Monday, November 8, 2010

Monday market update

MLS numbers courtesy of the VREB via Marko Juras.

Month to date November 2010
Net Unconditional Sales: 131
New Listings: 192
Active Listings: 3,749 

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

Looks like sales activity has kept up thus far with October 2010. While it's definitely up from August and September ultra-lows, a little perspective is necessary: we're still talking about volume that doesn't even come close to matching most of the last 10 years. Listings are high, sales are low, average reported prices are flat, although the homes that are selling are selling for prices not seen since 2007, that is, they're down.

Meanwhile CAAMP released a rather rosy glimpse at a massive debt problem in Canada, as total outstanding mortgage debt leaped over $1 trillion, yes, that's right.
Its sixth annual report on residential mortages found the vast majority of mortgage-holding Canadians (84%) could afford an extra $300 or more a monthly in payments.

This certainly bodes well for Canadian solvency levels, as the total level of outstanding residential mortgages in Canada crossed the $1-trillion mark in August, a 7.6% increase from last year.

Over the past 15 years, the volume of residential mortgages has expanded 194%, or about 7.5% a year. Growth was especially rampant between 2004 to 2008, exceeding 10% each year, the report said.

Eighty-nine per cent of Canadian homeowners have at least 10% equity in their homes, while 80% have more than 20% equity, the report found.

Of the 18% of Canadian homeowners who removed some equity from their homes at an average of $46,000 over the past year, the most common use for the extra cash was to pay down debt.

Although variable-rate mortgages are becoming less costly than fixed-rate mortgages, 66% of Canadians taking out new mortgages chose a fixed rate, the five-year term remaining the most popular in Canada.

102 comments:

Marko said...

So far for the month SFD averages are down, only 1 million dollar sale so far.

Price Original: $583,540
Price List: $573,498
Price Sold: $559,337

sdcavens said...

"Eighty-nine per cent of Canadian homeowners have at least 10% equity in their homes, while 80% have more than 20% equity, the report found."

Which means that 11% have less than 10%, and 20% have less than 20%. Which is a pretty scarey place to be in a declining market. This seems very high to me, considering the number of people I know with no mortgages (mostly seniors or people in their 50s)- wonder what percentage of mortage holders have less than 10% equity?

Robert Reynolds - GBA said...

@ sdcavens

Everyone who bought in the last 2 years...

DavidL said...

@ Just Jack wrote at the end of the previous blog: Where you have Cinderella having a credit check to find out if Prince Charming's castle has a high ratio mortgage before she lets him fondle her glass slipper. And the three evil step sisters replaced with a realtor, broker and banker. Of course Shrek's swamp will have to have an archaeological assessment for Fairy bones along with an environmental audit for swamp gas.

That's just hilarious ... Grimm's Fairy Tales meets reality!

DavidL said...

@Robert Reynolds wrote: Everyone who bought in the last 2 years...

I figure by the same time next year, anyone who who has purchased since 2005 will either have negative equity or be cursing that they didn't when the market peaked.

HouseHuntVictoria said...

Everyone who has bought using a 5% (10% and 0% in some cases) down payment amortized over 35 years (or longer) and not made extra payments etc... rather than "everyone who bought"

There's been lots of high ratio financing for certain of late but there's also been a lot of trade-ups with people maintaining a fair amount of equity...

The future of real estate in Canada does not look bright based on total ownership and debt ratios, as well as consequences of interest rate hikes, I don't think we should be over-stating it though.

Robert Reynolds - GBA said...

Bit of an update on my situation.

I've recently raided my down payment savings in order to buy up to an equal partnership in my company. Doing so has probably put me out of the market for the next year or two at least while I save up that money again. Hopefully with more dividends coming in and a greater share of the company profits I will get back my investment fairly quickly.

That said, when I made the decision to buy into the company, I had to weigh the fact that it would mean not being able to buy a home in the next few years. Past performance does not indicate future returns, but I did a lot of looking back as well as trying to predict the future.

Looking back, I first started seriously looking to buy a condo in August 2007. The median price was $269,500 in the city of Victoria, where I was looking to buy. I was looking at lower end units, with a price range of about $225,000-$240,000.

Today the median price of a condo in Victoria city is $265,400. by not buying I have already saved $4,100 in lost principle.

Interest rates for 5 year fixed was about 7.15% (posted) which means from August 2007 to August 2010, I have saved more than $41,779 in interest payments. In the same period I would have paid $15638 in principle. Of which I would have lost $4100 as I have already stated. Strata fees amount to another $7200-ish, and taxes are probably about another 5 grand. Moving costs and legal say 3 grand.

Interest: $41,779
Principle: $15,638
Loss in Equity: $4,100
Strata Fees: $7,200
Property Taxes: $5,000
Legal, move in mumbo jumbo: $3000
(I am ignoring opportunity cost, taxes, improvement costs.)

Total cost of buying from August 2007 to August 2010
$76,717 (say +/- 10% ish)

Cost of renting superior shelter over equivalent period:
$46,800

Net gain by renting vs. buying
$29,917

This isn't taking into account Realtor and legal fees as I wouldn't be selling now anyways.



Not buying has saved me nearly $30,000, almost half my annual salary! (HHV, I owe you a beer)


Now looking forward. This part is more subjective, and all the assumptions are my own so grain of salt and all that.

Do I see Victoria RE going up or down?
I am going to say either down a bit like the 90s correction or flat, which is the same thing in the long run. I cannot see it going up. (a crash would be great but I am not betting on it)

Interest rates, up or down?
The BoC has recently apologized for increasing the prime rate this summer as they feel it was too soon. They have informally said they don't expect any movement for another year or so. On the fixed rate side, bond markets are yielding diddly squad. I don't see that changing any time soon either. I see low rates and near ZIRP for at least 3-5 years.

My financial position.
Seeing how I am going to have more control over my earnings, and the benefit of earning dividends I feel fairly secure. I am taking on more risk as a business owner, as business can and do fail. However, with risk comes opportunity.

My personal position
I have been with my girlfriend for a number of years and marriage and children are likely not far off. Graph for reference

All in, waiting has saved me a ridiculous amount of money. I expect similar performance over the next 3 years. At that time I expect my personal position will be one more conducive to buying a home. I should hopefully have recouped my down payment savings, and perhaps prices will have stayed the same or possibly gone down.I hope my business is successful and growing, and that interest rates are near where they are today.

If all goes according to plan, if I were to buy in 3 years I will have a higher income, similar or lower home prices, and similar financing options and rates. If past trends continue I will have saved around $60,000 by waiting.

Robert Reynolds - GBA said...
This comment has been removed by the author.
Just Jack said...

The number 1 investment and the best investment that you will ever make.....


Is in yourself.

Your job pays you $70,000 a year. How much real estate would you have to buy to earn that kind of income.

Buying into your company is a good idea. The only thing that is a problem - is getting out of the partnership. Have a lawyer look over the contract - it's really, really important. Because that is how you're going to get screwed over - big time. Get it in writing.

Just Jack said...

I'm wondering, if instead of using your down payment to buy into the company, would it be better to take the savings and put the money into a long term bond. Then use the bond as collateral for a loan. If you are buying shares in a Canadian Corporation would that not make the interest tax deductible. So you would end up with a monthly loan payment and still have the bond earning money?


Any accountants out there?

Just Jack said...

Mortgage arrears (those that are behind 3 months in payments) are back up to 0.45%. The last time arrears were this high was in the first quarter of 2003.

The lowest was around 0.15 in the busy home sale days of 2007. The worst months were in the mid to late 1990's when the rate touched 0.68

So, we are getting closer to the top than the bottom in mortgage arrears. Maybe I will I get that 2008 BMW X6 for $20,000 next year.

Alexandrahere said...

Good Monday afternoon all. Here are my stats from 01 Nov - 07 Nov.

SFH: Min 2 beds, 2 baths. Priced from $375K - $775K. In the core areas of: Victoria, Esquimalt, Oak Bay, Saanich East and Saanich West.

NEW: 21
SOLD: 22
P/C: 25
OM: 11

Avg. Selling Price was $564,227
Median selling Price was $572,500

SFH in these areas within the above criteria sold for 93.4% of the original asking price.

Some outstanding sales were:

1227 Tolmie ask:$869K;sold:630K
4420 Tremblay ask:679K;sold:580K
2438 Lincoln ask:749K;sold:650K
529 Springfield: ask: 589K;sold:513K

Condos'

Min 2 beds priced from $260K to $625K in the areas of:

Victoria: Most areas
Esquimalt: All areas
Oak Bay: All areas
Saanich East: Most areas
Saanich West: Gorge,Tillicum & Interurban

NEW: 11
SOLD: 7 apts & 2 townhouses
P/C: 14
OM: 8

Apt style condos sold for an Avg price of: 395K; Median price:$330K

Condos sold for 95.5% of the original asking price.

Two townhouses sold; one for $290K down from 309K and the other for $353K down from 360K

Robert Reynolds - GBA said...

Just Jack

Thanks for the supportive words.

One of the things I do is set up insurance funded Buy-Sell partnership agreements. So I've read through the contract and lawyered up. I am buying the shares from my old man, so hopefully no one screws anyone else, as Christmas would be awkward as that time Granny forgot to take her meds.

I thought about doing a collateral loan thing, but i figured it would just be simpler to raid my TFSA and be Non-Reg and be done with it. I am very debt adverse, even when it makes financial sense.

Just Jack said...

So in your target market the average has dropped below the median. I believe we had a person drop in to this blog from Vibrant Victoria a month or so ago, saying that this was not very likely if it could even happen at all.

The way I interpret the market when the average price drops below the median price is that market has shifted away from the "move up" market. There is more activity in the market below the mid-point in sales.

The move up market is the last market segment keeping prices reasonably stable. In your target market the last sale on the street now sets the high point in prices with the next sale of a similar home most likely being lower than the previous sale.

And the race to the bottom begins.

Marko said...

35+ sales went pending today. In the last two weeks two of my clients have been outbid on properties! Argghhhhh...

msr said...

@Rob

I love the graph

omc said...

I take it that it is the lower end of the market still selling. It isn't in my end, just price corrections and new listings. Even saw a court ordered show up in Cordova Bay today.

Waiting said...

New Vancouver Sun article today
Of course the headline is suggesting all is well.....but

"Prices were unchanged in eight of 21 metropolitan areas in September, it said. "In Vancouver and Hamilton, a number of builders reported lower negotiated selling prices in September, while in Victoria, some builders offered discounts to spur sales."



Read more: http://www.vancouversun.com/business/Montreal+Calgary+lead+house+prices+higher+than+expected+September/3799712/story.html#ixzz14nwhc3Kv
http://www.vancouversun.com/business/Montreal+Calgary+lead+house+prices+higher+than+expected+September/3799712/story.html

omc said...

There are some people touting the flat prices while inflation helps housing catch up scenario. Heck, we even have one poster who thinks that there is room for higher prices. This is not supported by any data, in fact it is a hopeful guess. there are three possibilities for the next few years in the housing market.

a simple man said...

omc - I am with you - I really can't see there not being price declines...especially after viewing a few open houses over the weekend in the Estevan area. One house for close to 3/4 of a million needed the kind of "updating" that only an excavator could conduct. The market here is still insane and people are being stretched too much for too long.

Alexandrahere said...

HHV: Take a look at 1327 Dunsterville (hate that name). It seems to have everything that you have been looking for except a 2nd bath on the main. They are asking $449K. The large bachelor looks very nice and probably fetches a pretty good price. Also upstairs is a very nice new kitchen, there are new windows and flooring as well.

I know if I really wanted to buy something, that this would be a possibility worth looking at. Maybe at $419K?

Marko said...

4378 Emily Carr Dr just sold for 900k, sold back in April for 705k. Looks like flipping is still working for some people.

Phillip said...

there's really only one scenario over the next 15 years
https://sites.google.com/site/canadianhousingdemographics/

HouseHuntVictoria said...

@Alexandrahere,

Thanks for the tip. Interesting that the place is listed below assessed value. My guess is it sells this w/e and for more than asking (with the caveat that there is nothing wrong with the house, but I wouldn't be surprised if there was a need in there somewhere (roof, foundation, electrical etc).

We won't be buying anytime soon. Much like Rob posted earlier, we're happy renting, saving money and we just struck a deal with our current landlord to take advantage of a nicer place for the winter without losing our current place and save $3K on rent too.

omc said...

I was going to link to that emilly carr house as an example of a clueless buyer in this market. Still, it was an estate sale so I wonder how much the flipper put into it.

Marko said...

"I was going to link to that emilly carr house as an example of a clueless buyer in this market. Still, it was an estate sale so I wonder how much the flipper put into it."

Well looking at photos the kitchen cabinets are laminate so obviously this was not a high-end reno.

Marko said...

Mind you, at 705k + 12k property transfer tax + 1k closing costs = 718k. On the other side 900k - 11k for commission and closing costs = 889k. Now factor in carrying costs, etc. You can't go crazy out on the reno if you want to make some money.

omc said...

I thought the flipper would have made a bomb at that price. The buyer must be a complete moron to pay that kind of price. That area isn't in demand at all. There are a lot of better deals in that area, on nicer streets.

I used to be in the industry; I wouldn't look at a flipper shack.

Marko said...

Yea, the flipper obviously did very well on this one, but not as much as the 705k and 900k sale price would indicate once you factor everything in.

omc said...

Is anyone else noticing the stale sales showing up at the top of the PCS. One from March and the other from August today. Trying to show some sales in a part of the market that has almost none?

HouseHuntVictoria said...

I'm not going to link to him or use his full name because I don't want anyone to think I recommend you read him, but the ever-surprising F.C. had this to say recently on his blog:

"Condominium Current Pending Fernwood Sales total 4 with an average selling price of $ 201,125 with an average days on the market of 127 Days.

It Would Appear the Fernwood Area Condominium Sales Prices are down a little and the Days on the Market have increased this Fall."


Emphasis mine. He compared the $201K number with the previous 12-month average (Nov/09 - Nov/10) of $245,669 and said it was "down a little." I guess in his world an 18% drop in price is "a little."

Sweetrealtor said...

Not our market but I'm sure it will be enjoyed on this site. http://vancouvercondo.info/coaster

Al said...

Marko said:
"... On the other side 900k - 11k for commission and closing costs = 889k. ..."

Why only 11K commission? Who is the agent (One Percent)?

Marko said...

"Why only 11K commission? Who is the agent (One Percent)?"

Correct.

You won't find many builders or flippers paying "full commissions," or at least not ones that want to stay in business for a while.

Sometimes profits are so small that a full commission would split your profit into two.

Sweetrealtor said...

Marko, you can't assume only 11k because it was a 1% listing. A lot of times the buyer agent has an exclusive buyer's agency agreement and the buyer agency commission is increased to 3%1st100k&1.5%balance anyway. And this change won't be seen on the sales data.

Marko said...

"Marko, you can't assume only 11k because it was a 1% listing. A lot of times the buyer agent has an exclusive buyer's agency agreement and the buyer agency commission is increased to 3%1st100k&1.5%balance anyway. And this change won't be seen on the sales data."

Would you say the additional compensation for the buyer's agent usually comes out of the sellers or buyer's pocket?

Sweetrealtor said...

Sellers.

Marko said...

I agree with you that technically it comes from the seller's pocket, but in reality it is coming out of the buyer's pocket.

Do you think the seller will be willing to negotiate to the same degree on the price after you ask for $15,000 in commission for the buyer's agent and the seller is only offering $5,000?

happy renter said...

Blame the HST

DavidL said...

Interesting that the Times-Colonist article blames the HST and doesn't consider any other reasons (excess inventory, market malaise, etc.) for a lack of sales.

Meanwhile in Edmonton (no HST/PST), new housing starts have plunged to the lowest level since June 2009. According to yesterday's article in Edmonton Journal:... attributes most of this to the fact that much of the market for real estate was brought forward into the first half of the year, when people anticipated higher interest rates to come after the summer. Even though higher rates have yet to materialize, the pool of potential buyers has been thinned out, leaving a softer market.

Hmmm ... they have an excess inventory problem in Edmonton as well.

HouseHuntVictoria said...

DavidL, the TC has rarely provided an original thought in anything real estate related in Victoria. This is just one more example of industry mouth piece writing... I highly recommend people stop paying for that sh&t.

patriotz said...

Interesting that the Times-Colonist article blames the HST and doesn't consider any other reasons (excess inventory, market malaise, etc.) for a lack of sales.

Excess inventory is the result of lack of sales, not a cause, as anyone with elementary reasoning skills can figure out.

There is only one reason for lack of sales in Victoria or anywhere else and it's the one reason that the RE industry and media won't talk about:

Sellers are asking too much.

DavidL said...

I completely agree that sellers are asking too much! The flip side is that there is no longer a pool of buyers who can afford the asking price. Virtually all buyers (qualified and otherwise) have either bought or have regretted buying and are now getting out of the market.

Excess inventory is both a symptom of overbuilding and misjudging the number of people willing/able to enter the real estate market. Builders who didn't presell will eventually have no option except to lower prices. Nobody wants to be the first to do this, but the cracks are already showing.

DavidL said...

VREB's latest excuse for the 19% decline in sales: Advanced purchases late last year and tighter credit qualifications for low-equity home buyers introduced in the spring have impacted consumer demand," the report said. Also, weakness in the U.S. economy and a strong Canadian dollar have negatively affected the accommodation and food services sector in the capital region

The high Canadian dollar has been affecting the tourism sector for three years.

a simple man said...

Patriotz and DavidL: I agree with both of you - Prices in Victoria are simply too high.

Many sellers are still hesitant to reflect that in their prices, which is only human nature.

A three-quarters of a million dollar tear-down in Estevan? Lunacy. The smallish lot may be worth $400,000 in today's market which is still a lot of money for most people for a bare lot.

Many have removed their listings to try again next spring with the thought that the market will rebound as it typically has in recent memory. But maybe this time it is different here, really.

Next spring (Feb? Mar?) may just be the start of the undoing of all this unsustainable pricing.

I see it in homeowners all around me in Oak Bay - many are straining under the ever-increasing financial pressures.

Lots of really nice houses not moving in Oak Bay...why? Wrong price.

Marko said...

"The smallish lot may be worth $400,000 in today's market which is still a lot of money for most people for a bare lot."

Demand for bare land lots in Victoria/Oak Bay is large, and there is limited supply. In the last year only 16 lots have sold in both Victoria and Oak Bay, only two of those lots have sold under $450,000 - both in the Mayfair area.

2003 Runnymede Ave. (4950 sq/ft) went for $512,000 and that is nither Oak Bay nor a great location.

There are people out there willing to pay a premium to live in a new home in an attractive location.

a simple man said...

I stand by my claim that even $400,000 is too much for a small bare lot, let alone the demolition and disposal fees for the tear down houses on it.

How long would it take the average Victorian to save $400,000? I am guessing 10 years or more.

Marko said...

You can stand by any number you want and what you think the average Victorian should be able to afford; however, the market dictates the price.

The average Victorian is not building a brand new house in Oak Bay.

a simple man said...

Marko, I agree with you that the average Victorian is not building a home in Oak Bay.

However, the overarching theme is that real estate prices here are just too high, whether you live in Oak Bay, Fernwood or Langford.

Sure people are buying now, but at what cost to their quality of life? Obviously there is a cohort of folks to whom money is no object, and Victoria has a number of them, but then there are the rest of us.

I also agree that the market dictates the price - for better or for worse.

Leo S said...

Here's a good deal for everyone:
http://victoria.en.craigslist.ca/reo/2053749588.html

So for the meagre sum of $2400/month in rent, you get to live in a 2BR condo with beautiful views of... the condo building across the street.

In 2 years you will be rewarded for your sacrifice (after all you could have been renting a house all that time for the same money) with a $700,000 mortgage. At that time your payments will skyrocket from $2400/month to more like $3200/month if interest rates remain low. And that for the next 35 years.

Brilliant!

Just Jack said...

I'm going to have to flip that one on you Marko.

The demand for vacant lots is weak in Victoria and Oak Bay in relation to the demand for a houses. Home owners have driven up the price of starter homes, not builders. That's one reason the average days on market for vacant lots is 50% higher than lots with homes on them.

A builder really doesn't want to lay out 500 or 600K for a building lot, because after she has built a home, the completed price puts the property close and over a million bucks. And that's a small target market to speculate in.

A cost plus job, that's a different story. And maybe that's why builder's charge a lot more to build homes in Oak Bay than Langford. Since Oak Bay people can afford more, they should be charged more. The more millionaires that are separated from their money, the better for our economy.

omc said...

I would say the demand for vacant lots in Oak Bay is very high. I know several people who have bought houses and torn them down. I would gladly build instead of buying a crap house if I could get a lot for a decent price. I can`t though, because people will pay more for a tear down than I will.

omc said...

That lot on Runnymead is far worse than you think; it straddles the border. The person who did the tear down gave up when he couldn`t get permits passed in both Victoria and Oak Bay.

a simple man said...

omc - you are not alone. When I buy in Oak Bay it is with the hope of a new build...but as to my initial point - the cost of a tear down is just too much. I see a tear down as a bare lot + at least $25K in expenses.

omc said...

The cost is far higher than that; you have to pay for new services too. Some areas have archaeological surveys to pay for, others environmental. It is very different tearing down in Oak Bay as compared to buying a serviced building lot.

Marko said...

I don't think we are going to see being able to buy a 6000+ sq/ft lot in Oak Bay and build a 3000 sq/ft home under a million going forward.

2171 Bartlett - 1.3 million.

2744 Bowker - 1.6 million

The demand is there for new homes in Oak Bay and there is a percentage of the population with money.

In general lot prices have recovered dramatically in the last18 months. 18 months ago you could buy a 6000 sq/ft lot on Players Drive (Bear Mountain) for $200,000. A 6000 sq/ft lot just sold on Spirit Ridge (Bear Mountain) for $345,000.

Demand is out there for building lots, but there is no inventory due to lack of development. Even the ones in View Royal started off at 276k and just kept increasing the prices as lots sold.

a simple man said...

omc or Marko or anyone with knowledge:

Any ideas as to the cost for removal of an old house and re-establishing services on Oak Bay? When does an archeological survey need to be done? Environmental survey?

These are very important questions for my future.

I know someone that demo'ed a home in Oak Bay last year and the fees were around $25K for just the demo, shipping and tipping fees (was a bungalow).

Mark said...

Marco said:

Demand is out there for building lots, but there is no inventory due to lack of development. Even the ones in View Royal started off at 276k and just kept increasing the prices as lots sold.

I know those lots and just about all of them have brand new spec houses sitting on them now.....guess what, not one sold. Lot of for sale signs though.

Those builders are either in denial or just plain stupid. Either way I think they are going to lose $$$ on those specs. 800k asking is a little insane wouldn't you agree?

a simple man said...

Mark - thanks for that perspective. I would agree that most of the bare lots I have seen sold have been to developers. The one on Bowker was a tear down, but a developer bought for $788K it and someone paid $1.6M for it - about $800K to build the house? ...great location, though.

omc said...

You have to archeological and environmental surveys whenever there is a reason. In the willows beach area there was a first nations village for example. There are other sites also. The environmental mostly has to do with creeks and such. These can greatly increase your costs, the archeological is around $50k I am told, but if they find anything it gets much worse.

I have never done the services out here and I am a bit dated on info. I will leave that one to Marko.

Basically building in an existing neighborhood can be a pain in Victoria.

The lot I am talking about on Runnymead was bought with an existing house on it by a local physician. He tore it down and put the permits in only to find that it actually straddles the Oak bay/Victoria border. He could get the plans OKed by Oak bay, but not by Victoria. He has been trying to sell the lot privately. If that is the one that sold for $512k, he has lost a lot of money. It is hard for me to know if it was as there is a 4 lot subdivision 2 houses down.

Marko said...

"Those builders are either in denial or just plain stupid. Either way I think they are going to lose $$$ on those specs. 800k asking is a little insane wouldn't you agree?"

300k for lot plus 320k to 350k to build, plus realtors' commission, plus net HST. You are looking at 700k to break even. 800k would be insane if they were getting lots for 200k - but I know a few builders in there any they paid 296k plus property transfer tax on top of that.

"Spec" is a really bad term in my opinion. Some of these spec homes are a lot better in quality and finish than custom homes. Most of the homes in the subdivision have features like heat pumps, hardwood flooring, heated tile floors, solid kitchens, etc.

Yes, 800k is a lot of cash for a new home; however, that is the new reality.

Marko said...

The 512k lot is one in the 4 lot subdivison.

HouseHuntVictoria said...

Update on the Dunsterville house Alezandrahere pointed us too earlier this week: my prediction was right, it sold fast, and over asking ($470K vs asking $449K).

Let this be a lesson to home sellers: price your house right, you'll get the sale quick, and for true market value.

BTW, we renewed our mortgage pre-approval this morning: 5 year fixed rate is 3.24% and variable is 1.95%. That's why prices aren't falling faster than they are.

Marko said...

One of my clients' got outbid on a condo that had multiple offers after being on the market for 50+ days. I think extremely low interest rates on 5-year fixed are bringing back a lot of first time buyers back into the market.

a simple man said...

omc - thanks for the information.

Wow - those are low rates. Regardless, they prop up unrealistic prices.

I won't be fooled.

omc said...

Agreed HHV, the mortgages are really low. What I have been seeing a bit lately on PCS is houses going off market, BUT when you look at them they state they will be back on the market in January.

Most housing bubbles only correct moderately the first year, but far more the second year. Could this be our flood of listings in the spring.

a simple man said...

HHV - do you mind if I ask where you would get those rates?

having a pre-approval n your pocket is power.

Mark said...

Blogger Marko said...

"Yes, 800k is a lot of cash for a new home; however, that is the new reality."

Sorry,that's your 'reality" not mine OR anyone else's with a brain.

Mark said...

Marco let's see how many of those spec homes are still for sale in the spring AND at what price....I bet it won't be 800k

Mr.4AM said...

Here's some interesting info for buyers and especially builders/developers.

Telus BICS dept is now starting to provide guidelines to ready new homes (SFDs & Duplexes) for FTTH "Fiber to the Home", where Internet speeds could start out as high as 100 Mbits/sec and eventually go up to Gigabit or even higher down the road.

Shaw has also started some FTTH trials in Vancouver and Calgary this year, although relatively small in size.

More info about Other Canadian FTTH projects.

Also according to the FTTH Council report ,by Q2 2010, North America should have ~20 MILLION 'homes passed' (ready to be serviced) with FTTH. That's roughly 7% of the NA population.

Yes, we are WAY behind many European and especially certain asian countries, but at least our local Service Providers are finnaly getting on with it.

What's revolutionary about Fiber services vs the existing Telus phone line copper or Cable modem Coax services, is that we've pretty much reached the limitations of just how many bits/bytes can be shoved and shared into copper lines. On the other hand fiber is relatively limitless. 'All' the service provider has to do to increase the speed of a fiber service is to change out the end devices (i.e. your modem and the network equipment it connects back to in the central offices of the provider).

FYI, the fiber cables (but not the modems or switch/routers you will get initially) Telus and Shaw are laying today, will ALREADY be capable of serving HUNDREDS of Gigabits/sec to your home. In other words, once you get fiber, expect massive speed increases every 3 to 5 years. I.e. 100 Mbits, then 1 Gigabit, then 10,then 100 Gigabits (in about 10 years?)

Mr.4AM

PS. Ok, you may now wipe your drooling faces.

Marko said...

"Sorry,that's your 'reality" not mine OR anyone else's with a brain."

Maybe you should become a builder and sell the homes for 600k. ;)

HouseHuntVictoria said...

A simple man, big 5 bank, max discount off posted rates.

Marko said...

As far as services, I don't know about Oak Bay but Victoria takes $6,600 for sewer and storm water, more if you dig in a basement. And I believe $2,700 for a 1'' water line.

Plus permits, this and that....yea....it is expensive to build.

a simple man said...

HHV, omc and Marko - thanks for your responses.

I think that this winter and next spring will be interesting to watch here.

Al said...

For anyone interested in buy/rent a condo/apartment, 90% of them in Victoria have been hit by bed bugs:

http://www.bclocalnews.com/vancouver_island_south/saanichnews/news/106973863.html

DavidL said...

@Mr. 4AM

Thanks for all the FTTH information.

trevor said...

Blogger Marko said...

"Sorry,that's your 'reality" not mine OR anyone else's with a brain."

Maybe you should become a builder and sell the homes for 600k. ;)


I think you missed the point of Mark's post Marco. If I'm correct I think he meant the prices that you think are the new reality aren't realistic at all and perhaps you want them to be reality because you profit as a builder and realtor.

Personally I think those houses are worth probably 600k but definitely not 800k. If a builder is having to charge 800k to make any money then maybe he shouldn't have built the house. The lots were obviously way overpriced to begin with. So maybe a poor business decision by the builder?

I too would like to see what the status of that subdivison is in the spring of 2011. I don't think the houses will sell for anywhere near 800k but what do I know. I am just a realist who obviously refuses to live in Marco's new reality ;)

Marko said...

"Personally I think those houses are worth probably 600k but definitely not 800k."

Last three sales of brand new homes on Players Drive (Bear Mountain), 778k, 735k, 730k....which would indicate that similar homes to the ones in View Royal are worth over 700k on Bear Mountain, given the closer proximity of View Royal to downtown I don't see these homes going for 600k

"The lots were obviously way overpriced to begin with. So maybe a poor business decision by the builder?"

Time will tell, but a brand new home on Nursery Hill (View Royal), really poorly finishing in my opinion, just sold for full asking price of 729k. The ones close to the hospital there are better in build on average and better location, so I doubt they will be going below 700k - especially the ones with a 2 bedroom suite.

Alexandrahere said...

HHV: I noticed that as well on the Dunsterville property.

Wow a variable rate of 1.95%. No wonder people are out buying.

From now on when I report my "sold" listings each week, I will report any homes within my criteria that sold for at or below BC Tax Auth. Assessment. So far this week though, all homes have sold over assessed value.

a simple man said...

So...what does it cost in Victoria to build a new home, land excluded - again this is a subject near and dear to my heart (and my wife's).

Many of the houses in Estevan are on 70-100 year old foundations with low height basements and frankly some just really tired structures. I would feel better sinking a little more money into a tear down and then a new build.

So, per square foot, how much does a quality home build cost? Again, minus the land value.

thanks to everyone in advance...

Marko said...

Give me some criteria:

- Size of home
- How many garages, attached or detached.
- Levels
- Crawl space or not
- Heating system
- Exterior finishing
- Interior finishing
- Style of home (will determine wheather home needs more expensive construction like torch on roof, etc.)

trevor said...

Marco those houses and all houses will sell for what the market at the time says they are worth.

The market could very well say they are worth 30% less a year from now, who knows for sure. I do know that given your age and lack of experience (proven many times with your posts on this forum)that I would take your prediction as wishful thinking.
You are a realtor after all and have a vested stake in this overpriced market continuing.

In my opinion those house aren't worth what they are asking for them. Will Mr market agree in a years time. I guess we will see. In the meantime i people want to pay too much for a house that is on them. I know a lot of very house poor people in Victoria who have all bought into your sense of "reality"

You have several times posted that Victoria has a lot of wealthy people. Funny but the stats suggest otherwise. Victoria is a blue collar town it always will be. The rich folks aren't driving this market, the 5% down crowd is and they are all in over their heads.

I have lurked here for a while now. Thanks to HHV for running this blog btw and I am starting to see an agenda with many of the posters here. You are a builder and realtor and as such I think your view is skewed. Ultimately Mr Market will decide who is right.

trevor said...

Blogger a simple man said...

So...what does it cost in Victoria to build a new home, land excluded - again this is a subject near and dear to my heart (and my wife's).

$150/sq ft will build you a nice home. Problem right now is that lots are so overpriced but they will come down to

HouseHuntVictoria said...

A simple man,

To do a budget job, think $140/square foot-ish. That's you being the contractor and hiring all the sub-trades etc. That's using the cheapest finishing materials too.

As soon as you get into quality finishing, start adding things like $10/SF flooring, $150-$200 linear foot for kitchens/baths... etc.

This is one-offs too. Developers out at Westhills etc are doing the budget stuff for well under this price point because of volume discounts.

That's build price. Not build + servicing + permitting + + +

I've got a plan and budget laid out for a 1700 SF 3 bed 3 bath home that I'm confident I can build for under $250K. Just can't find a $100K lot to do it on ;-).

Marko said...

$150-$200 linear foot kitchen? Decent cabinets alone will cost $300-$400 linear foot depending on hardware. PLUS granite, plus faucets, plus sink, plus under mount lights, plus appliances.....

You would be surprised how quickly things add up.

$250k for 1700 sq/ft sounds about right for the average home.

HouseHuntVictoria said...

I stand corrected on the cabinet costs.

Mr.4AM said...

Must watch video: Quantitative Easing Explained in 6 minutes. Hilariously sad!

a simple man said...

Thanks to everyone for their comments - I appreciate them.

Marko, for perspective, something along these lines

with full basement (plans need slight altering for down staircase), heat pump, no garage at this point.

Further, with the inevitable slowdown in trades and a decrease in demand for building materials, will building get cheaper next year?

I acted as a general to one of the houses we lived in previously. I saved some money on the build for certain but will NEVER do it again as I would have been better off putting that time into my career. Plus it was like herding cats - and the lies, every day. Too much to take.

Al said...

A simple man has a nice house plan :-)

For that one plus basement and with someone else as general contractor, your probably are looking more close to $200 than $150 per SF.

a simple man said...

thanks Al - we want the house to fit into the neighbourhood, so many of the plans form that site work.

$200 a square foot seems reasonable. We have simple tastes in terms of finishing so we may be able to save a little there as well.

Marko said...

A simple man,

The full basement adds a lot to the costs. Oak Bay will probably hit you with a larger sewer/storm water services. The trucking/excavating cost is going to be large ~ probably around $15,000 or more. From Oak Bay every load is going to be at least 1 hour trucking costs. Then additional concrete, etc.

With building permits, contractor fees, given it is Oak Bay, I wouldn't budget under $475,000 for this.

A lot of inputs that go into building a home are driven by the global market. For example, the majority of windows in new homes in Victoria (Milgard) are shipped from the states.

Same with a lot of other things, hardwood, culture rock, appliances, tile, etc.

We are going to need to have another economic meltdown for new home construction costs to dramatically decrease.

As far as trades go, I think there is an absolute shortage (however, I have no stats to back this up).

I think what we will see during any slowdown in construction is it will weed out poor tradespersons. Truly skillful trade’s people will continue to obtain a decent wage.

Even during the huge slowdown during 08/09 I don't remember a single trades person coming to the home we were building looking for work.

Marko said...

Immigration policies (80% or so of new immigrants have university degrees) are no conducive with lower trades persons wages either.

a simple man said...

Thanks Marko;

I agree that a full basement will add costs, but I have always thought of it as cheaper than above ground sq footage...perhaps I am mistaken.

A friend recently demoed a house in the Uplands and built a new place - the demo and trucking costs were $25K, so I agree that it is a factor to be considered seriously.

$475K is within what I had thought, so your opinion reinforced this (which is coincidentally almost exactly $200 per square foot for the upper floors).

I agree that a lot of inputs are driven by the global market. However, the global market is sick and on life-support, especially the US. I am sure the sale of building supplies to the US from Canada has plummeted in the past few years, so that has to be reflected in some manner in the wood we buy I would think. Perhaps I am wrong - I have thankfully not bought building materials for 2-3 years and never in Victoria.

As far as cultured stone goes, I will get the real deal from Langford - seems silly to import something fake when we have the real stuff in abundance nearby. More money to install, granted, but better for the soul. Luckily, I can get all hardwoods at cost (best friend from high school).

I think we are in a economic meltdown so I would expect a slowdown. Another Victoria tradesperson who is a regular poster on Garth Turner's blog (Dan in Victoria) is frequently lamenting that he and all his contractor friends are seeing serious slowdowns and that almost everyone is worried. I agree that best tradespeople will always have work and the bad ones will be the first to pack up.

Who knows what the future holds? That is what makes life awesome.

Marko said...

The "real deal" from Langford is not bad, we just bought 150 sq/ft of it; however, it is more expensive than something like Eldarado culture rock. I would not go crazy on the rock unless you plan on going overbudget ;) $25 sq/ft for a decent job any way you spin it.

Marko said...

"Another Victoria tradesperson who is a regular poster on Garth Turner's blog (Dan in Victoria) is frequently lamenting that he and all his contractor friends are seeing serious slowdowns and that almost everyone is worried."

This always puzzles me, three weeks ago I called 6 tradepersons to get an estimate to do hardiplank siding. 3 never returned my message, only two showed up, and the prices were so ridicolous I just ended up doing it myself and actually took the time to nail the hardiplank to the studs not just the sheeting as seems to be common but poor practice in my opinion.

Everyone is "worried" but their prices sure don't reflect it.

a simple man said...

Marko - glad to hear I am not the only one that gets mistreated by the trades...

I think no-one wants to be the first to blink yet, or that they simply don;t think the slowdown will last long enough for them to budge their prices.

Honestly, the hourly wage that some charge is astounding. Some deserve it.

Just Jack said...

During a recession in the housing industry, the strongest survive. That's not the "best" builders that's the "cheapest" builder.

Marko is not going to be buying from the "best" cabinet makers or installers, but the cheapest. To think that buyers will not do the same to contractors is illogical.

The prospective new home owners are doing this on the blog right now. They are asking "how much to build" not who is the "best" builder to use.

The "Free Market" system promotes mediocrity with prices dropping to the lowest quality standards possible before the public or government set the lowest minimum acceptable standards.

Marko said...

Month-to-Date Market Statistics
Posted by
Nov 15 2010
Monday, November 15, 2010 8:00am:

MTD November
2010 2009
Net Unconditional Sales: 228 604
New Listings: 359
796
Active Listings: 3,750 2,973

Please Note

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

Marko said...

I disagree with this, during a slowdown people have more time to look around and weed out poorly built homes. During a boom the cheapest builders thrive as everything is flying off the shelf.

The really difficult competition is the "owner builders" that build a home, move in for a year and then sell avoiding all sorts of taxes and fees a professional builder has to incur. I think if you build and sell within a 5 year period HST should apply and so should capital gains.

The playing field is not even.

Marko said...

SFD to date.

Price Original: $651,200
Price List: $638,208
Price Sold: $613,649

Condo sold average: $323,708

Just Jack said...

Good point about the HST, Marko.

Is market value including or not including HST. Assuming that market prices are flat. If the HST is part of market value, then a property that sells one year later should sell near to the same total price including the tax. Or the other way, would be that the property sells a year later for the total price less the HST.

So which way is it? Which is market value? When I look at re-sales of new homes, I see it both ways. Not enough consistency to say which is which. I think buyers of new homes should be aware of this, after all it is 12 percent of the price.

So how would you know, if you're paying 12 percent or so, too much?


I would look at re-sales of near new homes that are very similar. If the total price including HST new is a couple percent more than a year old home, I would think that's fair. I would also stay clear of large subdivisions where one developer controls the pricing. There are quite a few recently built subdivisions and condominium complexes where people bought and had to sell a year later at a significant loss. If they had originally bought at fair market value, this would most likely not be the case.

So if you are going to buy or build new, then I would take a good look at re-sales of near new homes and use that as the gauge. In this way you might tell the builder what your willing to pay, not what he/she wants to charge.

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