Every spring/summer, buyers buy and sellers sell more units than every fall/winter. Of course, the MSM proclaims this perfectly normal cycle as something more newsworthy than it really is. There is no disputing that this summer
Roger's done up some dandy graphs demonstrating the trend as we move into the fall. This first graph shows you the three month trend of new listings (green) and sales (blue).
Please note that sales have been fairly consistent through these months (which is not grossly abnormal, though I would have expected the peak volume month to be May or June, not July) but they have still declined into August.This next graph really shows the decline over time. Each bar shows the total of the previous four week's activity.
This last graph makes it look like total listings are falling off a cliff. They are not. This is perfectly normal and inventory, while not high, is certainly not at a level that will support sustained upwards price pressure.
Months of inventory for the week ending August 21 is: 4.7 ish. Average prices were flat or falling between July and August. The rest of the year should show declining sales volumes, flat inventory levels and I would guesstimate an average SFH price drop from today's levels by about 5%, showing an annual average price change of + or - 3% from 2008. Industry will spin this as "stable." I'll tell you I think the numbers are really a disappointment considering the volume of FTBer's brought into the market by "free" money. The bubble didn't burst, but it didn't get hyper-inflated either. What will happen next remains to be seen.
54 comments:
I don't know if anyone cares but since we hotly debate real estate commissions I thought people might want to know about insurance agent commissions.
Read all the dirt at my blog.
Canadian Life and Health Insurance
Teaser:
Term 10 = 40% of first year premium
Term 20 = 60% of first year premium
Universal Life = ??% of first year premium
I know some of the bears are a bit discouraged but patience is required. Real estate markets change slowly. You can see in the following graphs that even with lots of RE industry "spin", MSM excitement, and record low interest rates we are still down considerably from the peaks of spring 2008.
Here is a graph showing 6 and 12 month rolling averages. Every year VREB publishes the annual number showing how things are much better than the year before. Won't happen this Christmas.
Here is a graph of monthly numbers and the 3 month average. that shows we are down considerably from the peak prices of April 2008. However, there has been a reversal in the price trend. Will it hold as we enter the slow fall/winter season and fixed mortgage rates start to rise?
Here is a graph of year-over-year price change. As long time readers know I am not a fan of using YOY unless it is shown on a graph so we can see the trend. I wonder why VREB hasn't been talking about YOY in recent press releases?
Well Mr Reynolds as most of us bears will eventually be purchasing a home, I wonder if you would explain the difference in the home/life insurance that you buy from the bank and the insurance from someone like yourself.
I think it would provide good advise to most of us future home owners.
advise = advice
I think I need thicker glasses or at least ones with less Scotch in them.
My current take on the future of real estate in BC.
While people will debate all day, I personally don't think interest rates are going anywhere for a good couple years. The BoC has said no change till June 2010, I bet we see a bit of a bump then but no more than 1% or so. Certainly not run away rates in the double digits.
So where does that leave us? Low rates means cheap financing. Banks have little to no risk due to CMHC, so they lend to just about anyone. Housing starts are slower but not so slow to create no new inventory, and sales not so hot as to dry up all the listings.
In a nutshell I see several years of flat. Sales will be up and down, prices will be up and down, but mostly tracking sideways. No matter what traumatic events transpire which we think will/should/must topple the real estate castle the Govt. will smooth it out with interest rates, Quantitative easing, or any other of countless tricks up their sleeves. I no longer think there is an "event" which will trigger the RE collapse, we have been through too many events this last year. Stock market crash, collapsing banks around the world, record low interest rates, falling commodity prices, spikes in unemployment, and not so much as a hiccup in real estate. If this year couldn't bring down RE, I am doubtful anything can.
So am I capitulating? heck no. If RE is flat for 5 years or so that means it is dropping in real terms. As long as I continue to rent for a fraction of what my place would cost to buy, and keep savings the difference every month, and I earn more than RE appreciates I'm still better off.
I see flat Real Estate prices for at least a couple years. I want and I think a 20-30% decline is needed but I don't expect it to happen anymore.
Then again, straw and the camel.
Just Jack said
I wonder if you would explain the difference in the home/life insurance that you buy from the bank and the insurance from someone like yourself.
ask and ye shall receive
in a nutshell
1) It's cheaper from me
2) It's better from me
I don't wanna Tread Jack too much, so feel free to comment on my blog if you have questions.
I also have a 4 part series on Mortgage Insurance.
Part I - Life Insurance
Part II - Disability Income Insurance
Part III - Critical Illness Insurance
Part IV - Putting it all together
I guess I lied about the threadjacking
Here are some more graphs which I think bears will find interesting...
Projected active listings show we will be entering September with more listings than every year since 2005 - with the exception of last year.
Active listings graph..
There is a shortage of listings at the low end due to high FTB demand. What will the mid and high end sellers do as demand drops off?
Here is my estimate of total MLS sales for August. VREB will proclaim how much better things are over last year but what about 2005-2007 sales levels?
MLS sales by month..
September will be a big month for BC real estate market watchers for several reasons:
- BC government has already softened up the public for next weeks budget. You can expect a severe deficit, spending and job cuts. Consumer confidence will ...
- Stock market has had a good run but will it hold? September & October are often bad months for the market. Is the recession really over?
- Federal government will start selling lots of bonds to fund deficit. Watch bond rates rise - foreign buyers will start demanding higher rates. Fixed mortgage rates will then rise.
- The seasonal RE sales slowdown is already underway. Once kids are back in school many parents give up any ideas of moving.
- The last of the under 4% pre-approval letters are now expiring. This makes affordability worse for buyers.
A big wig government employee told me that some BIG changes are coming after the September 2nd budget and even more changes in 2010 when the BCGEU contracts are up. No news to anyone here of course. I'm just thankful that I don't have a huge mortgage.
S2
So much for the BMO fear mongering, earnings came in alright and it's up a couple of bucks this morning.
When are you cackling paper Pollyanna's going to realize it isn't going to be over until you've lost everything?
When you've lost everything. Soon enough.
THEY will always be richer and therefore, more powerful than you are. And your life savings and "investments" are their prize. You are their prey.
So it has always been; so it will always be.
THEY rigged the game and THEY will win; you will not.
It's amazing how so many fools line up to participate in a corrupt system that makes Las Vegas casinos look like a welfare handout program.
What happened to the big report that was going to take down the banks ? Did you cash out of BMO pain ?
Garth was saying there were many that fell for the internet fear mongering and closed accounts and went short. Ouch !
Here is the counter-spin graph for today.
Total MLS sales year-to-date..
2009 got off to a shaky start as buyers stayed in their recession bunker. Lured by low rates and easy credit they started buying again in May. Sales from January to August are now running ahead of 2008 but lag behind 2005-2007. I expect this to be the pattern for the remainder of the year.
But you won't hear any of this from VREB next week. They only refer to other years when it supports a "buy now" statement.
Roger,
Excellent graphs, keep up the great work.
I have been a discouraged bear this summer, but these trends in sales, listings and prices are starting to perk me up!
Black News reports:
Victoria Realtor given 60-day suspension..
Wensley is the fifth Victoria realtor to face disciplinary action this year. His suspension is to run from Sept. 2 to Oct. 31. and he must also pay a $1,000 fine.
The other four Victoria cases and those in the rest of BC are described here..
Good link Roger, I am surprised there are so many suspensions and complaints. It's a good thing though, if there were none I would be suspicious.
$1000 isn't much of a fine.
Just walked past a realtor's office here in Napa and the owner/brokwe practically leapt out the door when I slowed down to look at the listings in the window. I've never seen a more beautiful place with more beatiful businesses, with almost a third of the commercial space empty. It's like walking through Whistler village with a third of the retail businesses and restaurants gone-- you get the idea.
Anyway, when I mentioned the current sfh median in Victoria to him, he practically blanched and went back inside. In Napa!
Driving down the Silverado trail, which is a prime winery tour route, it looked like about a quarter of the winery or grape growing estates are for sale. I don't know for how much, but it seems like a sign of the times here.
Leaving out luxury homes, you can buy properties in the Napa area very typical to new homes in bear mountain at around the low $300,000 range.
If Obama manages to bring in some sort of universal health care along the lines of what we have in Canada, the lower prices are going to prove irresistable to many Canadians. And why not? After the correction here, there is a lot more value for money.
And San Francisco is only about as far away as Nanaimo is from Victoria. Sheesh.
Interesting perspective Greg.
For the last six years I have been asking where have all the people come from? Since a good 85 percent of buyers are from BC, if they left somewhere then somewhere prices must have come down! Up until last year, no where in BC did prices go down!
Fast forward to Napa, where have all the people gone? A question that we may be asking ourselves in the not so distant future.
This is what happened 27 years years ago in what was then one of our worst recessions. People left Victoria to find work.
I'm, seeing more "for rent" and "vacancy" signs this year than I have in the last 6 years. So if you have half a dozen rental properties mortgaged and they all go vacant, where do you go from there?
Good stuff greg,shows how out to lunch buyers are up here.
Yesterday I was walking past a high endish condo on Fort St and Fern which they have been working on for months now digging up massive trenches all around the foundations. Obviously some serious leaky issues going on there. But today began the ugly process of stripping the entire exterior down to the the nuts. What a mess !
No wonder there were alot of rentals up about 6 months ago on CL. Those who owned wanted out while this went on and any renters left because of potential mold problems. Could only think how much each unit had to pay when you see it stripped to nothing,easy $80,0000 per unit.
I have heard many people in Victoria say that there is no recession here. However the latest EI numbers show the number of people collecting has more than doubled in the last year.
EI Stats - click here..
This does not count the number of recipients who were collecting EI and had their benefits run out.
I was talking to the good folks at the Mustard Seed Food Bank yesterday. Supplies are dwindling and demand is up considerably since the start of the year. Please consider donating and helping the less fortunate (many of whom are children). They are also collecting school supplies at Hillside Mall for children who will have nothing other than public donations.
Economists and financial market analysts are all using the word "stabilizing" when discussing the economy lately. I think their definition is "we don't know what will happen next".
BCREA's Cameron Muir is no exception. Here he goes again with another forecast talking about stabilizing RE markets. This guy hasn't been right with any of his forecasts since he took on the job a few years ago.
Cameron's latest - pdf..
The Teranet-National Price house index is out for June in Canada. It uses methodology that is very similar to the US Case-Shiller index.
Here is the link:
Teranet house price index
If you look at Calgary, the long term trend is clearly down since August 2007. Down 15.4%.
Vancouver is showing a small summer uptick but is down about 11% from last year's peak.
The trend in these two markets is at odds with current RE industry spin.
When I posted this graph I said the spin about RE sales being higher than 2008 would be heard for the rest of the year.
It didn't take long for the BCREA to issue their latest forecast (above) and for the TC to reprint it as news.
Why do they never mention that this economist has been wrong with every prediction he has made since he joined BCREA? Oh yeah - advertisement revenue..
"And San Francisco is only about as far away as Nanaimo is from Victoria. Sheesh."
Have you looked at real estate prices in San Francisco? They maybe down but you still get a lot more for your coin here.
Another leaker being ripped apart on Oak Bay Ave and Richmond. So much for the quality builders,I can only imagine how many are still awaiting funding that are basically screwed.
"Have you looked at real estate prices in San Francisco? They maybe down but you still get a lot more for your coin here."
But you are in Frisco man,not trapped on an island.
One thing I don't agree with is comparing Vic prices to major centers in the world. I have travelled a fair bit and Vic is not Paris, New York, San Fran or London. Vic is a town to me, and there is no industry to support these high prices. Kinda like pointing to a honda with a $150k price tag and saying"but a ferrari is worth....".
This prediction with Muir is a bit of deja-vu with me. The last time he called for extreme high prices to continue creeping up, well we know what happened next. We were almost in the same place with our first born, and walked away from the market shaking our heads. This time we need to move to a bigger place and I really don't want to move into another rental. It is hard when you can affford it and have a big deposit. We are way better off having rented the last 2 years compared to the market as we banked over $50k by simply saving less than the difference with a mortgage.
Rents vs mortgage are still way off; we won't be buying at this peak either. I still know too many young families drowning in debt who felt they had to buy because they had a kid.
If Obama manages to bring in some sort of universal health care along the lines of what we have in Canada, the lower prices are going to prove irresistable to many Canadians.
I have sad news for you. Obamacare won't provide free health care to visiting Canadians any more than Canada provides free health care to visiting Americans.
Were not Paris, New York, San Francisco or London.
When it comes to population size, weather, employment, industry and home prices we are the Fraser Valley.
If you don't believe me, just walk outside and count the number of pick up trucks on your street.
During the last five years both Ottawa and Calgary have increased to a million people. Victoria pretty much stagnated at 350,000.
Took a bike ride into the downtown/central park area around around Quadra and Pandora a few nights ago. Yup, interesting city we live in - certainly not the "uptown" social crowd that we are told will be living there soon.
Then tonight I took a ride through Oak Bay (do they ever repair the roads in that town). Some 20 year old wannabee real estate mogul with his metrosexual girlfriend in their new red mustang convertible were trying to talk this octagenarian into selling his house. Really, they could at least have the decency to wait for the ambulance to arrive first.
Went to pick up some fish and chips and you guessed it the fellow in front of me was telling the cook how great his real estate investment has been.
Really people have you no shame. Do really think telling someone who is making a little over minimum wage and wondering if they are going to make rent, how many hundreds of thousands of dollars you've made is cool.
Okay, thanks for listening to my Thursday night rant.
Does anyone have a recommendation for a good (independent preferably) financial planner to help Mr. and Mrs. Animal Spirit form a long term finanical plan? Roger, HHV, Greg, etc. feel free to e-mail me directly (formerly Dumb Canuck) if you need.
Also, 1134 Dallas now down to 1.245M (doesn't look like the realtor switch worked).
Friend buying a house. RBC didn't want to know what the assessment was - wanted to go of off a stated value, which was higher. Has anyone looked at what bad debts our banks will have, and how it is securitized, or is this a CMHC issue (in which case one would hope the Auditor General would take a looky-look).
Thats funny,can you say RBC profits/overlend ranks above consumer brains to overborrow when it comes to houses.
Just when you thought the banks were tightening the noose on lending rules. I see a real double standard here as I know of a couple of people with excellent credit and good long standing jobs who wanted a consumer loan for a measly $10,000 roughly each with little other debts but were denied because they don't own any assets besides a car. Long standing customers too, soon to be ex-customers.
Meanwhile they lend out $600,000 to fools with nothing down and give them a blue house shaped sucker. I wanted them to go apply for a pre-approved mortgage and see what they could get. What a complete joke this whole lending system is.
Yep it's a joke, but I've stopped laughing as this comedy is about to go tragic...
Our budget is about to be brought down, and I would consider this the appetizer to the more substantial 'main course' that will be revealed in February. Revenues are down, the unemployment trend is up, the outlays associated with health and social services can only be expected to climb. In the meantime, the government will feel compelled to 'tighten its belt' at a time when doing so will just make the rest of the economy want to puke. So government will make the poorest even poorer (social assistance probably won't be improved in the budget), and the middle class will also feel the pinch as wage freezes take effect and tax rates climb. Meanwhile, investment goods (ie. appropriate service delivery planning, etc.) will lose favour to survival goods at a very high long-term cost.
Never mind the pain of an overdue housing correction...
We won't need higher interest rates to reach the tipping point this time...pure unemployment, falling/stagnant wages, and unsustainable debt levels will do it. We've gone to a just in time, and just enough to make the payments kind of finanacial philosophy, and there just won't be enough padding to cushion the impacts...
Wow, mortgage your ass for a piddly $7000 profit in a year ? Man,I want in that property ladder ASAP with massive gains like that. Does that even cover the transfer tax ?
From Muir's drivel :
"Home sales have doubled since January, with prices edging higher in Metro Vancouver and Victoria in recent months," said Muir.
Those prices are still below last year's numbers, however. According to the real estate association, the average price of a home sold through MLS in Victoria is forecast to be $468,000 this year, down four per cent from 2008. However, in 2010, that forecast average price is expected to hit $475,000."
Animal Spirit,
I do my own financial planning using many of the financial tools that are widely available. So I do not have a specific name to put forward.
You did not mention what you are trying to do. Are you looking for a complete financial plan (insurance, RRSP, TFSA, real estate, investment selection, tax strategies, etc.) or just help in one or more of these areas?
There are a few fee-only planners in Victoria but most are on a commission basis. I won't get into the merits of either since it was an explosive discussion last time and we lost a great poster because of it.
Here is an interesting article for you. The reader comments are quite good as well...
Where to find a true fee-only planner..
I only know about the insurance side so I can't speak to mutual funds etc. But last week after posting on my blog about commissions I did some digging to see how I might be go about setting up a "fee for service" insurance brokerage. What I found not only confused me but made me kind of mad.
In the insurance industry we are paid a commission to sell a policy. The company that sells the policy pays me, the advisor a commission. Nothing out of the ordinary there. As I mentioned previously, the Insurance Council of BC frowns on the act of reducing a commission to make a sale known as "rebating". Rebating is illegal in most provinces, BC is a little more relaxed and allows rebating up to 25% of commission, this includes gifts, reductions in premium, or just cutting a cheque to the client after the sale.
So if I am not allowed to reduce my commission, how can I waive the commission entirely and simply charge a fee. From what I found, and my interpretation could be wrong, I can't. The insurance companies and the insurance council will not let you waive commission on any policy other than one for a direct family member.
So I can charge a fee then sell a policy but I will still be paid a commission on that policy. Which means I could still be influenced by the commission in my recommendation, even though I am supposed to be impartial due to the fee.
The only way I can see around this conflict of interest is to charge a fee for a written plan, make specific recommendations as to what kind of policy a person needs then send them to someone else who will take the order and sell them that policy and that policy only. The other party will be paid a commission and I will be paid a fee, the client pays twice.
Crappy deal for the client. :P
This post is for Vic. I know he will appreciate it. Makes me think of shoeshine boys buying stock in 1929....
Books? Check. Laptop? Check. Condo? Check..
That article was lovely. Using rough numbers, let's see how much money they'll make in 4 years.
$200k principle, $50k down payment
Selling after 4 years at their suggested $240k.
4yrs interest = $23k @ 4% fixed.
Realtor comission @6% = $14400.
4 years of taxes = $8000 estimated.
4 years of strata fees ($200/mo estimated) = $9600.
utilities ($100/mo) = $4800.
lawyers fees = $2000.
metrosexual furniture = $2500.
----------------------------------
total = $64300
Return on investment of $50k is about $14k for four years. IF prices don't drop. I'd like to tell his parents to sell it, put him into residence, and advise him to get an on-campus job.
Cool article roger, get rid of the kid from your basement for life by buying him his own pad,lol.
Roger - thanks for the financial plan input. What Mr. and Mrs. Animal Spirit are going to do is create a full financial plan. Your thoughts triggered me to the June 9 post by Reid and the various comments with it.
Our approach will be (not in a strict order) to:
(i) read some of the books suggested in the June 9 comments
(ii) create a financial vision
(iii) pull together our background financial data
(iv) create a financial plan using the readily available tools
(v) implement parts of the plan as we are ready
(vi) look at (and resolve) any personal blocks to financial success
(vii) initially work with one of the bank financial 'planners' to bounce ideas off and gain further education
(viii) revise the plan and implement the changes as we get further educated
(ix) consult specialists (such as a fee-only planner) as needed
(x) reach our vision
"If Obama manages to bring in some sort of universal health care along the lines of what we have in Canada, the lower prices are going to prove irresistable to many Canadians."
I have sad news for you. Obamacare won't provide free health care to visiting Canadians any more than Canada provides free health care to visiting Americans.
Open your eyes, I'm talking about comparable care in America for Americans.
If that happens, you will see a flood of green card applications from Canadians.
Why not live in Napa for half the price of Victoria? It's one of the most liberal areas of the states, the prices are lower for everything, and the only discernible difference from Victoria is a better climate, and a lack of affordable health care. With affordable health care, you do the math.
You also conveniently missed the other main point, which is, how is the economy there doing worse than here? Do you honestly think the bubble here will never end?
More tripe from bubba.
Yes that's true. Despite Obama's "smart" wars and lies, far more Canadians are emmigrating to the US and buying real estate there than the reverse.
And that's been true since November, long before heath care was on the horizon.
That so-called "flood" of green card applications would also give rise to a flood of green card rejections. You can't just up and decide you want to immigrate to the good old USA.
If that happens, you will see a flood of green card applications from Canadians.
Why don't you send in your application for a green card and report back to us? I think the tripe is coming from your direction.
That so-called "flood" of green card applications would also give rise to a flood of green card rejections. You can't just up and decide you want to immigrate to the good old USA.
For the benefit of readers who are thinking about loading up the truck and moving to Beverly Hills, here's why you will be making a u-turn at the Peace Arch crossing and coming back to good ole' Victoria.
1) To apply for a green card, you need a job offer and sponsorship from an employer in the USA. The sponsorship will cost the company around $10,000 in legal fees.
2) The company will have to apply for a "labour certification" on your behalf. This means the immigration service must agree that your occupation is in demand in the USA (real estate doom bloggers need not apply), cannot be entirely satisfied by current US residents, and that your professional credentials to serve in that occupation are recognized and valid. The company must advertise your job for six months to prove the position cannot be filled by a US citizen. The elapsed time for this process is at least a year and usually closer to two years.
3) After your labor certification is issued, it will take at least six months for a work permit to be issued, and a further six months for your green card to be issued.
So when you find a company willing to spend $10,000 and wait nearly three years for you to start, you are away to the land of Obamacare.
Of course, you could always try for an H1 visa or TN status (free trade), but the chances of Obamacare applying to you in this case is nil: you will be classified as a non-resident alien. You won't even be able to get a US Social Security Number--just a taxpayer ID number that enables you to pay taxes but not draw any benefits.
Sorry to be such a wet blanket.
Notice: Bubble & Fizzles "wet blanket" does not apply to the millions of Hispanic illegal immigrants who cross the southern border each year.
Who the US essentially welcomes with open arms.
Isn't that what all the back roads further east are for?
Sorry to set the "wet blanket" on fire and the ashes into the stratosphere.
Or you could just wait in Victoria, until Harper sells us to the USA. Mulroney got a position at Harvard University for "free trade". Harper should get a least a chief cook position at a San Diego MacDonalds.
Disclaimer
To all the cooks at MacDonalds I apologize, it was either Mickey D's or Wendy's and you won the coin toss as Wendy's gets Ignatieff.
These Real Estate Believers® in Vancouver ask: “Are we overexposed to inflation and interest rate changes?”
Slow motion train wreck
Hmm maybe Vancouver real estate ain't that great an "investment" after all, or so suggests the Globe and Mail this morning in "Couple Drowning in Real Estate Debt"
This story caught my attention as I have a couple of friends in a nearly identical situation in Victoria, minus about $300,000 of debt. They've crunched some simple numbers and have decided to sell off their condo... and are undecided as to whether to downsize their house as well.
The last paragraph of the article: "This couple has parlayed debt into real estate that is producing a good return,” Mr. Moran says. “But if interest rates rise just [one percentage point], mortgage costs would consume all rental income. For that reason, they should consider downsizing their house. It is the safest course they can take."
Mr.4AM
Oops, Roger beat me to the story. Shoulda read the last posts before submitting. :)
Mr.4AM
Not just the interest rates, but the vacancy rate. If there rental property goes vacant they may be faced with a lower rent, longer lease up period or not even being able to find a tenant. This is what happened in the early 80's market in both Vancouver and Victoria. From paper millionaire to bankrupt in 12 months. And there is nothing they could do, except sell in a falling market. And most just followed the market down, being unable to get ahead of the falling prices or unable to sell as the mortgage was more than the home's value.
Let's face it the higher the unemployment rate rises the more people will be leaving the cities, doubling up or moving back home to the parents.
The sad thing with that story is that they probably did not even get much house for the $1M...
I am not that couple because I am still scarred by my parents' experience of the early eighties. But we could be. My husband thankfully, is willing to continue to rent for awhile...
As bad as this sounds, I'm hoping for a terrible fall...not so much because I like to see good people hurt, but because, those other good people (those who have adheared to some semblance of reason and logic, who have not jumped in, knowing what is available is just too out of sync with intrinsic value)have been hurting a long while and its time the standard rules begin to apply again.
Budget Day is here.
Preliminary news:
The B.C. government will introduce a budget Tuesday that assumes the province is already at its lowest point in the recession and is set to start a slow recovery, says Finance Minister Colin Hansen.
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