Wednesday, September 8, 2010

Piling it on

I have to admit, I'm not sure why the Bank of Canada raised the overnight lending rate today, but they did.

I don't see too much optimism in any Canadian markets right now, at least inflationary optimism anyway.

I doubt if variable rate mortgage interest rate changes will have much impact on the local real estate market, which appears to be trending down in both sales volumes and average prices while listings remain stubbornly high:

 h/t Double-Agent for graphs

The gap between variable and fixed-rate mortgages is narrowing. But it matters not really. Public sentiment is what matters most to this market moving forward. If people overwhelmingly believe prices are falling and the bubble is bursting, the pressure to buy a home will change to "What were you thinking buying a house in this market?" Today's interest rate change will likely only slightly impact sentiment, making people believe affordability is getting worse, not better.

What are you hearing at the water cooler and when you drop your kids at school?


Mingoman said...

A flattening of the yield curve is deflationary!

Russ said...

Good morning bears,

Long time stalker, first time poster.

Thought I'd share the highlight of my morning with you. This is the opening sentance from the most read article in today's Globe + Mail:

"As Canada’s housing market softens, the question for many homeowners is how much prices might decline "

Look out below! This sucker is headed down

a simple man said...

Thanks Russ and welcome to the fold.

I agree - as the mass media turns its attention from RE being a savior to now being an anchor prices have only one way to go.

Emotion is powerful.

HouseHuntVictoria said...

A funny little video chronicling what we hear all too often in real estate.

WiseInvestor70 said...

Housing Woes Bring a New Cry: Let the Market Fall

WiseInvestor70 said...

"Canada has seen two classic real estate bubbles – Toronto in 1989 and Vancouver in 1994. In Vancouver in 1994, prices declined an average of 21 per cent in three and a half years. The bubble was likely caused by declining mortgage rates throughout the 1990s. The Toronto 1989 bubble saw prices decline 27 per cent in five years. The bubble had multiple causes, the most relevant of which was a substantial population influx mixed with declining mortgage rates from the highs of the early 1980s."

Why the housing market may be heading for correction

Alexandrahere said...

Good morning Russ and welcome.

How much will more will prices decline and then how long will the entire marker stagnate for? The stagnation this time could last for years.

Robert Reynolds - GBA said...

That video is golden. Garth does have a nice full beard...

The rate change today is purely political, the BoC said rates would go up 25bp and they did.

The bond market is showing the opposite trend. Though now is a good time for people in Variable Rate Mortgages to switch to a fixed rate if they are so inclined.

Anecdotal, but the last few months I have had fewer clients looking for mortgage insurance on new homes. Probably a sign of fewer sales. I always sold the least expensive policies possible to these clients, so while I am seeing a drop in sales, the revenue generated isn't as much as some agents that try and sell big expensive policies.

I have seen a resurgence of inquiries for disability insurance though, which I found shot way up when the economy tanked. My thinking is people think about loosing their job, and having no income, and make the leap to "What if I get hurt/sick and can't work?"

itoka said...

Not related to mortgages directly, however our rent just went down! I think it is related to the number of suites competing with apartments and condos. We did suggest that we might move one year from now as there are more places available. This was not a threat, just the reality that our rent had been going up. One month into the increase and we got a call to say it would come down. :)

DavidL said...

@itoka said: Not related to mortgages directly, however our rent just went down! I think it is related to the number of suites competing with apartments and condos.

I've heard similar stories of recent rent reductions with home owners who rent suites finding out that they need to drop prices a bit (up to 10%). I think that it likely relates to ongoing economic uncertainties and persistent higher unemployment. Basically, if you are a renter who is "spending too much" on rent, you want to downsize ASAP. Renters can downsize with as little as one months notice while homeowners (mortgage payers) need to wait for a qualified buyer who is willing to pay the asking price. Landlords want to keep good tenants and will offer them rent reductions to keep them there. With rents decreasing, real estate values won't be far behind.

DavidL said...

HHV said: I have to admit, I'm not sure why the Bank of Canada raised the overnight lending rate today, but they did.


"We're seeing two forces at work here," said Bill Maurin, chief financial officer of Meridian Credit Union, based in central and southern Ontario. "One is the [Bank of Canada] trying to slowly raise interest rates to curb inflation. Second, you have a lot of investment going into the bond market. This is pushing up the demand and prices of bonds and adding to the pressure on interest rates."

itoka said...

"Landlords want to keep good tenants and will offer them rent reductions to keep them there."

I think you are right David. We have never been late with our rent payment, are quiet, keep the place spotless, are double-income no kids or pets and in the last 5 years have not needed anything repaired etc. In effect we are the "ideal tenants."

We spoke to the real-estate agent and she said compared when we were apartment hunting 5 years ago, today there are a lot more options thanks to suites and fewer tenants to compete with.

Leo S said...

Hey Marko, what happened to your discount MLS listing only option? I was just going to use you as an example on another board but I see it's not listed as a choice anymore...

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

and yes, I make my buyers aware of all the risks.

HouseHuntVictoria said...


So VREB isn't abiding by the rule changes then and resorting to direct pressure to get you to conform?

Why am I not surprised? No wonder the Competition Bureau is going so hard after these organizations.

msr said...


You should let the competition bureau know about that little discussion. I'm sure it would go a long way to helping them take the realtors down a peg or two.

Marko said...

I don't know exactly what the VREB stance on it is, I haven't talked to the VREB. I was told by a managing broker that there are still some logistical issues with "mere listings," I just uploaded the property, you do the rest. Every real estate boards can interrupt things differently. I have a lot of things going on, so I just decided to drop it for the time being until I have time to read all the rules, regulations, and policies.

Things are changing so quickly that many people are not familiar with a lot of things. I've already been to the accountant twice to get my cash back books in order. The first 70% commission cash back cheque my brokerage cut out as 70% + HST to my client, now is this right? or is this wrong?

I am dealing with a lot of new things right now, and I am a new agent, so....

I'll let you guys know what's going on with "mere listings" as soon as I know. Kind of sucks that you can't put the clients name on, all the calls still have to go through the listing Realtor.

Anonymous said...


VREB and some realtors I know are hoping that things will get better now that summer holidays are over and folks are back to work. Nope - September will be just as bad. Please add the graph that I posted in the last blog topic to the ones above. Thanks..

2000-2010 September Sales

Readers with PCS accounts will probably be noticing a pickup in listings this week but few sales. Lots of price reductions too. Those that have to sell are trying to unload but they waited too long to list. As supply-demand pressure intensifies this fall market values will continue to drop.

However realtors that don't BS their clients, track the market and are good at negotiation do OK in any market. The old hands have seen downturns before and know what to do. If you plan to buy or sell in this market choose your agent carefully.

Marko said...

I really don't think there is this huge monopoly that people make out real estate to be. First of all, I've sold lots of homes privately before I had my license. It can easily be done.

Second of all, if you want on MLS you can list with One Percent, you can find someone privately to do a "mere listings."

When buying, I offer 70% cash back, other Realtors offer 50% cash back, and very few people use this.

The other day, I was pitching this to a buyer and she told me that she wanted a full service Realtor to help her buy a home....what do I say to that? What does the competition Bureau say to that? Her choice to go with "full service."

Options are out there, people just aren't exercising them.

Marko said...

I think one of the legalities with "mere listings" was for example, seller gives me false information, I enter it into the system. Buyer buys the home directly from seller, who is liable for the information that was entered falsely into MLS given that the REALTOR was merely advertising it on MLS for the seller.

Leo S said...

Thats why you put in weasel words like most of the listings already out there. "Measurements approx, buyer to verify if important".

a simple man said...

I deplore weasel words.

Much like the building inspectors who have wording in their contracts that basically absolve them from any possible errors they make. Never made sense to me.

Marko said...

Yea, I put it into one of my listings. I obviously couldn't measure the third floor from the outside, so I did it from the inside, adding 4 inches for interior walls, and 6 for exterior walls. Some people do it differently; hence I put in the weasel wording.

At the end of the day, liability is still on me, I can't uploaded a 10,000 sq/ft lot as 5,000 sq/ft and say lot size is approximate and be on my way. I don't think that would go over well in court.

Marko said...

On a side topic, SFH average price is running 664k through the first 8 days of the month, lots of 800k+ sales to start the month.

a simple man said...

I understand the need for weasel words in today's world - but I am just saddened that we need them.

Alexandrahere said...


Perhaps you are right about the "average" price so far this month. But others, take note: On my PCS so far this week there have only been four sales. Also within my criteria of SFH in Vic,Esq,OB,SE&SW, the "average" ASKING price on the 14 new listings this week is $586K.

Leo S said...

Lower sales lead to more volatile prices from month to month. I fully expect there to be a few "up" months still to come on the way down.

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

Fixed rates are rocketing forward.
2.07 to 2.26 on the Canadian 5 year bond yield in the last TWO days.

Anonymous said...

I'd hate to break it to you bullbear but 5 year yields have been bouncing around a lot lately. Call me when they're back above 2.5. Until then 5 year mortgage rates are in a holding pattern around the 3.5-3.8 range.

DavidL said...

Did any one else notice lots of updates to their PCS today? After being relatively slow for the past week, I've noticed many new listings and almost as many price changes. No new sales, though.

a simple man said...

I would like to create a new award, given weekly, to the shadiest maneuver witnessed on the PCS.

We can call it the "Weasel", much like the Oscars, etc.

My nomination for this week's weasel award goes to 2081 Kendal Ave, who listed on Sept 3 for $879,900 and repriced today for $879,000. The obvious attempt at gaining our attention has worked.

Any other nominations?

Just Jack said...

Two decades of condo prices in Victoria as shown by the resale of the same condominium.

$145,000 January 1990
$147,000 July 1991
-interest rates around 9 percent
$180,000 August 1994
-interest rate still around 9 percent with a building boom in Victoria. a $100,000 cost you about $800 a month to finance. More people leaving Victoria than moving to the city as BC was not the place to be. The cost to rent a home was about the same as the monthly mortgage payment for the same home. Commonweath games are just finished - although you can still see some old timer who can give up the dream and are still wearing the jackets today.

$149,500 February 2000

$ 90,000 September 2001-leaky condo
Rents were higher than the monthly mortgage payments, but it was difficult to save the down payment.

Down go the interest rates- up goes the prices

$260,000 May 2005
Now cheaper to rent the home than to buy it. Mom and Dad give all the kids money to buy homes by using their lines of credit.

$335,000 May 2007
CMHC opens the barn doors. The horses, cows and a flock of chickens escape. Canadians applaud themselves for having prudent banks that have save Canada from an American style downturn. They celebrate by taking a trip to Europe and putting the cost onto their lines of credit.

$305,000 September 2010
CMHC locks the barn doors.
Homeowners are looking at higher interest rates for a devaluing asset for the foreseeable future. The volume of buyers falls off to the lowest level since the year 2000. Listings increase as the front end baby boomers begin to sell off their excess properties.

2012 Jeb Bush runs for president on the ticket that he can fix all the day traders' computers on Wall Street by plugging them up with voter cards he found in his basement.

The US is bankrupt and can only fight limited wars on weekends. Which amounts to sending Boy Scouts in canoes across the Canadian border.

2014 1/2

Canada surrenders.

HouseHuntVictoria said...

Just Jack,

There's only one problem in your outlook:

2014 1/2

Canada surrenders.

Never. It's more like this: Boy Scouts are met on the beaches of Lake Erie, Lake Michigan and Oak Bay by "armies" of cookie-throwing girl guides who cry the war-chant "1812! 1812!." Unable to resist trans-fats, boy scouts overload their canoes and sink in the bays. Canadians welcome the once-a-soldier-now-a-refugee lads with open arms. Despite the surge in "immigration," the now 3-year-long Canadian real estate collapse continues because the "immigrants" know real estate values can, in fact, go down.

HouseHuntVictoria said...

David, I've seen a flood of activity in my PCS, especially the accounts that track the low-end segments of the market. Very little sales activity, mostly new listings and price changes. There's been a few sales, but nothing of note and mostly around assessed value. Condos are hardly moving at all.

I suspect we will see a significant increase in the average price of SFH in September, perhaps even back above $600K when all is said and done. I suspect little movement in condo and TH average prices.

With so few sales to make up pricing data, volatility will be significant. Don't expect VREB to spin this as market stability though because they know very well that October could bring in similar results to August, which was abnormally low.

The price drop between July 2010 and August 2010 wasn't indicative of a market-wide 5% cut in prices, IMHO. It was more indicative of low sales volume coupled with low high-end sales volume. If we continue to see low sales volume, we can expect wide swings in the reported average prices -- which again, IMHO we will for the remainder of 2010 at least.

Alexandrahere said...

Simple the idea. This site is developing into one with a wild sense of humour.

Dave said...

judging by the "after labour day" listings, we could see a decent increase in inventory.


bullbear said...

Sorry Fairfield, i wasn't aware we had an experienced bond trader amongst us. So you figure a 30 basis point five year bond yield 'holding pattern'? Wow, i can't wait to share this entertaining foresight with my bond broker. So an experienced trader like yourself, you'd be aware of the recent 98% bullish sentiment reading for bonds. You know, kind of like the sentiment reading Dec '09 for Canadian RE.

Marko said...

39 SFH sales so far this month....

Below are averages...

Price List Price Sold Price Original
$686,154 $656,223 $709,187

Definitely room to negotiate!

Anonymous said...


In low sales months the SFH average, that VREB releases to the public, will swing wildly due to the variability of high end property sales. That is why I like to post the "typical SFH" average which excludes waterfront and acreage properties. If you want to track this number and don't have access to VREB data it can be found in CMHC's Housing Now - Victoria report Table 5 issued at the end of every month.

Here is the the average sales price of typical homes over the past few months. In () is the SFH mixed average reported by VREB in their monthly news release to the public. Median is shown in []

May - 609K - (646K) - [595K]
June - 586K - (649K) - [561K]
July - 582K - (615K) - [560K]
August - 546K - (587K) - [549K]

We really need a house price index (HPI) for Victoria. The overall median price of SFH is a better proxy for market value conditions than average price. VREB reports this number every month but they don't graph it. Perhaps you or someone else can do a monthly graph update using Excel.

Alexandrahere said...

I think in order to have a really good feel for the current market one should focus on one maybe two areas and analyze only them.

Gordon Head is a good one. You can watch only the houses built say in the 70's there. There were really only the two floor plans in those years. Both were bi-levels, having the main living area entirely on the 2nd floor. Most of the homes were bought with an unfinished entry level except for the "foyer". The lots were pretty well all the same size as well.

So now all you have to compare is the upgrades and maintenance. What did the house beside it sell for last year? Two years ago? Six months ago?

Another area is Rockheights in Esquimalt. Most of those homes were built in the 60's and again only having about three floor plans and similar sized large lots. So again all you have to compare is the upgrades, (whether it has a suite or not), maintenance and if it has a view.

It gets much more difficult to assess by photo's alone in areas where the houses are all of different ages, sizes and in various states of repair.

Also of course there are many new/newer streets in Langford that all the homes were built within 18 months of each other again with similar floor plans and that pretty well all have suites.

Of course I realize that you all know this....but sometimes you have to go back to the basics or else all of these statistics and charts will eventually drive you mad.

So if that three bedroom 2 bathroom bi-level house in Gordon Head sold for $629K in 2007 and the identical one across the street sold for $585 in 2008, and the one on the corner sold for $685 in February of this year, and now your house on this street has been sitting there for three months at a reduced asking price of $569.....then yes, "average", & "median" house prices are dropping.

jesse said...

I'm not hearing much at all these days, actually. Of those I know who have tried to sell, very few were successful. They simply gave up and decided to try their hands at renting instead. In some cases it has thrown a bit of a wrench into their retirement plans.

But just look at the numbers. I've stated it before, but Victoria is looking even worse than Vancouver in 2008 and we all know what happened in the subsequent 6 months...

The high MOI is approaching stratospheric heights. It only gets worse until March from here on out. Who knows what rabbit's going to get yanked of the hat next year; certainly Vic has plenty of those to go round. :P

patriotz said...

Of those I know who have tried to sell, very few were successful.

If the properties didn't sell, they weren't trying. Any property will sell at the right price.

Someone who lists RE (or anything else) at over market price is only pretending to sell.

Just Jack said...

"if the properties didn't sell, they weren't trying. Any property will sell at the right price."

I take it you mean, the agents were not making an big enough effort to sell the home. Since homes don't sell homes, people do.

A salesman that only relies only on price to sell his goods is not a salesman but a sales clerk. Having said that, it becomes obvious that if the home is not exposed and marketed to the market for a reasonable time, then it may not sell. And with the slowing sales, the days-on-market is increasing.

Since fewer buyers are putting in offers, it only stands to reason that a price reduction may not be the singular answer as to why a property has not sold. The terms are now increasing in importance. Things like closing dates, appliances, window coverings, old oil tanks etc. are taking on more importance to the buyer.

And unusual properties will require a longer exposure. Acreage, waterfront properties are limited markets which may take, under balanced conditions, a year or more to market. So, if you want to sell in 30 days - you are going to have to draw attention to your property over the competition. A sales clerk will do it by price a salesman by service.

a simple man said...

Oak Bay Update - a spike in new listing and a lot of price changes...

Comments form a few people around here that sold recently "Thankfully we got out in time..."

I am willing to graph the median prices if no one else is doing it already - let me know and I will put it in my to do pile.

omc said...

I will second those new listings. My PCS is all of sannich east, broadmead, ten mile, queenswood and oak bay. It has been going crazy the last few days with new listings and price corrections. What is surprising is that many of them are truly new listings, not just relists.

HouseHuntVictoria said...

A simple man...

Ho w about you graph Oak Bay from 2006 on, I will do Gordon Head.

Numbers are here.

a simple man said...

Sounds good - just SFH or all categories (SFH, condo, townhouse)?

Chris said...

HHV, the median price and units sold graphs for Oak Bay are part of what I posted on VV. I did deseasonalize them, but I assure you that's all I did. I can post a graph of the raw data if you like.

a simple man said...

thanks Chris - that would save me some time and I would appreciate it.

HouseHuntVictoria said...


If you link them here I can put them up on the front page. Thanks.

Chris said...

Is the software set to reject posts with links? They disappear. Just "copy shortcut" on the images in the VV thread to snag the links.

patriotz said...

Since fewer buyers are putting in offers, it only stands to reason that a price reduction may not be the singular answer as to why a property has not sold.

The reason fewer buyers are putting in offers is that fewer buyers are willing to pay ridiculous prices. There are more buyers willing to pay lower prices. Downward sloping demand curve, you know.

A property will ALWAYS sell if the price is lowered enough. Always, always, always.

I mean here, not Detroit of course.