Thursday, July 2, 2009

June stats

The sales continue. Here's the unofficial stats, press release is out:

New Sales: 946
New listings: 1436
Total active listings at June 30th: 3794
Sales to new listings ratio: 66%
Sales to active listings ratio: 25% or 4 months of inventory.

H/T to Tim Ayres on Twitter for the numbers.

Last month's numbers:

New sales: 879
New listings: 1362
Total active listings: 3789

Sales up, new listings up, total listings up. Clearly Victoria is in an overall SELLER'S market being driven by the low-end and move-up buyers.
The average price for single family homes sold in Greater Victoria last month was $588,186, up from $573,442 in May. The median price also rose to $529,900. The six-month average was $559,827. The overall average price for condominiums was $298,200 month, down slightly from $306,971 in May. The average for the last six months was $294,725. The median price for condominiums in June was $275,000. The average price of all townhomes sold last month was $413,218, up from $400,788 in May. The median price remained unchanged at $375,000. The six month average was $401,829.
Prices aren't going up, 26 properties over $1 Million drove the average higher. Consumers keep preferring SFH's over condos and townhouses:
MLS® sales last month included 539 single family homes, 242 condominiums, 104 townhomes and 18 manufactured homes.

106 comments:

Roger said...

VREB has released their June 2009 stats. Click HERE--

June 2009 Statistics - Monthly Analysis--

May 2009 shown in ()

MLS Sales - 946 (879)
MLS Active Listings - 3794 (3789)

SFH Average - 588.2K (573.4K)
SFH 6 mo. Avg. - 559.8K (550.8K)
SFH Median - 529K (525K)
All SFH Sales - 539 (514)

Condo Average - 298.2K (307K)
Condo Median - 275K (279.5K)
All Condo Sales - 242 (223)

Town Average - 413.2K (400.8K)
Town Median - 375K (375K)
All Town Sales - 104 (88)

Year-over-Year Analysis--

GV - Greater Victoria
June 2008 shown in ()

MLS Sales - 946 (723) - Up 31%
MLS Listings - 3794 (4513) - Down 16%

GV SFH Average - 588.2K (580.1K) - Up 1.4%
GV SFH Median - 529.9K (538K) - Down 1.5%
GV SFH Sales - 484 (358) - Up 35%

GV Condo Average - 298.2K (319.9K) - Down 6.8%
GV Condo Median - 275K (295K) - Down 6.8%
GV Condo Sales - 242 (180) - Up 34%

GV Town Average - 414.4K (441.1K) - Down 6.1%
GV Town Median - 375K (407.4K) - Down 8.0%
GV Town Sales - 103 (75) Up 37%

Reid said...

The 484 SFH sales in June 2009 exceeded all months in the past 3.5 years except May 2007 (when they were 522). Buyer demand is huge and I would guess that sales would have been at even higher if it were not for the lack of decent inventory at the lower price levels.

This lack of lower priced SFH inventory combined with much higher expectations from many new sellers (I have seen a lot of houses now being listed 15% to 30%+ above assessment in recent days) will drag down sales volumes in the summer months.

But unlike June 2008 when you had growing inventories and lower consumer confidence, today you have higher demand and lower inventories, so prices are likely to remain at/or increase over current levels in the coming months.

The fall may be a different story, but it remains a strong sellers market for now.

Roger said...

Readers will find that the surge in MLS sales will be big news in the TC and on TV tonight. Let's take a closer look at the numbers without all they hype...

Total MLS sales of 946 in June were tied with the peak boom year of 2007 which was 949 sales. Why the big surge in May and June after the dismal 1st quarter? Two reasons: rising consumer confidence (belief that the recession is nearly over) and record low interest rates. Fixed interest rates are now rising and pre-approved potential buyers are scrambling to grab something before expiry.

What about SFH prices? You would think the buying frenzy would have driven up prices drastically. Even with 26 home sales over $1M and 1 over $5M the average SFH price only jumped by 15K from May. SFH median prices only increased by 4K with all the first time buyers competing against each other.

Many entry buyers are purchasing condos and townhouses. Condo median and average prices dropped in June and are down year-over-year (YOY) just like in previous months. Townhouse average prices increased MOM but the median stayed the same. Townhouses YOY are down as they have been for many preceding months.

What does the future hold? There is no doubt that June sales numbers were exceptional. Some commentators have said that the pent-up demand from the 1st Qtr. was released in May or June. Now that the summer weather has kicked in, kids are out of school and vacation season begins watch for sales numbers to drop every month. This will continue until December like it does every year.

In my opinion the low interest rates have drained the FTB pool and it is pretty shallow now. Even with all the demand prices are still lower than last year's peak. As demand drops and interest rates rise what do you think will happen to prices moving forward?

HouseHuntVictoria said...

Right now is definitely one of the worst times in Victoria's history to be a FTBer. Despite the low interest rates.

Roger said...

Didn't take the parrot newspaper long to repeat the VREB news release...

Victoria real estate market hot again; sales numbers near record levels..

Roger said...

HHV said:

Right now is definitely one of the worst times in Victoria's history to be a FTBer. Despite the low interest rates.

I think that depends on the first time buyer's (FTB's) perspective. You are a savvy buyer looking at long term financial goals. But you are in the minority. We live in a credit oriented society. Most people today focus on monthly payments instead of purchase price. Cars, homes, furniture and other big ticket items are rarely paid for with cash. If they want it and can make the monthly payment they buy it.

Many FTB's consider today a great time to buy because they can get the house they want (not need) for a lower monthly payment than was recently possible.

Click here for numbers..

Using the same thinking they believe that they will have a higher monthly payment for the same house when rates go up. These beliefs are both predicated on watching the market over the short term and not understanding real estate cycles.

The fact that interest rates are at record lows and that they will renew at higher rates is rationalized away by believing that their wages are going up significantly over the next few years and that real estate always goes up. Most people learned nothing from the US housing crash and need to see things for themselves. Personal experience is a harsh teacher.

So the bubble will get blown a little bigger in the next few months until interest rates rise again. We all know what happens after that...

Village said...

Until rates rise, I see us at a floor. Likely to see market undulation at the current price level and then declining as rates rise. But then, I've been wrong so who knows. I'm using the follow assumptions.

1. Rates won't go lower. (Burned by that prediction)
2. Wages are not rising.
3. I see no major economic sector to take over the failing (auto/forestry) ones.

It will be interesting to see what happens after the Olympic hype is gone and people are presented with the bill.

StargazerXL said...

Despite the brisk sales of the last month reported here and elsewhere, I'm actually surprised that the median SFH price isn't higher. The increase over last month's median is only 4K! That doesn't sound like "Victoria's real estate market is officially hot again" to me, though perhaps that reflects more the actual numbers of sales.

As usual, however, we get the same RE cheerleading from Carla Wilson. Funny, I don't remember her describing the drop earlier this year as "dramatic" back then. It is almost too much to keep up with these distortions month after month. Maybe I am starting to feel "outrage fatigue."

Dave said...

Here's the headline:

"Victoria real estate market hot again; sales numbers near record levels"

http://www.vancouversun.com/Business/Victoria+real+estate+market+again+sales+numbers+near+record+levels/1752805/story.html

Dave said...

Village, I agree with your analysis that we are likely to see flat prices going forward. That expectation is consistent with the history of this market.

Interest rates may rise (note that BOC is holding short rates for at least one more year) but that effect might be offset by wage growth. Believe it or not, wages (average weekly) are still going up through this recession. Unemployment is definitely on the rise, but the drop in total employment has been relatively small as some sectors still continue growth through the recession.

Ryan said...

I don't think this is a floor, or a bottom, or anything other than the annual Spring Bounce. This time next year they'll be talking about how the market has picked up again, but prices will be 10%+ below what they are now.

August through January is when the bear growls.

omc said...

Funny how the local media is so positive when none else is.
reality

StargazerXL said...

Ugh, more TC annoyances: if you go to their News website, the link to the article about the latest VREB press release is accompanied by the following sentence:

"If you were waiting for the real estate market to cool further before buying, you may have waited too long."

Sometimes I think the TC is writing things to annoy us bears deliberately. Hmmm, could Carla Wilson be B'n'F???

Roger said...

You can check out the mean-spirited TC comments and reader posts on their article by clicking here..

Dumb Canuck said...

Stargazer, I think that HHV indicated that B'nF was a 'he'. So, unless Carla is actually Carlo, I wouldn't say so.

Then again, newsrooms can be funny places...

Dumb Canuck said...

She's back!

Update on the 1134 Dallas flip...
Flipper Bait

MLS®: 5804367 (used to be both 258338 and 250314):
~ 1 million 1.5 yrs ago (bought)
250-300K reno cost
95 K carrying cost (5%/yr)
45 K agent fee (assuming 1.5M sale)
20 K staging cost
1,410,000 Total Cost

~1,790,000 list in the summer
1,675,000 (first week of Oct).
1,595,000 (list shown Nov. )
Jan. 1/09 - taken off market, lock box on door
1,495,000 Feb. 6/09 re-listed (same agent)
1,395,000 Mar. 18/09 price drop
1,295,000 sometime before May 2/09
early June/09 - off market (with lock box on door)
1,395,000 June 30/09 - relisted with Sotheby's (price increase of 100K, but no lock box on door)

??? sales price
495K drop in list price, or 22.2%
??? % drop to sales price

2009 assessment: $1,173,000.

StargazerXL said...

Roger,

Thanks for the heads-up. Though I saw comments from a few familiar handles, that article seemed to bring out negative comments from a whole lot of people I'd never heard of before...

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

I just want to say thank you to HHV. Your perseverance is admirable and I could never do it. Same to Rodger, patriotz, JustJack, Metaldwarf and all the rest. Without you this blog wouldn't exist.

I have been reading this blog for what -- 3 years now? Each year I thought the top was in. And each time we hit a top my interest in the topic wains as I finally feel vindicated. Yet each year this market struggles back. You guys keep the blog alive and distill it so we can all gain better a better understanding.

But for the love of ____ (insert your choice of deity) would someone please get out a gun an shoot this dead horse so that those realists among us can purchase.

If there has ever been a time I wanted to see this place implode it is now. I'm sick of Carla and the TC, I'm sick of teaser rate, Bank of Canada BS, and I'm sick of morons who can't see 3 miles across the border at what is going on down there --- not to mention the rest of the world.

I feel like I live in Disneyland. The streets are clean and the buildings look great but when you look behind it's all facade. And when you leave the park your wallet is empty. I only hope everyone is having a good time.

Rant over.

StargazerXL said...

Talus, if this is Disneyland, I guess we're the Country Bear Jamboree!

Just Jack said...

This is the dead cat bounce, the right shoulder of the graph, the straw that breaks the camel's back.

All of the feelings that each one of us are having is what makes up the bounce. People are feeling that this is the last chance at ever owning real estate - EVER.

Even a prisoner on death row has the faint hope that they will be saved or paroled. The people who are buying today have been waiting for some relief in prices and mortgage payments. These are the last pool of buyers that are being drawn in.

Look back at the past markets. Just before the fall in prices there is a flurry of buying and a bounce in prices. This market is no different that any other real estate cycle and is a text book case.

This market has vamped and re-vamped and re-re-vamped again with extended amortization periods, ultra low interest rates, uncontroled lending practises and equity lending.

It has been truly a wild wild west show among real estate brokers and realtors. If anything good comes out of this market crash it might be legislation to protect the public from these sharks by holding them financially responsible for misleading the public and filing false documents. Heads at CMHC should roll for their policies that have lead to generations indebted for their entire working careers to a mortgage due to CMHC's predatory lending practises in order to increase their net worth.

And for the young couple who have bought a $600,000 plus home with nickel down financing, most will be declaring bankruptcy. What a crappy way to start out in life!

Dumb Canuck said...

Just Jack - completely agreed. This market is based on emotion, not fundamentals.

Heads will roll - unfortunately it will be in divorces, foreclosures, bankruptcies and the like.

Wonder if Carla understands the role that she and the rest of the MSM press release clones are playing in this.

Our family earns somewhere between 80 and 90 K per year. Great job, great employer. Paying 500 or 600K for a house with our income would be absolutely stupid for us. But others are doing it. Why? emotion controlling rather than a combination of emotion and logic.

Just Jack said...

Earlier I asked if anyone had any information about Bear Mountain.

Well, Monday Magazine dated July
2-8 on page 6 sure does.

S2

Bob leftcoaster said...

The lastest from the Globe and Mail's Financial Facelift section: responsible forenters.

Linked article

Interesting read for savvy homebuyers. Now I doubt that I'd follow the same lifestyle choices but it shows what a large mortgage can do to your financial situation if not implemented carefully.

Dumb Canuck said...

Here's the link to the Monday Magazine article Just Jack referred to:

Bear Mountain Bargain

mln said...

From that G&M article:

“Ownership of real estate has been as a good way to pace inflation. But where the cost of ownership is vastly higher than renting, renting wins,” Mr. Moran concludes .

It's such a simple concept, and I think part of the reason why I have no problem waiting for this housing price bubble to deflate or burst.

Metaldwarf said...

Ooo Disneyland! I always loved the Tiki Tiki Tiki Tiki Tiki Room. Yes now it's stuck in your head forever, your welcome.

Went to the bank on Friday to get a Line of Credit for emergency only. Asked the banker lady what I would be pre-approved for mortgage wise, my spouse and I have no debt of any kind, cash in the bank and healthy RRSP's. A combined income of 85K and were pre-approved, without providing proof of income jut verbal statements of our situation for $600,000 LOL!

Metaldwarf said...

Oh and for all the squirrel eaters out there. I am working on a much more important survival skill, I'm learning to brew my own beer this weekend. One of you better learn how to grow hops and barley. I'm doing my part you do yours.

;)

msr said...

Nice work Metal!

I've been brewing beer for the past year, it's a great hobby. I'm going to be building a fermentation chiller to brew lagers this summer.

Metaldwarf said...

msr

I have only tried ales, and to mixed success. Shoot me an email, we should get together and provide the frosty malt beverage for the next bear get together.

metaldwarf@hotmail.com

Metaldwarf said...

I know they are hard numbers to come by but can anyone (Roger looking at you) put together an approximate number of new buyers that have entered the market in the last year or two, specifically this latest rally. Furthermore, extrapolate how many first time buyers might be left, as well as the ratio that have used zero or 5 down and 35 year mortgages. When I went to the bank the banker gave me a weird look when I objected to 35 years as the default choice. When I mentioned a 20 year term and trying to quick pay it in 17, her jaw almost hit the floor.

I would really like to know how many "greater fools" are caught up in this mess and how that group of the population will effect the rest of us. With a few thousand homes changing hands these last months it seems like a lot, but how big a chunk of the population is it in reality and how much can we expect them to influence the rest of the market. There are a lot of owners in town that have no mortgage, and are "out of the game" how much of a hedge will these mortgage free people play?

Also with all the SFH activity in the 400K range, where are all the sellers going? They can't all be moving up as the higher end hasn't had the volume of sales, are they leaving town? speculators with more than one property? renting? dieing? The numbers need to balance and I haven't seen much commentary on where they are ending up.

Robert Reynolds - GBA said...

Look Ma I got my own blog now!

The blog will focus mostly on insurance and employee benefits. The first post is on Mortgage Insurance.

/self pimp

Disclosure: Yes I am selling something, no I don't expect anyone to buy it. As always feel free to call me out on any spin or BS.

AKA Metaldwarf

Roger said...

Metaldwarf,

Sorry but the kind of data needed to generate the stats you requested is not available. Even the real estate boards have sketchy data which comes from purchaser surveys and anecdotal reports.

BTW - Good luck with your new blog. Your first post was interesting.

Reid said...

My view on Victoria real estate over the coming months is not as negative as many other posters. Today there continues to be a lot of buyers who want to own real estate in this city. Even though medium and long term interest rates have risen recently, you can still get a five year mortgage at 4.25% which is still ridiculously low and today banks are still offering people massive credit. As per Metaldwarf:

“A combined income of 85K and were pre-approved, without providing proof of income jut verbal statements of our situation for $600,000”

This equates to over seven time’s income. This is the highest borrowing level I have seen, but I have a number of friends approved at six times income today (some even after the recent rise in interest rates).

In the meantime, the expectations of sellers and many realtors appears to be that prices are back on their upward trend. I saw a house listed in Strawberry Vail a few days back at $800k with an assessment of $488k. Although this example is extreme, most new houses I see are being listed at 10% to 25% above assessment, much higher than we were seeing back in January and February.

Until buyers back off, this market is not going to crash. My sense is that buyers will only back off once:
• Their credit is curtailed (as we have seen in the US)
• Short and long term interest rates rise enough to curtail borrowing capacity (they have to get over 5% at a minimum)
• Unemployment rises enough that people on mass actually start to worry about their own jobs

I do not see any of these things happening in the next 3-4 months, so I do not see a massive backing off of buyers. There has been no recession in Victoria and consequently the hardship lessons often associated with recession has not taken place.

Yes we will see the seasonal drop in buyer demand and yes we will see the number of FTB’s come off once the May pre-approvals are gone, but the market is not going to crash soon after that. Inventories at the low end are simply way too low and far too many people want to own entry level houses. As long as the credit is there, the "dreams" will be fulfilled.

My sense is that there will be a tug of war as sellers are going to continue to have their unrealistic expectations and buyers will be offering less becuase of their lower borrowing capacity as interest rates slowly rise. But I sense it will take about six months of low buyer demand before the average seller will get serious about lower price expectations.

As a result I expect prices at the lower end of the SFH market to remain flat or rise moderately for 1-2 more months, then
stay flat this fall. If we are to see real price decreases it will start in December or early next year unless we see some serious shock to the global economic system. But if real estate makes it to next spring without any hardship, then anything is possible.

I agree with most posters that a lot of these current low down payment buyers will find themselves in serious trouble in three to five years, but this is not going to material impact the shorter term market outlook.

Robert Reynolds - GBA said...

Reid said

As a result I expect prices at the lower end of the SFH market to remain flat or rise moderately for 1-2 more months, then
stay flat this fall. If we are to see real price decreases it will start in December or early next year unless we see some serious shock to the global economic system. But if real estate makes it to next spring without any hardship, then anything is possible.

I agree with most posters that a lot of these current low down payment buyers will find themselves in serious trouble in three to five years, but this is not going to material impact the shorter term market outlook.


I'm right with ya Reid. I want it to crash and burn but like many homes in Victoria the market seems to be made of asbestos, and its very fire retardant.

One bit of clarification on my mortgage preapproval, I have about $80,000 in down payment, so the mortgage amount was $520,000 and total purchase price possible was $600,000. So still at about 6x income, I just wanted to clarify.

Roger - I didn't think those numbers were available, but if i figured if they were you were the guy to ask.

FYI I made another post on my insurance blog. With HHV shifting the focus of this blog away from just housing to more general financial literacy I decided I wanted to contribute information to the community. I know a great deal about insurance, specifically business insurance, and I wanted a forum to talk about ideas and strategies. I debated with myself about being anonymous or identifying with my company. I decided to go with my company name as I felt I needed the association to be credible as a source. I am actively trying not to come off as selling something, all the opinions expressed are my own. Let me know if I fail and start sounding like a Realtor or industry cheerleader.

Metaldwarf

omc said...
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omc said...

I hope the lower end of the SFHs stays flat for the fall and winter, but I don't know if I see much chance of a drop this fall. I don't really expect the market to cool until the BoC rate is raised destroying overnight the illusion of affordability. I would expect this to be a bit on the dramatic side. I was hoping this would be fairly soon, but the stock market isn't looking so hot lately so I am wondering if bond yields will keep creeping.

Roger said...

I think we need to keep a little perspective about all the sales hype. The 1st quarter of 2009 was one of the worst in recent years due to the all the "doom and gloom" talk and fear of an impending depression. The second quarter has been driven by record low interest rates and an upturn in the stock market. Even with this "pent up" demand sales are still not as strong as 2007. Take a look at the graphs below and you will see how sales trend downward every year in the July to December period.

MLS Sales by month..

SFH sales by month..

Condo sales by month..

What will happen in the 3rd quarter? Credit card defaults are increasing, unemployment is still rising and the recession is far from over. The Dow is now at the lowest level in 10 weeks and the TSX is down 530 points in the last 10 days. There is now talk of the US needing a second stimulus. Mortgage rates have risen and the benchmark 5 year fixed has jumped from a discounted 3.7% to 4.4%. Many pre-approval letters for the low rates will be expiring soon. Time will tell how this will all effect real estate.

Reid said...

Roger, I agree with everything you say and it makes perfect sense. Problem is that my experience in this town is that many of the indicators you mention do not drive real estate buying at the entry level. The market appears to be driven almost soley by affordability and borrowing capacity (put the Nov 08 to Feb 09 period aside when people were really concerned).

If job losses really mount then people may get scared again, but today people are fairly optimistic and sense the recession (which still has not even come to Victoria) is over.

So as long as people feel OK about their job security and interest rates stay low (they are still very low despite recent increases), I do not see a massive reduction in entry level buyers. Yes we will see a seasonal reduction as you suggest, but nothing like we saw last year. Combine this with the extremely low inventory of entry level SFH's today, we would need a massive reduction in buyers for many months to get prices down.

But it is interesting that the current market is quite varied in terms of prices. My research would indicated the following general trends today:
- there still continues to be many dreamers trying to sell their houses at unrealistic prices, so real inventory of houses is a lot less than currently on mls
- Prices of entry level SFH's with suites is at or above peak price levels of last year
- Prices of lower priced SFH homes that are not suiteable are still demanding good prices at or slightly below peak levels of last year
- There are some decent price reductions (10-15%) for non suiteable houses in the $650k to $800k range, especially if the house requires some updating
- There are even better deals (20% plus) on houses over $1 million, especially if outdated.

So if you had an entry level home with a suite and wanted to upgrade to a nicer home in a better area, this may be an excellent time to do it. Take advantage of the entry level buyer, upgrade to a great home for your family and finance the difference very inexpensively.

For this market to correct the entry level buyers have to go away as this chokes move up buyers and in turn the entire market. I do not see this happening until long and short term interest rates rise more. Five year Cdn bonds are down 40 basis points over their June peaks and if stock markets continue to tumble these are likely to fall further.

My sense is we may have to wait for the mortgage resets to drive this market down hard and that may still be a few years away.

omc said...

I certainly don't think things are rosy, and I do agree with your outlook on the economy Roger. What I am realising is that many people can't do a 2 part problem, so they can't see the connection betwen interest rates and prices. Many people do believe that this is a great buying opportunity and will believe the realtors until the market actually collapses. When the short term rates rise substantially? I do think we are in for a collapse in the future now, not just a correction. In Feb my wife and I were getting ready, and if our price range would have dropped another 5-10% we probably would have entered believing that if it continued to drop it wouldn't go too much farther. Now we are bears.

patriotz said...

Personal experience is a harsh teacher.
...

"Experience keeps a dear school, but fools will learn in no other"

- Ben Franklin

The School of Experience is out for the summer but will be in session again in the fall, around the time Gordo starts swinging the axe.

Roger said...

Reid,

I don't think we will have to wait as long as you think. It's all about emotion now... Interest rates were low after Xmas but the 1st quarter sales were dismal. This was because financial fear was running in high gear and consumer confidence was low. The fools now believe that things are behind us and today is a great time to buy.

Wait till Gordo starts announcing where he will get the $1.9 billion in cuts in September. And if the stock market crashes again "green shoots" BS won't cut it to soothe the markets.

I think this reversal in the RE market is just a dead cat bounce and in September the seasonal slowdown and other economic factors will result in falling prices once again. I guess we will just have to see what happens in a few months.

On a side note it is a bit disappointing to see so many bears throwing in the towel. A number of the previous regulars no longer bother to post. It will be hard to keep this blog rolling with only a few folks making comments.

Reid said...

Roger I guess it will all come down whether the economic shi* hits the fan again and if it actually impacts Victoria next time because unless it does I still see plenty of Victoria buyers ignoring all logic and buying to the maximum of their debt capacity with all of this supported by our Cdn banks.

I know a number of people in government and none of them are concerned over possible job losses. They have been reassured job losses will be minimal (less than 5%) and they will simply not replace posts where people leave/retire over the coming years.

I made the post last night as the entire dicussion on the real estate market and where it may be headed seems to have died. Maybe many of the regular posters have caved.

I did have two friends that bought houses last month and in both cases I could not argue too hard with their purchases given their personal circumstances. The houses they bought (both mid priced) were in highly desireable locations and priced well below what they would have paid last year and below assessed value. It is very likely their houses will be worth less in 3-5 years, but they argue that they want a home now for their familes and not wait until their kids are half grown up.

I guess we will have to see what unfolds this fall.

Just Janice said...

We live in interesting times. It will not be long now, we will not have to wait for mortgage resets to start the cascade of falling property values.

The market is not rational, and it will not take a rational event (higher interest rates and resets) to trigger the slide (nothing suddenly changed last June, but it did change in September). Quite simply, it will take the perception that now is not a good time to buy regardless of everything else that happens to be going on or not going on.

When somebody says "I just bought a house.", ask them how they saved the 25% down, then ask them if they bought it based on only 1 of their incomes, or based on 2 incomes, ask them if they borrowed more than 3 times their household income, ask them if they plan on staying there 10 years, ask them if they have a 20 or 25 year amortization. Ask them what would happen to them if their interest rate were to rise to 6%?

And when they say 5% down, both incomes, 35 year amortization, maxed out, would like move up in 5 years. Ask them how they sleep at night, as you'd love to be a 'buyer' but haven't figured out a way to do it without being completely unable to sleep knowing that the downside risks to the market outweigh the upside risks, that one of you could be unable to work, that interest rates could climb to unmanageable levels, that renting is far cheaper than buying, that you'd rather not be imprisoned by your home and that you'd like to have your home paid for before you retire, and while you're at it have enough money left at the end of the payday to save for that eventual reality?

BTW - I've started a blog, more general economics stuff, lots on housing but there will be other stuff that catches my interest from time to time....

http://confessionsofaneconomist.blogspot.com/

Olives said...

Great comments Roger and JustJanice. I believe a lot more turmoil to come shortly, the confidence will again decline,and will this time have a much greater impact on Victoria.

As for Government layoffs, hasn't this begun? I thought I heard on CBC radio this morning that 300 were being laid off this week.

Mango said...
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Robert Reynolds - GBA said...

A two day TSX meltdown is becoming the new normal. the markets have gotten shell shocked, the wild gyrations almost don't matter anymore. The people who couldn't stomach the volatility have all jumped ship, and the rest that are left are comfortable riding the ups and downs.

Interesting MLS listing, 264274

This appears to be the cheapest SFH in Victoria, at $328,800

I know that stretch of Denman fairly well as I have family just down the block, pretty much every house there is a rental and/or drug house. This one probably has an interesting past.

768 sqft, 2bed 1 bath and crackies showing up at your door at 2am looking for a fix can all be yours for only $1826.45 per month for the next 35 years.

Robert Reynolds - GBA said...

Doh! It was a duplex not SFH.

The offer also includes listening to your crackhead neighbors at 4 in the morning as well, that just sweetens the deal really.

Laughable!

Roger said...

B2B (alias Mango),

I wondered what happened to you. As I recall you used to live in the UK and you came back to Canada. I hope your return to Europe is going well and that you are enjoying the new job.

Hopefully some of the other missing regulars will drop by with their comments. I miss VG (or Vic) in particular. He always had some controversial comments that kept things rolling.

Just Jack said...

I'm still here just too lazy to set it up to log in under my user name so I use Just Jack's. He's too busy with work anyway to notice. :-)

I haven't posted very much because what is there to say that hasn't all been said before. Recent Victoria real estate is like watching paint dry.

I will say though that this is all going to end very badly and I'm thankful that I didn't buy in this recent dead cat bounce.

S2

S2

s said...

B2B (alias Mango),

I wondered what happened to you. As I recall you used to live in the UK and you came back to Canada. I hope your return to Europe is going well and that you are enjoying the new job.

Hopefully some of the other missing regulars will drop by with their comments. I miss VG (or Vic) in particular. He always had some controversial comments that kept things rolling.


whoops some issues with earlier comment on here, I think I deleted it by accident. Thanks for the kind words Roger and I look forward to contributing more on here to help keep things lively.

B2B

Vic said...

roger,

thanks for the acknowlegement,thought my posts weren't the new direction the blog wanted to go. Also been busy with my new business venture but still reading occasionally.

I will say,regardless of low interest rates, the market is a complete joke as Obama needs another trillion and prices are projected to go down here by the LePage report but the bus has left the station again loaded with more sheep.

I have personally witnessed some outragous antics by agents that have shown me beyond a shadow of a doubt that many people in this town are completely retarded when the agents come knocking.

It's to the point where relationships are jeopardized when I am asked why I am not buying when "everyone else is", and I politely answer that it's insane and the biggest bubble in North America. (And we are talking intelligent people,so I thought) but the arrogance of supremity and is hard to take. Thus one needs to focus on more profitable ventures then keep banging my head against the wall.

Robert Reynolds - GBA said...

The recession might be finally coming to Victoria, one of my larger clients recently announced that they are to be laying off about 70 workers in Victoria and Vancouver, and shutting down their Victoria office. If we start seeing public sector job losses as well as continued losses in the private sector the market might just slow a little.

More and more every day I believe that Victoria's RE market is based entirely on emotion and psychology. I honestly believe that we could be in the middle of WW3 and Victorians would still be snapping up bungalows and condo's as long as the battle was not on our island.

Additionally, I am starting to believe now that Victoria is actually "insulated", I am continually surprised that we really haven't felt the recession much at all up to this point. The thing about insulation though is that its only a matter of time before it breaks down.

Govt. job losses are my best bet for a catalyst to bring the recession home to roost for Victoria.

I have made a few more posts on my insurance blog about Term insurance rates and Critical Illness Insurance. Please post in my comments I would love to know what people think as this is my first try at blogging.

Vic said...

One more comment,I see the new home construction demand is up again, too bad it's all crap. Lets buy a condo dear,we will only need another $80,000 to plug the leaks in a few years.


Repairs to leave owners in a cloud
Building forced to repoint brick as city won't allow stucco



Owners of a downtown Victoria leaky condo warn the city is about to kick up a month-long storm of caustic concrete dust by forcing them to repair old brickwork rather than resurface it with stucco.

It also will mean that after having spent $5.5 million in repairs they'll be left with an inferior fix and a building with no warranty, says Denby Place strata council president John Mallett.


The owners, many of whom bought their units for about $100,000, will never recoup the cost of the existing repairs. They can't afford a more expensive cladding which would add another $20,000 or $30,000 to loans they've already taken out, the Mallets said

"Even if people were willing to take on a further $30,000 per unit to reclad it, nobody has the ability to get that kind of financing," said Lisa Mallett.

"We can afford the cost of the stucco within our existing budget. We have a contingency. If we do anything else that's more expensive it's going to cost $1.5 million on top of our $6 million we've already borrowed."



http://www.timescolonist.com/business/Victoria+leaky+condo+repairs+leave+owners+cloud/1773894/story.html

StargazerXL said...

Metaldwarf, er, Robert,

I am still not so sure Victoria itself is insulated. It seems to me that RE is similarly booming in most Canadian metro centers over the last few months, and prices in those locales are also approaching or even exceeding their previous peaks.

I think that most insulation in RE these days is that found between the ears of all these FTBs!

Roger said...

Vic,

Glad to see you are still around. I think this blog is still covering real estate news, stats, crazy prices and real estate spin. A few of us have just added some financial planning topics to the mix.

RR-GBA said:

Govt. job losses are my best bet for a catalyst to bring the recession home to roost for Victoria.

Check out this article...

B.C. deficit to grow: finance minister..

Hansen said he won't specify how much bigger the deficit would be until the new budget is tabled Sept. 1, and he also won't speculate about possible tax rate increases. Tax and resource revenues and expenses such as rising social assistance cases remain volatile, he said.

The government continues to look at administrative savings such as cutting back travel and advertising. Hansen said he and finance staff are going through discretionary grants, and things like provincial sponsorship for international conferences in Vancouver are getting the axe.

The B.C. Government Employees' Union says its members may also be getting the axe. It said this week that government officials are preparing plans to cut more than 200 full-time jobs in the forests ministry, and another 30 to 40 jobs in the environment ministry.


Those forestry job cuts are just the first to leak out. I watched CHEK news @5 and the legislature reporter said more program and job cuts will be coming out this summer. Apparently the plans are ready to go and they need to start cutting before the Sept. 1 budget just to meet the Feb. budget targets.

Insulation getting thin... Can you feel the heat....

omc said...

I was talking to a friend who was dealing with the BCGEU. The union is expecting substantial cuts down the road.

I wonder how big the cuts will be as I think the olympics are going to be a great flop. Not only are they in a recession, but are you taking your family anywhere near the place during flu season. Think swine flu and Mexico.

Vic said...

230 job cuts to the Forestry ministry and 30-40 more in Enviromental, and I bet this is just the beginning. Makes you wanna race out and go into hock for hundreds of thousands doesn't it.

Vic said...

oops, I see roger already posted that, back to my hole.

Olives said...

For anyone here that doesn't automatically read it - there is a very interesting (distressing) article in the Globe & Mail today on the commercial real estate problems in the U.S.

VicREBear said...

Roger said,

"On a side note it is a bit disappointing to see so many bears throwing in the towel. A number of the previous regulars no longer bother to post. It will be hard to keep this blog rolling with only a few folks making comments."

I think most of the regulars are still visiting and reading the blog, even if we're not commenting as often, Roger. I continue to appreciate everyone's insights and experiences, and I stop by here daily.

The other reason I haven't posted lately is that I've been rather embarrassed to do so, as I did actually buy a house back in March and just took possession last week. So much for my bear credentials! However, let me give a quick overview of my rationale. First, my fiancee and I are in our fifties, and were getting rather tired of our previous noisy
urban location. We had been keeping an eye on a very lovely, fully renovated ocean view house in Metchosin that had been on the market for over a year, as the price dropped steadily through the winter "correction" until it hit approximately the municipal
appraised value. We knew that the house was extremely well constructed, having been built by a well-known local builder back in 1980 as his own home that he had lived in until 2007 (at which point the renos were done).

To make a long, dull story short, we were able to buy it for a very good price, before this stupid spring rally had begun and when realtors and sellers were still pretty nervous about the market. The house requires no upgrading or renovation at all, and we were able to put 85 percent down and are carrying a very small mortgage which will be paid off within five years on an accelerated schedule. I ride my bicycle to work from Metchosin to Royal Oak, and our quality of life has improved by orders of magnitude. My fiancee has dreamed about living in this very area of Metchosin for 25 years, so she is as happy as a lark (and good equivalent rentals out this way are impossible to find).

Nonetheless, I am still fully expecting the value of the place to drop below what we paid over the next couple of years. This latest mini-bubble is just as artificial as the last one, and simply cannot be sustained in the long term. However, we bought the house so as to live our lives and not with so-called investment in mind, and we are enjoying the place very much.

So, I'm keeping my VicREBear handle, hoping for the best for everyone here, and will keep visiting the site regularly and will comment if I have anything relevant to contribute. Thanks again to everyone, as your support and ideas have saved me a lot of grief!

Bitterbear said...

Psychology is playing a huge role in the RE market. I suspect there is nothing more insulating than mass delusion.

Delusion is driven by the faulty assumption that perception is reality and it is an easy matter to manipulate perception through MSM and other marketing tools. If perception is manipulated in the desired direction and people accept perception as reality, then belief has been established and critical thought suspended.

I think transgenerational social values have instilled in the general population the belief that home ownership is required. Without it, one is variably considered to be poor, unreliable, lazy, less intelligent, missing out, afraid etc. Once one takes the leap into ownership one has "arrived", one is "successful", one has performed a rite of passage and is now considered a grown up and part of an upper financial strata.

These values are perpetuated by industries who stand to gain from it. They use slick and sometimes not so slick marketing strategies to drive the "great fools" to market. These campaigns take advantage of some basic human tendencies such as following the crowd (Sales are up!), dispersion of responsibility (Everyone will be in the same boat when rates go up), respect for authority (If economists from RBC say it, it must be true), myth of obligation (I've been your faithful agent for 2 years), cognitive dissonance (If I paid so much for this place, it must be a nice house). When all else fails, fear is a good way to maintain the delusion (buy now or be priced out forever). All very effective strategies for manipulating belief.

Action follows naturally from belief, and there is always a friendly real estate agent at the ready to sell you your membership to the exclusive home ownership club.

Propaganda is powerful particularly when no one recognizes it for what it is. When we let it, it enslaves and ruins us.

Roger said...

VicREBEAR,

Congratulations on the purchase of your new home. You studied the market, waited for the price to reach an acceptable price point for you and bought for the long term without much leverage. Enjoy your new place and hope we hear from you again if some topic is of interest.

Bitterbear,

Great comments. That was an interesting perspective on what has been driving so many people to take on huge debts when renting is more financially prudent in most cases. I am working on a detailed buy now vs. wait calculator and hope to have some results posted soon.

Roger said...

Speaking of the MSM and spin headlines here is one from today's TC.

Island housing starts soar 46 per cent..

But year-over-year figures lag as developers hold back on plans.

The author did write a fairly balanced article but I bet the editor chose the headline which is all many people read. Here are some excerpts and my comments.

"Housing starts are looking very good for Victoria," Casey Edge, executive officer at the Victoria branch of the Canadian Home Builders' Association, said yesterday.

Of the capital region's total June starts of 79, Edge noted 50 were single-family homes and 25 were townhomes. "That's excellent," he said, adding the numbers are similar to figures seen when the market was stronger a couple of years ago.
.

Wishful thinking by CHBA. Remember their full page pumper ads in the winter. Here are the actual numbers for Vancouver Island and Victoria. Sure they are up from May but look at year-to-date and YOY.

VI Housing Starts - Click Here..

The first six months of this year have seen 862 homes started, a 61 per cent decrease from the same months in 2008..

"The Canadian housing market posted its first back-to-back monthly gain since February last year," said Millan Mulraine, economics strategist at TD Securities.

"However, despite the strong increase, starts are down 33.9 per cent compared to their June 2008 levels, and are still 48.5 per cent below the high-water mark set in September 2007."
.

Dumb Canuck said...

I have a question.

Our extended family has around 8 acres in the outlying area of Victoria. 6 acres ALR, 2 acres in a different parcel not. Neighbours looking to get land out of ALR, city looking to put sewers down street.

Owner is getting older, one income, only a few years to retirement, looking for help with repairs (roof needed, renos, etc) and the relatively small mortgage / HELOC. Family is willing to help, but what are the implications of:
(i) a shared mortgage, between owner and son, or owner, son and daughter.
(ii) direct investment to reduce the mortgage;
(iii) increasing the HELOC, to cover the repairs
(iv) using a HELOC for one of the children to leverage investment in a new property or to build a house on the second property.

Thanks for any ideas.

greg said...

DC

(i) sounds like joint tenancy. If you're comfortable mortgaging your own share in the property, sounds okay to me at low rates of today (not variables)...
(ii)sounds like a gift from kids to parent. Do you have the money to spare?
(iii)mortgage is always a safer option than a HELOC, as the payments are spread out over time, and the rate can't be adjusted at the banks whim.
(iv) if the kids can't afford their own mortgage, it seems kind of risky to put the parents title on the line like that, but what do I know.

By the way, this is not investment advice, I know nothing about investments, it's just a personal opinion since DC asked.

Muriel said...

Can anyone recommend a good mortgage broker - i.e. one who would not try to sell us a dangerous mortgage and tell us we must buy now or be priced out forever?

We have no plans to buy until the fall, at the very earliest, but we have been gradually putting the various elements of home-buying plan into place (i.e. get decent jobs,pay down debts, save downpayment, etc). I have put our details into the various online calculators a million times, but at this point we'd like to get a firmer understanding of what kind of terms we would be offered should we choose to buy.

Suggestions appreciated.

PainInThe said...

Bad time to get into the market. VERY bad time.

Goldman-Sachs Front-running Scandal

Robert Reynolds - GBA said...

Walked through Fairfield with the lady today, lots of for sale and sold signs. Everything over 600k, almost twice what I can afford, unless you talk to my banker. As I mentioned I asked my banker what I would be approved for, the answer was 520k plus 80k in Down payment, 600k total purchase price. That is, if I go with a 35 year variable rate. Her calculation was indeed based on monthly payment rather than total price, and this was with TD the supposed most conservative of the big banks.

I have been thinking about the RE market and how it doesn't make sense. If I am better off than most, no debt, slightly above average income, money in the bank, and I can afford to buy, how is everyone else buying there crazy expensive homes. Well cheap money and 35 year mortgages have a lot to do with it, but I think it might be something else.

Yes people are loading up on debt but they are buying and paying and not going broke, at least not yet. It really is "what the market will bare" that also explains one of the big differences between here and the USA. People in the USA have a lot more money than we do. The last few trips I have made there have shown me that

They earn more than we do
they pay less taxes than we do
their daily staples are way cheaper than here

they have far more wealth than we do

so why are their houses dropping in price when they can afford to pay more. While our prices keep at the absolute bleeding edge of what we can pay?

I can only explain it with "prices go up because they have always been going up" logic. I can make the counter arguement for the states. "Prices are falling because they have been falling, therefore it's cheaper for me if I wait till they fall some more" deflationary feedback loop thinking.

Both us and US are caught in feedback loops but they are opposite each other. Feedback loops are hard to break, over a trillion dollars hasent made a dent in US RE prices. I think we will need just as drastic measures to snap us out of it. Time and again we have predicted the end of this bubble, affordability, recession, stock market crashes, energy prices, demographics, all wrong so far. Our reasons make sense lord knows we think about and debate them enough, but as many of us have suspected logic plays no part here. Something big has to happen to break this cycle and I am sure none of us see it coming whatever it is. Unroll then I will keep renting, saving and looking forward to being freaking crazy cash rich and liquid compared to mortgage poor and HELOCed, while living out my retirement in some cheap all inclusive banana republic resort...

Not bitter... Okay maybe a little

Bob leftcoaster said...

If I am better off than most, no debt, slightly above average income, money in the bank, and I can afford to buy, how is everyone else buying there crazy expensive homes. Well cheap money and 35 year mortgages have a lot to do with it, but I think it might be something else.

Yes people are loading up on debt but they are buying and paying and not going broke, at least not yet.


I know how some of these FTBs are able to secure such expensive properties. Like some of my friends, I receive parental pressure in the form of, "You should start looking so that we can help you with your down payment before houses get more expensive."

In my situation, they think I'm foolish for refusing their money and also for thinking that prices will not go up.

Vic said...

A few very interesting stories. The boomer demographic shift is in it's infancy but could become a huge factor sooner than we think but via other countries like Japan.

http://tinyurl.com/nvj6zg

Roger said...

Muriel,

You asked about mortgage brokers. The role of a mortgage broker should be to scout the mortgage market and get the best mortgage that fits your personal situation. Many people are only focused on the maximum mortgage amount, interest rate and the monthly payment which is not a good idea. One also needs to consider fixed vs. variable term, additional payment options, mortgage switch terms, termination penalties, renewal flexibility, reputation of lender and several other factors. The broker can take all your financial info and provide you with your mortgage options.

However, with rare exception, the mortgage broker is not a financial planner and it is a big mistake to consider them for this role. It is the buyer's responsibility to determine what level of debt they wish to take on and what type of payments they feel comfortable with now and in the future. We are at record low rates now and in five years the mortgage has a very high probability of renewing at a much higher rate (6-6.5% is historical average).

The question of how the mortgage broker is paid for his services is also important. Only a few charge a fee to the client. The fee is normally paid by the lending institution when the loan is issued. There are many good brokers out there but you should realize that just like real estate agents they do not get paid unless you buy a property and use their services.

I do not have a broker that I wish to recommend. However, this topic has been discussed extensively on the Kids in Victoria forum. Some of the mortgage brokers that post there, like Al Kennedy, are very informative. I did a search on their site for you and here is the link to start you on your search. Lots of good info in the various posts.

KIV - Mortgage Brokers -click here..

Vic said...

Trouble in paradise ? Median home price the same as here but forclosures ramping up bigtime. How long can the insanity here last ?



MAUI WIPEOUT: Residents swept in debt

Foreclosures, bankruptcies pummel county in economic crisis



"The buildup really has me concerned," Andersen said. "It's like a dam that has water coming up higher and higher behind it."


http://tinyurl.com/lmcf47

Muriel said...

Thanks Roger,
Not having kids yet, I don't think about the KIV site unless someone directs me there, and it's very nice of you to have made it easier for me by linking to the search results.
As we are more just trying to get some concrete info about the terms and amount of mortgage we could be offered, it may be better for us to ask our credit union to pre-approve us. It's just that, once we are ready to take out an actual mortgage, we plan to go through a mortgage broker, so I feel a bit guilty about asking our credit union for a pre-approval that we very likely will not use.

Robert Reynolds - GBA said...

Muriel I can recommend
Dick Carey of Td Canada trust

I haven't done buisiness with him personally but we have had lunch and he is a good guy. He has like 30 years experience and can go to the market I'd TD doesn't gave what you want.

Also I can reccommend Leo Lee of Td as well he is a client of mine and a real standup guy. I have even chatted with him about our views here of RE and he agrees with us.

Roger said...

Muriel,

A couple of other things to consider if you are inquiring about a mortgage at your credit union, bank or mortgage broker

- They can sit down with you and ask you about your income, debts (loans & credit cards) and assets. From this they can give you a verbal estimate of the the mortgage amount and give you some indication of monthly payments. There is no commitment by either party and no hit to your FICO score (credit rating).

- If you bring in all your paperwork (pay stubs, CRA notice of assessment for the last few years) they can do a detailed application and send it to their underwriter for approval. Then they will issue you a pre-approval letter with the maximum loan amount, down payment requirement and an interest rate hold for a certain period of time. The rate hold for resale homes typically varies from 60-120 days depending on the institution. Get the longest rate guarantee that you can and ask what they will give you before filling in the application.

- If you are planning to buy in the fall you should get the pre-approval letter now from your desired lender. Once the economy shows signs of improving rates will go up quickly. We have already had a .6% jump in the last month.

- You should know that your credit will be checked when you are pre-approved and given a rate guarantee. This will result in a small drop in your FICO score ( so it is not a great idea to apply with a lender that you are not planning on using.

- When you make an offer you should still put in "subject to financing" even though you have a pre-approval letter. Some agents will tell you not to do this because you will have a cleaner offer. But you should know that you are pre-qualified but the property is not. The bank will require some form of appraisal and could deny your loan. This clause is your protection. Also they will ask you if anything has happened to your financial status (job loss, loans, pay level etc.) since you made the application. Job loss, maternity leave, credit card problems could all derail the loan.

You may know all this stuff but some of the other readers might find this useful.

Muriel said...

Thanks again, Roger.
I'm familiar with most, but not all those tips, and your explanation is very straightforward. Getting the longest possible hold on a mortgage rate and getting pre-approved now, before the rates go up, are not things I had put much emphasis on, but now I will. Just in case.

MelanieSolijon said...

We could only hope for a better tomorrow both for the homeowners and those in the real estate business. Thanks for sharing your numbers. I know of a real estate coach who could also help many in the real estate industry make money despite the current crisis.

Just Jack said...

Roger Said

"- When you make an offer you should still put in "subject to financing" even though you have a pre-approval letter. Some agents will tell you not to do this because you will have a cleaner offer. But you should know that you are pre-qualified but the property is not. The bank will require some form of appraisal and could deny your loan. This clause is your protection. Also they will ask you if anything has happened to your financial status (job loss, loans, pay level etc.) since you made the application. Job loss, maternity leave, credit card problems could all derail the loan."



Excellent point and here is how the real estate agents get around the "subject to financing" clause.

The agents will have a short time period of say 5 days to remove your subject. Depending on when you get a meeting with your banker, and the time it takes to complete credit checks and an appraisal, you may have to remove that subject before you get final approval of your financing. This in affect negates the "protection" that you thought you were getting with the subject to financing clause.

Check with your lender and ask how long THEY need for their due diligence. Real Estate agents in Victoria and Vancouver do the "hard sell" by rushing applicants and keeping them "hot".

Beware of the back up offer. It always amazes me that a home that has been on the market for two months with no offers - gets a back up offer by a third party after you have made your offer. And you know what, no matter how many times I ask, the agent will never show me that back up offer.

Just Janice said...

This blog has gone from some pretty sane discussions on why real estate is not an investment in Victoria, to actually supplying the ammo for poor fools to shoot themselves in the foot. After all, you only need a pre-approval if you're going to buy, and buying now might just be the biggest financial mistake of your life (right up there with getting a divorce, or knocking somebody up)...

The economy is not going to all of a sudden return to life, and wishing it was 2007 does not make it so. There are significant barriers to a meaningful economic recovery right now. Specifically, the underlying problems of over-leverage have not been resolved, and many resource misallocations have yet to be resolved. What happend is Sept/Oct 2008 is not the kind of situation that is fixed in less than a year, it's not even the sort of thing that's fixed in 2 years. Sept/Oct 2008 was a category 4/5 economic event, and has suffered much of the same mismanagement that New Orleans did after Katrina. As such there is no need to rush out and get a pre-approval, as I do not see a sudden return to an inflationary environment anytime soon.

See Japan 1990's to better understand our situation and then ask yourself how bad Japan would have been if the rest of the world hadn't been importing all the stuff it produced at that time?

Just Janice said...

I guess it's taken on a "harm reduction" approach to home buyers...

Roger said...

Just Janice said:

I guess it's taken on a "harm reduction" approach to home buyers...

Some followers of this blog believe that now is not the right time to buy for any reason. Others have decided that they are really looking at the long term (10 years +), do not want a renter lifestyle and will buy in the near future even if they could purchase the same property cheaper in the future.

I have been a poster on this blog almost since inception. Many, including myself, have predicted that this bubble would burst long before now. What we did not factor in was how the federal government and CMHC would sell the public down the river in order to pump up the economy. Ridiculously low down payments, long amortizations and low interest rates are a recipe for disaster. I am bearish on Victoria real estate but recognize that there is little point in jumping up and down singing the same tune every month.

I think it is a good idea to present a range of viewpoints and information so that readers can make an informed decision. A balanced blog will attract more readers and hopefully prevent many from making a bad financial decision. If someone decides to buy at least they will have the knowledge to protect themselves during the purchase transaction and know the consequences down the road.

Just Jack said...

The decline in prices from April 2008 demonstrated a price ceiling for real estate in Victoria. The subsequent decrease in interest rates lead to an increase in prices to near the previous record high.

TO ME, this is the turning point. We now know where the top in the market place is. We reached the zenith in values in April/May of 2008 and even the hundreds of billions of tax dollars and give away interest rates could not make this pig fly any higher. Now it becomes a waiting game as those who bought 2 or 3 years ago are faced with selling at a loss or forever chained to a mountain of debt.

The good news is that the over extended home buyer can still get out of the market with some loss but they well be selling by choice.

Wait a year, and those buyers will have no choice in selling. The lender will be calling the shots.

Vic said...

In the past two recessions I experienced in the early 80's and 90's, did the media keep yelling at people to BUY BUY BUY ? No,there was some real estate clowns that predicted a "balanced" market at the top but eventually sanity prevailed and things corrected as they should.

Were the bankers lending out cash to damn near anyone with a pulse at 19% ? No, you had to qualify under strict guidlines. We are in a market of desperation where past governments said let the chips fall where they may,this version says "we can't let this happen no matter what". Therefore the laws of gravity still have not taken place,but it will. Be patient,we Canadians,especially BC'ers are a slow bunch.

Vic said...

I noticed a house in Oak Bay sell for $100,000 under assessment only because it was the original 1987 condition and needed an updating but nothing drastic looking. If houses in Oak Bay are selling that much under just for a face lift then what does that tell you ? Just jacks comment of a turning point rings very true in my opinion.

Just Jack said...

Over yonder in View Royal, there is a new condominium complex that is advertising a $20,000 rebate to buyers on closing.

What a sweet heart of a deal. You buy a condominium and they give you $20,000 on completion.

Or is it?


I took a look at this building the other week and found top floor condos listed at $409,900. Since your getting a rebate of 20k, then your only paying $389,900. Sounds good - NOPE - sorry buddy your over paying for the suite by 10K. Comparable suites are selling at $380,000.

The marketing attracted your greed for $20K and they nicked you another 10K.

There is no free lunch in the world of kick backs.

Roger said...

Following up on Just Jacks comments...

Here is a graph of Greater Victoria house prices as a percentage of the April 2008 peak.

SFH Graph - click here..

And what about all those condos for sale..

Condo Graph - click here..


You can clearly see that even with record low interest rates, cashback mortgages, CMHC cheerleading and MSM/realtor hype we are still down 5% from the peak for houses and 10% for condos.

And it is now July. After reading VREB's weekly stats this morning one can see that sales are starting to slow down. Once those 3.7% pre-approval letters expire and the sales slowdown gets broadcast it's all downhill.

Roger said...

Teaser rates, teaser rates..

Zero percent for 2 years and only 5% down with 35 year amortization on a luxury condo. "Move in today and SAVE - The life you want is closer than you think"

Available here - limited time only..

omc said...

I think the turning point will be more related to "affordability" as in what people can float as a monthly payment with the lowest interest rate they can get. I wish we were there, but we ain't.

Vic,

Oak Bay is still way over heated with few signs of coming back to reality. The house you are talking about is in henderson, which even last year was selling low compared to assesment. I think that there must have been some mistakes when the assesment was made for that area. That neighbourhood has a very different feel compared to the rest of Oak Bay with lots of rentals and suites. Lets face it, we are also still talking about $900k. Not exactly affordable.

omc said...

Look at the birds eye view, that house backs on to the parking lot of comosun. Can you say boom cars and other silly stuff? They got max $s for that place.

Roger said...

OMC said,

Oak Bay is still way over heated with few signs of coming back to reality.

I have to disagree with you on this one. Prices are still too high for what you get but the market is not overheated and the smart money sold out last year. Check out these price graphs to see what I mean.

Oak Bay Average & Median..

Oak Bay - Rolling Averages..

Prices have been dropping for some time. The rolling averages show the trend much more than monthly stats. Rich folks did not get that way by making the same mistakes as first time buyers.

omc said...

I don't disagree with you much Roger, but I will on this one. Prices are down, but up quite a bit compared to the spring. Oak Bay is one of the areas we have been watching closely and also have friends who are doing a lateral move right now. Multiple offers are the norm, and many houses have accepted offers on the first day.

Roger said...

OMC,

I don't think we disagree very much on Oak Bay. I follow the Oak Bay sales activity as well (sales, list price, selling price etc.) It has had a flurry of activity in the last few months just like everywhere else. Sure prices rose from the bottom seen earlier in the year but not to last year's price levels. But I don't look at things over a couple of months. I like to look at the trend over a period of time.

This fall we will look back at this spring as just low interest rate madness. It is happening all across Canada even in Toronto where unemployment is at 9.6%. It will fizzle out and then the market will resume the downward trend.

Vic said...

omc,

yes I was amazed at that price level they are going fast as well as the decors of that part of Oak Bay, all built in the 60-80's with either boring type of layouts or dark/cold homes lacking real character. Have been in a few over the years and not what I really consider classic Oak Bay styles of homes and clearly overpriced.

That Remax report out today has the MSM having orgasms about multiple bids as the standard. Looks like a second round of "pent-up" demand buyers being led down the garden path. I would sure like to know what the definition of "pent-up demand" really is. It seems this has been 7 years and the pool of these people never runs dry,mindboggling to say the least.

omc said...

The pent up demand is just a group mentality to me. People are really believing that it is the time to buy. I don't see the realtors mentioning a sellers market though.

We don't have indexes for the houses sold here so I go by similar houses sold. I also have friends in the market so I get a fair bit of info there. The lunacy of 2007 is back here in Oak Bay. Any thing decent sells within 1-2 days aften without inspection. If we say that lot value is now $500k here, the value of the structures is absolutely nutty.

A house on Byng street assesed at $740k sold last year at $800k, almost exact house on Victoria street (same assesment) sold at $620 in Feb. Now we are almost at $800k again for similar.

Vic said...

And now we have the Bear Mountain pump now that Barrie has brought in the Dubai dollars. I find this deal interesting as I was under the assumption he wanted out with a $400 million price tag, but now the Dubai boys are actually buying into the deal so it can be completed. Was BM actually in a very tough financial spot in order to not just get a clear takeout ? It almost seems that way. From what I know these Dubai's are very cagy when it comes to deal making.

Vic said...

We have another Washington Mutual collapse in the making.



CIT Group Says Its Failure Risks Demise of Customers

July 13 (Bloomberg) -- CIT Group Inc., the century-old lender that hasn’t been able to persuade the government to back its debt sales, says its demise would put 760 manufacturing clients at risk of failure and “precipitate a crisis” for as many as 300,000 retailers.

A collapse would ripple across the “small and medium-sized businesses who rely on CIT to operate -- to pay their vendors, ship goods to their customers and make their payroll,” the New York-based lender said in internal documents obtained by Bloomberg.

A CIT default would create liquidity issues for the corporate sector,” Ed Grebeck, chief executive officer of debt consulting firm Tempus Advisors in Stamford, Connecticut. “If CIT isn’t doing trade finance and lending, its customers will look to other banks for replacement and from what I’ve seen, they aren’t willing to step up.

Roger said...

OMC.

I generated this 3 month rolling average of Oak Bay house prices. You might find it interesting. Note the spring price bump in the last few years.

Oak Bay Graph..

omc said...

Very nice work Roger! I am going to have to show that one to the wife.

One thing I dislike about the pump by the realtors, is that it is all the same information rehashed and released at different dates to get max exposure. Did we really nead this remax "report"? Why does the MSM even consider it to be news?

Dumb Canuck said...

Henceforth I shall be known as Animal Spirit... (or at least as soon as I can get my google account to change to it)

These markets aren't acting rationally, so Animal Spirits must be at play.

Had a dream of a bear invading a tent a few nights ago.

Animal Spirits at play.

Roger said...

In an earlier post I mentioned that a lot of buyers were running around with pre-approval letters burning a hole in their pocket. The Mortgage Brokers Association of British Columbia has confirmed that this is the case....

Canadian Mortgage News..

Animal Spirit said...

Animal Spirit lives!

Animal Spirit said...

So:

(1) everyone goes out and gets a 60 or 120 day pre-approval, what, a month and a half ago.
(2) Then they rush to buy a house, a good portion buying within the first 30 days, because they fear the pre-approval rate running out.
(3) Then a few stragglers with pre-approvals and a few who didn't get the lowest rates buy
(4) Wouldn't this cause a dramatic spike in sales (i.e. April, May and June) followed by a reduced number (July, August), followed by a precipituous decline (thereafter)?

beware: animal spirits at work, all rational explanations wrong, including this one.

Vic said...

The major positive I see out of this insanity is that there has been really no major price jumps as should have happened with the surge in unexpected volumes. In stocks this is called the distribution phase where large volume has almost no effect...or AKA the sucker phase. ;)

Roger said...

Animal Spirit,

I think you are spot on with your analysis...

Vic said...

Well,well,looks like my radar was bang on with Barrie and possible money problems. Anyone got a spare $10 mill ? maybe some Arab guy does,lol.




NHL asks Tampa Bay Lightning co-owner Len Barrie to pay up

St. Petersburg TimesJuly 14, 2009


Another chapter in the story of the Tampa Bay Lightning's bickering owners will play out this week, as Victoria's Len Barrie has a Friday deadline to come up with $10 million to prove he can continue funding the team.

The deadline was imposed by commissioner Gary Bettman, who has ordered the participants to not speak on the issue.

Bettman acted during a June meeting when he demanded Barrie and co-owner Oren Koules settle their financial and philosophical differences about how to build the team.

Barrie must come up with cash or a letter of credit from a financial institution payable to the NHL. The money is to cover his share of the team's projected losses for the fiscal year that began July 1 and provide an additional cushion.

Consequences for not complying were unclear, though it is conceivable Bettman could take away Barrie's managerial rights