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| H/T to Double-Agent for graphic |
Required further reading. H/T Skeptic
From the article: Real-estate agents talk about the three Ds: death, debt and divorce. These are the forces that push owners to sell.... once Labour Day passes, people who put their plans on hold during the summer will begin to move forward. Owners may list their house or condo because they have a new job in another city or they need more space. The opportunists who were looking to take advantage of [the] “just craziness” in the spring are gone. [Agents are] being called to evaluate lots or properties in preparation for a fall listing. “They’re coming to the market for a reason, not just to cash out,”
Required further-further reading
From the article: Canada's economy would sustain damage as the wealth effect shifts into reverse. Still, a correction is the solution, not the problem, and preferable to allowing the bubble to persist. Ottawa's activities during the recession spared us greater misfortune, but we have yet to pay the bill. It's in the mail. And it's going to sting. (emphasis mine)
43 comments:
HHV,
Thanks for posting the graph. Here is another one...
2010 has lowest summer sales in 10 years!
VREB will have to keep talking about experiencing "normal 1990's sales" for the foreseeable future.
and "normal 1990's sales" is not a fair comparison to now as it compares the numerators of the data (raw sales number), but ignore that denominator (absolute number of houses in the Greater Victoria region): while the raw sales numbers may be similar, the total houses now compared to the 1990's is dramatically different (see Langford, Colwood, etc).
If you were to take a percentage of sales for the total housing pool, it would be far, far worse than the numbers suggest.
Might vreb make this calculation for us?
Or **maybe** we can do it ourselves.
Single family home (SFH) sales over a million dropped considerably in July. Have these big money types figured it out? This will get worse as the weather changes (think cold, windy waterfront).
May - 394 SFH sales - 24 over a million dollars
June - 326 SFH sales - 27 over a million dollars
July - 299 SFH sales - 15 over a million dollars
Fewer high end sales will push the reported VREB average price lower in the coming months.
@ a simple man:
Here's the population for the CRD from 1986 through 2009: BC Stats link. You are absolutely correct that the comparison should be based on the total number of houses. I'm sure that housing numbers corresponds with the population growth ...
Household units in the Victoria area, if I recall correctly, are roughly 2.2 people per unit.
Our average growth rate between 1986 and 2009 was about 1.268% annually.
Stands to reason then that sales volumes should "even out" along those lines right?
A more accurate measure then would be population adjusted from 1999 levels (or current if you believe the VREB spin) of 500ish, up to 600ish to account for the increased number of households.
Essentially, we're experiencing 17% less demand currently than we would have experienced in 1999, adjusted for household unit inflation.
Of course, these numbers aren't all that accurate because they assume that household unit inflation was mirrored in actual number of units built, which I can't claim.
I spent last weekend enjoying time with family on Pender Island. Compared with a year ago, the amount of real estate (lots, cabins, houses, time-shares, etc.) for sale was astounding. I would guess at 300 to 400% increase. I suppose that recreational property is the "first to go" during a market slump. Prices are already sliding ... they will be plummeting by 2011.
DavidL: I also have spent some time recently on Saltspring and in Parksville and I saw the same thing - particularly on Saltspring.
thanks for the great stats and graphs, double agent. Would it be possible to get a graph of the composite summer sales (June-Aug combined) like the first graph of this post? I think it would be telling.
With a great big chunk of the summer out of the way I'm getting the anecdotal accounts of things slower on the business front in Victoria. Not dead slow, but not busy enough to make up for the winter months.
Businesses have made a few cuts over that last year of things slowing down, but they seemed to be easy cuts. I'm curious and worried what we'll be talking about by Feb. or March of next year. I have a feeling a much larger number of businesses will be making moves not to help their bottom line, but to keep their doors open.
simple man - I think this is what you were asking for...
June-to-August Sales by Year
2010 is even worse than 2007 and we all know what happened then. Looks like one has to go all the way back to 2000 to find fewer summer sales.
BTW - My estimate is for around 475 MLS sales in August. This requires sales to continue at the same rate observed in the previous two weeks.
Fantastic - thanks Double-Agent. And I suspect that if 2010 sales were adjusted for total available houses and 2000 was done the same (ie. houses sold/total houses in Capital region), the percentages would be similar.
Our neighbours to the south see home sales plummet in July. Our sales are way down as well.
Good summary article in the Globe and Mail.
Recovery hopes slip as U.S. home sales tumble
If the stock markets keep falling Canadian consumer confidence will drop and our home prices will accelerate downward.
Between my BMO and RIM, the last coupe of weeks have not been pretty for me.
Now that sales and prices are falling we don't seem to hear anything from the housing bulls.
This may explain it. Life on the Internet
yup...I miss bubble and Fizz(le) and am glad I don't have to buy him a beer this fall...unless the market does a 180...
youtube video showing how excellent the construction is on some model homes. You're going to wanna mute the music.
Can someone with some construction back group (Marko) comment on the obvious terrible quality.
I've never built a house, but I did a lot of work in theater, and I've built sets stronger than that.
Engineered I beams are stronger than the traditional solid wood ones. I see nothing wrong in that video other than that crappy car at the end.
How robust are the neighbourhoods around Cadboro Bay, Mt. Tolmie and North Oak Bay. My family recently relocated to Victoria and we are in a rental but looking to buy a home. We can afford the current pricing in these neighbourhoods (with a mortgage, of course!) but I'm optimistic that prices will drop.
@ Robert Reynolds - GBA
Yeah, I saw the same video linked from Garth Turners blog (greaterfool.ca) last night. The engineered I-beam aren't really a problem - check out this comparison of wood I-beams versus sawn lumber for floor joists.
I am not a carpenter or home builder - but to me there were other issues were that were apparent: uneven spacing between joists, long nails protruding through the flooring, questionable support for the steel beams, etc.
My father's house was built in the late 1950's. It is "rock solid" with excellent construction. My house was built in the late 1970's and is well made - but not as well as my father's house.
Houses constructed in the past 10 or 15 years often appear to be poorly made. (I've checked out partially constructed show-homes and friends houses.) Don't get me wrong - I'm sure that there are some excellent house builders out there. I believe that during the recent housing construction boom, there have been many novice or apprentice builders who have been using substandard building techniques.
I wouldn't be surprised if during the pending housing slow-down, that construction quality improves.
@ NewVicResident:
I don't have any experience with North Oak Bay, but both Cadboro Bay and Mount Tolmie areas are highly desirable. Prices are a bit lower in the Mount Tolmie area as it is further from the ocean. Prices in both areas appear to be softening.
If I were in your shoes, I would rent for the next couple of years until it is clear how far down the market is heading. I am convinced that the money spent on rent will be less that the drop in average house prices ... just my humble opinion.
Yawn. Thanks for remembering me, simpleton! This softening of the market reminds me of 2008, and we all know how that ended!
^Who woke the sleeping troll?
Banished I say, banished. May you buy a house before the bottom and sell before the top!
Oh god not the myth of the solidly built 1950s house again! "They sure don't build them like they used to!". Yeah they stopped doing things like put cancer causing asbestos in everything, using cast iron plumbing which rusts away rather quickly, not using vapor barrier, using clay weeping tiles, and the nice and deadly in a fire BALLOON FRAMING. I would never in a million years buy a house that's more than 20 years old. No way.
As for the video it's pure bunk. The house isn't finished yet, there's still bracing in place which means the framers aren't done. The nails that missed the joist? Does this cause a problem in some way? Big deal some guy with a nail gun missed the mark a few times so what.
@ fairfield: Oh god not the myth of the solidly built 1950s house again! "They sure don't build them like they used to!". Yeah they stopped doing things like put cancer causing asbestos in everything, using cast iron plumbing which rusts away rather quickly, not using vapor barrier, using clay weeping tiles, and the nice and deadly in a fire BALLOON FRAMING.
I agree that housing from almost any era have problems - in the 1950's it was asbestos, in the 1970's it was aluminum wiring, in the 1990's it was leaky condos (walls sealed too well), etc.
The 1950's house that I was referring to was built in Victoria in 1958. It was built with copper pipes, cement pipes around the perimeter, and platform framing. Granted that the vapour barrier was poor and the insulation even worse.
The house was designed by an builder/architect who also acted as his own general contractor. In the same neighbourhood, he built a number of houses sequentially, finishing each house before starting the next. Each house had a differing design and each designed to take advantage of the "lay of the land". High-quality materials were used and the construction quality was excellent. The man was obviously a perfectionist.
This approach to quality is far superior (but more expensive) that the cookie-cutter approach taken in new subdivisions during a "boom cycle". Building a quality home can be done at any time ... I just haven't seen many quality homes recently.
Bubble 'n Fizz(le) said...
This softening of the market reminds me of 2008, and we all know how that ended!
Not sure if has ended yet but I do know that BOC dropped its o/n rate from 3% to 0.25%. Not much room for that now.
@ NewVicResident
Nothing wrong with any of those neighborhoods. Tolmie went up up later than Oak Bay and caddy bay and is dropping sooner, but all are in the same boat. Any of the better closer to town areas will weather the storm a bit better than farther out areas.
We are a bit in the same boat, we can afford but are expecting a drop. I am from Vancouver originally.
Greater Victoria is one of the smaller cities in Canada, being 15th on the list by population. The Greater Victoria area is then divided into 13 municipalites and then into 137 neigbourhoods, like Mt. Tolmie, Cadboro Bay and North Oak Bay by the real estate board. These neighborhoods are set by their location, generally using the arterial roads or natural features as boundaries. The neighborhoods are not set by household incomes or average home prices in each area, although people of similar education, social standing, income levels, and interests etc. tend to clump together. The singular reason why these neighborhood descriptions are generally reflective of the various groups is because these geographical boundaries are so small in size.
For example, during the last 30 days -
2 homes have sold in Cadboro Bay
6 homes in Mt. Tolmie
0 homes in North Oak Bay
So with this miniscule amount of data, it is not possible to say if one neighborhood is increasing or decreasing in relation to another except by the least reliable of methods which is anecdotal.
This goes to the heart of one of the most overused and least understood phrases in the real estate agent's handbook used to sell homes.
-location, location, location
A phrase that everyone knows what it means, but few people have the same answer.
Does it mean the city
Esquimalt v.Oak Bay
Your neighbourhood
North Oak Bay v. Uplands,
Your street.
Foul Bay v. Dallas Road
Your site
Corner lot v. cul-de-sac lot
And would all of the above, be universally the same for everyone.
For example if your 60 or 16. Located close to the Jubilee hospital. Is this good or is it bad. Fernwood close to downtown?
So what does, location, location, location really mean? In a town as small as Victoria, not very much. Of course there is still some prestigious neighborhoods of similar homes like Uplands, but with Broadmead, Bear Mountain, West Hills, that prestige might just be losing some of its luster.
Just Jack: tsk tsk....Bear Mountain--prestigious? Give your head a shake. Are there greater fools than those whom purchased in that location? Well, except for those who purchased a pre-built condo in the Bayview. Also look at "prestigious" Broadmead. Many of those homes are also losing their luster. Probably in that case though is because suite rentals are not permitted in the area period.
Of course you know I am just bantering with you.
@ Alexandrahere
I hadn't realized that the Bayview Condos are now being sold as "100% QUALITY. 50% PRICE.".
I see what you mean!
Wow - what does 50% off a new condo do to the condo market? Why would you pay more for an old, used condo than a brand new one for 50% of new? I would think this would have precipitous effects on the condo market.
And how do you feel if you bought in the Bayview last fall at full price?
Bear Mountain is offering 25 to 40% off.
Doesn't the developer need to get all suites occupied in order to complete the development? Perhaps someone with more knowledge can please explain ...
Home prices as measured by CREA are expected to fall a further six to seven per cent through the rest of this year
WOW if they say is going to be 6 to 7 % I would say it will be between 20 to 30% this year alone. Then 2011 will be worst than that as all the people who pulled out their properties off the market thinking next year would be better will flood the market
I was just checking out (online) the Camden Green development in View Royal. Prices start at $169,900 for 406 sq ft = $420/sq ft. But wait - they throw in two free mountain bikes with your purchase!
I wonder how much these micro-suites will sell for in a few years' time ...
According to my PCS, 2904 Shakespeare St (MLS® 280587) just dropped from $495K to $430K - subject to court approval. Yeeks!
There are currently about a thousand condominiums listed for sale in the Victoria CMA.
In the last month 290 condominiums were listed for sale and 142 were sold.
I'm thinking that with the drop in sales, we now have a "glut" of condominiums.
Here's how the median price has changed for each month this year.
$299,900 and 116 sales in January
$279,900 and 196 sales in February
$307,000 and 190 sales in March
$299,900 and 193 sales in April
.....CMHC regulations change
$292,250 and 194 sales in May
$299,000 and 179 sales in June
.....HST introduced......
$289,950 and 136 sales in July
$280,000 and 77 sale in first 3 weeks
extrapolated to 107 sales for August and a price of $275,300.
One year ago (3 weeks in August)
$294,950 and 162 sales. The month
ended with 225 sales and a median price of $290,000.
Two years ago in August of 2008
$278,750 and 164 sales.
Three years ago in August of 2007
$275,250 and 225 sales.
Four years ago in August of 2006
$258,000 and 183 sales.
Five years ago in August of 2005
$211,500 and 179 sales.
So prices have rolled back three years for condominiums. If you bought four years ago and had to sell today, you'd break even. If you'd bought five years ago, and sold your suite today you'd have enough for a 5% down payment plus some money for closing costs on the purchase of the typical Gordon Head box, and still you will need a suite to make the payments.
So while the condominium value has gone up $63,800 in the last five years, the typical detached home has gone up from $428,000 to $562,000 or $134,000. I think this pretty well kills the idea that buying a condominium today is a good way to get into the detached home market.
If condo's have gone up $63,000 and houses $134,000 your ROI for a condo is on par with a SFH, particularly when you take into account LTT, Property taxes and potentially interest payments (all sunk costs that don't contribute to appreciation). The exposure vis a vis a leveraged investment is also reduced. I would suggest that the lower price point of condo's may in general make them a more liquid asset also. Either way, anyone who thought they would buy a condo to "trade up" to a SFH was in denial - why would condo appreciation exceed SFH appreciation, and given an equivalent percentage increase the increase in absolute dollars would be greater in a SFH. The only way to get ahead in the condo game is to marry someone else who has a condo and sell them both to afford a SFH!
Just in case anyone thought that optimism was dead:
http://photoshare.shaw.ca/messages/viewthumb/5127382933-1277327380-94719/parm/page/1/15/
Sorry, don't know how to imbed a hyperlink...
Blogger DavidL said...
According to my PCS, 2904 Shakespeare St (MLS® 280587) just dropped from $495K to $430K - subject to court approval. Yeeks!
See now that is just plain F*ucked up......I look at a piece of junk like that and honestly think maybe 200K and even that is too much but of course have to assign a premium cuz it's in Victoria (yes I'm being sarcastic)
Please tell me you are giddy because it dropped 65K?
I see stuff like that and realize we have a loooooooooooooooong way to go before anything makes sense again in Vic. UNBELIEVABLE!
I think the bank may be waiting a while for its money. Mind you still plenty of morons out there so who knows.....heck with such a HUGE discount you should easily be able to "flip that house" for an easy 50k profit. Just check out HGTV its a cinch!
@Mark
Of course the price is ridiculous for 2904 Shakespeare St. My point was that whoever is managing the court-ordered sale deemed that slashing the price $65K was the only way to get the house sold.
Incidentally, I'm not in the buying market. I'm busy getting my mortgage paid off as quickly as possible while rates are low.
Hi Mark and DavidL;
You both make important points - that prices are still too high (significantly so) and that some are beginning to see that this summer was the start of a big price erosion and the only way to get a sure sale in a market with few buyers is to slash prices substantially.
DavidL - thanks for bringing this property to our attention - I think this is one of the powers of this blog and why I love it.
Mark - thanks for your comments - they are equally true - prices have long since been rational here.
Respectful discussion and debate is terrific.
That is a considerable price reduction for the Shakespeare property. Especially when a one-storey home, on the other side of the park, with only 1400 square feet of floor area sold a year ago for $495,000. Current prices being close to what they were a year ago.
Personally, I think this is one of the less desirable areas in Fernwood, Oaklands, or Sears neighborhoods, because its too close to the fast food joints that have wrecked havock on my waistline. Its also a corner lot which is at the expense of having a private back yard. So even though this home is 500 to 900 square feet larger (depends if you want to call finished attic space a room or not), I think its slightly less than the one that sold a year ago.
If the interior of the home is in well kept, then I think the agent is trying to stir up a lot of interest, possibly to cause an auction environment. Because I would put the home at 10 grand less than its assessed value of 472K.
With five bedrooms and two baths, its a starter home for a large family. Tough to do with money at $600 per $100,000 or roughly $2,400 per month requiring a $90,000 a year income needed to qualify for the mortgage. But if you have a growing family and a middle income wage household, Victoria is not the place to be.
Interesting to see what kind of activity the property will get this weekend. Will there be multiple offers or will the agent add 5 lbs scarfing down Big Macs at the open house whilst waiting for a buyer.
@ Just Jack
Interesting analysis.
KFC, McDonalds, Dairy Queen - all within walking distance. (Oh my!) ;-)
@ Just Jack
Hopefully if the market "corrects" enough Victoria can be a place for a growing family and a middle income. That is obviously a requirement for a vibrant city. There's no intrinsic reason why housing needs to be so expensive in Victoria (its not like there's tonnes of high income jobs driving up the demand side), its just psychological. With the City's decision to focus on urban villages for 40% of future population growth hopefully we'll see some further densification around the city which should exert further downward pressure on SFH (particularly ones near a mall, but nothing else of consequence). Of course there will always be rich enclaves in a city like Victoria, but the "rising tide raises all boats" mentality doesn't make sense in this market. I lived (and prospered) through the AB boom, where working at Tim Horton's drive through paid $18.00/hr and night crews as Superstore made almost $30.00/hr. That created more wealth in the market which drove housing prices - from what I'm noticing in Victoria that's definitely not the case (my wife is a lawyer and the salaries here are about 60% what they were in AB, so it extends to the professions as well as the semi-skilled).
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