Monday, November 29, 2010

Monday market update

MLS numbers courtesy of the VREB via Marko Juras.

Month to date November 2010 (last week's month-to-date totals in brackets)
Net Unconditional Sales: 435 (333)
New Listings: 665 (552)
Active Listings: 3,658 (3,737)

November 2009 totals
Net Unconditional Sales: 604
New Listings: 796
Active Listings: 2,973

SFH average price currently stands at $659,336. Doubtful we'll see sales volume numbers matching November 2009 totals, however, it's a given that November's volumes aligned with the October improvement from the terrible numbers reported in August and September. Average prices remain skewed by low sales volumes, however, SFH with suites priced under $500K continue to sell quickly with even a few competitive offering situations for the ones tucked off the busy streets. This appears to be a market that doesn't know where it's going into 2011.

Update: Let's play a little game
Mark linked to a story where TD Bank's Ed Clarke mused about lowering the maximum amortization length from 35 years to 25 years (effectively taking us back 10 years or so in the mortgage insurance industry). He thinks this will prevent a bubble from forming. For the sake of arguments, let's not get into the bubble talk (it's either here or it ain't) but let's assume that for the good of everyone, something needs to be done to put out the fire under the real estate market (there really isn't one, but you could be forgiven for thinking there might be). What to do? I say if you really want to end the era of "free cash" get rid of the CMHC. There should be no more mortgage insurance for banks in Canada. If you want to end the endless cycle of people taking on debilitating debt loads: STOP PROTECTING THE BANKS FROM THEMSELVES. 

Add your suggestions in comments. 


Rhino said...

Just perusing the rentals on Craigslist. Over 100 listings today, with December 1 only a day away. Also, December 1 and January 1 usually have the lowest demand for tenancy. Looks like a lean Christmas for some amateur landlords

Mark said...

TD Bank CEO, Ed Clark, says the government should cut the maximum mortgage amortization from 35 years to 25 years.

“We see a world in which low interest rates and excess liquidity has created asset bubbles all over the world,” Clark told reporters last week.

“We don’t have a problem here, but why are we not making sure we don’t create a problem?”

Clark says Canadians have been following a policy of: “Don’t save. Take a longer period to spread out your payments.”

Oh my wouldn't that change things and fast! Of course it won't happen.....because the Govt is scared shitless of the bubble popping!

Just Jack said...

Actually, lowering the amortization period may not be that bad of an idea. Those with 40, 35, 30 year mortgages would be grandfathered. It would be just new purchasers that would be affected.

The lower amortization would drop prices and stimulate demand again for those remaining people who have not bought.

Rising prices at one time were stimulating our economy. But now that prices area stagnated the high prices are hurting the economy. Of course some people will have to fall on their swords. But someone has to take the hit for the team. Better the few than the many.

Its better for the economy to sell two homes for a total of $700,000 than one home for $700,000. And heh, Oak Bay lots may be drop under 300K, that might start builders crushing some of these older timber boxes in Victoria and Oak Bay.

Ed Clark's statement is probably just a trial balloon to see how the people re-act. I'm sure Harper and Flaherty are watching the public's reaction.

Qualifying people at the five year rate was a joke and demonstrated Flaherty's lack of knowledge of real estate and greed by the consumer and the industry. The five year rate has dropped 2 percent since then, so we back where we started but now with lower sale volumes.

Marko said...

"Oak Bay lots may be drop under 300K, that might start builders crushing some of these older timber boxes in Victoria and Oak Bay."

Looking at the recent sales of new homes in Oak Bay I don't think the 35 to 25 mortgage change would affect many wanting to live there.

Taigaa said...

4334 Northridge selling with multiple offers and in a few days sounds good, but the selling price of 506 cmopared to assessed of 484 is only 4.5% above assessed, so that is still quite a bit lower than the current average I am seeing (8% above assesed) so that is no big feat, they probably just wanted to sell quickly.

Leo S said...

@a simple man.

I've written a greasemonkey script to extract data out of the detailed view in PCS. So that makes it easy to export from PCS to Excel.

For example, sales on my PCS.
Charts on separate sheets.

For example, I can recreate Taigaa's price/assessment data very easily for my part of the market. So there you can see the market has been pretty flat in the lower range. Price/Assessment has decreased about 4% in that time period. Price/Interior Sqft has increased about $25/sqft, and price/lot sqft is dead flat (none of these are visible on the google docs, I had to download to add a trend line).

So basically, not very exciting since the market isn't moving, but if anyone can think of anything better to do with this data and needs more columns its pretty easy to add.

Right now my limit is set to 520k, and only SFH in the core areas. If someone wants to set me up with a PCS for the entire market I'd be happy to extract the data into spreadsheet format.

We can add any field that is present in the detailed view of the PCS to the output (notable missing fields are DOM and any price reductions). Once it's in Excel you can analyze it however you want.

Marko said...

Some interesting sales last few days.....

1158 Pembroke went for 35k over asking price.....

A - 2746 Shelbourne close to full asking price after 117 days on market.

Marko said...

Anyone get a chance to see 2825 Fifth St?? Duplex with suite? sold for 335k....I wonder what that looked like inside.

Leo S said...

35 years to 25 years knocks 120k off of what ING thinks we can borrow.

patriotz said...

Ed Clark's statement is probably just a trial balloon to see how the people re-act.

More than that, it's part of a campaign by the banks to escape the blame for the coming RE bust, and get the public to blame the government. Which they rightly should, since the banks are simply operating under the parameters set by the government and can't set their own for competitive reasons.

No way is our "Conservative" government going to take the amortization down to 25 because that would bring on the bust immediately. They know it's coming too, but they want it after the next election.

a simple man said...

Hi Leo - that looks great. Once you have it in excel I can upload it into SAS and we can really do some neat things...

Leo S said...
This comment has been removed by the author.
Leo S said...

Excel is no problem. Actually you can download it yourself from that link by going file -> download -> excel

The main problem is the data itself, since you are probably interested in a different range for the market. I can post the script so ppl can try to run it themselves. However I'm not sure if all the pcs sites have the exact same format.

a simple man said...

thanks Leo - yes, google docs exports excel very easily - I think the real solution is to get a PCS account for the entire region. Then we should be able to get all the data, with a column for region, and do some neat, simple analyses.

Leo S said...

I think the real solution is to get a PCS account for the entire region.

Yes. Marko, I know I'm not your favorite person on this board, but can you hook us up? I suspect other realtors will be somewhat perplexed at a request for a pcs for the whole market. "Yes, I'm considering everything from 10 million dollar mansions to the dumpiest of condos" ;)

HouseHuntVictoria said...

Leo, it's impossible to have one PCS account for the whole market. I'm not sure if you're limited to 300 or 500 listings at a time, but it's broken into unit types and neighbourhoods. It's not even possible to have one PCS account that can handle all condo listings within the VREB.

Leo S said...

Well really I'm only interested in sales, which there wouldn't be that many of (I'd just periodically run the script to update the spreadsheet data on the sales).
But if the system just won't allow wide criteria then that is another matter.

Alexandrahere said...

Why not gradually drop the amortization periods. Say 34 yr 2011, 33 yr 2012, 32 yr 2013 and so on until it gets down to the historical amortization of 25 yrs. Of course, as Just Jack mentioned, the ones who have already bought with extended amortizations would be grandfather protected.

To buy a house at age 31 and not have it paid off until age 71...I can't imagine that kind of sentencing. Talk about feeling trapped.

HouseHuntVictoria said...


For the most part, CAAMP studies show that people more often than not pay off their mortgages faster than the amortization schedules they choose when they take on the debts.

Quick pain is better for the market than long term uncertainty IMO. If you mess with amortization terms, I say do it at once... the drop from 40 to 35 years had a negligible effect on the market from 2008-2010 anyway.

a simple man said...

I agree - drop it down to 25 years for new applicants, the others can be grandfathered.

Then increase the downpayment to 10% while you are at it and confirm all types of income the way they used to. When I applied for my first mortgage they combed over everything, even requesting bank records for two years back.

Will save people from themselves and their ever-greater morbidity from latte and Range Rover disease.

DavidL said...

I totally agree that all new real estate purchases must have a maximum 25-year amortization. This would save many people from indebting themselves beyond their ability to pay.

I also would suggest that existing mortgage holders must also qualify for 25 years at mortgage renewal time. Yes, this may make things hard for people who can barely make their mortgage payments on an existing 35-year or 40-year amortization - but these people will be the first to go bankrupt when the mortgage rates rise. Maybe it will help reassess their financial priorities or to sell while they can?

Just Jack said...

I don't think its a matter of saving people from putting themselves into life time debt. Its more about keeping stability in the marketplace. The current low down payment, long amortization period and low sale volumes will actually make prices swing more wildly.

The future for real estate may be to have more crash and booms more often, like the current stock market is acting.

The only thing holding property values up is consumer confidence in that homes are seen as tangible wealth and always increase in value. We lose that consumer confidence and no one can tell where the bottom is. Because the one thing that there isn't - is a shortage of houses and condominiums.

omc said...

My PCS has been very busy these last few days; price corrections and new listings that is. I am noticing a fair % of these appear to be held by investors, not owner occupied.

I wonder if this is an indication of things to come as people don't usually list in December as it makes them appear desperate. It almost appears to be a balanced market now, and a bunch of off the market houses have "will be re-listed in January" on them. The people who have made money on real estate are selling while the gettings good.

think said...

omc, I am noticing the same thing - interestingly my PCS has double the listings as it did this time last year even though tons have gone off market. I think the true market will show itself this spring when all those listings return as well as a flood of new listings but sales stay low - there is going to be a lot of downward pressure on prices come the new year. I think a lot of people are holding on to false hope for a spring bounce that is going to quickly show itself as a major spring bust. I am seeing tons of houses for rent and vacancies all over town - a lot will be on the market soon I bet.

Leo S said...

Script uploaded, in case someone wants to try it on their PCS

patriotz said...

For the most part, CAAMP studies show that people more often than not pay off their mortgages faster than the amortization schedules they choose when they take on the debts.

That information is looking backward, i.e. it's for people who bought 20 or 25 years ago when prices were much lower, and equally importantly, interest rates were much higher. As interest rates (and thus payments) declined the owners had increasing disposable income to pay down the mortgage.

Been there, done that.

The situation for those buying today will be the exact opposite.

jesse said...

If the standard is to take even 25 year am that's a problem. A large % of mortgage holders don't have 25 years of work ahead of them. Or maybe they do...

Try buying "all you can afford" when you're 45 years old.

HouseHuntVictoria said...


"The situation for those buying today will be the exact opposite."

This may well come to pass but we won't know until we can look back on it will we? Or are there comparisons from other jurisdictions we can look to?

Just Jack said...

I think what Patrioz said above is the smoking gun of this real estate market.

The generation of buyers before today's buyers were motivated to pay off that mortgage fast. And most wanted to put 15% or more down on a house. They did not want to be a slave to 8, 10 or 13% interest rate. Most had experienced the affect of 18, 19 and 20% interest rates. Which caused their monthly payments to double. Much like a 2 or 3% increase in the interest rate would do to this market today.

Not so for today's buyer. Maxed out payments over 35 years with little or no chance to double up on a payment or put more cash down each year on the mortgage. Indeed the low interest rate actually is a deterrent to making extra payments. The amount of cash you need to buy down your payment is massive in relation to the monthly mortgage savings. It's just not financially viable to pay off that mortgage quickly. That leaves all those people who overbought at risk for a long, long time. But the real Tsunami is the HELOC, the home equity line of credit where people have maxed out their payments on cheap credit and that is HUGE in relation to those that overbought a home.

The bigger the markets - the bigger the fall

The next generation of buyers will look back at this market and say to those that maxed out and overbought....

"Duh, what did you think was going to happen"

a simple man said...

my calendar just flipped...and I can hear it rising through the hills...


What are last months numbers, or do we have to wait for the official announcement from vreb?

Marko said...

Wednesday December 1, 2010 8:15am:

Nov Nov
2010 2009
Net Unconditional Sales: 479 604
New Listings: 722 796
Active Listings: 3,723 2,973

Please Note

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

a simple man said...

thanks Marko...

21% drop in volume from last year.

25% increase in inventory.

This is even with the hundreds who have gone off market for the better market next spring...they hope

omc said...

I have been watching another trend lately that seems to be on the increase. Please take it in the spirit I am offering it; I really don't mean to offend.

I am wondering if the out-of-town retirees have almost a negative influence in the housing market these days. I am saying this as I have lived in south Oak Bay the last number of years (the preferred area for the Alberta retiree). I have noticed houses that got painted up and flipped back in the great influx of 2004-2007, get sold again and again. Most of the time to retirees. After talking to a realtor I got a confirmation that many out of town retirees only last 1 or 2 years here.

One of the houses that gets sold again and again is only a few houses away, so I have gotten to know a couple of the owners. Those 2 moved back for the same reasons; family. They don't like to be so far from family/ they need to help with grand kids.

My father is in this age group and lives in the lower mainland. He was saying that many of his friends moved away, only to move back. His impression is that you don't tend to make new friends at that age so they didn't feel they integrated into society as well.

So while the reported % of out of town buyers is 6%, I wonder what the % of people selling up and moving back is. I have no proof of it, but I think it might be higher. When I drive by houses that might interest me, I am seeing a fair number of Alberta plates parked in the driveway (the owner's). I haven't seen the sea of Alberta plates at an open house for years now.

Again, these are just observations. I think people should do like "a simple man" and rent before they buy here. You could end up saving more money than you think.

omc said...

I think you are right on the money a simple man.

Last year was an extreme year when there was nothing of any value on the market. To buy a house one had to close your eyes and turn off your brain. The only 3 houses I went to see should have been condemned for rot and mold. They all sold for very close to the astronomical asking though. Things have improved far more than the #s are telling.

a simple man said...

from vreb:

The average price for single-family homes sold in Greater Victoria last month was $636,634, down from $641,780 in October. The median price declined to $530,000.

Just Jack said...

I was speaking with an Alberta retiree. He wanted to live on the best street in the best neighborhood and was told that it was Exeter in the Uplands. Well, after that he wouldn't buy anywhere else. Eventually, a home came up for sale on Exeter and he flew out from Calgary and bought it. Spent tons of cash remodeling the home. But, him and his wife were lonely out here with no family and found it difficult to make friends in the city. She had asthma, so the climate helped her. He had arthritis and had a lot of pain from our wet climate.
After three years, they gave up on Victoria and moved back to Calgary. It took him close to two years to sell the home and at a loss. But that's the price of arrogance.

As a further note, I'm always surprised of how many retire to Victoria who are over weight, smoke, and have no hobbies. Maybe they think the climate will make them live longer healthier lives? They also complain about how many colds they get here and that living in Victoria is like living in a car wash. I just think its nature's way of weeding the weaklings out.

I have to admit that I have those dreams of moving somewhere else when I retire. Having lived most of my life on the Wet Coast, I would like to retire somewhere with far less rain and a blister pack of strawberries don't cost five bucks, like Arizona.

I could learn to shoot and vote republican. Or is that learn to shoot republicans? I better get that figured out before I move there.

DavidL said...

@just Jack wrote: I could learn to shoot and vote republican. Or is that learn to shoot republicans? I better get that figured out before I move there.

Better check with Dick Cheney to get his perspective ... :-)
Dick Cheney shoots a fellow Republican

Leo S said...
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Leo S said...
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omc said...

Boy, you can't escape the news on possibilities of raising mortgage standards. A bit too much of a coincidence me thinks. I am starting to think it is the gov't getting us ready for the changes.