Thursday, April 1, 2010
Open post
My wife and I are super busy shopping for a house right now so I don't have much time to blog. We figure this is the perfect time to get in before interest rates and house prices jump higher in unison forever pricing us out. We plan to take out the maximum allowable too before the new lending rules kick in on the 19th. Wish us luck!
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«Oldest ‹Older 201 – 237 of 237I went to a BNI (Business Networking International, basically networking and marketing meetings for the self employed) today and the real estate agent and the mortgage broker were doing their 10 minute talks. It was all about HST, new mortgage rules, CMHC, yadda yadda.
DOOM was in the air!
One other guest made the comment "Well I guess that means I won't be buying for a while."
Perceptions they are a changin'
Edit from deleted post.
@ MLN
I am paying 5.0% at TD on an unsecured line of credit, also empty. So I guess that is +2.75%
@MR 4AM's new tax link
Doubling the CPP would help a huge number of people, as most retiree's don't have enough income in retirement. Funding it on the other hand, not so great, Employees and Employers already contribute nearly 10% of earnings to CPP as it is.
Are they going to double the CPP rate to 20%? Fat chance.
Are they going to make CPP invest more aggressively like pre-dotcom and loose half the fund again? not a chance.
Are businesses going to fight this like crazy? you betcha. (or wage cuts to net out the difference)
If the CAW is behind it there has to be something wrong with it.
File this under, wouldn't it be nice if we didn't have to pay for it.
"Give a man a computer and an internet connection and let him show you how much of an idiot he is".
Thanks for all the insight and entertainment. I'm sure glad I never listened to the "experts" lurking around here.
I should say that this sites tag line, "for savy real estate buyers" should also include, " dead wrong for 3 years and counting".
Good for you, happy owner. I do not suspect you would waste much more time here then, since you are obviously too wise for that. Have a great year!
@MLN,
I've got an line of credit from RBC at 3.25% that I've never used.
Its not to late to listen Happy Owner. List your place just below assessed and hope for a quick sale. Don't try to be a hero!
And the bell rings low...
http://www.timescolonist.com/Victoria+real+estate+market+ready+cool/2905321/story.html
The average price for a home in B.C. was $516,970 in March, up by 21.4 per cent from the average of $425,708 in March 2009
Read more: http://www.timescolonist.com/Victoria+real+estate+market+ready+cool/2905321/story.html#ixzz0l5UIS8Hc
So if we get a 20% correction we are really only sitting where we were last year? That is crazy.
Starting to see the first signs of price weakness in the market. Yesterday, a 30K dollar price reduction (South Oak Bay no less).
Today a sale in Broadmead:
Price Original $719,900
Mar 22/10 $699,900
Sale Price $650,000
Today's news articles:
Real estate sales in B.C. level out
"Since the beginning of the year, we've seen home sales moderate," said Cameron Muir, B.C. Real Estate Association chief economist.
"That is largely the result of pent-up demand that has already been expended in the marketplace as well as eroded affordability as higher home prices and, more recently, higher mortgage interest rates are certainly squeezing some low-equity buyers out of the marketplace."
Ritchie to auction off Island real estate
Several Vancouver Island properties are going on the auction block next month with no minimum bids or reserve prices.
Included in the May 19 auction conducted by Ritchie Bros. Auctioneers are two residential lots at the Crown Isle Resort Golf Community at Courtenay, two houses at the Crown Mansion development at Qualicum Beach and an oceanfront homesite overlooking Discovery Passage at Eagles Cove Estates north of Campbell River.
Victoria's hot real estate market ready to cool off
Greater Victoria’s hot real estate market appears ready to cool off as mortgage rates go higher and rules on borrowing tighten.
Real estate sales and prices were up in Victoria in March compared with the previous year but the sector is headed for more balance as the Royal Bank and the Bank of Nova Scotia tossed another bucket of water by raising mortgage rates for the second time in two weeks and new buyers braced for tighter mortgage rules that come into effect this Monday.
“What I’m seeing is a levelling off,” said Randi Masters, president of the Victoria Real Estate Board president.
Randi took a look at sales the first 2 weeks of April and knows the boom is over.
Mint.com
The Renter’s Manifesto
Want to see the type of real estate stories they will be printing next year?
“In that moment, the money didn’t matter. Only the condo mattered. Now, all the money I have, goes towards paying the loan. I live for the loan.”
"Happy" "Owner's" "Sitting" "pretty" rhoids must be acting up...
Bombs away!
Median price of a detached home in the urban core municipalities as at April 1 of each of the following years.
April 1, 2005 $391,000
(The last period in which rents (income) was equivalent to mortgage payments (expenses)
April 1, 2006 $471,400
Old, old rules were still in place for CMHC 10% down. CMHC did not guarantee investors.
April 1, 2007 $521,500
New CMHC rules which open up the financing to the lose standards like the USA. Sitting pretty buys a home.
April 1, 2008 $574,500
"Houston we have a problem"
April 1, 2009 $525,000
"Where the hell did that iceberg come from" A recession in BC?
April 1, 2010 $620,000
CMHC chief economist says No bubble here as a Vancouver bungalow hits $1,000,000.
April 19th CMHC changes the rules
for lending. In most cases people will be able to finance 60 to 70 percent of what they could the day before. $620,000 x .65 = ???? Price roll back to 2005 levels
April 21, Sitting Pretty impales himself on the fence post which he wishes he had just been sitting on before.
A local real estate agent, Tim Ayres, sometimes drops by this blog to post his perspective on Victoria real estate. Tim is a straight shooter and has an interesting blog of his own.
This week he posted the results of a VREB buyer survey which was sent out to local agents. You can read it by clicking here - pdf
While this is only a limited sampling of local agent activity it does contain some interesting stats. In particular I found this quite revealing ....
45 out of 192 realtors reported more deals collapsing due to financing?
Looks like the new rules and increased mortgage rates are having an effect already.
6% of buyers were buying a property for investment purposes. These folks are subject to new rules as of April 19 but many lenders have already implemented the new, restrictive rules. There will be fewer of these buyers in the future (especially condos).
28% of buyers are FTB's and 26% are buying with less than 20% down so they are subject to the new CMHC rules which take full effect April 19th. After this date only the interest rate hold of their pre-approval letters is still valid. They need to re-qualify for the maximum loan amount if they were not previously qualified using the 5 year rate.
Watch the sales over the next few weeks. We are off to a very slow start for April. I am projecting sales in April will be less than March and that will mean the brakes have been slammed on hard.
DoubleAgent you'll notice that 74% of buyers in that survey are either all cash or 20% down buyers. If this survey is a true picture of the market here then it'd be fair to say that only 1/4 of the market is going to be affected by the CMHC rules. I don't think this survey is all that accurate but if it is then these changes may not be the bear snacks you were hoping for.
April 21, Sitting Pretty impales himself on the fence post which he wishes he had just been sitting on before."
Now Just Jack, just judging from Sitting Pretty's posts, impalement might have just been the goal all along...
Nice study done by Tim,
Here is a little more data, that perhaps some of you gifted stats people can overlay and interpret with Tim's data.
March Sales (Victoria, Peninsula, Westshore)
Detached homes 383 (55%)
Strata homes 309 (45%)
New Listings for March
Detached homes 726 S/NL ratio 0.53
Strata homes 629 S/NL ratio 0.49
Where the properties were bought
Victoria 441(63%)
#listed 821 Ratio(0.54)
Peninsula 81 (12%)
#listed 146 Ratio (.55)
Westshore 170 (25%)
#listed 388 Ratio (.44)
Summary for the above is that generally all of the markets are well balanced laying in the sales to new listings ratio range of 0.4 to 0.6 With Saanich Peninsula and the Victoria core municipalities showing the strongest markets while the Westshore, at 0.44, is close to becoming a "buyers" or "bear" market. The higher ratios, at 0.55 and 0.54, indicate that prices should be stable with supply and demand being well matched. If prices are rising, this could be an indication of irrational exuberance or what some might call a "bubble".
I also looked at more specific markets. In this analysis I found the strongest market to be detached home sales in the Saanich Peninsula at 0.59 and the weakest market to be condominiums in the Westshore at 0.39 Not enough to speculate on future rising or falling prices.
I read it a little different than Maniac.
A quarter of the market for March was 173 sales. And most likely these sales would be concentrating in and bashing the heck out of the condominium market. Dropping the Sales to New Listing ratio way down into the "bear" market range around 0.25
Which would also have a weakening affect on the detached homes dropping the sales to new listing ratio down to 0.48
The wild card here being fear in the condominium market. A drop in half the sales in condominiums is like standing at the bus stop and the guy next to you gets nailed by the bus. You find yourself standing a little farther back and not so anxious to get on the real estate bus.
Just Jack,
Interesting March stats you have been posting recently.
I strongly believe March was the end of the boom. I have heard that CMHC is already enforcing some of the new rules in advance of April 19th. This coupled with the mortgage rate increases might explain why sales are so slow in April. When I update the graphs next week I think bears will see that the brakes are fully on. Listings are still piling on and with the drop in sales I expect the sales/new listings ratio to go down significantly.
The TV networks will be all over this story in the first week in May when real estate boards release their stats. The print media like the TC will reluctantly cover the story even if it offends their advertisers. There will even be talk of prices dropping and the snowball will start rolling down the hill just like it did in May 2008.
BTW - I sure wish HHV would start posting again. I get the impression he and Reid might be close to shutting down this blog. It can't survive for long with hundreds of posts to an April fools joke. Losing this blog just as the market turns would be a real shame.
Remember all that talk about Olympic visitors coming to Victoria to buy real estate. Looks like this was wishful thinking.
TC - Greater Victoria 'missed Olympic spinoff benefits'
"The fantastic gravitational pull from the Olympic Games put a bit of a damper on Vancouver Island hotels and restaurants as Islanders and visitors chose to experience the Games by passing [on] the Island," Chemistry principal Frank Bourree said in his monthly Tourism Bulletin.
Average occupancy in Greater Victoria's 4,325 hotel rooms slipped to 50 per cent in February, down a full 10 points from the same month a year ago.
If you recall a year ago we were in the depths of the recession and hotel stats were dismal then. This year 10% below that.
Here is why the new mortgage rules and increased interest rates are draining the FTB buyer pool.
Lets take the case of a buyer with a household income of 100K. They are looking at houses (no suite) and estimate annual property taxes of 2.5K and heating costs of 1.5 K. They have a down payment of 30K.
Last month they could have got a 5 year fixed at 3.7% and been qualified for a 35 year mortgage of 551K @ $2333 per month.
Today the bank offers a discounted 5 year rate of 4.7% but with haggling they get 4.5%. The maximum they qualify for now is 495K @ $2333 per month. Same payment but 56K less house that they can buy. That same 495K loan last month @ 3.7% would have had a monthly payment of $2095 ($238 less)
They inquire about a variable at 2.25% like their friends have. CMHC requires that they must qualify at the 5 year posted rate and this works out to a max. loan of 408K @ $1404 per month. Low payments but they have to buy a much smaller house.
Todays buyer has less purchasing ability and will have higher payments than a month ago. It's over folks!. Once FTB's are unable to buy overpriced starter homes from moveup buyers the market has to readjust - prices at all levels will drop to meet reduced demand.
"Average occupancy in Greater Victoria's 4,325 hotel rooms slipped to 50 per cent in February, down a full 10 points from the same month a year ago.
If you recall a year ago we were in the depths of the recession and hotel stats were dismal then. This year 10% below that."
Now THAT'S what I call an Olympic *SPLAT*
In Oak Bay I am seeing a couple of price reductions a day...some as small as $10,000 and some many times that.
ie. all listed in past month, and changed prices since
2431 Currie Rd was $999K, now $929K
2336 Estevan Ave was $689K, now $658K
2276 Windsor Rd was $789K, now $769K
2057 Townley St was $670K, now $645K
1059 Oliver St was $750K, now $699K
slow erosion. for now.
You're all asuming that the 25% who have under 20% down would not qualify for CMHC insurance under the new rules. First of all that's probably a bad assumption. Second of all CMHC isn't the only game in town when it comes to mortgage insurance. One thing I can guarantee is that the seasonal slow down in sales is fast approaching and so we probably won't know the result of the changes until next spring. Sorry bears it might be another year in the rental for you.
maniac, I think most of us are anticipating several more years in a rental. Prices aren't going to collapse overnight.
First time buyers will certainly qualify to buy a home under the new CMHC rules, it's just that it will be at a lower price.
I was speaking recently with a lady who bought last year for $600,000 because of the suite income. With the new changes she would not be able to buy that same home.
Things will change. Today a realtor knows that you can get the financing for a 600K purchase. A week from now he will know that (s)he can't push you up in price without risking a collapsed sale. Today, 23 percent of realtors are seeing more deals collapsing in their market areas. What will it be in one week from today?
maniac78 has a point, if the wheels do not fall off this cart soon it will just flow into the typical down season. However, if April sales come in less than March, then we have a problem. I still think we will see a little bounce before April is done though.
CD & Maniac78,
We had 195 reported sales in the first 11 days of April. Do you really think that there will be 595 more sales in the last 19 days of April?? That is what we need to beat last March sales.
March 2010 - 789
April 2009 - 747
April 2008 - 768
My PCS is filling with new listings every day. This week under 500K I have had 34 new listings, 10 sales and there are currently 197 active listings (condos & SFH). Between 500-600K I have had 19 new listings, only 2 sales and there are currently 130 active listings (condos & SFH). From my perspective this month is a sales disaster. I hope some of the other readers will report their PCS stats.
The spring sales season usually peaks in late May/early June. If 2010 peaked in March it will be a disaster because active listings don't peak until August/September. Lots of eager sellers and fewer buyers than previous years - what happens to prices??
Just Jack said:
I was speaking recently with a lady who bought last year for $600,000 because of the suite income. With the new changes she would not be able to buy that same home
When it comes time to renew her mortgage she will be stuck with whatever interest rate her present lender will give her. I hope she went with a bank not some flaky lender that chooses not to renew when her mortgage comes due. Moving to another lender or re-financing will not be possible because she won't qualify under the new rules.
These new CMHC rules will be affecting a lot of buyers who got a suite deal over the last few years. It will be worse for non-owner occupied condo owners that try to refinance. The new rules require 20% equity instead of 5%.
"These new CMHC rules will be affecting a lot of buyers who got a suite deal over the last few years. It will be worse for non-owner occupied condo owners that try to refinance. The new rules require 20% equity instead of 5%."
I am curious as to how many of these were bought with 5%, my friend lives in Shutters (2007) and apparently occupancy is less than 50%, how do these people afford to keep these condos empty?
I've noticed a few significant price reductions, but no flood. For example, there is a 1 bedroom + den units at the Falls right now for $1,350 with a parking spot. Pretty good deal for what it is in my opinion.
The wheels ARE falling off the cart right now! This is the critical turning point month, the stats will tell the story! If the stats are really showing low sales and lots more inventory for the full month of April it is clear that a crash will happen, it is totally reasonable and possible that prices could drop 10-15% by Christmas if the inventory keeps piling on and sales slow. 2008 is the blueprint for what may happen. I'm expecting a crash by the fall.
Think,
Even the real estate pumpers are admitting the boom is over. They are now trying to push the soft landing story just like they did in the US before the crash.
Financial Post -
Housing may have peaked
The spring homebuying season has reached a fever pitch with a record number of "for sale" signs being placed on Canadian lawns for the month of March.
But there are indications the market has reached the peak with nowhere to go but down.
Yet despite the huge increase in year-over-year sales, March was the fifth straight month that the percentage increase has declined. In some markets, sales are already falling. Seasonally adjusted sales in British Columbia dropped 17.8% from a quarter earlier and Alberta sales dropped 9.7% during the same period.
"If this isn't the top, we are very close to it in terms of sale activity and price," said Gregory Klump, chief economist with CREA.
Mr. Klump doesn't predict the market will reverse dramatically, but says year-over-year comparisons are going to continue to shrink for sales and prices.
Mr. Klump said prices at the high end of the market are going to start driving down because consumers in that segment are trying to beat the clock on all the changes coming.
I am giving the benefit of doubt that Easter may have delayed some condition removal dates and sales as double agent mentioned earlier.
I was following March numbers and then at the end of the Month we had a surge so I am not counting my chickens yet as we could get a surge from the new rate increases at the beginning of this month.
Who knows...
The only source I have that this week is not living up to expectations and no bounce is occurring is from bloggers and a lack of positive spin from the real estate boards.
Double-Agent,
Any chance you could give us some idea of what sales numbers and new listings numbers are looking like so far this week? The suspense until Monday is torture ;)
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