Thursday, November 18, 2010

Demand?

This whole brouhaha with the CREA and the Competition Bureau has had me thinking for a long time about what I (we) would like to see happen in the real estate industry.

Personally, I'd like to see open and transparent property related data, freely available (not to be confused with free as in no money exchange for data) and accessible to the general public. The sales industry protects this information with an invisible pay wall - want to see sales price history and other deemed important information about a property? Hire a REALTOR®.

It's true that you can get some of this data by popping round to your local land titles office and paying to see it, but this exercise becomes very cost intense if you're like me and you're wanting it not for the exercise of purchasing one property but for the exercise of trying to better understand how a segment of the market has performed or is performing. Sure Landcorp can get you data series too, but if you're not going to make money off of purchasing it from them then it's a pretty bad investment right?

There's been a transition of reality regarding the housing market in the past 30 years. Previously owning a home provided a family with a stable foundation - owners worked for the same company their whole careers and their home's market value mattered little because buying and selling was never in their medium term plans. The 1980s, 1990s and especially the 2000s ingrained the "property ladder" construct into the boomer generation and their children so much so that the five year plan is considered long term planning by most, both in their career and home ownership dreams. Because of these phenomena, the market is so much more important today, yet the information needed to accurately apply macro data to individual properties and neighbourhoods remains behind an obstructive pay wall. The agreement between the CREA and the Competition Bureau did little to change this.

I think the TSX model would be a great example for the real estate industry to follow. If I'm interested in buying a stock or ETF, I can Google the existing data and make an informed decision. I can track market segments, I can track preferred shares of GM too if that's my prerogative. I don't have to pay the TSX a dime to do so either. Until I pull the trigger and put some skin in the game. Then they get theirs. And who pays 'em? The companies that charge me money to conduct the transaction and the companies that use them to get their investment dollars. Sounds eerily similar to the way the real estate industry already works doesn't it? And that's my point.

The members of the CREA protect data because it makes their phones ring. When their phones ring they have the opportunity to convince you to use them to conduct your transaction. They charge a fee for this service, as they should. Many Canadians believe they charge too much. Some don't, and are happy to pay full commission believing it's in their best interests. Choices existed before the agreement was made, new choices will exist moving forward, perhaps catering to consumer demand, perhaps not.

So what do you want to see? If a real estate brokerage wanted to be forward thinking, driven by the belief that if they treat their customer with openness, transparency and respect, they can build a profitable and sustainable business model, what would you expect them to offer you and how much is a reasonable charge for these services?

83 comments:

Just Jack said...

The agents already offer you a free market evaluation of your home, active listings and will show you comparable sales.

I think what you are asking is to have unlimited access to the data base. For a forum such as this, I understand the desire, but for the average Joe SixPack, I don't see the same need.

It's been a long learning curve for most of us during the last few years. Most of us now have a better grasp of value than the typical agent. And we have learned that the best analysis can be foiled over and over again by government intervention in what at one time was thought to be a "free market" We've learned that common sense is no shield against fear and greed. That prospective buyers are gullible and that first time buyer are expendable with their financial futures greasing the treads of the machinations of the move up market.

Most first time buyers can not comprehend the disaster of spending such a massive proportion of their life time income on something that can be destroyed by an earthquake or a 2 percent rise in interest rates.

A telling story of our messed up society is Colonel Russell Williams a soldier that faced death in the combat zone and attacked and killed at home. But what made this hardened killer break in his interrogation was not a lifetime behind bars, military court martial or shame, it was the fear that they would tear his home up to look for evidence.

The fear of his home being messed up was more disturbing than being convicted or the fate of his victims.

Marko said...

Can't belive 1324 Grant St went so quickly for full asking price...wow...635k!

Marko said...

Has anyone noticed the lisitng in Fairfield on Roberston street? Shows up on realtor.ca but not in PCS.

Speaking of demand, what do you guys think the demand is going to be for a service like that?

omc said...

I don't have any access to find out what that house on Grant st is, but I think that this time of year brings some very irrational sales. Since I have been watching, there never seems to be much on the market this time of year. If the there is something, it goes high.

Another brain dead sale that just went through is 2015 Pelly place, it just sold at $729. Just before the big drop it sold for (as I recall) $675k. They have done nothing to the house, and it is a very hard to sell type as you have MANY stairs to to get to the front door only to get to a brain dead lay out. I guess you wouldn't have to worry about the kids making a mess of the yard though. I pride myself in staying in shape, but couldn't imagine coming home from a Costco trip there. Also, if you were to look at previous sales in that area you would see it is overvalued.

Whatever you do, don't buy at this time of year. Wait till spring when the listings rise.

Alexandrahere said...

So far this week on my pcs i.e. SFH in Victoria,Esquimalt,OakBay,Saanich East & Saanich West and within my criteria of a min of 2 beds & 2 baths with a price range of $375K - $775K, there have been 11 sales. Both the average and median prices are up substantially from the weeks past. The average selling price is at $621K and the median is at $634K. Condos are not faring as well.

Mr.4AM said...

Here you go Marko, an opportunity to truly be a unique developer in Victoria. It's like IKEA on steroids. It'll make you think outside...well in this case, inside the box in terms of house architecture/construction. Check out this video (requires facebook account) on how to leverage that 1200 sqft duplex into a 10,000 sqft Transformer-like mansion.

Mr.4AM

Mr.4AM said...

Wow, did you guys see the barrage of news that came out today?

1. Olympic Village goes into Receivership - 480 unsold condos, 740M in debt to be passed on to the tax payers!

2. Province Suspends 15% cut to income taxes

3. Fired Minister says caucus run like a "battered-wife syndrome", ruthless/bully Campbell brings staff to tears."I'm tired of the bull shit!"

4. Sarah Palin going for 2012 Presidential elections (Seriously!? WTF!)

Mr.4AM

Leo S said...

Access to all the data would be nice for us number fetishists, but I agree with Just Jack that it won't make a difference for most people. However I think that could be run as a business and I wouldn't mind it being behind a pay wall.
If some enterprising realtor can set up a really well designed web interface to the data that they have access to and charge some money to access I think that would be perfectly fine. After all, that stuff doesn't come for free, and I would rather have it accessible for some smallish fee than based on some business model where it is just a tool to coerce you into signing with a realtor.

Once you've made a decision with that data, you should be able to hire a realtor on an hourly basis to cart you around to some open houses, or to consult with.

Marko said...

Interesting market, seeing a lot of homes going for well under asking price, also seeing a number of homes going over asking price....

1627 Hybury just sold for 26k over asking.

Leo S said...

1627 Hybury went on our favourites as well, but it was pretty obvious that it would sell immediately. Looked like it was in decent shape and priced under assessment. No surprise there.

Marko said...

Depends what your definition of decent shape is....to me it looks like it needed a complete reno.

Leo S said...

Decent shape as in not an obvious tear down. Of course it's not up to the "granite and stainless" standard.

What other 2700sq foot house in Gordon Head is priced at under 500k? I think you have to go to Langford to get anything comparable.

This one was put up at well under market value, and thus it sold quickly.

Al said...

1736 Feltham Rd has just been sold for $545K.

Looks good for the price. That could be used as a reference for other similar houses in the area, with or without an agent.

Animal Spirit said...

Interesting. 2908 Hipwood (I belive a half duplex) is now listed on the UVic Faculty rental site at 1650/month with a 18 month lease.

Previously had started at 529.9K on MLS, and dropped to 489.9K - was assessed at 445.

The most recent list would be 24.7 times annual rent, or 297 times monthly rent, not including repairs, interest, etc.

Taigaa said...

Does anyone know what 8545 Alec road just sold for and what the assessed value is? It sure was on the market a long time, but it finally sold recently.

Marko said...

Sold for 829k and assessed 804k.

Taigaa said...

Thanks very much Marko!

Leo S said...

Reading this article on soft landings, which is mostly the usual conjecture, but this is pretty interesting on the possible scenarios for Vancouver values

I've been here long enough that the arguments of high prices being the new reality and soft landings and everyone wanting to live here sounds almost normal.
But then you take another long look at the chart of Vic housing prices over the long term and the magnitude of the mountain we're sitting on hits you in the face again. After the runup in the early nineties we had a soft landing, but that runup was nothing compared to the last decade. So is this the first bubble that won't pop? We'd have to have 15 years of flat prices to catch up to the long term trend here...

Jack said...

Leo, I must say the magnitude of the bubble on that Victoria SFH graph looks (and is daunting). But I'm wondering how the two previous run-ups (trough to peak) stack up in terms overall increase in prices?

Eye-balling it looks like the last decade saw about 100% increase in prices?

1984-94 closer to 150% increase?

and 1971-91, what's that? like 500%?

I'm betting this has been discussed before so apologies if this is well trodden ground.

Leo S said...

Yeah this is old news. I just needed that reminder after trending more and more towards flat prices over the last few months.

Yes, flat prices are possible, but based on the magnitude of appreciation it does seem exceedingly unlikely.

jesse said...

How many people here would actually use previous sales data to determine what price they pay for a property? If so, how?

Just curious. What other people have paid in the past for similar properties doesn't influence what I would pay but that's just me. I only look at the value the property has, whatever "value" means of course.

Alexandrahere said...

Well another Bayview Condo has been sold!!. Selling Price? $474K BC assessment at a whopping $680K. Monthly strata fees are ridiculous as $608 per month. I really do feel sorry for those (non investors) who bought at pre-sale prices or close to original asking price.

Leo S said...

Good point about % increase though. Last decade was ~150% increase, but 84-94 was more like 170%. You really do need normalized and inflation adjusted graphs to draw lines on, not absolute prices.

Now if we had open access to this data....

Marko said...

"Selling Price? $474K BC assessment at a whopping $680K. Monthly strata fees are ridiculous as $608 per month. I really do feel sorry for those (non investors) who bought at pre-sale prices or close to original asking price."

I actually showed this unit to one of my clients and it would be good deal if it wasn't for the strata fees. Also unit is on the second level floor, not ground floor as the suite number would indicate.

Some huge sales have pulled the average price of a SFD to over $678,000 as of right now.....with most of the month gone, I think we are going to set a new record.

Marko said...

On another note, this morning I picked up building plans for a new project and the designer has laid off both of his employees, first time in 10 years.

I think new home starts will be dramatically down next year. Lot prices are simply ridiculous for anything spec.

John in Port Moody said...

"Demand?" The same questions need to be asked about "Supply?"

What use is CREA's partial supply and demand data anyway?

Here is one view: http://www.realestateevolved.com/2010/11/real-estate-intelligence

Btw, interesting perspective; thanks!

HouseHuntVictoria said...

John,

Your main post on your blog is about the return to balanced market conditions that you think is occurring. Are you not using local MLS data to form that opinion? As a REALTOR®, what else can you rely on to form your opinion that now is a great time to buy?

Marko said...

How crazy are lot prices?

Sales in the last 10 days:

Lot#6-4035 Braefoot Rd - 503k
Lot#1-4035 Braefoot Rd - 504k
Lot#2-4035 Braefoot Rd - 520k

1060 Beverley Pl - 320k plus you have to tear down the garage. 320k to build a 20' wide home? what the.....wow.....I didn't think this would go over 280k on a good day.

Bubble Boy said...

I am an active reader, however not so active poster. That said I would like to share my best guess on this housing thing. I too think housing is overvalued and due for a 20%-30% price reduction. One of the reasons I think this will happen is because of are age demographics. The boomers are the single largest generation to ever be around the same age at the same time in history. At the moment and in the years ahead the demand for larger family homes will shrink drasticly. The smaller condos in city will weather the storm the best. And small towns of old peeps will get smaller. The only way we can change this is by imagration and I just dont think we can keep up. So my best guess is befor all this happens we need to see the last bubble bust( the comodity bubble) and that is just around the corner. I think in the next few months once all the smart money gets out of gold,oil ect we are going to see the big one . House prices going back to 1997 -1998 range. Anothe point to add is that there has never been this much consumer debt in Canada EVER. So Let me know what you think about my crazy negative guess.
Cheers

Al said...

When we talk about house price, it is probably a good idea to include the inflation impact, say the house price will go back to xxxx range would mean "xxxx price + inflation".

Remember even the rent has increased over 50% since 1997, mostly due to inflation.

Don't know if anyone has inflation adjusted graphs? That would be more clear.

Just Jack said...

Now that ownership of the Olympic Village has past to the City of Vancouver it may advantageous for the city to challenge the HST.

Not because the suites are a year older now, but because the condominiums have been lived in by the Olympic Athletes. These are not new condominiums - they are used units and should not be subject to HST.

Phillip said...

Bubble Boy, i agree with you about the demographic whammy we’re about to get hit with. I came across this age graph that nicely displays some of those challenges
https://sites.google.com/site/canadianhousingdemographics/
BC’s curve is as you’d guess, an even more pronounced boomer/20yearold drop off. But as you mentioned, you have to weigh that against BC’s immigration draw. Not only do i agree Canada couldn’t possibly fill its huge demographic holes with enough immigrants, BC’s immigration draw should fade too. The US is simply becoming far too enticing with its affordability and of course weather. For instance, I’ve noticed many a prairie folk shifting their plans of retiring to BC, to simply buying a winter home in the southern States for as little as a tenth the price.
p.s. the last commodity cycle peaks were i believe 1920, 1951 & 1980, so you might be on to something

a simple man said...

bubble boy -

I agree. There are a lot of reasons why I expect a drop of that magnitude. There are very few valid reasons why we should expect an increase or stabilization.

a simple man said...

Bare lot near Windsor Park - looks about 5500 sq ft - $595,000. Not sure how long it has been for sale, but I would think this is a prime lot if a person wanted to build.

Still...$600k before building...that is a lot of cash.

Introvert said...

Don't some of you get the eerie feeling that there might not be a market correction in Greater Victoria? That we won't see prices decline 15, 20 percent or more? What if there will always be enough well-to-do Canadians who decide to fulfill their dream of retiring in the mildest climate in Canada and can afford our inflated house prices? What happens if we discover that our little market here is sort of perversely sustainable?

omc said...

That lot has been on and off the market for quite some time. It is a pretty good location, but VERY loud from the playing fields. They have lots of soccer and rugby games there.

omc said...

A good comparison for that lot would be a 2 bd house that sold on PLumer st, just a few blocks away. It went for $550k, but of course you would have to demolish the house. Probably a better location with similar size lot.

Animal Spirit said...

nice attempt at cautious concern that designed to create doubt introvert. most of us have seen that lobbying angle before.

Introvert said...

Animal Spirit,

You're right, I do want the market to go up, not down. But are the questions I posed not worth asking?

HouseHuntVictoria said...

Introvert, anything is possible.

But if you want to debate the thesis that wealthy boomers will rescue us from our own over-indulgence on real estate crack then it seems to me, at least, that we should look at Victoria's migration rate relative to other cities in BC (below average), immigration rate relative to other cities of a similar size in Canada (well below average), and local household income which includes the boomer retirees (again, below the national average).

We'd also need to look at the types of properties that appeal to this subset of the market to get a sense of how this theory is doing locally. Off the top of my head, I'd say the properties built with this buyer in mind have been underperforming the market (think all those new condos on the Songhees and Bear Mountain etc), heck even the "affordable" retiree-only condos down in Fairfield sell for less than non age restricted properties.

All those new houses in Langford... who's buying those? Families right? How about the GH BC boxes that get listed for $499K and sell the next day for over asking? Doubt very much if those are retirees buying 'em.

We've debated this issue at length on this blog. The numbers don't support the myth of the wealthy boomer coming here to play the greater fool. Locals drove the market up, and if the market dips, drops or crashes, locals will be responsible for that too...

If you'd like to bring some unique insights to the discussion I'd love to read 'em.

omc said...

The honest realtors I talk to say outright that the out of towner retirees are making up a small and diminishing part of our market. The bubble since the crash has been supported entirely by local over-borrowing.

Phillip said...

Introvert, not saying you’re wrong, but I too think the well-to-do Canadian boomers you speak of are also quite wise and adaptable. As an example, i know of two mostly retired couples who bought in Victoria in the past several years with the dream of retiring there, who’ve now sold. I know one of the couples took their equity and bought places in the Maritimes and in northern Florida. They were telling friends with the extra left over, they were looking at 50 foot sailboats (maybe jokingly). Not sure what the other couple has bought, except they always spend the winter in US as they’re big golfers.

a simple man said...

thanks for the feedback on that lot - although noise for living on the park would be ok by me...

with regards to out of town buyers - I don;t really think they make up that much of the market here. I remember Marko stating stats that 6% of buyers are form out of town. I am relatively new to Victoria from moving out east where I had a big yard, house and the whole shooting match (paid for). We are renting here and have no debt, not one dollar, but still wait. All my friends from back east say they would love to live here - if they were millionaires. Now retirees from where I moved from are talking about getting a smaller place and buying a winter getaway in Florida or Arizona - far, far cheaper.

I don't believe the out-of-towner hype for a second. And prices cant;l go up much further - people are barely able to hold on now and the economy is direly ill.

Introvert said...

All right, it seems the well-to-do Canadian retiree theory isn't flying with you guys. So, I'm wondering, what is it, then?

HHV thinks "locals drove the market up." OK, let's assume that's true, in order to further the discussion. Why, then, did Victorians drive their market so radically up, and residents of, say, Kitchener, Ontario, didn't do likewise? There aren't too many other cities whose house prices have climbed as high and as fast as ours, right?

So, I ask rhetorically, are Victorians, as a group, different? Does our collective mentality fundamentally differ from that of other urban centres, such that we act in certain ways to drive up our local real estate market to bubble level? I'm just asking, are we different?

omc said...

Well, out-of-towners did drive the market for a while. The whole property bubble mania that gripped all of the other "resort retirement" towns did the damage here as well as other places.

The economic crisis hit; prices dropped a bit; interest rates went through the floor and it was everyone back in the pool for those who got bypassed. Now we will be trying to find a new afford-ability level come the spring. As has already been mentioned, why the heck would any out-of-towner retiree buy here? You can buy in the states for a fraction with almost a guarantee that prices will go up quite a bit.

Buy here? Lose money.

omc said...

A simple man,

Spend a busy weekend at that location before you say that. They have provincial championship level games there. It is overpriced.

a simple man said...

Hi omc - no worries - I won't be buying any lots at that price.

I think most cities in Canada experiences a dramatic increase in house prices in the past 5 years - I know my old home did. Victoria stated at a higher price point and it is still there. I expect that as this place is terrific, aside form a few social problems downtown.

John in Port Moody said...

House Hunt Victoria said, "Are you not using local MLS data to form that opinion?"

Yes, but in combination with supply data I'd been able to get from a GVHBA source.

"As a REALTOR®, what else can you rely on to form your opinion that now is a great time to buy?"

I believe the combined supply information is more reliable, and yes you are absolutely right, it is an opinion and shouldn't be relied upon (and why I have disclaimers), although I truly believe a return to a balanced market is almost upon us.

What I believe is most important in forming an opinion (that now is a good time to buy) is the record low rates. Any thoughts?

Btw, thanks for reading the post; take good care.

Leo S said...

@Introvert

Why, then, did Victorians drive their market so radically up, and residents of, say, Kitchener, Ontario, didn't do likewise?

Why did .com stocks go to the moon while others didn't? Why did some people buy BreX while others did not?
The answers are incredibly complex and no one here will be able to explain it. Once a boom gets going it fuels itself. Finding the spark for that boom is far beyond the scope of this blog.

There aren't too many other cities whose house prices have climbed as high and as fast as ours, right?

Not true at all. There are tons of cities that have had price explosions in Canada, in the US, in the whole world. It is very common, and so far it is incredibly rare for a city to actually sustain those high levels. Some cities with unique situations like Monaco, or truly world class centers where incomes are high have done it. It is possible, but I just don't see the similarity between those places and Victoria.

So, I ask rhetorically, are Victorians, as a group, different?

You're trying to turn around the "it's different here" argument to make the case that there are good reasons for the high prices here. I don't buy it for the reasons stated above. Real estate booms are commonplace, and they almost always come back down.

And if they don't? If prices don't correct and just sort of trundle along at this level?
For us it doesn't change the decision to rent. If prices come down we win big. If prices stay flat we win.
Only if prices appreciate very strongly are we better off buying, and no one, not even the CREA, is predicting that.
Or if interest rates skyrocket we'd be missing an opportunity, but if that happens the housing market will collapse for sure.

So there is no real gamble. The question is only, how much money will we save by waiting? If we ever decide that amount is small enough we can always jump in.

Reid said...

John, in my opinion we will see more buyers come back into the market now that prices are down a bit, but mostly because five year interest rates are at all time lows. Does this make it a good time to buy? The answer to that depends on your circumstance, but for most the answer is no.

The real estate market IMO has been and will continue to be driven by borrowing capacity and ease of securing a mortgage. In recent years the movement to longer amortization periods and lower interest rates has increased mortgage borrowing capacity dramatically. This combined with the incredible ease of borrowing has allowed house prices to rise dramatically. In April the new mortgage rules reduced the borrowing capacity for those who rely on CMHC for mortgage insurance forcing them to qualify at the five year mortgage rate and reduced rental income borrowing capacity. Guess what these changes materially impacted the borrowing capacity of these buyers which happen to make up a good percentage of the market. Since then sales have been terrible and it is no coincidence.

Now five year mortgage rates are at 3.3%, an all time low and this once again allows potential buyers to borrow more mortgage debt. This will bring new buyers into the market and combined with recent price reductions possibly will create your “balanced market” prediction, but for how long?

The real unknown on how long the real estate market will stay so overvalued is if/when interest rates rise to historical levels (say 6%) or will banks start to crack down on new/suspect buyers. I find it amazing that a buyer with 5% down, limited credit history and no experience buying a house can secure the same mortgage interest rate that someone who puts down 50% and is far more established. In the US today and in commercial credit this simply does not happen. If you are a higher risk client, you either do not get the loan or you pay a much higher interest rate to offset the risk. Here in Canada, the government has taken the risk out of lending for banks, so everyone can secure maximum borrowing capacity which props up the market.

So as long as interest rates stay at these incredible low levels and credit is easy to secure for all regardless of risk, you may well see a balanced market. But this real estate market could tank hard if either one of those dynamics change.

Marko said...

"If prices stay flat we win."

What kind of calculations are you running to come to that conclusion?

I bought a small unit in the 834. After 20% down mortgage is about $160,000 @ 3.3 % @ 25 years = $782 + strata + property taxes = approx $1000/month.

Similar units in the Juliet rent for about $1000 - $1,100.

After 5 years mortgage is approx $137,500.

How would I be ahead by renting for 5 years?

It would be interesting to calculate the probability of prices in Victoria decreasing over a 5 year period in terms of real dollars. Looking back, 1981 to 1986 is the only one that sticks out.

A number of year over year decreases, but 5 year span...

John in Port Moody said...

Reid, yes I agree with all of your comments. Thanks for taking the time to articulate it as well as you did.

Another unknown is the effect of the Immigration Investor program offered by the feds. I read an HSBC article that a steady flow of people with money have been coming to major culturally diversified centers like Montreal, Toronto, Calgary and Vancouver.

I've also read a blog post by a Vancouver Realtor (sorry, can't remember who) who seemed to be getting some of this business (all cash). I'm sure this has been keeping the prices up in Vancouver and causing locals to move to the burbs; sprawl.

This makes any prognostications beyond a few months a dice game.

Leo S said...

What kind of calculations are you running to come to that conclusion?

Using roger's wait vs buy spreadsheet linked on this blog.

I'm not comparing equivalent accommodation, I'm comparing accommodation that serves our purpose now vs what we would like to buy for the long term. That won't be a condo.

I bought a small unit in the 834. After 20% down mortgage is about $160,000 @ 3.3 % @ 25 years = $782 + strata + property taxes = approx $1000/month.

We've discussed this before.
I don't recall what condo you have (or rather, may have, come next fall). Given the 200k price and the current price list I assume it is a smaller 1br near the ground. So for 1000/month (I guarantee you strata won't stay that low) you get 500 or less square feet. You also forget the opportunity cost of tying up your 40k. Depending on your investments that'll be another 70 to 200/month.

I dont want to make this a competition but I'll use our rental because I know it as a comparison. We rent a top floor corner unit 1br with about 600 sq feet for 860/month. New hardwood, tile bathroom and kitchen, otherwise dated 60s appt stuff, so of course not nearly as fancy as a new place. The extra space is the most important given 2 ppl I don't think we could easily live with 100sqft less.

So your costs are about 1100 ours are about 900/month for a place that actually fits us. In addition we don't have the liability of a place tying us to Victoria in case the job situation changes.

Of course, at 200k for an imminent realty millionaire such as yourself you'll be fine no matter what the market does. I'm just demonstrating how it doesn't make sense for us even when comparing a lower value condo, and we're looking at houses in the <500k range.

The decision to buy for us will come when we've decided that we're no longer happy with the appartment and are willing to pay the ownership premium.

Al said...

omc: "why the heck would any out-of-towner retiree buy here? You can buy in the states for a fraction with almost a guarantee that prices will go up quite a bit."

We moved from Ottawa to here. Actually we were on vacation here in July 2004, didn't came to buy a house, but fall in love with the city (one of us studied in UVic before), and bought a house on the first day, then went back to work and moved here 4 years later (bought a bigger house in Feb 2009, sold the old one Oct same year)

We were thinking to buy somewhere in the states before, but 911 changed everything. We were tired of keeping getting questions as: "why didn't your Canada send troops to Iraq?" when we were there and aboard, and tired of all these security fuss including the new pad-down.

Maybe it is just us, but Canada is our home and we want to stay home, no matter what.

Introvert said...

Just going back to the question of whether it's the locals or the out-of-towners who drove up/are driving up the market. I'd like to suggest that the distinction between locals and out-of-towners may not be so black and white. For example, I know a couple in their late-fifties who moved here from Calgary about three years ago. On top of selling their (fully paid-off) house in Calgary, they had saved a substantial nest egg. So now they live in a new home that they built on land that they bought in Saanich. Say this couple, after living here for 3 years, decides to sell their house and buy a different, maybe better house in Victoria. Is this, then, a local who is driving up our market, or is it an out-of-towner? I mean, after living here for three years one is sort of a local; on the other hand, all the money that it takes to buy and sell and buy is still out-of-town money, money not earned locally but earned over a span of years in Alberta.

My point: where does the line between an out-of-towner end and a local begin? And if the distinction is a little blurry sometimes, isn't it possible that out-of-towners may play a larger role in driving up our market than we might otherwise think?

Marko said...

"Given the 200k price and the current price list I assume it is a smaller 1br near the ground."

Bought mine 16 months ago for under 200k with a few upgrades. But yes, 533 sq/ft, 3rd floor, facing Johnson.

I had the opportunity to buy unit 608: 1 bedroom + den on the sixth floor, 678 sq/ft, very nice layout for under 260k but seemed like a lot at the time. Regretting it now, the extra space would be awesome.

omc said...

Al,

You entered the Victoria housing market in 2004. Different ball of wax all together. There was a big out-of-towner retiree component to the market then.

Would you seriously do it all again today. The market has gone up what, 150% since then. Pretend you didn't have that windfall, but had to put your hard earned cash up. Would you take out a monster mortgage at retirement to buy a vacation home here knowing it is most likely to correct as the rates increase?

The stats show that the out-of-towners are not.

omc said...

introvert,

they are out of towners, as their purchase had nothing to do with offordabilities with local wages.

Alexandrahere said...

Incredible!! Another Bayview unit has sold!! This one is TH#3. It wnet for $515K!! I believe they were originally asking over 1M for this one. It is the largest townhouse out of the 6 there and it has 1725 Sq Ft. There are three bedrooms and a den plus four baths. Each bedroom has an ensuite.

Marko? Once again in the monthly strata fees (of over $600), it says it includes the hot water and heat. I thought these units were heated via electric baseboards. Do you recall?

omc said...

Pressure on the market for price increases is caused by people entering the market, or of course investment. Selling your house to buy another doesn't really change anything. one on the market, one off the market.

Marko said...

I showed this Bayview townhome to another client and the value is there. If strata fees were like $300-$400/month my client would have bought one.

No baseboards, all townhomes have a heatpump + gas fireplace.

A 1700 sq/ft townhome in Langford goes for 400k or so; therefore, these are a relative bargain given the finishing + concrete structure + location + heating/ventilation system + underground parking + new bridge coming.

Strata fees are a killer thought at $674/month for this unit. That is small mortgage payment.

However, for a single professional because all the rooms have their ensuite it wouldn't be that bad I guess. You could probably rent out the other two rooms for $600 to $700 each to help with strata and mortgage. I know, not ideal, but feasible.

Al said...

omc,

Our old house (bought here in 2004) sold in Oct 2009 for about 55% more than we paid for (with 2 evaluations and 6 offers, don't think we sold low). With chunk of the gain went to CRA, it is not exactly a windfall.

We didn't buy a house in 2004 for vacation at all, we bought it thinking that we would move into it. In todays condition, we probably wouldn't buy before we move, but we will buy after we move as we did last year (in Feb just by luck), with most funds from our Ottawa house sale.

a simple man said...

Alexandrahere;

Thanks for that information - sales like that Bayview townhouse really show what is happening.

Sold for roughly half of what the developer initially wanted. That would make even the most hardened developer think twice going forward.

The RE climate is changing. If someone told you a year ago that a new Bayview property would fetch half its asking price no one would believe you; yet, here we are.

HouseHuntVictoria said...

OMC,

I'm reading a bit of a contradiction re out of town buyers in your last two posts.

I agree with the second statement though: the action of selling a Victoria home to buy another Victoria home would be considered a "local" in my system of logic. The two are effectively a wash and do not add up to a new player in the local market. Where they earned their money is completely irrelevant. If I'm a consultant who telecommutes from Victoria for companies in the US am I an out of towner?

When I say locals drive up the price, I mean first time home buyers with fat wads of borrowed cash willing to over pay for properties and the move-ups who in a drunk on the fat wads of borrowed cash tossed at them for their fixer uppers in Tillicum go barreling into GH to get into a bidding war on a 30 year old hasn't seen an update since the beginning BC box that also requires them to up the limit on their HELOC to fix up.

I stand by my assertion that in order to understand the out of town "wealthy boomer" market you have to look at what out of town wealthy boomers are buying. Yes, some may indeed be purchasing homes in Broadmead, Fairfield and Oak Bay, but the homes that are specifically being built for this market (Bear Mtn, Songhees etc) are not doing well sales wise.

Reid in a comment above hit the nail on the head IMO, it's availability of credit and interest rates, now more than anything, that is keeping this market from falling more than it is. For anyone who thinks the market is heading up, why? Where are the indicators? And please don't point to a single sale that went for over asking in GH as your evidence.

Phillip said...

Marko, you must have left out a bunch of costs on your condominium calculation.
For comparison, I thought i’d give our rent versus buy calculations. They were based on the average of 7 properties we looked at shortly after we moved here that were comparable to our rental. Our calculations are over a ten year period and include opportunity costs (even on our $450 rental deposit). The assumptions are 25% down, 5.0% interest rate, and a $340,000 purchase price (we rent a 7th floor, 630 square foot 1 bdrm, 180 degree southwest ocean view, secure underground parking, between ocean & downtown for $900 per month)
Based on these numbers we will save $23,547 per year over the next ten years or $1962.25 per month by renting our place rather than purchasing it at today’s price. Note: the assumption is we'd be able to sell it in ten years for the exact same $340,000 less commission. Sure the 5.0% interest rate is a wild card, but rates could easily end up being closer to 10% five years from now too, just as several western European countries are nearing at present.

Alexandrahere said...

Marko and all: Actually the $600K a month for that Townhouse at the Bayview is steep but if that also includes the heat and hot water as stated, then that isn't quite as bad. All of those larger condos in say the Ocean Park Towers in the Songhees pay for their own base board electricity and their own hot water....and with all those windows the electricity bill is a fortune during the winter. I think eventually that particular townhouse will make a tidy profit for the purchaser down the road. One of the better buys I would say in that area.

Alexandrahere said...

Whoops,,,,I meant the $600 per month strata costs. Also, the taxes will have to go down as well for most of these units as well.

think said...

From CBC news:

Housing bubble a danger: expert

17/11/2010 3:50:39 PM

CBC News
One of the first economists to predict the U.S. mortgage crisis warned Wednesday that Canada's housing sector could be headed for a sharp correction.

Dean Baker of the Washington-based Centre for Economic and Policy Research said he sees no reason why average home prices in Canada should be about 50 per cent higher than in the U.S.

Baker said if interest rates rise by two per cent, Canadians could see house prices collapse by 25 to 30 per cent.

Given the potential damage, Baker said the federal government should consider regulations to further tighten mortgage lending and the Bank of Canada should consider raising rates.

Ottawa has already moved once, in February, to tighten lending requirements.

And on Oct. 19, the Bank of Canada left its key interest rate unchanged at one per cent after three consecutive quarter-percentage-point increases, saying that the Canadian outlook had changed and that it expected full recovery to take a year longer than it had earlier predicted.

After that, many economists predicted the central bank would avoid raising rates further for a matter of months.

Baker was recently given the Revere Award along with two others for being the first to sound the alarm on the U.S. housing bubble five years before it burst.

Marko said...

"Marko, you must have left out a bunch of costs on your condominium calculation."

I left a bunch of costs out on the other side as well such as Landlord gives you notice and you have to incur moving costs and time, etc.

"Note: the assumption is we'd be able to sell it in ten years for the exact same $340,000 less commission."

That is quite a stretch as far as assumptions go.

PS. What building do you live in where the cost of the unit is $340,000 and the rent is $900?

I have heard this arguement before about renting in the Falls - rent is only $1,500/month for a two bedroom and unit is worth 600k. True, rent is $1,500/month but the unit actally sold for 399k ;)

Leo S said...

left a bunch of costs out on the other side as well such as Landlord gives you notice and you have to incur moving costs and time, etc.

I don't think you want to get into an argument on unexpected expenses. There are obviously far more of them when owning than renting.

Phillip said...

Marko, I thought my 0% assumption in rent and price appreciation was fair considering some of the demographic, interest rate, credit-tightening, affordability, unemployment, household debt, etc headwinds facing us this coming decade. I recall running decade scenarios of -20% and +20% for price appreciation as well, but it hardly tips the scale at all towards ownership in the +20% case. In case you were curious, I only used a 4% annual yield for missed opportunity costs (even though our fixed income & equity portfolios have been far outperforming that - although I admit, it took me a while to find a good manager). I also used very conservative figures for buying/selling costs, any suite renovation/maintenance costs and strata/property tax increases. Finally, didn’t include anything extra for homeowner insurance. If there was a way i could attach a picture, especially the view. It surprises me too at times, we can rent this cheap. But, I won’t be mentioning that to the owner.

happy renter said...

I too was surprised by that $900/month rent. Since I just sold a condo and then had to look for another to rent, I have a pretty good sense of what things are going for right now. If I could have found that deal, I would have been so, so lucky. The places with views and parking downtown that I saw started at $1100/month, and that was for a very, very crappy place with stained carpets, kitchen counters that had huge holes in them, etc.. $1200-1400 one bedrooms are, sadly, the new norm.

a simple man said...

Good for you, Phillip.

I rent a 4 bedroom house with a huge yard near Willows Beach with a weekly gardener and peace of mind. Our downpayment is in the most conservative accounts and return about quarter of the rent to us. With home office write offs, cheaper insurance, no maintenance costs (there have been numerous recently), no mortgage interest, etc I am way ahead.

And with the 6 hours a months the gardener is here and I don't have the wrestle the shrubs and lawn, I consult, which puts us in an even better spot, saving money for the future while the houses around us lose value.

Not a bad place to be.

msr said...

@happy renter

What time of year were you looking? If it was July onward then you probably got caught up in the Student Storm. Prices appear to spike up because students will rent anything for $500/room/month. Once prospective landlords see what students do to housing and what they're paying for crap it makes sense they'd up the price.

As a comparison, I moved into an apartment in June. I pay $1300/mo for a 2br, top floor, corner unit, ocean view. The building also has a pool/hot tub/games room and a small gym.

happy renter said...

@msr

I was looking for November 1. Maybe there are fewer places on the rental market at that time of year and so less selection/fewer good deals? In any case, there's no way I could have rented a descent place with a view and underground parking for $900/month. The typical Victoria apartment buildings that are 3-4 stories tall, built in the 60s/70s with covered parking but not underground often go for $900-1000 for a 1 bedroom in downtown or in Fairfield/Cook St. Village (which is where I was looking). Any taller buildings with underground parking tend to be more expensive. That's probably not always true and I'm sure you can find a deal here or there, but I think they're getting harder and harder to come by given that you're often paying off someone else's big mortgage. This place that's currently on craiglist strikes me as being exceptionally cheap and it's on the 3rd floor and likely face Yates or looks right into another building:
http://victoria.en.craigslist.ca/apa/2069167352.html

Marko said...

Month-to-Date Market Statistics
Posted by
Nov 22 2010
Monday, November 22, 2010 8:30am:

MTD November
2010 2009
Net Unconditional Sales: 333 604
New Listings: 552
796
Active Listings: 3,737 2,973

Please Note

•Left Column: stats so far this month
•Right Column: stats for the entire month from last year

a simple man said...

thanks Marko - still predicting 500 sales for Nov?

This weather may keep buyers indoors...be safe out there everyone!

a simple man said...

in other news, the house on Meadow Ave that dropped through the summer form an initial asking price of $750K and ended on $630K before being delisted a month ago was just relisted today - for $700K.

I hope they put in $70K worth of improvements in that month!

omc said...

I saw that one. Are they fishing for suckers or what. People do seem to fall for the "new listing" lies.

BTW

That lot on Windsor park isn't the one I was thinking about. There is another one that comes and goes on the market across the park from that one. It is the equal to the lot I was thinking about.

think said...

Are those people selling the meadow house insane - that is so obnoxious, wow! Ha ha! Going to be entertaining to see if there is a big enought sucker out there...

Marko said...

SFH as of right now -

Price Original: $719,434
Price List: $704,202
Price Sold: $675,041

Condos

Price Original: $342,954
Price List: $335,389
Price Sold: $324,168

"thanks Marko - still predicting 500 sales for Nov?"

Still a possibility. If we have 120 this week, Monday's usually bring in 30 to 40 so possible + the Tuesday.

But I am changing my prediction to 480

a simple man said...

Marko - I know it has been said before but, thank so much for providing this data to us. I particularly appreciate the new way you are reporting with the original and eventual sales averages. I know it is more for you to calculate and I appreciate the efforts.

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