Monday, August 16, 2010

Mid month numbers

Courtesy of Marko Juras and Double-Agent in last post comments.

Sales for the last week jumped to 108 from the anemic 78 in the first week of August.

Sales [volumes] can vary from week to week so we [Double-Agent] calculate(s) a rolling average based on the last 4 weeks of data. The current level sits at 113.

Extrapolating we should probably see about 420 sales for August. This is the worst level of sales in this decade!!


New listings are on the usual, seasonal downtrend. Active listings have dropped slightly but remain stubbornly high.

The overall months-of-inventory (MOI) has been climbing over the last year and will probably be close to 10 by the end of the month.

Prices are already dropping and this trend is suspected to continue in light of all the recent media attention.

You can clearly see that 2010 has had the worst June, July and August sales in 10 years! This defies the HST tax myth being pushed as the reason for low sales. Sales were at 10 year lows before the tax went into effect.

56 comments:

Alexandrahere said...

Double Agent:

One thing though that I believe to be true but am not 100% sure of is that: on transfers and on final re-locations, the government pays for the costs of selling a members primary residence within certain boundaries. So at least their "must sell" doesn't hurt them as much as it does for many others.

DavidL said...

AlexandraHere said: the government pays for the costs of selling a members primary residence within certain boundaries

You are absolutely correct. You can read about it here: http://www.njc-cnm.gc.ca/directive/index.php?sid=111&hl=1&lang=eng

Just Jack said...

We are now reaching back to sales volumes of a decade ago. So at what level does our market become dysfunctional. Looking back at past sales volumes, we have some examples.

In 1981, annual sales dropped to 1,690 and the marketplace was devastated.

In 2008, annual sales dropped to 3,355 and our prices were sliding down at a rate of 1 or 2 percent per month.

In 2009, annual sales rebounded to 4,117 as did our prices.

Now we are looking at sale volumes of a decade ago which were 3,220. And we are seeing anomalies in the marketplace where demand is the weakest, in properties in the outlying districts, acreage and waterfront. And market activity is retracting quickly back to the urban center.

So, it may be a good time, to sell that 400 square foot loft and buy a house in the country. While, there is still a window of opportunity. A window that will close when the market has retracted further into the urban core and that loft may just become unsaleable!

Alexandrahere said...

Thanks DavidL, I'll save that administrative order for future reference perhaps.

Just Jack said...

The agents are blaming the fall in sales on the HST.

It seems that home buyers in BC and Ontario are so dense, that they could not figure out that the HST affected new home sales only.

And by extension, Calgarians must truly be as intelligent as petrified wood as their sale volume fell by 41 percent too. Obviously, they thought the HST in BC and Ontario would affect them too.

Why not point to a more universal and obvious reason. Its tougher to buy a second home in Canada. In otherwords, 30 to 40 percent of the market has been purchases of non principle dwellings. Which has been ongoing for the last half dozen years. Thousands upon thousands of secondary homes have been bought in Victoria, using Home Equity Lines of Credit, for speculation.

Would you like your mortgage super sized with your Mcmansion? Jumbo mortgages that are designed to clog your financial arteries. As prices continue to roll back to 2007, 2006, 2005, etc, levels, more and more Victorians will find that the equity feast has left a bi-weekly for the next 30 years.

So, we just lost a quarter or more of our market. Would you not notice losing one of your car wheels on the way home from work? So how many other wheels have to fall off this cart before buyers notice?

Just Jack said...

... will find that the equity feast has left a bi-weekly "taste in their mouths "for the next 30 years.

Bad Proof reeding skills

Need to get a bigger screen or smaller eyes

Double-Agent said...

HHV - Thanks for putting my graphs up in a new post.

Here is another interesting one for you. click here

You can clearly see that 2010 has had the worst June, July and August sales in 10 years! This defies the HST tax myth being pushed as the reason for low sales. Sales were at 10 year lows before the tax went into effect.

Long time readers know that I have stated, on more than one occasion, that 2010 is looking a lot like 2008. The second half is clearly looking worse from a sales standpoint but the rate of drop is very similar as shown in the graph above.

On the prices front here is a quick recap from a previous post...

VREB does have a non-public report that breaks out typical residential properties from acreage and waterfront. Here is the the average sales price of typical homes over the past few months.

May - 609K (646K)
June - 586K (649K)
July - 582K (615K)

In () is the overall average reported by VREB in their monthly news release to the public.

One can clearly see that the average price of a typical home has been dropping for two months and the overall average of all types of housing dropped considerably in July.

In my opinion this is just the beginning...

Double-Agent said...

More info on prices...

I track Saanich Central, West & East as a benchmark area because it is popular with first time buyers. In the price range from 400 to 625K there are currently 175 homes for sale and 46% have had one or more price reductions. There were 8 sales last week.

Looks like more price reductions will be coming this week....

If you need to sell now it is important to price your house realistically. Active MLS listings are near record highs and sales, already at 10 year lows, will experience the usual seasonal downtrend until next January. Competition is fierce. List for slightly below market value so that you stand out from the other homes on the market. Of course the property needs to be spic and span, decluttered and ready for showing at a moments notice.

WiseInvestor70 said...

China's house slaves and real estate bubble

The world is about to experience another big depression soon, I already feel sorry for people that is heavily indebted.

Here over Vancouver you can start smelling the disaster on the air. Specially when I was able to negotiate my rent, for half of what my existing landlord is paying on his monthly mortgage payments.

Skeptic said...

A number of times I have read that people who don't get their price will just take their house off the market and list next spring. They are gambling that prices will rise again but they could lose bigtime.

Globe and Mail - Canadian home sales sink 30 per cent in July

The housing market stalled in July as sales sank 30 per cent from the same month a year earlier, the Canadian Real Estate Association said Monday.

Prices edged up 1 per cent from July, 2009, though they slipped 3.5 per cent from the previous month, with sellers finding far fewer buyers willing to step into the market.

The average resale price nationally was $330,351, according to CREA. In June, the price was $342,662.

We expect a downward correction of nearly 10 per cent in the monthly average prices, followed by several years of stagnation of price growth at the rate of inflation, in order to bring Canadian house prices back to balance,” Toronto-Dominion Bank economist Grant Bishop said.


In cities like Vancouver and Victoria with high property prices the drop could be much worse. Next spring sellers could be in for a big shock. Time will tell.

HouseHuntVictoria said...

Skeptic, you bring up an interesting point.

Many people believe that cities like Victoria and Vancouver are more desirable than elsewhere in Canada and this is why prices couldn't possibly fall much here. Yet the data clearly shows that the ultra-low sales volume in cities like Victoria and Vancouver are dragging down the national sales volume numbers.

It's clear from the experience in many cities around the world - many of them as desirable or more so historically - that cities which experienced the most price appreciation went on to experience more price depreciation when compared to the so-called less desirable cities whose price run-ups were less significant.

With excessively low sales volume in Victoria and excessively high active listings numbers, it doesn't take more than a rudimentary understanding of basic economics to understand that prices must decline for as long as current market conditions persist.

Mindset said...

Was just checking my PCS and thought I would throw some numbers out for those without a PCS account. Unless houses are mint or in a fantastic location it looks like many are selling for under assessed value.

Examples: 1979 Lansdowne rd. Assessed 640, just sold for 600. 6.5% under.

2096 Avondale Rd. Assessed 723, sold for 645. 12% under.

1546 Ryan St. Assessed 381, sold for 352. 8% under.

2706 Richmond Ave. Assessed 455, sold 410. 11% under.

What a difference 90 days makes. Am I the only one that finds it a bit unnerving how fast things swing around these days?

Rhino said...

Mindset,

I agree the turnaround has been swift but lets keep things in prospective.

Look at your PCS account at all the SFH under 400K. Basically nothing all garbage. 400K is a hell of a lot of money for a young family even if you have 2 working professionals. I saw way more under 400 in 2008/early 2009, so I am not excited yet.

patriotz said...

Many people believe that cities like Victoria and Vancouver are more desirable than elsewhere in Canada

Then why aren't people willing to pay more to RENT? Rents are the same as in Calgary or Toronto.

It's simply a bubble.

JustWaiting said...

Patriotz,

Good point.

People pay the rent that they can afford and it is a monthly cash expense not based on credit. Rents will only rise to the level people are willing and able to pay.

In a real estate bubble city like Victoria buyers will take on more mortgage than they they can afford and scramble to make the monthly credit payment. They do this because they mistakenly believe prices can only go up and this is an easy path to riches. Many will soon learn that experience is a harsh teacher.

JustWaiting said...

I think it is too late for us to learn anything from the US housing crash.

Private Market Can't Work

.

Just Jack said...

My believe is that rents are similar in these cities because base line wages are also similar. Thus, the landlord is constrained in how much they can rent there suite. Raise the rent too high and your suite goes vacant, as the working poor can no longer afford to rent your suite and move on to different accommodation.

So rents are more tied to the income level of the working poor. And while most of the people on this blog may have chosen to rent, the fact is that most renters don't have that choice and are renters by necessity.

Housing is however different. People in Oak Bay or Bear Mountain are living there by choice and not necessity. Perhaps the housing market of the lower income neighborhoods around the downtown area are more in line with the rental market. As these buyers are closer in household incomes with renters, in these depressed neighborhoods, buyers are purchasing more by necessity than by choice.

But as household income increases so does your choice of homes and neighborhoods. So any relation between rents and prices now becomes imperfect.

In a deep recession or depression, that may change as asset wealth is destroyed. But the price to rent ratio is not the reason for the destruction of wealth it is the change in economic conditions that is now now affecting the "chosen" people.

The contrary view is, if the government were to raise the minimum wage to $20 per hour, then renters could pay more for rent and the price to rent indicator would be more in line with the long term trend, but that wouldn't make housing less expensive.

The price to rent and the household income to price indicators also miss the affect of low interest rates or larger down payments from "flipping" properties as people move up the property ladder. Nor will these indicators provide any solace to those caught in a housing downturn as markets tend to over correct.

Just Jack said...

"In a real estate bubble city like Victoria buyers will take on more mortgage than they they can afford and scramble to make the monthly credit payment. They do this because they mistakenly believe prices can only go up and this is an easy path to riches. Many will soon learn that experience is a harsh teacher."

I think just waiting has a good point here.

Going a little further on this point.

In past bull markets people did not have access to fast easy credit and home equity loans. With the steady increase in prices and falling interest rates people have been able to finance themselves out of court action by lenders.

As prices now begin to roll back to 2007 levels and interest rates begin to tick higher, this option is obliterated. In my opinion, if CMHC had not backed the banks, the banks would have tightened up their standards along the lines of the USA with a similar result.

But CMHC has to answer to the people of Canada and this increasing ginormous liability if not restrained can damage the high ratio financing market in Canada. If investors pull away from buying the Mortgage-Backed Securities created by CMHC, then I would expect a Canadian made version of the Freddie and Fannie Mae melt down. And since our property values are now starting to roll back and more people will no longer be able to refinance themselves out of court action, those MBS's, like in the states, will become toxic, as the return on these MBS's fall and the people of Canada will no longer accept paying the difference to the investor.

All we have done has been to defer the inevitable in Canada.

HouseHuntVictoria said...

JJ,

You mean the government of Canada by "investors" here, right?

"If investors pull away from buying the Mortgage-Backed Securities created by CMHC, then I would expect a Canadian made version of the Freddie and Fannie Mae melt down."

patriotz said...

People in Oak Bay or Bear Mountain are living there by choice and not necessity.

Yeah, but rents in Oak Bay or Bare Mountain aren't any higher than in comparable areas of other Canadian cities either.

The "rents aren't higher because renters are poor" argument doesn't hold much water.

Rents aren't out of whack with prices in Victoria because renters are poor, they're out of whack with prices because there's a speculative bubble.

Just Jack said...

I think our inner city market probably peaked at the start of the second quarter and the typical home has come down by some $40,000 since then or some 6 or 7 percent over the last three or four months or an average of about 2 percent per month.

I believe our house prices in the inner city municipalities will have rolled back to the same level as 2008 by the end of this month with the volume of sales year over year down by 40 percent. The MSM (except maybe for one) has turned on the housing market like a pack ravenous Rottweilers. And Canadians are realizing that home ownership has a downside. The "water cooler" talk is now negative on housing. Fear has begun to grip the investor, speculator and prospective home owner and they have pulled back by 30 to 40 percent in purchases. And Garth Turner's visit to Vancouver has sold out. Yikes, does anyone need any more proof.

On the flip side, opportunities do exist, but most home owners will not consider anything that have to do with real estate. But that's why there are opportunities, because while everyone is an expert in a rising market, only a few know how to reposition themselves in a falling market to take advantage of market anomalies. Future profits will be smaller, but there will be profits.

I know of people who bought in the city and hate their neighbors and have always wanted acreage. But instead of selling their overpriced city war shack and buying a house in Metchosin for the same price are putting on a 200K addition because they are unsure of the market. No, there is no logic - just emotion. And fear has the power to incapacitate most of our actions.

Just Jack said...

The government of Canada guarantees the return on MBS's, but you or more likely insurance companies and other investments groups can buy them. They pay about the same as a GIC - which sucks but they are secure. I hope.

Skeptic said...

Today's Real Estate News...

TD forecasts 10% drop in home prices

Canada’s real estate market is due for a “moderate correction” with homes that are anywhere from 10 to 15 per cent overvalued, says the TD Bank.

“TD is the latest major financial institution to rain on the real estate parade. Other Canadian economists have said the market is overvalued by as much as 25 per cent. The Canadian Real Estate Association (CREA) also revised its figures downward this month.


Toronto housing slump deepens

The slump in housing sales accelerated in August, the Greater Toronto Real Estate Board said.

Sales in Toronto were down 29 per cent in the first two weeks of August compared to last year. The average sale price was $412,934, 3.5 per cent lower than mid-July.

-----------------

Looks like Victoria has company. Marko reported dismal sales for the first two weeks i Victoria yesterday.

Just Jack said...

Renters don't have to be poor, some chose to be renters for numerous reasons. So yeah, you can find a "business" man renting an Oak Bay home for $4,000 a month, but is he the norm?

I believe there are two groups of renters, the largest are the "working poor" The people who have difficulty in saving for multiplicity of reasons. They could be making 70K a year, but they spend most of it buying 'pez" containers on ebay - or whatever.

Then there are the ones who are saving for a home, they are looking for good accommodation for their money, but cheap enough so that they can save. Again, they could be making 70K a year, by selling pez containers on ebay, but saving most of it.

So yeah your're right the "poor" renter can be seen as an inaccurate generalization. But of the two groups, the first group is the majority, and the majority set the rental rates.

Now, the second group does have a choice, they could spend more of their income on rent, but they choose not to. When you have choice, you have economic power which puts downward pressure on home owners in Oak Bay that are trying to rent their homes to "good" quality tenants. A slum landlord doesn't have to worry about tenants and can gouge on rent as there is always one more potential renter out there. But there aint too many "business" men willing to part with $4,000 a month. Because the main reason he is willing to spare the 4K is that the benefit is massively larger than the cost. While the "poor" renter is paying a large portion of his income with very little or no benefit.

So, some how you have to work in the value of this "benefit" or the amount of personal savings of group 2 that could also be spent on rent. Otherwise you will have an infinite amount of price to rent ratios that are changing constantly.

I think house rents do increase proportionately with most house prices at the starter home level. But start to vary widely at the middle income house level and are disproportionate when you are in the upper income house range. So, today a house near Mcdonalds on Pandora rents for $1,500 a month while a home in Uplands is $4,000. But the difference in house prices is $500,000 versus $5,000,000. So can we have a bubble only in selective parts of a market - I don't think so. If a real estate bubble "pops" then all segments of the market are affected.

I think a better argument would be to look at what you pay in rent versus the monthly mortgage payment. If the difference is increasing then you would have a possible bubble forming. But that can all change if Ottawa drops the interest rate from 7 to 5 percent. Or raises in from 5 to 7 percent.

I think the only way you can tell if you're in a bubble is after it pops. That's not to say that prices are not ridiculously expensive and unsustainable, its just that the price to rent ratio by itself, doesn't tell you anything about when things will change or how much they will change for some of the reasons shown above.

Just Jack said...

Another thing to keep in mind is that only 3 or 4 percent of the population are annually in the real estate game. And that 3 or 4 percent sets the lending values for the remaining 96 or 97 percent of the rest of the homes. And with the recent drop in sales volumes we could be on our way down to 2 percent of the population pricing the properties in all of Greater Victoria.

Kind of spooky. If sale volumes continued on their downward trend, it could be possible for the lack of sales to hit a critical point where the market becomes dysfunctional. Back in 1981, that could have been 1 percent of the market. Maybe, that's more important than any other indicator, when there are no longer sufficient sales to create a functional marketplace. Maybe thats a better indicator of a bubble, simply the long term annual sales volumes in Victoria. So it would be something like prices go up with sustained sales levels over 3500. Prices moderate at 3000, prices drop significantly at 2,500 and the market is dysfunctional at 1500 annual sales.

Alexandrahere said...

Yesterday that much talked about house at 3038 Foul Bay Rd sold for $475K, down from original asking price of $599K.

Jack you know that I and many others thoroughly enjoy all of your posts. Your sense of humour, in your case shows true intelligence. But Jack?....that dream of yours of a house in Metchosin isn't the dream of all.

Myself, I love walking to Beacon Hill Park....one block away....strolling Cook St. Village...one block away....walking downtown (thru the much pumped up Humboldt Valley) 4 blocks away.
Not to mention corner stores,corner gas, theaters and simply an overall pedestrian friendly lifestyle. Many of us would feel totally isolated and automobile dependent in Metchosin and other "rural" areas.

But...... to each his own.

Just Jack said...

Oh gawd, I could never live on acreage. I forget to water everything. I have a little garden right now and its pathetic. The last few sunny days have dried out a lot of leaves. If I want to expierence the country I just look out of the window of my Viper as I cruise along the highway making sure that the windows are up tight, so I don't get any of those country smells.

"Green Acres is the place to be"

-Darling I love you, but give me Park Avenue.

Sweetrealtor said...

3038 Foul Bay should never have been priced at $599K. Crazy! I know the comment gallery is very informed here and will keep seller's lofty ambitions in mind when comparing sale prices to listing prices.
It never ceases to amaze me how much some homeowners think their property is worth. This "my house is a castle syndrome" is further complicated by some agents trying to "buy a listing" by coming in at an overinflated listing price (as mentioned in a previous post).
A listing price close to market value is and always will be the most important factor in selling your home. Followed closely by good presentation and quality of performance of the agent or homeowner in charge of fielding inquiries.

Just Jack said...

But the house was "appraised" at $578,000 in April and sold for 475K. Were the home owner and the appraiser the same person?

I mean that's quite a difference between the appraised value and the sale price. Do you think the listing agent should get their money for the appraisal back? Or maybe the agents should hire them more often?

Now when I read in a listing, the property was appraised at .... I will think the property is over priced. Oh well, we all make mistakes, I know that if it were not for my fabulously good looks, I could have gotten in deep doo doo many a time. But, that's the cross I have to carry in life, that and having 6 toes on one foot and that re-occurring fungi problem - but I'll save that for another post.

Sweetrealtor said...

Appraisers (IMHO) come in high when doing the appraisal for a seller and low for a buyer. With the market taking big plunges and swings, the appraiser really needs to come back and re-evaluate if months have past. We just did this on a listing of mine and the appraisal was quite different after 3 months had passed. Costs money to get them to do the revision though.

Alexandrahere said...

I'm glad I invested some savings a few weeks ago. The interest rates for GIC's were unbelievably low (I thought). Today I looked at the five year rates and compared them with just a couple of weeks ago:

5 yr GIC non redeemable rates:

Ally: then 4% now 3.6%

GIC direct: then 3.88% now 3.4%

Community CU then 3.75% now 2.1%

ING: Has been constant at 3.25%.

What are the baby boomers going to do? Sell their house's at greatly reduced (expected) prices and live on the proceeds at a max. of 3.6%?
All those years the CFP's kept forecasting their investments at an average of 8%. So they thought that $600,000 they would get for their house would bring in an income of $48,000 annually (at 8%). And now they will only be getting $22,500 annually (at 3.6%. Maybe it would have been better for some to have "lived it up" during those working years and just retired on the GIS.

Just Jack said...

So true Alexandrahere;

I think the only reason real estate is still active, is that the equity and bonds are so pathetic in their rates of return. A lot of boomers are getting their equities and stocks eaten up with inflation and fees. While Goldman Sachs computers skim the pot. Too many computer programs buying and selling stocks based on speculation rather than the assets of the companies.

As for appraisers coming in high or low depending on the client. Do they charge more for that service? I mean if you're going to cook the books, one should be paid well for it. If they aren't wouldn't that just make them ..... ah stupid as well as crooked.

I mean in this case the appraiser, missed the value by $103,000 on pretty much a standard box house. That's almost 18 percent or nearly the standard down payment. If that ain't crooked - it certainly is incompetent. How many brokers use this person? - a lot of them I bet. How many mortgages are over valued by 18 percent? I mean there is a difference in opinions - but 18%.

I'm thinking a medieval stockade in market square and a bucket of rotten tomatoes here. Or how about $103,000 in damages if you had bought the home based on their report. 5 percent, I can understand. Even 10 percent because he/she ran over the neighbors cat before going to the property - but 18 percent on a box!

patriotz said...

And with the recent drop in sales volumes we could be on our way down to 2 percent of the population pricing the properties in all of Greater Victoria.

Exactly, which is why the "homeowners won't sell so the market won't go down" argument is so bogus. All it takes is a significant number of investors to try to sell - without matching demand - for the market to tank.

And of course some homeowners always have to sell anyway.

So many people just don't get this.

Just Jack said...

I agree, if the volume of sales dropped that low, then the only properties selling would be the ones that HAD to sell in a fixed time period. And the only thing an agent could do is keep dropping the price to entice offers.

That is, as long as two prospective buyers don't lock horns on the same property. I see this happen at Lunds and Kilshaws auctions. Two middle aged women duking it out over a mirror glass picture of John Travolta in Saturday Night Fever.

So sad. --- but entertaining!

Alexandrahere said...

Hmmm...for my single family housing this week in Vic;SE,SW,OB&Esq price range: 375K to 775K min 2 beds, 2baths, I have 10 solds reported. For the entire week last week I only had 10 sales.

Except for that one on Foul Bay, most of the houses sold for close to asking.

853 Reed 499K sold 505K

1231 Judge 624K sold 619K

631 Avalon 629K sold 625K

1956 Brighton 599K sold 605K

1144 Loenholm 749K sold 738K

This weeks start is a change from the last few.

DavidL said...

In 1981, the population of Greater Victoria was about 234,000. In 2010, the estimated population is 345,000 (a 47% increase). In 1981, the total SFH* units sold were 1,690 (see link below). Does this mean that we will be seeing a repeat of the 1981 RE slump if current sales of SFH drop to just 2500 per year? Who can predict what might happen in 2011?

Of course, economic conditions are totally different now than in 1981: variable interest rates are at 2.75% (instead of 17%), houses cost about 5 times more than in 1981, consumer dept has now grown "through the roof" (with easy credit and absurdly low interest rates), and with 35-year amortizations with 5% downpayment being common for first-time homebuyers as compared with the maximum 25-year amortization/10% downpayment allowed in 1981.

It's a different situation - but could the results end off being the same? Check out the 17% drop in the average SFH price from 1981 to 1982: http://www.vreb.org/pdf/historical_statistics/YE782009.pdf

*SFH = Single Family Home(s)

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

Alexandrahere,

I clear out all my solds and offmarkets every Sunday. In the last two days only 6 of 588 listings that I track have sold. All were under 500K but my range is 300-600K. Not high end and not very many...

But I have seen a lot of THIS in the outlying areas.

bullbear said...

Is anyone up for a secular paradigm shift?

http://www.bis.org/publ/work318.htm

Graph 3 shows Canada's forecasted demographic impact on housing.

"these economies are projected to experience the negative impact of ageing from 2010 onwards. As baby boomers age, they reduce their housing stock - and thereby depress prices..."

"In sum, the estimates suggest that real house prices will face substantial headwinds over the next forty years due to ageing."

jsan said...

Here is an interesting piece looking at the current Australian housing bubble and baby boomers, with lots of quotes on the topic from the Federal Reserve and BIS.

http://www.unconventionaleconomist.com/2010/08/population-ageing-is-bad-news-for.html

From the blog writer:

"A key driver of Australian house prices since 2000 has been the explosion of negatively geared housing investment as the Baby Boomer generation reached their peak earnings age and started 'saving' for retirement by speculating on housing. But with the Baby Boomers soon to enter retirement, they will no longer be able to negatively gear. Further, since rental yields are pathetically low (around 3% after costs) and with the potential for continued capital appreciation diminished, it is highly likely that the Boomers will dump their investment properties en masse in order to fund their retirements, thereby causing a nasty housing correction. That's if a sharp slowdown of the Chinese economy doesn't burst our bubble first."

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

The housing debate has resumed over at KIV. Interesting comments but the denial by some is understandable. I guess no one wants to hear that prices are falling in their area.

Take Langford for example. Last month sales, average and median prices for single family homes (SFH) were way down. This can clearly be seen in the official VREB stats. July 2009 June 2010 & July 2010

July 2009 sales - 59
June 2010 sales - 42
July 2010 sales - 29

July 2009 Median Price - 456,000
June 2010 Median Price - 554,950
July 2010 Median Price - 460,000

July 2009 Average Price - 470,571
June 2010 Average Price - 586,802
July 2010 Average Price - 499,407

Sales are half of what they were last year! The high end home market has stalled in the Westshore with 50% of house sales now below 460K in Langford. No wonder there are so many price reductions on MLS.

Skeptic said...

Readers might be wondering how sales went last month in the other areas of Greater Victoria. Here is an extract from the VREB stats I posted earlier.

Area - July 2010 - July 2009 - YoY%
Victoria - 36 - 46 - down 22%
Victoria West - 4 - 7 - down 43%
Oak Bay - 21 - 25 - down 16%
Esquimalt - 10 - 23 - down 57%
View Royal - 6 - 9 - down 33%
Saanich East - 72 - 92 - down 22%
Saanich West - 22 - 50 - down 56%
Central Saanich - 14 - 23 - down 39%
North Saanich - 10 - 14 - down 29%
Sidney - 4 - 22 - down 82%
Highlands - 2 - 2 - same
Colwood - 7 - 29 - down 76%
Langford - 29 - 59 - down 51%
Metchosin - 2 - 8 - down 75%
Sooke - 17 - 49 - down 65%
Waterfront (all districts) - 11 - 13 - down 15%
Total Greater Victoria - 267 - 471 - down 43%

Area - July 2010 - June 2010 - MoM%
Victoria - 36 - 40 - down 10%
Victoria West - 4 - 1 - up 300%
Oak Bay - 21 - 14 - down 50%
Esquimalt - 10 - 14 - down 29%
View Royal - 6 - 8 - down 25%
Saanich East - 72 - 51 - up 41%
Saanich West - 22 - 28 - down 21%
Central Saanich - 14 - 11 up 27%
North Saanich - 10 - 14 - down 29%
Sidney - 4 - 12 - down 66%
Highlands - 2 - 3 - down 33%
Colwood - 7 - 22 - down 68%
Langford - 29 - 42 - down 31%
Metchosin - 2 - 2 - same
Sooke 17 - 24 - down 29%
Waterfront (all districts) - 11 - 16 - down 31%
Total Greater Victoria - 267 - 302 - down 12%

How can anyone honestly look at this sales slump and the near record high inventory and say the market is "balanced" or that prices won't fall?

DavidL said...

Thanks for the great sales stats, Skeptic! I guess that for some people "de-nial" is a long river in Egypt ...

Alexandrahere said...

Wow, thanks Skeptic for the sales run down in all areas.

Mark said...

I think we are entering a very interesting time for condo sales in the Victoria area.....

Up until now I believe the developers and realtors were in cahoots, artificially keeping prices of the newer condo developments up.

Bayview and others have already started advertising big ass discounts but several others developments are now showing their desperation by offering rent to own....now that's a keen idea! AND when we speak to the realtors representing the devlopers they are screaming "BRING ALL OFFERS" ALTHOUGH THEY AREN'T REFLECTING ANY DISCOUNTS IN THEIR ADVERTISING. The Ovation comes to mind.

I think we will be seeing deep deep discounting and possibly auctions in these building....yes I said it AUCTIONS! People forget it happened in the mid 90's Condos will be the first to get hit and keep in mind many of these are "investment properties" Then the dominoes will start falling.

Bring on the carnage!

Rhino said...

David, can you really blame people for being in denial though. Over the last 10 years any hiccup in the market, has resulted in a roaring comeback. I think it will take a few years to change that psychology, especially in the SFH market that is not overrun by speculators. Also with ridiculously low interest rates this is going to be a long grind IMHO.

HouseHuntVictoria said...

We're going to see a lot more of this: cash strapped home owners depending on suites trying to get too much money with too many restrictions in non-typical rental neighbourhoods with months of vacancies ahead.

DavidL said...

In 2002, I purchased my Saanich home before the market started overheating. At that time, a typical SFH in Victoria was selling for 3 to 4 times the typical family income. For most of the past 60 years, this "3x" factor has been typical for SFH across Canada. (Of course, a generation ago, a family income was often just one income.) These prices were affordable and sustainable.

Recent prices for a SFH in Victoria have been 8 or 9 times the typical family income. How someone could think that real estate prices could continue to grow in a depressed economy in beyond me. I've been telling friends for at least five years that they are better off renting and saving the difference for when the market crashes. I have been surprised that it has taken so long for the market to peak and begin to fall - but this has been primarily due to government tinkering (low interest rates, extended amortizations, etc.)

Unfortunately, real estate has been marketed as an equity rather than for what it really is: a huge dept obligation. Greed/ignorance causes people to speculate in real estate with the promises of ever-increasing resale value. I have been very disappointed with how mainstream media and real estate boards have been essentially promoting a "get rich" pyramid scheme for the past 7 or 8 years.

I feel badly for anyone who has got themselves into unsupportable dept. I have some friends and neighbours who will soon be in a negative equity situation. I can understand why it may be difficult for them to face reality.

Just Jack said...

For most of the last three decades, homes were being purchased at 3 to 4 times income. Indeed many lenders used this a "rule-of-thumb" for mortgage lending. However, the interest rate was for most of this time hovering around 10%.

In the last decade, our banking system has been opened up to competition, mostly from the states and our once conservative "rules-of-thumb" have been replaced with risk management and acceptable losses that are based on the assumption that real estate prices, in the long term, always increase. Along with an interest rate that cratered below 4%.

At one time, lenders were taught to be conservative as they were protecting the savings of the depositors, today they are told to leave their ethics at the door. Appraisers that were known to intentionally over value properties were at one time "black listed" by the lenders. Today, most appraisers have become "toy boys" to brokers and bankers.

CMHC's role was a one time to assist people that had difficulty in getting bank financing. Today, CMHC is an insurance policy for the banks allowing them to make big profits with little risk, as the tax payer writes the cheques.

The government swung the vault doors open to tens of thousand of Canadians with O down 40 year mortgages along with other loose policies. Then a few years later reversed the policy thereby entrapping these people in a market of falling prices as the cut off the supply of cheap credit for new buyers.

And we blame the couple who buy a home at 8 or 9 times their income for creating all this mess! For most, all they ever wanted was a home, like their parents, and their parents had. And now they're about to be swindled out of that.

By halving the interest rate and lowering standards, We have seen income multiples and rent to price ratios double.

After all a man, dying of thirst, will drink arsenic laced water. As long as their is not enough arsenic to kill him. The trick is to know when to stop drinking.

Or you can do what the bears do
-drink beer.

Skeptic said...

Not all the Realtors® think HST is what killed the market. Shayne Fedosenko, a Pemberton Holmes Realtor® in Sooke wrote this letter to MP Keith Martin saying the collapse is all about new mortgage qualifications regarding suite income.

Pemberton Holmes on Facebook

Brand new houses in Sooke, down to $299,900 from $399,900, no calls. The market has dried up all due to financing. I talked to 7-10 mortgage brokers and many agents while I was at the Victoria Real Estate Board golf tournament and everyone is scared. Hundreds of foreclosures coming, about 75% of the home owners could not qualify to buy their own houses (especially with suite).

Last month there were 300 home sales on the Lower Vancouver Island with 4700+ listings. One of the worst ratios ever. End of June is supposed to be the closing day of the year. Every Realtor has a few nightmare bank stories right now.


Seems like a different story than VREB's balanced and stable market news releases

kabloona said...

HHV, no kidding about the over-priced suite wa-a-a-y out in the boonies in Shawnigan Lake. Who is the landlord trying to kid....herself? Obviously, nobody is buying it....$740 per month for that dump?

Then one poster tells her to lower her price and get realistic and she clearly doesn't appreciate the dose of reality.

Some people....

Alexandrahere said...

When the mortgage comes due for these owners the banks will not make them "re-qualify" for a mortgage. They are not in the real estate business they are in the loan business. As long as the homeowner(s) are making there monthy payments there will be no problem. However, unlike when they first took out there mortgage, they won't be able to wheel and deal with the bank. In other words they'll most likely pay the posted rate. Sure they will be able to "look around" for something better.....but only if they "qualify" will it do them any good.

Alexandrahere said...

sorry folks I really do know how to spell....should check my grammar/spelling before posting.

itoka said...
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itoka said...
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