Sunday, June 6, 2010

The new condo phenomena

We had the luxury misfortune of staying in a new condo for a little while recently. This one was built, let's say early-boom, in 2004 and 2005. It shows: workmanship is arguably better than those constructed in 2007 and 2008, but finishing quality is poor - sure the appliances were stainless, but the counter tops, cabinetry, fixtures and flooring didn't even try to be faux-luxury. That and it's probably 100 square feet bigger than its younger siblings' offerings.

But man-alive, two things are nagging me about this place even days after leaving it:
  1. The layout made me think the developer designed it himself on the back of a napkin over a cheeseburger at lunch - kids in grade ten shop class probably can do better design work.
  2. Not one person I saw coming and going from this place looked a) old enough to be a homeowner and b) professional enough to afford the low-to-mid-$300K price tags this building has been demanding since completion.
It got me thinking. This town is in a new paradigm. Readers of HHV, myself included, we prognosticate on what must be going through the minds of homeowners, well, mostly home buyers and home sellers really, almost daily on this blog. But what do we really know? These kids wandering in and out of this building to and from their careers jobs and social lives probably have never experienced real economic hardship in their lifetimes - unless they have the odd distinction of having been born on Black Monday back in 1987, and I'm sure many of the people living in this building are children of that year.

OK, so what was I thinking originally? Many of these "kid homeowners" bought the dream: buy a condo, live in it long enough to pick up a partner in a downtown bar or workplace, mess around some and produce an offspring, maybe commit in a civil ceremony or its equivalent, sell the condo and buy a house having made out like a bandit in the process. But that dream isn't so real in a time of falling condo prices. Imagine being an agent, trying to have the pricing conversation with Joe and Pauline, and letting them know that their mistaken belief of a 50% gain over 3 years is more like a lucky-to-break-even-after-selling-and-buying-costs-are-calculated. I don't envy them at all.

These early months of a downturn in the real estate market are so new, so completely different than expectations for many home sellers, they must be in complete denial. Especially the ones who have never been through anything like this before. "Prices will rebound next spring. We'll just wait and list then."

Denial. Stage one. I wonder if Strata Councils will create price-bust support groups?


Anonymous said...

HHV - Right on the mark with this topic. Condo owners have been paying strata fees and lots of mortgage interest the last few years and have been building little equity (unless they have been making extra payments).

No easy money for these guys. When you consider the acquisition costs (property transfer tax, legal fees) and real estate commission to sell they will end up paying the bank to make the sale happen.

Check out this annotated graph of condo prices in Victoria over the last few years.

a simple man said...

Thanks Double-Agent. It is evident that condos are first off the mark downward. I would suspect that many condo rentals will be hitting the listings soon (as an aside, I have seen a number of houses in Oak Bay go to rental after unsuccessfully trying to sell recently).

Will the glut of condo rentals bring the people out of the basement suites and into cheaper, newer, possibly brighter, condos, then causing financial stress to those who depend on rental suite income?

Have homes with suites now lost their appeal - are suites now more of a liability when selling a house? I know that when I look at a house now and see a suite all I think about is how much it will cost me to convert it to livable space for my family...

Alexandrahere said...

Good Morning All....some stats

Last week: i.e. 31 May - 6 June

Condos: Vic, Sa, Esq & OB
Minimum 2 bed; $260K to $625K

New: 33
P/C: 13
Sold: 6
O/M: 3

Some notable price reductions were:
Eerie: $689 - $614 ( -$75K)
Richardson: $$549 - $498 (- $51K)
Belleville: $$588 - $498 (- $$90K)

SFH: Vic, Sa, Esq, & OB
Min 2bd & 2bth; $375K - $775K

New: 75
P/C: 13
Sold: 11
O/M: 9

Three of the sales were new to the market and sold for list price. One Sale on Musgrave in Oak Bay went for $607 - down $68K from the original asking price of $675. Another on Calumet went for $498K down $27K from $525.

Some notable price reductions in these areas were:

Cookman - OB $659 -$619 (-$40k)
Phillion - Esq. $789-$699 (-$90K)
Finlayson - $619 - $559 (-$60K)
Foul Bay - Sa -$599 - $549 ($50K)
Moss - Vic- $829 -$769 (-$60K)


Anonymous said...


Your stats reflect what is going on the market so far this month.

Looking at your stats I see that the sales/new listings ratio for condos is 18% and for SFH 15%. This is well into buyers market territory and worse than is being seen for the entire Victoria area.

Here are the stats for the period June 1-6...

Total MLS sales: 129
New MLS listings: 349
Active MLS Listings 4446

Note that overall sales/new listings ratio is 37% which is still buyer (bear) territory.

Alexandrahere said...

I think there will always be people needing "low end" suites. As a result of the glut of condo's on the market; I think you will find substantial rent reductions of "in-law" suites.

For owners that don't particularly "need" the income,probably the most desirable of these suites would be tidy little bachelors.

These take up say 1/3 - 1/2 of the basement area. Some couples that I know have them and they just like the little "perk" of having their property taxes, property insurance, and their Hydro paid for them. They only rent to quiet, single people perhaps having a beloved cat. Also they have a live-in babysitter for their house when they go on Vacation.

The new owners of those huge homes out in Lanford with 2 bedroom "legal suites" are most certainly going to take a beating and unfortunately their mortgage payment took into consideration that income.

Rhino said...

I kept some stats from my PCS last week (31 May - 6 June). All detached SFH under 800K in 'Victoria, Victoria West, Oak Bay, Saanich East'.:

New Listings: 36
Price Changes: 31
Sold: 25
Off Market: 15

Looks like detached houses in the desirable areas are holding up a bit better. My total inventory on PCS actually went down over the week (by 4).

Anonymous said...


At the end of the month every month several things happen to the stats.

- Tardy agents update their sales a few days before the end of the month. That is why sales in the last week of any month are always a bit higher.

- Many listing agreements are written to expire at the end of a month. That is why you see so many marked OM on the first of every month. However these listings still count in VREB's monthly report.

- In the first week there is a bump in new listings as expired listings are renewed. Often these renewed listings come back at a lower price but are given a new MLS number (i.e. the relisting scam).

We do analysis on a weekly basis. You might find these graphs interesting..

Weekly Sales & New Listings shows sales are down in June and new listings are up as owners try to bail.

Weekly Active Listings shows that listings are still rising after month end adjustments.

Skeptic said...

This is the kind of stuff that makes people distrustful of realtors.

MLS®: 278920 was listed for 438,000. On my PCS it came up with a price change on June 7 to 421,000. But it was sold for 420,00 on June 5th. So the agent has marked it down after it was sold so that it looks like it sold near full price. How unethical!

2022 Hornby - Sidney

HouseHuntVictoria said...

It's standard to see a decline in listings for the rest of the year, usually beginning right about now, is it not?

Total listings are still very high, sales remain weak and are getting weaker. It's the MOI number that we should be tracking very closely now, and it's not high enough yet market-wide to be an indicator of "bust" but it is high enough in certain segments (condos especially) to be indicator that come fall prices will be down from where they are today. Enough to make any rational person want to wait to purchase.

Alexandrahere said...

See a "new listing" at 929 Rankin in Esquimalt for $529K. Nice house. Went into "removed listings" aha!! there it is....originally listed at $597K removed on 28 May at $568K.

So overall reduction: $68K. Sneaky..I'll be watching these "new listings" in this way from now on.

Anonymous said...

HHV said,

It's standard to see a decline in listings for the rest of the year, usually beginning right about now, is it not?

It depends on the year. Sometimes the active listing peak is in June (like last year) but it can be as late as October. Interesting to note that in 2008 when prices fell the peak was in September.

My previous chart shows that listings are still climbing on a week-over-week basis. Stay tuned for more increases.




Anonymous said...

Here is the overall MOI graph and other ratios for Greater Victoria.

Click here

MOI for May by category:

SFH (non waterfront/acreage) - 4.36
SFH (all) - 5.52
Condo - 5.02
Townhouse - 5.53

NanHousing said...

The problem with DOM stat is it only takes into account houses which sold and doesn't take into account those that didn't sell, which would have 'infinite' or 'unknown' DOM. They have no opportunity to be included in the statistic.

If DOM is 60 then you can't expect an average house to be sold in 60 days if MOI is 7. It is actually only a 25% chance an average house would sell within 2 months and a 60% chance to sell within 6 months!

It is abusing stats if realtors go around saying the average home would sell in 60 days.

HouseHuntVictoria said...

Those are great graphs Double Agent, thank you.

Strange, I wouldn't have thought SFH MOI would be higher than condos. The PCS that I see shows a great many unsold, languishing on the market, number of condos, yet not so much on the SFH side. Must be the high price brackets ($750K+) that are sitting dead?

Anonymous said...

HHV said,

Strange, I wouldn't have thought SFH MOI would be higher than condos...... Must be the high price brackets ($750K+) that are sitting dead?

Yes it is the high end that is having trouble selling. That is why I gave two MOI numbers; one for typical SFH and the other includes all SFH including waterfront and acreage. The typical SFH has an MOI of 4,36 which is less than the condo 5.02.

Anonymous said...

Just for fun I ran the MOI numbers for March when the market was still hot.

May MOI by category with March in []

SFH typical** - 4.36 [2.78]
SFH (all) - 5.52 [3.75]
Condo - 5.02 [4.55]
Townhouse - 5.53 [2.98]

In March there were 372 typical SFH sold vs. 332 in May. But listings jumped from 1035 in March to 1449 in May

The boom in Victoria is sooo over. No wonder you see so many changes on the Price Correction Service (PCS) as panicky sellers try to unload after the market has peaked.

** SFH typical is single family homes that are non waterfront and non-acreage. (i.e. what typical buyers would purchase)

Ryan said...

A side-note to the original post, young people planning to sell a condo to buy a house are actually better off if they get 'stuck' in the condo. Because of the way leverage works, those in a more expensive home stand to lose more money if the market drops proportionally.

Consider two hypothetical owners. Both bought $250,000 condos with 10% down, and have since seen the value of their condo rise to over $300,000.

James was able to sell and after fees and taxes got $60,000, which he used to buy a $600,000 house with 10% down.

Debra was hoping to do the same thing. But the market has started dropping, and condos aren't selling for $300,000 anymore. Debra is 'trapped' in her condo, unable to trade up.

Over the course of the real estate crash, the market drops 50%. Let's be even more aggressive and say the market for condos drops 60% due to price decompression. Debra is upset because she's still trapped in her condo, with no realistic path to ever owning a SFH. She sees that condos dropped more than houses, and curses her "bad investment". She owes about $100,000 more than her condo is worth.

James on the other hand was able to ride the wave up and buy a SFH with his "equity", carrying out the plan of most condo buyers. But he owes about $240,000 more than his house is worth. And his mortgage payments are $2000 a month more.

Obviously, the best way to ride out the real estate crash is to rent. But the second-best way is to have the cheapest "investment" you can. The very worst thing is to take on a lot more debt and buy a more expensive asset right before the crash. Which is what a lot of people seem to want to do.

Skeptic said...

Right on schedule.. The BCREA and that clown Cameron Muir are predicting prices will keep rising in BC even though there will be fewer sales.

Here is the article in the Vancouver Sun. You can expect the same pump story by Carla in the TC before the sun sets.

Housing sales expected to ease before increasing in 2011: survey

Residential sales are expected to ease back three per cent this year to 82,350 units, before bouncing back four per cent in 2011 to 85,900 units, according to the B.C. Real Estate Association.

The average residential price is forecast to climb six per cent to $494,600 this year around the province and increase one per cent to $499,700 in 2011.

"Strong consumer demand in Vancouver, Victoria and the Fraser Valley was largely responsible for driving the average home price in the province higher over the last three quarters,” added Muir. “However, demand has moderated in those markets and a larger inventory of homes for sale has pulled market conditions into balanced territory, providing less upward pressure on home prices."

This guy hasn't made one prediction that lasted more than a few months. But he keeps on making price and sale predictions down to the nearest 100 in 2011. What a fool!!

You can read the entire BCREA press release (Carla's upcoming article) by clicking here (pdf)

CD said...

Double Agent / others:

I have a friend who's neighbor just sold for 587 and was posted as unconditional sold for 487. It was a mistake and he contacted the Realtor about it and it has not been changed. How much work is it to correct a sale price once its sold?

Thanks in advance.

NanHousing said...

If people here think Victoria's tide is turning, you aint seen nothing yet.

Here are last month's numbers for Port Alberni/Tofino:

SFH: 17 sales/311 actives
Condo/Townhouse: 4 sales/79 actives

Animal Spirit said...

Nanhousing - do you have similar data for Duncan/Cobble Hill? We are thinking about looking up there eventually.


NanHousing said...

Here are all the stats for different places on the Island:

Duncan isn't doing very well either.

Houses 78/517
C/TH 14/212

NanHousing said...

By the way, for Port Alberni the DOM is only 53 despite the 17/311. There is no way it will take an average house 53 days to sell.

Actually, 17 people knew they had to bail out and sharpened their pencils and got their places sold quickly. The other 300 or so are still twiddling their thumbs.

Animal Spirit said...

Thanks Nanhousing - so median price in Cowichan Valley / Duncan is 360K for SFH, 440K approx for Cobble Hill, with only a slight increase from last year.

The question is then is the 150K discount to Victoria median house (assuming same value, quality) worth the hour drive in each day.

And how much the decrease will be in the next year there. I'd give it the same rate, same length of time, starting from a lower base price.

Anonymous said...

Do you remember Helmut Pastrick, another BC economist who could never get it right - even once? He is back in the news but he woke up and smelled the coffee...

The market’s jagged little pill

Helmut Pastrick, chief economist for Central 1 Credit Union, explained the forces at work in a market that softened four months ago and will continue to soften for several more months.

There’s worse affordability, he says, for low-equity buyers because of higher prices and mortgage rates. There’s less pent-up demand from the pre-recession and recession period, and there are tighter new mortgage rules. As for supply, Mr. Pastrick says more listings have definitely come onto the market.

“This combination is leading to lower prices following the run-up out of the recession.”

Here is another interesting article. National Bank economists get it...

Housing market could have ‘wind knocked out of its sails’

National Bank of Canada worries that the impact of rising interest rates on the residential housing sector “could be dire” in Canada.

“Though the Bank of Canada has done well to set its rate normalization process in motion, the fact remains that the stakes at play are high, with home prices and household debt at record levels relative to income,” economists Matthieu Arseneau and Yanick Desnoyers said in a report today. “... The residential real estate sector, which is extremely sensitive to interest rate fluctuations, could have the wind knocked out of its sails if interest rates do nothing more than normalize.”

HouseHuntVictoria said...

HP still can't help himself. I can't believe these clowns are still using terms like "pent-up demand." If he's calling for lower prices that makes me worried it wont happen ;-)

Just Jack said...

On an annual basis prices for homes in Victoria's urban municipalities are up 8.9 percent from this time last year. However, the volume of sales has dropped 36 percent over the same sale periods.

In February of this year the median house price in the urban areas was $630,000. That median price has now dropped to $603,000 with property values dropping on average at a rate of 1 percent per month.

The substantial drop in sales volumes indicates that, due to the demand-driven downturn, prices will continue to drop at no less than 1 percent per month for the immediate future.

One could speculate that this rate of decrease might accelerate from 1 percent. However, we are so early into the downturn that an increasing rate trend is not perceptible.

Today, a prospective purchasers has more product to chose from and decreasing prices. If you can't find the home you want today, wait until next month when there will be greater selection at lower prices.

Skeptic said...

As predicted in my earlier post TC Carla has done a quick cut and paste job of the BCREA news release. It was too late in the day to get a comment from a local realtor pumping the market so a bit of the VREB May press release was added instead.

B.C. home sales to fall while prices climb, analyst predicts

omc said...

It has been a funny market lately. Earlier last week there was almost no new listings and some sales were shown. The sales were mostly from conditions being lifted when I looked at them. My PCS has been picking up lately for price changes and new listings, but almost no sales. Next Monday looks like it may bring some grim stats.

omc said...

Yikes, I just read that TD bank is now predicting a 6-7% average decrease in house prices in the next 3 quarters for the whole of Canada. If that is averaged over the whole of Canada, I wonder what they predict for overheated Victoria.

I can't find the article, but only read a reference to it on the G&M.

HouseHuntVictoria said...

^But Cameron and Carla told us prices are headed up? I'm so confused... all signs point to down, but these impartial analysts wouldn't steer us wrong would they?

Skeptic said...

You have to read the Globe & Mail to get a non-pumper view of real estate in Canada. Here is the latest article..

House prices to drop: TD

House prices will fall in 2011, TD Bank said Wednesday as it revised its outlook for the Canadian real estate sector.

The bank left its forecast in place for 2010, saying there should be about 475,000 transactions at an average price of $350,000. That’s a 9-per-cent increase compared to the end of 2009.

“However, this hides an underlying shift occurring over the course of the year,” said TD Bank economist Pascal Gauthier. “While we anticipated sales and prices to be strong in the first half and to cool in the second half, we now expect this contrast between the two halves will be sharper.”

This is amazing. Phil Soper, LePage's chief pumper, isn't buying the latest CREA report.

On Tuesday, Brookfield Real Estate Services chief executive officer Phil Soper told the company’s annual general meeting that CREA’s forecast is likely out of date, and the market will be notably softer in 2011. The company owns Royal LePage and Le Capitale.

“It’s likely too conservative, but they have the direction right,” he said. “Affordability is eroding in Canada, and higher prices and more expensive mortgages will push people out of the market quite quickly.”

Folks the pumpers are now saying it's over in 2011 and hoping to buy a little more time. Surging listings and falling sales say it's over now...

Just Janice said...

The answer is: Cameron and Carla both have mortgages and can't afford for prices to decline...

The market is changing...which means before my bean hits kindergarten (bean is due in July) we will likely be able to buy something at a price that at least approaches reasonable value... without mortgaging away the bean's future.

a simple man said...

How things have Oak Bay three months ago it was relatively rare to see prices reductions and sales were typically within $5K of asking, and sometimes above.

Now the standard is price reductions within the first month, if not sooner, and sales considerably less than asking in most cases, even after reductions. Often sales below appraisal.

Sanity returns slowly. And we are just getting started.

Anonymous said...

Fairfield is holding up nicely however. It'll probably be the only place in BC that won't go down one red cent.

a simple man said...

Hi Fairfield...

Some houses in your 'hood:

631 Cornwall S: $580K-->$559K

1049 Redfern S: $550K-->$515K

A few recent sales below asking...but you are right, it does seem to be faring a little better than other areas.

Anonymous said...

Sales are tanking in Calgary too. Check out the graphs from this Calgary realtor.

May Sales by Year

Early June Sales By Year

This is starting to happen across the country. A realtor I know in Saskatoon is reporting the same thing.

Buyers are moving to the sidelines everywhere

Olives said...

Everyone knows it's different in Fairfield.

My realtor friend's spouse says many of her listings are now chasing the market down (and not catching it). Not an issue in Fairfield of course.

Anonymous said...

Yes Fairfield is different...

In my office we see price reductions in all regions of Victoria except Fairfield. Fairfield is a magic place with beautiful homes and a certain cachet that is beyond explanation. Sellers expect a premium price and buyers are always prepared to pay whatever it takes to move there.

Alexandrahere said...

Hello all.....if you look at my June 1st post at 2:23, you will see some Fairfield home sales that took place after some pretty solid price reductions.

Truckloads of price changes taking place in my areas of interest. Trying to check each "new" listing to ensure it isn't a "re-list", as the term "BOM" is seemingly now an elusive term for Victoria realtors.

Rhino said...

If you look in 'fairfield's profile he has the same icon image as the dreaded Johnny Horton troll from the real estate talks website....Hopefully it is just a coincidence but beware.

think said...

Hey Fairfield,

MLS#278452 was 749900 now 727000
MLS#277815 was 799000 now 750000
MLS#278017 was 795000 now 749000
MLS#277020 was 725000 now 698000
MLS#275115 was 789000 now 749000

...and guess what - none of these are sold! And there are a bunch more but I'm getting bored of listing all the price reductions. Markets going down and fairfields going with it! Sell now or ride it down - 10-20% by Christmas!

Just Jack said...

Not all of Fairfield is good. I think the only area where prices will not go down one red cent would be along the west side of Wellington between the 200 and 400 block.

omc said...

tsk tsk think,

that house on Linden didn't start at $789 and reduce to $749. Where is your Fairfield spirit. Check out mls #276236, it started at $849,900! Fairfield is dropping faster than the rest of the market in the over $800k range. If you look at it Fairfield is probably the most overpriced in the area; small lots, crap houses and Vic high for the kids.

a simple man said...

New listing today on Caddy Bay Rd...the last line says it all..

"5 Br, 2 Ba Family home in Oak Bay with many recent updates while still maintaining character features. Coved ceilings & hardwood flrs on the main with 3 bd, 1 ba (jetted tub), LR, DR & updated kitchen opening to rear deck.2 more bd down,1 ba w/heated flrs & bright family rm. Other great feats & quality renovations are gas throughout (appliances, huge hot water heater), skylight, vinyl windows, newer roof & gutters, updated plumbing & water service, updated 200amp service & wiring, newer garage dr w/xtra driveway prkg. Great location right across from Willows school, close to Estevan Village & Willows Beach. Seller will lease back for good money."

think said...

simple man,

yes - I saw that new listing too and thought the same thing. It does say it all.


oops, you are absolutely right - gotta remember to dig through all those off market listings to get the REAL starting price!

This ride is on the downhill for sure. I sense a bit of panic starting to set in for some... especially if they own in Fairfield ;)

WiseInvestor70 said...

WiseInvestor70 said...

Just Jack said...

The winners of the WORST knowledgeable real estate agents goes to:

A tie!

The listing agent for 106 Medana, that listed the property for $595,000 and it sold for $750,000. Missed the mark by 26%

And the list agent fo 4553 Cordova Bay
listed for $750,000 and sold for $500,000. Not even close boys.

If an agent is off by more than 10 percent -they shouldn't get a commission.

Skeptic said...

Remember Tony Joe the former VREB president, real estate pumper and head spinmeister... He is spinning again on his Facebook page.

June month to date: 129 sales, 349 new listings, total inventory 4446. June 2009 stats for entire month: 946/1436/3794. Remember, sales were strong this time last year so a comparison may not exactly be accurate however the continued increase in inventory means sellers may no longer be in the drivers' seat.

ROTFL - When sales were higher YOY he trumpeted the stats in his press releases. Now that they are negative they aren't accurate? Does this guy believe his own BS?

Spinning stats is like using crack cocaine. Once you start it is really hard to kick the habit.

WiseInvestor70 said...

MLS 279960
SF Det 1238 Union Rd SE Maplewood $559,900

MLS 275961
SF Det 1141 Union Rd SE Maplewood $474,900

I wonder who is going to sell first, especially if 275961, has been on the market for 68 days ??

Skeptic said...

And now back to our regular programming... Canadian Press reports:

Housing starts drop in May, in latest sign Canada's housing market is cooling

New home construction slowed in May as the number of startups last month fell below economists' expectations — the latest indicator that Canada's once white-hot housing market is cooling off.

Canada Mortgage and Housing Corp reported Tuesday that the annual rate of housing starts dropped last month, pegging the rate at 189,100 units in May, down from a revised 201,800 in April.

Derek Burleton, vice-president and deputy chief economist at TD Bank Financial Group, said starts dropped in May despite unseasonably warm, construction-friendly weather in Central and Eastern Canada and were the first major setback for home building in several months.

"Today's data suggest that the rebound in home-building activity from last year's recession is quickly running out of steam," he wrote in a note Tuesday.

"Prior to May, starts had rallied strongly from a recession low of 112,000 units in April of last year. In the first four months of the year, starts had plateaued at the 200,000 level."

He added that TD Economics anticipates average resale home prices to decline by six to seven per cent over the next four or five quarters.

"A bigger culprit (than the HST) however, is easing price conditions in the broader housing market, as sales continue to come off the boil and more listings make their way onto the market," Burleton said.

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