how many are left.

NanHousing said...

Here is a great article from today's Nanaimo Daily News. It is about a reporter who interviewed a backruptee trustee for an article. The reporter goes on to talk about his personal views and tells it like it is about people getting into debt.

"We have people coming in here with $70,000, $80,000 and even $90,000 worth of credit card debt," he told me.

After I picked my jaw up off the floor, all I could stammer out was that those numbers boggled my mind.

Rogers informs me that in his office alone approximately $3 million worth of credit card debt has to be written off each month as people declare bankruptcy and have to liquidate assets.

Three million dollars a month, just from one office in a relatively small city on Vancouver Island.

Think about what is happening across the country folks.
Liquidating assets? I bet most of these people have little or no equity left in their homes as they probably ATMed all they could out of it and house values have gone down.

What a complete mess. How can anyone expect real estate prices to continually shift upwards with what is happening out there.

Drunk off cheap and easy credit and the hangover isn't going away.

NanHousing said...

for above article..

PainInThe said...

Dead cat bounce.

Happened in Las Vegas too:


Have no fear: Once the downhill slide resumes, it will be sharper, faster, and no more bounces either.

People can only be so stupid twice.

jesse said...

I am fascinated by how closely linked Victoria and Vancouver housing market fortunes seem. The "spring bounce" we hear about is not just Vic, it's Vancouver and the Fraser Valley as well.

It's not too surprising though. Seattle and Portland tracked each other pretty closely, for example.

All the talk of the Olympics being favourable in Vancouver seems specious when seeing how closely Victoria, whose residents will only be peripheral to the Olympics themselves, tracks Vancouver in terms of house price movements.

It is becoming evident that sentiment and availability of credit to support it have a big part to play in how prices move. I don't think we're yet at the stage where panic is taking hold, even after the second half of 2008. Patience.

Keep up the great blog, minus the profanity of course ;)

Roger said...

There was a big jump in bond rates in the US today. I guess the Fed's quantitative easing program is failing.

Well folks it is official now...

RBC Raises 5-Year Fixed Rate..

RBC just announced it is raising its 5- to 10-year fixed rates (RBC’s Release). It is the first increase in the posted 5-year rate in eight months, and it’s thanks to a big spike in bond yields.

Roger said...

How will the rate jump affect the RE market?..

Major banks have posted rates, "special offer" rates and competitive rates. The posted rate which changed today is always discounted when you walk in for a mortgage. The novice punter will consider the "special rate" to be a good deal but the savvy shopper will squeeze the loan officer for a competitive rate. Here are the RBC rates last week :

Five year closed: 5.25%
Special rate: 3.95%
Competitive rate: 3.65%

Here are the new rates:

Five year closed: 5.45%
Special rate: 4.15%
Competitive rate: 3.95% (guess)

This rate jump will have several effects on FTB's.
- New loan borrowing costs are going up unless you go for a variable mortgage which is dangerous considering the movement in fixed rates.
- Fewer agents and brokers will be suggesting taking a variable now and switching later. This means fewer buyers entering the market
- A .20% jump in rates means the maximum one can borrow against a set income has been reduced. See Reid's graph in a previous post.
- The psychological effect when this hits the news will be considerable. Many folks thought the government was saying mortgage rates would be fixed until next June. They did not understand that only the BOC rate was staying put and this was subject to change if economic conditions required a change.

I suspect many brokers will be busy this week as variable holders switch to a fixed rate. The bank will only give them the special rate since they won't have any leverage to get the competitive rate.

Reid said...

A key to the impact of the five-ten year interest rate increase will be if we see a second jump in the coming weeks. This will send a really strong message to the 5/35's and I suspect then the final leaning fence sitters will jump. Three months later there will be far fewer SFH buyers than we see today and we all know what that means.

If you are a 5/35 and you go variable today, you are taking a very big risk as five year rates could climb substantially over the next two years.

Vic said...

Looks like the last gasp for the sheep is coming,the buying pool must be getting thin by now.

The high end is still getting hit. I see a house in Oak Bay got a "new price" in a nice neighbourhood. Thought this was well over $700,000 last time I looked. MLS®: 262086

Not surprised by the numbers,fall will be the tell tale of the next wave down.

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

One has to put this months MLS sales in context...

We have the lowest mortgage rates on record, inventory and average prices are lower than last year and we only get 879 MLS sales!

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 - 879*

Interesting how VREB only referred to last years sales and not what happened in 2005-2007.

Anonymous said...

Yep, inflation + higher interest rates is coming folks.

In other news, the US housing market still has easily 2-3 years more downturn to go. I'm guessing closer to 5 by the time we're all done.

If you don't have time to read the article, just scroll down to the pretty graph. At least 18 months of consecutive ARM (Adjustable Rate Mortgages) resetting to higher (possibly *much* higher) interest rates.

Also sooner or later we're going to have us a nice (US) currency crisis too. Might take 1,2 or 3+ years, but this nonsense can't go on forever... and the Chinese are already laughing at Timmy.

Yesterday in China..."[Tim] Geithner tells China its dollar assets are safe. The crowd laughed..."

omc said...

I would like to think the high end is getting hit, but it isn't. I would say they have almost regained the ground that waas lost over the winter. That house in Oak bay is no prize and they are still asking more than assesment for it, in the early spring they would have been $100k under. I have some freinds who are looking to move up in this neighbourhood and it's a feeding frenzy. Bidding wars are back. houses selling in the same day, but they just don't show as sold for a few weeks until the conditions are removed. Complete lunacy

Dumb Canuck said...

Let's watch the macroeconomics and how Victoria does compared to it.

Unemployment should come out on Friday. If it maintains the current upward trend for BC and Victoria, then there is downside for the market.

The other main factor will be how our government handles the budget deficit. If it chooses to allow the deficit to float, then Victoria housing has a chance. If there are significant (more than 10% cuts) in civil service, then there is a big problem for local markets.

So far, the Feds in Canada have managed to sell people that things really aren't that bad - which is true in the cities. If public sentiment turns the other way, then watch out.

Reid said...

Complete lunacy is correct. Updating months of inventory (MOI) data for May shows that Victoria, Oak Bay and Esquimalt all have MOI at or under 1.0 for houses priced under $650k. Previously we saw these incredibly low numbers only under the $500k mark, but clearly people are starting to buy heavier at the higher price levels.

If you take Sooke out of the equation, the MOI for Victoria houses priced under $650k has dropped from over 5.0 in January to under 1.5 in May. MOI of 1.5 across all of Victoria (less Sooke) indicates a very strong sellers market. If you consider that probably 15% to 20% of the current mls inventory at these price levels are “sale pending” right now, the real MOI would be closer to 1.0.

All of this is happening while it is becoming clear in Ottawa that Canadians are way underfunding their retirement. Given the real estate behavior we have seen here in May I think the retirement problem is only going to get more serious over the coming decades.

In my opinion you would be crazy to buy a house right now given multiple offers, price levels and all the economic uncertainty. But it must be that if all you have saved is $50k and you really want a house, maybe today is your only opportunity to secure the financing that will allow you to enter the market.

jesse said...

"If it chooses to allow the deficit to float, then Victoria housing has a chance."

You forget what this government will do in a recession. It will not spend on the civil service. It will spend in areas with high unemployment like the Interior. Already they are saber rattling with reduced work weeks.

Besides, do you think Victoria's housing market is really that dependent upon government spending? Guess what: Victoria was speculating just like everyone else in the province. Whether there are government jobs or not didn't prevent people from taking out large mortgages and bidding up prices. Prices will collapse because prices are high. Employment merely accelerates the return to normalcy but the end destination is the same barring significant income growth. It's the same tune every bubble.

Vic said...

It is hard to fathom that bidding wars are still occuring. More proof that many in this town are still brain dead.

Globe and Mail Update, Monday, Jun. 01, 2009 07:53PM EDT

Amid widespread job losses and battered investment portfolios, consumers are increasingly struggling under the weight of their debts.

Figures released by Canada's major banks indicate a growing number of people are unable to cope with their debt loads, while businesses are largely handling it.

“Unemployment and the recession are starting to hit the credit quality of the Canadian banks' books,” David McKay, chief of Royal Bank of Canada's Canadian operations, said in an interview yesterday.

Data accompanying the banks' financial results last week show a significant increase in consumer loan losses, driven by a spike in job losses this year that came as “a real shock to the system,” he noted.

For the first time since the early 1980s, overall wages earned by Canadians fell in the first quarter from the previous quarter, according to data released yesterday by Statistics Canada. Bank of Montreal economist Douglas Porter said the main driver would be the “horrendous” decline in employment, which was the most serious drop since 1982.

victorianna said...

I'm beginning to wonder. Do I want to live in a town this stupid? Present company excepted, of course.

Vic said...

I hear ya victorianna,especially after reading this,makes me want to puke.

"I think this shows you Victoria is insulated and always has been," Markham said."

Vic said...

Oh yeah,and not one mention in the TC of RBC raising rates.

CD said...

Well. I have two friends in situations where they really want to buy. To be part of the club and have strongly considered buying due to low interest rates. And yes this is in Victoria... and near town and country.

Person 1:
$790 dollars per month, 3 bedroom town home single ground level late. The complex is 25 years old id say.

Person 2:
$780 per month, 2 bedroom condo. Nice condo. 80's building.

boomer said...

Owning a home (or 2) is considered an "investment" by most. On that basis its almost a proxy for the stock market-but considered safer.
They're both leading indicators of anticipated economic activity and will move in the same direction price-wise.

PainInThe said...

"I'm beginning to wonder. Do I want to live in a town this stupid?"

Yes, you do. Soon those stupid will be flooding the market with their upside-down and POS homes, driving everyone and everything to the REAL bottom, and faster than ever.

They're not propping up the market; they're blowing it up.

HouseHuntVictoria said...

From a post here a couple weeks ago: "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?"The drum got beat loud this morning. But the question remains: can the trend continue?

Just Janice said...

Reality check, look in the mirror and ask yourself are we better or worse off than we were a year ago?
In Victoria:
-Unemployment has more than doubled going from 2.8% in April 2008 to 6.2% in April 2009 (seasonally adjusted).
-The TSX has gone from 14,467 as of June 29, 2008 to 10,370 as of May 28, 2009 (a 28.3% year over year drop).
-Personal Bankruptcies in British Columbia are up 69% in March 2009 compared to March 2008.
-BC had a surplus of $2.9 Billion dollars in 2007-08, in 2008-09 that surplus was whittled to just $50 Million, and in 2009-10 is fantasied to be a deficit of $495Million...
- BC Welfare rates are up nearly 50% as of May 2009.

But hey, everything is just fine because interest rates have come down...go out and buy a condo or two...after all EI and Welfare pay more than enough should something bad happen. And we all know that we just have tonnes of savings to live off of anyways....

Wishing so always makes things better - doesn't it???

I've got to chuckle at how Mr. Duffy forgot to include year over year calculations for the price changes in the region....

Roger said...

Bank of Montreal and TD Canada Trust join RBC and raise 5+ year fixed mortgage rates by 0.2%

Mortgage brokers are now advising clients if they wish to lock or switch they better do it today. How many FTB's will have the nerve to go variable now that the spread to 5 year fixed is 1-1.2%

Here is an update to the variable vs. fixed calculator showing the risks associated with going variable and switching in a year.

Vic said...

"I've got to chuckle at how Mr. Duffy forgot to include year over year calculations for the price changes in the region...."

We don't talk about those YOY's,after all "we're insulated" so what does it really matter ?

Vic said...

What did I tell ya about Gordos 4 day work week plan ?

Answers needed on public sector job reductions

Any hopes the provincial government had that its voluntary four-day work week idea would make a serious dent in the deficit were dashed with last week's deadline for employees to sign up for the program.

The final tally? A total of 650 employees are willing to take 10 unpaid days off this summer. The saving amounts to $1,573,781, which is the equivalent of about 16 full-time jobs.

Bear in mind that the government has about 30,000 employees and has said it could lay off up to five per cent of them -- or 1,500 people.

Reid said...

If this US dollar continues to drop it will result in a second round off massive job layoffs around Canada. The implications on the manufacturing sector are very serious. Last time we headed to parity we were in far better shape than we are today.

If this curerncy trend continues, Gordo is going to have an even more serious deficit problem on his hands. How long could will he be able to hold off on the civil servant lay offs?

Anonymous said...

Great recap Just Janice.

Speaking of recaps...
Recession? Not in Canada! Oh wait. But don't worry we'll vow to always run a fiscal surplus. Oh wait. Yes I'm afraid there'll be a ... wait for it... 40 billion dollar deficit, but don't worry by 2013 or so we'll be fully recovered. Oh wait, did I say 40 billion, I meant 50 billion.

No wait... How about a cumulative 167 billion deficit over 5 years?! Ouch!!


Nick said...

Just to add a bit to the comments about the 4-day work week. Contrary to what has been reported in the media, that wasn't a government initiative. It actually came from employees as a way to mitigate layoffs and give people a chance to take some extra time off in the summer.

While I credit the employer with actually giving this a shot, many employees weren't able to take advantage of the program. You needed to get your manager's approval to participate and many directors turned down every request because of the fear that if they can do without staff for this period, their budgets might be cut in the future. Personally, I wasn't eligible because I'm working on a project at that time, otherwise I would have done it too.

patriotz said...

Owning a home (or 2) is considered an "investment" by most. On that basis its almost a proxy for the stock market-but considered safer.
They're both leading indicators of anticipated economic activity and will move in the same direction price-wise


Owning a house (not a "home", a home is where you live, not something you own) is an investment. It's a capital asset that returns future value, just like a farm, an oil well, GM, etc. That doesn't means it's always a good investment, any more than any of the above are good investments. You can lose money on any of them. What matters is what you pay for it compared to the future value returned.

RE and stocks do not move in lockstep price wise. RE always lags the stock market considerably coming out of a recession. This is partly because RE lags employment, which in turn lags the stock market, which moves very quickly due to its liquidity.

The stock market bottomed in August 1982 and then went into a long bull market, while housing kept falling and didn't really start pulling up again until after Expo. You are seeing the same thing right now IMHO.

One more thing - housing is a much safer investment than stocks, because the earnings of housing (rental value) are much more predictable than the earnings of stocks (corporate profits), and housing cycles move far more slowly than the stock market. But what that means is that it's easy to tell whether housing is a good buy or not, not that housing is always a good buy. It was easy to know that housing was a good buy in the mid-1980's, but it was a lot harder to know that GM would turn out to be a bad buy.

Reid said...

Unfortunately the new provincial budget will not be released until mid to late September as they are not swearing in the new Cabinet until later this month. Then we should have a better feel for the real deficit and what Campbell will do; backstoke on his $495 million promise or slash jobs.

There appears to be lots of room to slash jobs if desired.

patriotz said...

Then we should have a better feel for the real deficit and what Campbell will do; backstoke on his $495 million promise or slash jobs.

"Or"? How about "and"? Spend money where people vote Liberal and slash jobs where people vote NDP (now where would that be).

Roger said...

Reid said,

Unfortunately the new provincial budget will not be released until mid to late September as they are not swearing in the new Cabinet until later this month..

I think it will be much earlier, like July. We are already into the third month of the fiscal year. Every month that goes by the more drastic the cuts will be. The public service has been drawing up new budget plans for months.

The opposition is already asking if they are incompetent or lying. They could give a hoot but public confidence is necessary and clouds of doubt don't help.

Vic said...

I like how the Vancouver Sun allows comments under their real estate news but not the TC. I guess they like to operate like the Feds,no blogging allowed in Victoria media,cause we are insulated"....and might scare off the suckers.

Reid said...

Roger, the word I got was that they do not have to release the budget for three months after the cabinet is sworn in and that they plan to push the budget release as long as they can.

If the NDP push hard enough, maybe they we will see it sooner. The sooner the better from my perspective.

PainInThe said...

The TC is the ONLY insulation the island has.

Ryan said...

The TC is great insulation. It kept all my dishes safe when I moved!

Roger said...

I just saw CHEK news tonight. They are absolutely gushing over May sales and have the usual realtors on talking about the "hot" market.

The CHEK announcer actually said that this was a record year for sales and the whole theme was that now is the time to buy. I guess they don't bother to check the publicly available facts on the VREB site.

FTBs are just grist for the mill with the handle being cranked by VREB, realtors and the MSM. It is really sad when folks depend on these folks for information and market conditions.

Just Janice said...

The upside is that those who wanted to get out at the peak now have a second chance, and those who are silly enough to ignore the realities will pay the price. It's a bit of economic darwinism...

The lessons will be hardest on the youngest and most foolish (read FTB) who will likely experience a financial hardship the likes of which they have never known. On the upside, they are also the ones with the most years to benefit from learning such lessons early on...

It isn't going to be pretty, I just hope that the longrun benefits of the correction out weigh the heavy but short term costs.

Perhaps Economics and Personal Finance ought to be part of the high school least then people could interpret what they read in the TC and critically assess its validity.

HouseHuntVictoria said...

Just Janice, if it does nothing more that help the journalists at the TC in the future to critically assess the VREB et al press releases I'll support the motion.

Reid said...

The mindset of today’s buyer:

I was talking to co-worker today who is planning to buy a house for about $500k with about $50k (10%) down. I told him to wait a couple years for all the reasons we discuss on this blog. He told me I was wrong as there will never be a more affordable time to buy than right now.

I told him even at these ridiculously low interest rates that his mortgage payments and property taxes would exceed rent. Again he told me that I was wrong as his realtor explained that if you only look at the interest costs he would be paying less than $1,600 per month with property taxes and that is cheaper than renting the same house.

I told him to wait a couple years as prices will be down and your short term interest savings will be irrelevant. He said again, Reid you are wrong because if interest rates rise to 5.5% then I would be far better off renting whereas today I am better off buying and secondly real estate prices never go down.

There was no way to get through to this guy, but I did come away from the conversation with the sense that if all you have is 5% or 10% down then these low rates really do have a material impact on your ability to justify buying a house. These buyers could care less about what will happen in five years as their decision is based on the circumstances of today and today only. As Just Janice said many of these buyers will have to face serious financial hardships, but most appear to be choosing that path even though the warnings are out there.

Roger said...


I think you are wasting your breath with FTBs that have contacted a realtor and are actively looking to buy. They will just get angry, argue based on myths not facts or ignore you. Our society is now based on immediate gratification. Financial planning and carefully weighing a purchase decision are only practised by a few.

The consequences of this behaviour can be seen in the US where personal wealth has evaporated for many. Here is some more bad news for the housing market down there..

U.S. Mortgage Rates Jump to Highest Since December..

June 4 (Bloomberg) -- Fixed U.S. mortgage rates jumped to the highest level this year, signaling the Federal Reserve’s plan to lower borrowing costs has stalled.

The average 30-year rate rose to 5.29 from 4.91 percent a week earlier, Freddie Mac, the McLean, Virginia-based mortgage buyer, said today in a statement. The last time the rate was higher was Dec. 11, when it was 5.47 percent.

“That’s quite a jump,” said Donald Rissmiller, chief economist at New York-based Strategas Research Partners. “The more rates go up, the more we need home prices to go down to equalize consumers’ payments. It’s those payments that have brought about a level of stability in housing unit sales.”

Now why did those mortgage rates go up? Because they are directly tied to the bond market and it has been on a downward spiral in anticipation of an economic recovery. As bonds fall in price the yield goes up. US bond yields jumped today by .12% for 5 year and .17 for the 10 year benchmark maturity. Canada bonds have been following the US and that is why mortgage rates jumped this week.

I expect in the fall when all the pre-approval letters have run out and fixed mortgage rates have increased further that this housing bounce will be over. Then the downward trend will resume once again.

omc said...

I don't know if what has happened can be called a simple bounce as the bounce effect was multiplied by government stimulating the speculative economy. CIBC said today that they don't think that the BOC will be able to keep the interest rates low very much longer, despite saying they would leave it for 1 year. The US is set to raise intereset rates further due to inflation, the BOC will have to follow suite. Pop goes the weasel.

I will still be waiting a while to enter though. It's funny when you say to the typical FTB that I will do much better in a higher interest rate envirenment; they just can't understand that.

Roger said...

OMC said,

It's funny when you say to the typical FTB that I will do much better in a higher interest rate envirenment; they just can't understand that.

That is because most of them cannot comprehend that houses are like any other asset. The price can go down as well as up and there is a cyclical, multi-year pattern.

They had a chance to observe the market after it peaked last April. It was heading down until the credit crunch forced the government to lower interest rates to levels not seen before. This stopped the correction but only temporarily. Once the inevitable march back to historical interest levels commences the correction will resume and the equity of today's FTB will disappear.

Vic said...

“The more rates go up, the more we need home prices to go down to equalize consumers’ payments."

What a concept, why hasn't the VREB/TC figured this one out ? Oh right,that insulated thing.

I saw several "new" prices on a drive though Saanich last night. How come this is still happening if the market is so hot with bidding wars ? Right,we're insulated.

Reid said...

Roger, you are right I should not waste my time educating FTB's already committed to buying. It is just hard to see a young person making such a massive mistake.

It will be very interesting to see how these increasing long term bonds will impact five year mortgage rates in the coming months. Government of Canada five and ten year bonds this week hit levels that were both more than 1.0% higher than their January lows. We could easily see mortgage rates increase again if bond yields continue to rise as it appears banks held off raising interest rates as long as possible until earlier this week.

Reid said...

"It's funny when you say to the typical FTB that I will do much better in a higher interest rate envirenment; they just can't understand that."

This is the very financial illiteracy that plagues our country. Long term we should address this.

Vic said...

Whats a real sham is that the word "affordability" hasn't been brought up once by the MSM in the last 3 months of this market blip. When have you seen the media breakdown the costs on an average priced home and went through the reality of home ownership ?

Last night CHEK had to use two sisters who work in a real estate office to showcase the latest version of a FTB and why it was such a great time to buy.... because they "know" because of where they work. Real hard reporting there.

Just Janice said...

Employment numbers out...Greater Victoria, 3 month seasonally adjusted moving average unemployment rate now at 7%....

Meanwhile the loonie has decided to take another flight (or rather the american dollar has gone for a dive)...not good news for any of our industries that sell to Americans (hmmm like Tourism, forestry, manufacturing, etc.)...

Roger said...

Just Janice,

Don't know where you got your unemployment stat. Link??

Here is what I have for Victoria. Insulation heat shield now breaking down..

March 5.4%
April 6.0%
May 6.4%

Today's StatCan News Coverage..

Last Month's TC Article..

Roger said...

Are we seeing the economy bottoming out in Canada?

Unemployment in Canada..

Reid said...

Roger, I spoke to Doug Porter last week and asked him about unemployment forecasts. His comments were that although the "worst" of the recession is over that both the US and Canada will continue to lose jobs for 6 to 9 more months and unemployment numbers will continue to climb. The recession is far from over for the average Cdn worker.

jesse said...

"His comments were that although the "worst" of the recession is over..."

No mention that BC recessions typically lag the rest of the country. With a province so heavily dependent upon construction for GDP, the worst pain has just started. Projects under construction only started dropping early in 2009.

Ontario saw its manufacturing contract starting in 2008 so they are about 6-12 months ahead in terms of bad news. From the country-wide perspective Porter may be correct but for BC he's getting a bit ahead of himself.

Just Janice said...

I used table 8 of the Stats Can report which is what the EI program uses...seasonally adjusted 3 month average....

Just Janice said...

Roger -
You're right table 5.1 does say 6.4%....

a 0.4% increase in the unemployment rate in one month is a pretty steep increase (4.8% per year), if it keeps at this pace it'll hit 9.2% before the end of the year....

I don't think we have seen the worse of this recession, or even that we're anywhere near a 'bottom'....

Reid said...

Porter comments regarding the "worst" being over were from a business and investor perspective which was the context of our discussion. I think he is likely correct on that point.

But in probing him deeper after his presentation it was clear to me that from a personal/employee perspective the recession is far from hitting bottom. If you define maximum umemployment as the "worst" point in the recession (this is not when business will claim it was worst), then we are likely looking at 6 to 9 months away from bottom.

Based on the charts he had for forecast unemployment and extrapolating that to Victoria it would suggest about a 7.5% to 8.5% maximum unemployment rate. Now if Gordo steps up and "actually" cuts the civil service and support services, then this number could go higher.

I have always figured that if we exceeded 8% it would have a material impact on buyer activity, but then again we live in Denialville.

Olives said...

"I don't think we have seen the worse of this recession, or even that we're anywhere near a 'bottom'...."

For what it's worth...I totally agree.

Inglishmagor said...

The comments that the recession is nearing the bottom frightens me. By no means do I seek tough times for people.... but aren't recessions a natural back swing due to bad decisions? To avoid it just rewards bad decision making.

As for housing... The math just does not add up. If we don't see the drop off in prices there can be no other option but for inflation to bring things back in line.

It looks to me like the governments are going to do the same as FTBs. Borrow big to keep the game rolling counting on writing off the debt via inflation. In doing so though, interest rates have to rise. With higher interest rates they will open up a window in a few years where prices are down.

Once the debt seems reasonable because we all earn 200k a year now, a new bubble in 10 - 12 years.

When people say now is a good time to buy, I think they are right only looking 10 years into the future. 3 years from now will be a spectacular time to buy.

sorry for the rambling, just venting the nagging voice. It's odd right now with financially sound older people I know confident I'm missing out.

Vic said...

"sorry for the rambling, just venting the nagging voice. It's odd right now with financially sound older people I know confident I'm missing out."

Next time ask them this: if they think house prices go up another 10-15% from here and interest rates move up,then who is left to qualify to buy ? Answer: not many,especially the first time buyer with limited down payment,those days will be done.

As the rates rise,the rules to borrow at higher rates will tighten like a noose. Toss in Gordo's fall budget bomb and this town will maybe then wake up but I'm won't be surprised if they don't,we have already witnessed a lack of brain cells are a common trait of Victorians.

Dumb Canuck said...

Roger and Just Janice,

Since its a three month rolling average and the unemployment rate is increasing, the real current rate will be somewhere above the stated estimate. My guess is that it is around 6.8% (last month the 3 month was 6.0, this month 6.4, meaning that the new data point should be around 0.4 percent higher than the average).

This is quite similar to the 7.0 percent that Just Janice found in the second Stats. Can. value.

The real questions are: (i) does the rate keep going up, or does it flatten out; and (ii) what is the impact of the shadow unemployment in under the table construction worker and 'part time' worker increases. On this second point, it would seem that total income will be decreasing more than one would estimate based on unemployment levels.

Dumb Canuck said...

Anyone seen this TC article today?

Victoria luxury home prices suffer huge declines in real estate market.

Dumb Canuck said...

Here's the link

Anonymous said...

I also agree, I don't think we've seen the real bottom in the recession/depression, that said I'll await my final judgement by what the markets do in Sept/Oct.

The US housing market easily has another 3+ years of downturn due to the ARM tsunami coming starting May 2010. Combine that with the likelihood of increased interest rates and it'll be nose-dive 2.0.

Yesterday I read an article in the paper (sorry forget which one), that said that the Finance minister is now worried about the Canadian dollar getting too strong and it being bad for Canada to the point of virtually erasing all the bailouts. I for one, love a high Canadian dollar, but I'm not an exporter. The point is, the BoC may intervene at some point by buying US dollars (by up to 40 billion or so), but also admits this has failed in the past (hard to fight against the world's hedge funds, and 40 billion is a drop in the bucket in FX markets), and the last resort would be UK/US style quantitative easing (print $ CAD out of thin air)... When that happens, it may thwart away foreign investors in Canada.

The point being, this is far from over, there will be more dips and unquestionably more government intervention to try to counter those dips, and ultimately no easy way out. The long term 3+year trend from my perspective is down in nominal terms (inflation adjusted). We simply have too much debt (though not as much as USA), and it either needs to be written down and/or erased through inflation, either which way you look at it, the average living standard will decline.


StargazerXL said...

Any doubt I had about what the local banking industry thinks of prospective house buyers was erased for me this morning. I went to Coast Capital Savings to do my weekly banking, and found out they've started a new promotion to advertise their low mortgage rates. You will be amused, I'm sure, to learn that the instrument they have chosen to promote these low rates, are bright blue, house-shaped, um, suckers.

Enjoy those low monthly payments while you can, suckers!!!

Anonymous said...

StargazerXL, thanks for the laugh.
The Coast Capital link is here.

Roger said...

Yale economist Robert Shiller has an interesting article in the NY Times..

Why Home Prices May Keep Falling..

HOME prices in the United States have been falling for nearly three years, and the decline may well continue for some time. Even the federal government has projected price decreases through 2010.

But something is definitely different about real estate. Long declines do happen with some regularity. And despite the uptick last week in pending home sales and recent improvement in consumer confidence, we still appear to be in a continuing price decline.

There are many historical examples. After the bursting of the Japanese housing bubble in 1991, land prices in Japan’s major cities fell every single year for 15 consecutive years.

Roger said...

Dumb Canuck said..

The real questions are: (i) does the rate keep going up, or does it flatten out; and (ii) what is the impact of the shadow unemployment in under the table construction worker and 'part time' worker increases..

I think the rate will continue to go up. The summer tourist season will be slow with the new US border rules and the recession in Canada and the US. In September the tourist service industry layoffs will be considerable in Victoria. Gordo will be cutting expenditures (consultants, goods and services) and there will be further staff cuts (part time, term). The number of full time employess is the wild card.

Then there is the effect of the high Canadian dollar on our local high tech industry. Most of these companies are exporting and a rise in the lonnie drops right to the bottom line. Once you start losing money what happens next?

It is hard to do work under the table as a construction worker. All the renos being done for the renovation tax credit need a GST number on the receipt. Politicians are not that swift but CRA bean counters know how to get taxes!

The other thing to consider is what happens when the EI runs out. Gordo is lobbying Ottawa for EI changes because he knows that welfare costs will rise quickly due to ex-EI claimants.

Dumb Canuck said...

Roger - agreed (and good point about the GST # for home renovations). Under your scenario, increases in unemployment rate in Victoria could be a bit slower through the summer, and then increase substantially in the fall.

Anyone on EI won't be able to afford to buy a house (let alone payments), so the the pool of FTBs is decreased.

Dumb Canuck said...

As a Coast Capital Savings member, think that I should write a letter to the board asking them what in heaven's name they are doing loaning right now? And using a sucker as promo tool?

Roger said...

Dumb Canuck said:

As a Coast Capital Savings member, think that I should write a letter to the board asking them what in heaven's name they are doing loaning right now? And using a sucker as promo tool?

You might want to tell them that their "sucker" mortgage is a big hit on Twitter..

Coast Capital on Twitter..

Dumb Canuck said...


I have a question for you:

What specifics would you consider people need to know to be considered financially literate?

In your posts, you make reference to this quite often.


Art Vandelay said...

Our house (Esquompton):

Listed Monday. Sign on lawn Tuesday. Shown Thursday. Accepted offer Thursday.

Enjoy your parents' basements, bears.

Art Vandelay said...

Of course, the world-beaters on this blog will credit/blame the sale on:

stupid buyers
lying realtors
greedy sellers
the evil media
Santa Ana winds

Blame whatever or whoever you want, it's +$300K in 5 years.

So long, suckers.

Vic said...

"So long, suckers."

You must mean the ones with the blue house shaped suckers who bought your dump.

Just Jack said...

You forgot stupid sellers.

If your realtor has under listed your home this is the kind of activity you would expect.

So, how much did you leave on the table 10K, 20K, 30K or more?

Vic said...

"You forgot stupid sellers."

Toss in the other 10% plus you could have got last May and there was mega dollars left on the table.

This explains the greedy bull theory,they don't sell at the peaks because they are in a fog thinking it's going way higher and now have to panic sell because they may lose it all.

Roger said...

A quick scan of Art Vandelay's previous posts reveals that Art has trouble telling a consistent story. When you are making it up as you go along it is hard to keep your story straight. This time he has outdone himself.

Posted by Art on May 24, 2009..

We sold on the Prairies and have rented in Victoria for 7 years. We live in a modest house in a modest neighbourhood with an ocean/mtn view, and (let's face it) no actual winter by any Canadian's reasonable definition of "winter." For exactly the same monthly rent as we paid for our mortgage.

We chose to live in Victoria rather than die in Alberta. Whether we could afford to own the property we lived in was never on the agenda. Ever.

victorianna said...

Yeah, I've been thinking for some time there must be more than one Art Vandelay. Hardly surprising. Anyway, on to funnier things. That sucker thing just kills me. Stargazer, you should make that a comment on Garth's blog. I think more people deserve to see that one. And as a PR consultant, I would love to see someone really jump all over that one publicly. Wow! That promotion could ultimately join the ranks of trying to sell the Nova to Latin Americans.

Vic said...

Good digging Roger P.I.

Once again we see how schizophrenics with a computer can
forget their meds and sign on as the wrong ID at 3 in the morning. I can only imagine how many other nutjobs he is on here. Thank God for EMI.

Just Janice said...

I don't know if it's purely financial illiteracy, I think there's also a degree of economic illiteracy, and perhaps a certain lack of critical thinking that is epidemic.

Afterall, if the banks and your parents and potentially your spouse (all of whom are 'trusted' advisors), are telling you to buy - then it's hard to stand firm and say no, particularly if your are unable to come up with solid reasons why. Financially speaking, if your payments on debt are less than 40% of your income you're fine - for now. So financially speaking most FTB's have played by the financial rules, otherwise they wouldn't have qualified for CMHC insurance on their mortgage.

Where it gets sticky is in the domain of assessing the relevant risks. Is there a risk house prices will go down? Is there a risk of losing your or your spouse's job? Is there a risk that interest rates will go up? And of course there's the associated set of questions - the what if's - what if prices go down 10% or how about 20%? What if I lose my job or my spouse loses their job - would we be okay with that amount of debt and what is the risk this will happen? What if interest rates double - could we still make the payments? What if we had to sell the house - would we be left with negative equity in a year or two or three?

So while I think right now is an absolutely crummy time to buy (in part because the price to earnings ratio of real estate sucks in a historical context and the risks are substantial)...convincing others with no more than a because is impossible. Show them statistics, offer a credible theory about why things are going to unfold in one way or another, enable them to draw their own conclusions. Oh and if you know anybody who is now selling their home, congratulate them on avoiding the second leg down - it's going to be a long painful slog (assuming of course they don't decide to - move up the property ladder).

Roger said...

Just Janice,

FTBs are rushing in now for basically one reason - low interest rates. They were at historic lows and fixed rates have already started to rise with last weeks increase by the major banks.

Most FTBs and their "advisers" are relying on the myth that real estate always goes up (despite recorded data to the contrary). If one is thinking in terms of 10-20 years I would not disagree. But many are purchasing "starter" homes and condos with the intent of moving up in a few years. This is a big mistake. What they will see in five years is higher interest rates at renewal time and lower prices.

It won't be much fun sitting in that starter property making higher payments. And many will be underwater on their mortgage when prices fall. They will be trapped unable to sell unless they can somehow pay the difference to the bank.

Reid and others have posted extensively on why prices will fall as interest rates increase. I would like to hear one real estate bull post some reasoned arguments outlining why prices can possibly increase from current levels.

Roger said...

Many "civic leaders" and promoters have stated that Victoria is immune from an economic downturn. Here is a story in yesterday's TC.

Greater Victoria's jobless rate hits 6.4%..

...eight out of 10 provinces actually posted job gains in May, Statistics Canada reported.

But in B.C. the unemployment rate in May rose to 7.6 per cent from 7.4 in April.

Greater Victoria's unemployment rate kept on climbing last month, reaching 6.4 per cent -- more than double the rate a year ago.

In May, 1,500 fewer people were working in the capital region than in April, said Vincent Ferrao, a Statistics Canada analyst.

Over the past year, one of the biggest employment drops has been in accommodation and food services, where 6,700 fewer people were working this May versus May 2008.

In Greater Victoria's professional, scientific and technical services sector, there are 3,200 fewer people working compared with May of last year, Ferrao said. Public administration, a keystone of the Greater Victoria economy, is down about 3,000.

Roger said...

Riding the real estate roller coaster..

Toronto appraiser Barry Lebow, of Lebow Hicks Ltd., said the Canadian real estate market has nowhere to go but down -- no matter how much cheap money is thrown at consumers. These days he's taking the conservative route when assessing the price of homes because he doesn't want to face the wrath of a bank that has to foreclose on a house that was valued high and ends up selling for less than the mortgage placed on it.

"There are going to be tremendous changes in real estate... There are just not enough first-time buyers and the ones buying today, those people are not really buyers, You know what they are? They are renters of cheap money, variable-rate mortgages of 2.99%," says Mr. Lebow.

"If mortgage rates were 8% to 9%, these people wouldn't be buying. It's an artificial market. One hiccup in the rates and it's all gone."

HouseHuntVictoria said...

Good catch on the Art shart Roger. Something smelt fishy there, and low and behold, there was some rotten garbage just below the surface.

Those are great links too. Thanks.

PainInThe said...

So long yourself, Art, you lying sack of...

omc said...

I had a visit with a couple of friends who are very knowledgable in this stuff. People who have made, and continue to make money on investments which does include real estate. Boy were they bearish, and not just on real estate. A couple of quotes that were interesting regarding the "it's a great time to buy" BS were; "when they say that it ussually the worst time to buy." and "the best time to buy any investment is when people stop talking about it".

Roger said...

Update to my Victoria unemployment post..

1 Yr. Graph of Victoria Unemployment ..

Graph was in Times Colonist on June 6th.

PainInThe said...

Excellent analysis posted over on Garth's blog about exactly where we're headed and why.