Wednesday, December 1, 2010

November MLS stats

No surprises.

November 2010
Net Unconditional Sales: 479
New Listings: 722
Active Listings: 3,723
Average SFH Price: $636,634
Median SFH Price: $530,000

November 2009
Net Unconditional Sales: 604
New Listings:  796
Active Listings: 2,973
Average Price: $617,987
Median Price: $555,000

Month over month changes
Net Unconditional Sales: +2.5%
New Listings: -26%
Active Listings: -8%
Average Price: -1%
Median Price: -1.9%

Year over year changes
Net Unconditional Sales: -21%
New Listings: -9.8%
Active Listings: +21%
Average Price: +3%
Median Price: -5%

More of the same. There are active buyers, many seeking the same property types: homes with suites, near the core, priced around $500K. There are still far more delusional sellers though: people who think the days of double digit year over year price increases are still upon us pricing their fixer-upper properties as though they were better than new. This market is in a holding pattern. Sales volumes have increased since the August and September 20-year-lows, but they still remain dismal when compared to the majority of the past decade.

In case you were wondering why prices haven't dropped more substantially than they have? Let's compare volumes to 2008.

October 2008 
Net Unconditional Sales: 294

November 2008
Net Unconditional Sales: 257

Sales are almost double what they were in the early winter months of 2008. And that's why prices aren't plummeting.

188 comments:

Leo S said...

Missed the new post.

I corrected VREB's average data from 1978 for inflation. It didn't change the graph as much as I had anticipated actually. All values in 2010 dollars as calculated from the Bank of Canada inflation calculator.

Data here

Or the graph

The topmost trend line is for all the data 1978 to 2010. So if you believe that the runup in the last decade is normal, we are currently about 20% over the long term trend.

If you think that the last 5 years or even 10 years have been anomaly, there are two more trend lines that are based on data to 2005 and 2000 respectively...

Of course the wildcard is interest rates and mortgage policy, but this shows that even with inflation corrected data we are well above any sort of sane trend, and how previous corrections have gone below that trend.

Leo S said...

One surprise: In 4 days average price dropped from $659k to $636k. I was expecting the new record, but I guess a lot of low end stuff sold at the last minute.

Also, based on median prices the market has been flat for 3 years.

a simple man said...

great data, Leo S...appreciate your putting it together - it really demonstrates that this most recent surge is really unparalleled here.

I was surprised the average was no higher as well...

Marko said...

There were no big million dollar sales in the last 30 or so of the month, drove the price down quite a bit. Medium is well of the average.

Marko said...

I mean Median.

Mark said...

Median don't mean squat in a tiny market like Vic where sales are skewed by big ticket homes in any given period.

I've been talking to quite few hungry realtors (HHV you will notice I didn't call them realtards) and they are seriously considering getting out of the Biz. it's lean out there!

Phil said...

The five year fixed rate has dropped a full percentage point since May, to it's lowest point ever.

Look no further than that if you're wondering why this bust is taking so long to get going.

a simple man said...

but there were quite a number of million dollar sales last month, perhaps just in the front and middle half of the month:

"There were 20 single family home sales of over $1 million in November including one sale in Oak Bay of over $5 million. "

a simple man said...

Mark, median is valuable in this market as it minimizes the impact of outliers. Mean (average) is less valuable as it is sensitive to extreme outliers.

Marko said...

Sorry, bad wording on my part - what I meant was that in the last 30 sales, there were no million dollar sales. Not the last 30 days.

Leo S said...

"As the number of properites on the market continues to drop, that is expected to result in a higher number of sales in the new year" _ Randi Masters

Anyone understand the logic in this?

a simple man said...

no worries, Marko - I understood what you were saying, and it was in reference to the change in mean price...

Leo, are you expecting logic from vreb? Emotion is the backbone.

mln said...

I think it's another case of the "pent-up demand" theory. A lack of listings now translates into a higher demand next year.

It makes no sense.

HouseHuntVictoria said...

Buy it now before they stop making anymore.

caveat emptor said...

What costs what to construct a new house:
http://lansner.ocregister.com/2010/12/02/what-costs-what-to-construct-a-new-house/90890/

2700 sq ft house for $222 K. That sounds quite a bit cheaper than around here and might be one reason we won't fall as low as the US - higher replacement cost

Alexandrahere said...

Phil and all: The five year one percentage point drop is incredible alright. That (HHV) is the reason there was no real backlash going from a possible 40yr amortization period to a max 35 yr period. The rates were higher when that small window of opportunity opened up to anxious and novice first home buyers who were desperate to jump in before they were "priced out forever".

I know of many young couples who before 1st of July "re-mortgaged" early and paid big penalties just to lock into a low rate mortgage before the assumed increases would take place post July of this year. These people who can afford to stay without the possibility of going bankrupt will never be able to unload their homes as they have zilch in equity now and for many, many years to come.

The games the government/banks play on the innocent.

The amortization period should have never increased above 25 years.

Mark: I have also talked to a few realtors recently and they are not feeling too well or positive over the current market situation.

DavidL said...

@Leo

Thanks for producing the fantastic charts graphing the inflation-adjusted prices. Back in 1986, prices were really inexpensive and interest rates had substantially dropped (from the early 1980's levels). Alas, I has only recently graduated from high school and had no savings. In 2001, I saw the same kind of scenario - with prices slightly dipping and interest rates beginning to rapidly fall.

I halfheartedly think there is a 15-year cycle in real estate ... so perhaps in 2016 there will be a true buyers market?

Historical Stats: Canadian Residential construction 1926-1976

a simple man said...

I imagine BC Hydro's announcement today to increase electricity rates 10% for each of the next four years is a snapshot of what is to come. This is on top of the increase in water and sewer fees for Victoria announced earlier this week.

Just wait for the increases in taxes, municipal, provincial (sorry, we are taking back that tax break) and federal.

Houses are getting even more expensive to run.

Sometime the dam will break.

Houses here are 50% overvalued.

(now I am ducking)

a simple man said...

Hmmmmmmmmmm

"Greater Victoria’s unemployment rate moved up again last month to 5.6 per cent as Canada saw job growth in November, but not as much as economists expected.

The capital region’s unemployment rate rose from 5.3 per cent in October, following an increase from 5.1 per cent in September, Statistics Canada said Friday."

a simple man said...

news modification - they are now saying 10% per year for THREE years, not four as they previously reported.

Al said...

Just called Saanich, they said water/sewer fees will increase about 9% for next year.

Some of these increases will go the renters as well, especially for people who rent a house and pay all the utilies.

Although the property tax is lower here (Saanich is about half comparing to Ottawa), that will go higher too if the snow keeps coming ;-). Better keep on canoing/kayking/hiking/walking and birding as much as possible :-)

Marko said...

"House are getting even more expensive to run."

Maybe this is a good thing? Last stats I saw the average family home spends 2.5x the average home in Europe on electricity.

A 2000 sq/ft home for a family of 4 is ridiculous by international standards.

Perhaps we will see a trend of moving toward 1200 to 1400 sq/ft homes and or 2000 sq/ft with a suite for the average family.

Talus said...

Rent for $2200 - http://victoria.en.craigslist.ca/apa/2090535481.html

OR

Buy for 1.7 Million --
http://www.hollyandjohn.ca/listings/private-beachfront-home/

What is wrong with this besides having to say 1.7 million like Austin Powers.

a simple man said...

Marko - I agree that better use of space is paramount going forward. We are renting houses that we think are just big enough to see how it fits our family - a great try before you buy scenario. We have owned big houses before (5050 sq ft the biggest) and they just aren't what they are cracked up to be.

The book "Not so big house" is a good reference for this. buy quality, not space. Make areas multi-function. As expensive as RE is here, it makes good sense to look into what you really need vs what you want.

Mark said...

Talus that is a perfect example of why this market is so insane and why prices could very well retreat 50%

More people need to wake up and smell the damn toast!

Talus said...

Mark, I regularly check out the situation in Sacramento http://flippersintrouble.blogspot.com/

When they were averaging 30% down I thought that was as low as it would go. I was so wrong.

a simple man said...

talus - wow...that site is jaw-dropping.

Introvert said...

Especially lately, there have been many comments made here, on this blog, about how many 5-percent-down, 35-year amortization folks there are out there in Victoria. I know HHV just worships statistics and empirical evidence, so does anyone have any concrete stats specifically showing how many of these folks exist in Victoria? Since there are lots of hunches, gut feelings, general senses as well as anecdotal evidence being offered up by commenters here, and not so many reliable statistics focusing on our specific locale, I'd like to offer a few pieces of anecdotal evidence of my own--evidence that is somewhat contrary to the prevailing thinking. (I know, you're shocked!)

I know two couples, both in their mid-to-late twenties, who bought their first home in Greater Victoria within the last two years, who both had 20 percent down and opted for an amortization period less than 35 years. Now, let me add myself to this list. Same story as above: bought our first (and hopefully only) house within the last two years, and had 20 percent down (thanks to diligent saving, not a giant inheritance or winning the lottery). Only difference is we took a 35-year mortgage. However, I hasten to add that there is no way it'll take 35 years for us to pay off our house as we make extra mortgage payments on a regular basis, and will continue to do so for at least the next four years, at which point we will renegotiate and probably face a higher interest rate.

In trying to anticipate your criticisms, I acknowledge that, yes, this is a small sample size (three couples), and, yes, this is, of course, only anecdotal evidence, which doesn't mean a whole lot. Nevertheless, this is my reality and I think it's worth considering. I'm not saying that you guys are wrong, that there aren't sub-prime-type borrowers in Victoria who may be in real trouble someday, but there are also probably a decent number of "solid" borrowers, who can withstand a fairly sizable price drop before they approach underwater-mortgage territory.

I just question whether the vast majority of first-time home buyers in Victoria are in "over their heads." By historical standards, maybe one could argue that they are, but I would argue that times have changed; houses ain't cheap out here anymore and probably never will be. But by fairly realistic, modern, relative-to-location standards, maybe a good proportion of first-time home buyers aren't in as rough a shape as the common narrative suggests.

a simple man said...

I know I read somewhere recently that the average Canadian first-time home buyer invested 7% as a downpayment.

Introvert, I don't doubt that there are many purchasers like you - you sound like you have it together.

It is the 7%'ers I worry about. Especially since a good many of them likely took the old 5% cash-back mortgages.

I wish I could get specific stats for Victoria, but I am sure they are not public knowledge.

Marko said...

306 - 1121 Fort St just went for 279k......what the? 453 sq/ft for 279k

Leo S said...

I don't think we're so hard up for stats that we need to resort to an argument based on anecdotes.

The CAAMP Report has some good numbers, although they are not regional, and some aspects of it are suspect.

20% of home owners have less than 20% equity in homes. That indicates that a large percentage of people buy with less than 20% down (not sure how to calculate that % though).
Garth tosses around 7% as the average downpayment, wikipedia says Throughout 2007, the average Canadian home buyer who took out a mortgage had only 6% equity in their home. The 6% equity is or equals the national average downpayment for all mortgages including home buyers who traded up to more expensive homes. but that isn't cited.

Marko said...

From my experience, the typical first time buyer is quite intelligent and well educated. If you qualify for a 500k mortgage with 5% down, most likely you aren't working in a low paying job. Unfortunately, prices have weeded out a lot of people.

I know a number of mid 20s professionals living at home with well off babyboomer parents. Making 30-80k/year, not paying rent, utilities etc, saving large amounts of cash every month for a down payment.

In the last 3 months I've had a first time buyer put down 200k on a home, had another mid 20s first time buyer put down 50%+ on their first purchase.

Secondly, most first time buyers I have worked with are looking for properties 100k to 200k below what they are pre-qualified for as they can't justify having astronomical mortgages.

A lot of people don't view real estate as an investment or compare prices to rent. Some people simply want a place of their own, and they adapt to make it happen.

Leo S said...

Small houses have distorted price/sqft values as more of the value is in the land. Case in point: 1213 WALNUT St sold for $335k, which works out to $631/sqft

Marko said...

I also think affordability for the first time buyer is all relative. If you expect your first property to be a 2000 sq/ft SFD or brand new 1000 sq/ft condo at a high end building, than yes, real estate is not affordable.

If you think a 500 sq/ft condo should be plenty for a young couple, than it is not as bad. Especially if you have a combined income in excess of 80k.

HouseHuntVictoria said...

"I don't think we're so hard up for stats that we need to resort to an argument based on anecdotes."

Agreed. Anecdotes are easier to relate to though.

The CAAMP report is the industry equivalent to a report put out by the CREA. Both organizations serve people who make a living selling real estate related products. There is an inherent bias built into any report that has the potential to change public perception about a product - it's called the communications director who's job it is to make sure the communication (in this case the report) is presented in a manner that is "factual," yet readable by the general public in a tone the organization wants them to hear.

I think there's valuable information in their report, but as the blogger at Financial Insights did, you have to ask questions and dig deeper to get past the truthiness.

DavidL said...

@Introvert wrote: Now, let me add myself to this list. Same story as above: bought our first (and hopefully only) house within the last two years, and had 20 percent down (thanks to diligent saving, not a giant inheritance or winning the lottery). Only difference is we took a 35-year mortgage.

I would say congrats on paying the 20% down! When I bought my home in 2002, it was only months after getting a 2-year diploma from Camosun College (I returned to school as a "mature student" after working for 15 years), so I only withdrew enough from my RRSP's to cover the mandatory 5% down. My original plan was to pay off the mortgage in 17 years, but expect to have it paid off in less than 12 years. With today's prices, with 20% down - it would take about 25 years to pay off the same house with the same payments.

Jason said...

I think that there is more data in the CAAMP report if anyone wants to read it cover to cover. I did some time ago, but don't recall exact numbers.

However, here's some more anecdotal evidence for you.

We sold our house in May in Kelowna. It's not Victoria, but the market is similar.

Luckily we were priced right around the max dollar amount that qualifies for a break on property transfer tax for first time buyers. We had 4 offers from first time buyers all at that max amount (425k).

3 of the 4 had 5% down. I don't know what the 4th had.

The eventually "winners" bought with 5% down and they also have two new vehicles on credit. They are in their mid twenties, the wife is on maternity leave and the husband probably makes about 60k as an engineer (I know the company he works for).

We haggled over replacement costs for the roof and furnace which are both 20 years old and need replacing asap, and in the end we reduced the price by a couple grand to cover a portion of both, but to date, they still haven't replaced either. After hearing from the inspectors, I would not have left the roof for another winter, but possibly money is tight?

I also know 6 other couples who have all bought in the past 5 years. I don't think any had enough to escape CMHC, and they are all educated, well paid (60-120k) individuals. They bought within their means, but for some, a job loss would mean they would have to sell within 6 months.

I don't think that 20-50% down is at all indicative of the norm for first time buyers anymore.

Leo S said...

Part of it is comfort with debt. Were extremely debt adverse and the mortgage that we'd be comfortable with is significantly less than half of what we would be approved for. But many people like in jason's example don't seem to be concerned at all with a debt load that would keep me up at night. Like the recent stat that 1 in 5 canadians could not handle an unexpected $5000 expense and yet 79% felt they could comfortably take on more debt.

Marko said...

"3 of the 4 had 5% down. I don't know what the 4th had."

Hmmmm, that is interesting? Did the buyers' Realtors disclose this to you or your Realtor?

If I was writing up an offer for someone with 5% down I would not disclose the extent of the subject to financing condition.

a simple man said...

Hi Marko - in the other province I was in every offer I was every presented with had how much they were mortgaging and how much was cash - about 12 offers in all. there were a specific place for this information on the offer sheet - perhaps it is different here.

The last house we sold the folks were mortgaging over $400K. They were acquaintances of ours and I had a really hard time accepting their offer b/c I felt it was too much for them to handle. But they are adults, so...

Marko said...

"there were a specific place for this information on the offer sheet - perhaps it is different here."

There is a specific place here as well but you just put N/A in it. The condition is for the benefit of the buyer, so I don't know why a buyer's Realtor would choose to disclose it if it is something like 5% down.

a simple man said...

I guess their realtors weren't that concerned..no offer was more than 25% cash...but it was not Victoria.

Just Jack said...

For the month of November, there were 123 condominiums sold in the Westshore, Saanich Peninsula and Victoria core districts. 34% of these condominiums sold for less than their assessed value.

The single family home market performed better with 217 sales and only 19 percent of these homes sold under assessment.

Next month Santa brings us the new BC assessments. And my reliable sources have revealed that residential house assessments will be 5% higher than last year. Which means most or nearly all homes in Victoria, Saanich and the Westshore will be selling less than assessed value.

There is only a small window in which to launch an appeal of your assessment. If your a home owner and your think your over assessed, you should appeal the assessment.

happy renter said...

The Walnut St. house is also on a half lot, I believe. I looked at it when it first came up for sale. It's a pretty tiny lot and tiny, old house for that much money. Just out of curiosity, approximately what is the average $/sq ft in that neighbourhood (Fernwood)?

Marko, maybe 306 - 1121 sold for that much because it comes with a parking space? That would be my guess.

WorldtravellerPlus said...

Long time reader, first time poster. I'm from Vancouver but I've always imagined i'd move to Victoria at some stage as I really like it. However, I would never pay the prices for the real estate that are currently being asked. At the end of the day, i'm an investor and BC real estate as an investment class is absolutely brutal in comparison to equities right now. P/E is a basic valuation metric used to value equities and it's easy to find blue chip stocks with a PE of 10 (basically yielding 10% a year). If you take rent less ALL the carrying costs in BC, you'd be yielding something close to 3-4% (PE of 20). So although I think owning a home is just great, I think investing in a home is very stupid. The most common knowledge failures are as follows:

1. Paying interest is no different than paying rent.
2. Leverage is GREAT on the way up but is brutal on the way down.
3. What happens in 5 years when rates reset? Likely wages won't have moved but interest rates could have moved significantly.

Anyways, I will not touch real estate until it makes sense and for me that won't be for a long long time in BC...

Leo S said...

Turns out I read my graph backwards. Price per sq/ft in all SFH sales in the core areas under $520k has decreased by $25/sqft since end of may, not increased as I said before. Forgot that my dates are backwards.

omc said...

I thought that this season would be dead for real estate, and so would this blog. I guess I couldn't have been more wrong. Not much for sales though.

Marko,

Just curious, do you have the current listings.

Leo S said...

Facebook ad: Thinking of buying a home this year? Write your offer and remove conditions before December 20, 2010 and receive a bonus of $500!

Wow! A whole $500! Where do I sign?

Just Jack said...

If you're buying a starter home in Fernwood having around 1,150 finished square feet you would be paying roughly $390 per finished square foot.

A middle income home of around 1,800 finished square feet would be $300.

And Fernwood's rich and famous start paying about $255 per finished square foot for around 2,350 finished square feet.

The economic principle known as diminishing returns or marginal utility shows us that as the size of the home increases, the price per square foot rate decreases, that's why the rate drops.

Also, the neighborhood designations are 30 or more years old. The neighborhoods have drastically changed since then. I find a better analysis is designate what is a starter home, middle income or upper income by the size of the home, when built and the size of the lot, rather than is the home in Fernwood or Hillside.

However, there are exceptions, like Fairfield and Rockland, but these areas are dominated by large homes on large lots. Then there are the less desirable neighborhoods like Central Park and Downtown, which house a lot of our "challenged" population. That leaves James Bay, which is our equivalent of the West End in Vancouver where the one pays upper income prices for middle income style homes.

So, its not just a matter of what price per square foot rate is a house in Fernwood. It's more of what is the price per square foot rate for this size of home in a middle income neighborhood like Fernwood.

Catherine said...

I'm trying to get a feel for the Victoria neighbourhoods. Apart from the obviously good places like Oak Bay, I don't have much idea. I'd be interested in a brief description of the hoods and which are a bit sketchy and where the boundaries are between sketchy and not. Mostly intersted in Victoria south of UVic.

Catherine said...

Obviously Just Jack's comment has prompted this request. I didn't know that about Central Park (truth be told, I didn't know CP existed until I read his post ... I am from Vancouver)

a simple man said...

Victoria south of UVic = Oak Bay. Oak Bay is the municipality from the south half of UVic to the Ocean. Low crime and not much sketchiness at all.

That's my 'hood - I have only ever lived here in Victoria, both as a student and as a parent, so I have little input to living in the other areas. I am sure many posters here can fill you in.

a simple man said...

but, I wouldn't let my wife or kids walk in Fernwood after dark, nor Central Park, nor anywhere in Esquimalt or James Bay, or West Downtown near Our Place.

patriotz said...

If you think a 500 sq/ft condo should be plenty for a young couple, than it is not as bad. Especially if you have a combined income in excess of 80k.

If you think a 500 sq/ft condo should be plenty for a young couple making over 80k, you've got rocks in your head. That's well above the median household income for Victoria and for Canada. That speaks volumes for the sustainability of prices. If that's all the DINK's can afford, who's going to buy everything else?

BTW what would the price/rent for that condo be?

happy renter said...

If that 500 sq ft condo is downtown/Vic west, is full of stainless steel appliances, and has granite counter tops, the rent is about $1200 without a parking space, $1300 with.

Just Jack said...

Well Catherine, I could rank the neighborhoods by comments, but that may cause some people to be offended that I "dissed" their hood. So instead I will do it by median price and then diss their hood. That would tell you which neighborhood is below the average and which is above average.

There are some 11 neighborhoods in the City of Victoria that have detached homes. The median price in Victoria for a home is $570,500. So here they are ordered from lowest to highest.


1) Rock Bay - no data, mostly industrial properties and prostitutes

2) $409,000 - Downtown, small homes on small lots in rental condition. Lots of transients and drug related industries.

3) $456,500 - Central Park. Again small homes, small lots and druggies. This is where the newer police station is located. And police stations are always located in rough areas. Don't go walking bare foot in the parks in this area or you might step on a syringe.

4) $461,250 - Again small homes on smaller lots, but with less homeless, transient and drug problems.

5) $507,500 - Hillside the beginning of the typical sized home on the typical size Victoria lot, which would be 1,800 finished square feet on a 6,000 square foot lot.

6) $516,950 - Mayfair. Again a middle income area of homes. Far enough from downtown so that you don't find some one sleeping under your tree in the morning.


7) $523,500 - Fernwood - the main attraction would by the elementary school here, it has a good reputation. A lot more young families have moved here lately because of school closures in the "gray haired" areas. This is about the extent of the homeless shopping carts, some sleep overs occasionally in Alexander park under the trees and the occasional drug house. It seems everyone knows where the drug houses are - except the cops! The mayor lives here, but the streets still have pot holes. Obviously, he's pissed off the union which actually runs this town.

8) $530,000 - Burnside - a bit of a surprise for me here until you figure that the homes and lot sizes are on average a little larger here than in Fernwood.

$570,500 THE MEDIAN PRICED HOME
which is about 1,900 finished square feet on a 6,000 square foot lot, built in the 1960's.

9) $663,450 James Bay. Close to the seashore and downtown. Good for that urban couple who like to have romantic jogs along the seawall, eat at restaurants where the waiters wear kilts, pierce their nipples and like to be close to the downtown trendy clubs.

10) $697,500 Fairfield. Anywhere else in Canada this would be the start of a middle income neighborhood with 2,150 square feet homes on 6,000 square feet lots. Most of the time you neighbor will actually park his car in the garage! Although over the last few years you find the streets are being choked up with the cars from the newly created basement suite rentals. But really what do you expect to get for 700 large nowadays.

11) And lastly, Rockland at a median price of $857,000. Large homes on large lots that average 2,600 finished square feet on 8,400 square feet lots. Wally and Beaver Cleaver live here - of course they are in their 60's now.

Basically, if you have a couple of kids at the elementary level, you should be looking in Saanich or "gasp" the Westshore.

DavidL said...

@Just Jack

Entertaining summary of the Victoria neighbourhoods... care to do the same for Saanich? (I've lived in almost all parts of Saanich over the past 40+ years.)

omc said...

I know there are some pretty economically savvy types out there. I am thinking about moving a bunch, to be honest almost all, of our RRSPs over to funds that are managed in US funds. Of course I want to take advantage of what I see as an overvalued Canadian dollar. Could be an extra 8% or so on our investments this year? Any pitfalls, or input?

I am not one of the market savvy types.

omc said...

Catherine,

I would strongly suggest you rent here for a year before buying. I live in Oak Bay where many of the retirees settle, and it is shocking to see how many move back within a year or two. You are VERY far away from your family here and most find they have a hard time making friends. You can't afford to do this nowadays as prices are no longer rising, but falling. I am sure the realtors will try to tell you different.

The other reason is that the neighborhoods are very fickle here. Compared to other cities the areas are very small, and things change a lot area to area. Know the area you want before you buy.

Catherine said...

Thanks everyone for the comments. Just Jack, what is the name of #4?
I have been reading this blog for about a year and I am definitely a bear: everything returns to the norm eventually, as Mr. Schiller points out.
We are thinking of Victoria because even if Van drops 30%, we can still only afford a complete dump on the eastside and the dumps in Victoria have much more character!
omc, it would probably be a good idea to rent first... but it's hard to keep waiting. Hopefully we can be patient enough to jump in close to the bottom (bottom 1/3) - I have no illusions about being clever enough to get in right at the bottom. (Although of course we managed to do that when selling our condo 10 years ago!)
And as for friends - who needs friends when they have a blog to read every day.

Catherine said...

btw, I was watching a huose on Vancouver st between Bay and King (the listing eventually expired). Is that considered Central Pk?

Phillip said...

omc,

I’m with you on starting to hedge currency risk through USD funds. I too think the loonie is getting overvalued here. I’ve started scaling into USD near par, although I still think there’s a small chance the loonie could spike to $1.10 again, especially if oil jumps the $100 hurdle for awhile (good chance by next summer). My plan is to be heavily diversified into US bonds, equities, real estate & dollars by next presidential election. One chart you may want to loosely follow is the USD election cycle @ http://www.seasonalcharts.com/zyklen_wahl_usdx4j.html
cheers

Just Jack said...

Number 4 is the Sears neighborhood around Hillside Mall.

Bay Street and Kings is the Hillside neighborhood.

Marko said...

"If you think a 500 sq/ft condo should be plenty for a young couple making over 80k, you've got rocks in your head. That's well above the median household income for Victoria and for Canada."

Looking at the 2008 Stats Canada cenus the average in BC was $67,890 - must be over 70k now. What is it in Victoria? More specifically for two income earners? 80k household income is not far fetched.

Just out of curiosity, do you think 500 sq/ft is too small for a young couple (no kids)?

Marko said...

Catherine,

The City of Victoria website is also a great resource tool to look over bylaws, zoning, etc.

For example, there is a new garden suite policy in the City of Victoria to encourage affordable housing....you can put up an approx 400 sq/ft independent suite if your lot meets the criteria, and up to 600 sq/ft suite if your lot is over 6000 sq/ft and meets the criteria.

I saw a brand new one the other week and it was nice, basically a brand new condo in your backyard with hardwood floors, granite, island in kitchen.

Leo S said...

Just out of curiosity, do you think 500 sq/ft is too small for a young couple (no kids)?

Being one of those, and living in a little more space, I would say it depends on the layout. I certainly would not want less space than we have, but I can see if I let a bunch of swedes loose in an empty cube of that size they could probably do a lot better job of maximizing the square footage.

Doesn't mean I'm gonna go and spend a third of a million dollars on one though.

For example, there is a new garden suite policy in the City of Victoria to encourage affordable housing

Now that I could go for. Not really keen on having renters downstairs, but a detached little cabin would be pretty cool.

Marko said...

Monday, December 6, 2010 8:00am:

MTD December
2010 2009
Net Unconditional Sales: 64 453
New Listings: 157 480
Active Listings: 3,446 2,557

Please Note

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

Jason said...

"3 of the 4 had 5% down. I don't know what the 4th had."

Hmmmm, that is interesting? Did the buyers' Realtors disclose this to you or your Realtor?

If I was writing up an offer for someone with 5% down I would not disclose the extent of the subject to financing condition."

Marko, I wouldn't want my realtor disclosing that either, but 3 of the realtor's we dealt with were very green.

We simply asked and were told. The offers were so similar we were trying to decide who to deal with. We actually wanted to go with the offer from the 4th realtor who we knew had experience, but they literally withdrew their offer as soon as they heard their were multiples.

We went with the one who said "They're moving from Vancouver and need a house by July before the baby is born. We've looked at over 30 this weekend and this is by far their favourite".

Wow...

That was only 1 of the dozen or so gems that she spouted.

In the end we regretted it. The deal took 4 weeks to close, and twice we received verbal counter offers which we accepted and then the buyers wouldn't sign.

The last was for 423,500. We accepted, signed the changes, sent them off and then they didn't come back. The next day they wanted another inspection of the 20 year old furnace (the 3rd inspection that week). That inspection came back fine and we settled on 423,400.

If anyone has the numbers, I'd like to see a graph of the number of active realtors vs. the median price ;)

That would be an interesting graph to follow next year.

DavidL said...

@Marco wrote: Just out of curiosity, do you think 500 sq/ft is too small for a young couple (no kids)?

My girlfriend (now wife) and I rented a 750 sq. ft. basement suite for eight years. It was a bit tight, but otherwise fine. I think that 500 sq. ft. would be very tight - particularly if you need to store items such as tools, camping gear, etc. It depends on your lifestyle I guess ...

DavidL said...

Thanks for the stats Marco ... do sales/listing typically pick up or slow down as we get close to Christmas?

Alexandrahere said...

Hi all: Here are my stats for the past week; i.e. 29 Nov - 5 Dec.

SFH: Min 2 beds & 2 baths priced between 375K - 775K in the areas of Victoria, Oak Bay, Esquimalt, Saanich East and Saanich West.

NEW: 21
SOLD:20
P/C: 22

Only one house within this criteria sold for under BC assessment.

Avg Selling Price: $548,000
Median Sell Price: $536,000

Houses sold for 95% of the original asking price.

Some interesting sales prices were:
3687 Blenkinsop $580 to $470
1758 Townley $587 to $485
2002 Dron $689 to $635
2245 Harlow $660 to $600

Out of the 20 sales, 9 had declared suites.

Condos
Minimum 2 beds in the price range of $360K - $625K, in the areas of:
Victoria: Most areas (not downtown)
Esquimalt: All areas
Oak Bay: All areas
Saanich East: Most areas
Saanich West: Gorge,Tillicum & Interurban

New: 9
Sold: 9 apartments & 4 townhouses
P/c: 6

Avg apartment sale price: $280K
Median apt. sale price: $275K

Avg townhouse sale price: $415K
Median t/h sale price: $320K

Two out of the nine apartment style sales went for under assessment and 3 out of the four townhouse sales went for under assessment.

From this information, Condos are taking a worse hit than single family dwellings in terms of selling below assessed value.

Just Jack said...

A family of four can easily live in a 500 square feet condominium. The trick is to teach the kids how to sleep standing up. Also the balcony will now be called the "Great Room". The TV is located in the condo across the street all you need is space saving binoculars and lip reading courses. And don't forget Bed Bugs do make great pets - all you need is a really tiny leash.

Mark said...

This whole 500 sq ft thing is a joke and once again shows how out of touch Marko is.....the kicker is some of these places don't even come with a parking space, let alone storage.

Stop comparing this town to Europe dude the argument is old!

A couple living in 500 sq ft is a recipe for DIVORCE. Throw a kid into the mix and somebody is heading to Eric Martin!

happy renter said...

It is possible for a couple to live in a 550sq ft apartment. I've done it. The key is the layout and the ability for the couple to spend most of their at home time in the same room. There's little privacy in a space that small. So long as you really get along, you'll be fine. Also, all of your outdoor hobbies have to fit in whatever storage space you have. In a modern downtown condo, that'll probably work since most of them have descent storage lockers and the closets are big (or are big compared to what you'd find in a house from the 50s or 60s, say). In anything built before the mid-90s, you probably don't have great storage space, though. While these 500 sq ft spaces are liveable in the shorterm, they aren't places where you can settle down for life. They're a halfway point between renting and buying a home, really. A kid likely won't work in there and you can't accumulate any more stuff. I kind of liked that I was so squished in there that I couldn't buy more stuff. I really don't need more stuff. But, living in North American, and living on the island in particular, if you like to bike, kayak, hike, camp, etc., you can't help but accumulate stuff. At some point you'll need a garage or a bigger storage space. I still don't need all that much space, but it is nice to be able to spread out a little.

Ryan said...

The point about the 500sqft condo isn't that it's too small for a childless couple, it's that it's overpriced for what it is. It doesn't matter whether DINKs can afford a condo that will barely fit them, because they have above-average income and below average needs.

What about the single-income family with kids? That's who needs more than 500sqft, and can't even afford 500sqft. DINKs should be able to afford whatever they want because they are the above-average buyer.

sdcavens said...

Out of curiousity, can someone look up what 234 Edward St in Vic West went for? Required a major gut to deal with asbestos and wiring issues. Curious what they ended up selling it for.

Thanks,

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

ReMax Outlook for 2011

They expect prices to be flat (p6)

Leo S said...

@sdcavens
Sold $385,100, assessed: $420,000

Just Jack said...

Well, what does the marketplace want when it comes to size in condominiums.

During the last 90 days, 289 condominiums sold in the Victoria core municipalities. The median condominium size was 950 square feet.

Broken down by equal increments they were...

330 to 750 sft. suites - 76 sales
26%

751-1150 sft suites - 149 sales
52%

1151 and over - 64 sales.
22%


And as a sub set of the 330 to 750 sft range, the 500 sft and less had 12 sales.
4%

So the marketplace is saying NO we don't want small condominiums. Yet the builders are trying to make consumers believe otherwise or worse they are trying to make city hall believe this is the only way to improve affordability - to build condos that only 4% of prospective purchasers want.

And yes, the new condo complex will sell well with fresh paint and granite counters, especially with the speculator. But, the re-sale market on small suites is crap. So, the city gives the go ahead to build micro suites that few people want.

And how did that help the community?

Marko said...

"What about the single-income family with kids?"

You can buy a decent 2 bedroom 1990s 1000 sq/ft condo for between 250k-300k.

sdcavens said...

I lived in a 560sq. ft. 2 bedroom in Europe. It was surpringly livable- a couple with a child were the previous tenants, and they had lived there for 18 years.

But I'd agree that no local apartments of the size would be liveable- it was well laid out, had windows on three sides (you don't find double loaded corridors in apartment buildings), kitchen and bath were much smaller than people here would accept. I'd happily live in a similarly sized apartment if one could find one here.

Ryan said...

"You can buy a decent 2 bedroom 1990s 1000 sq/ft condo for between 250k-300k."

The required income for a mortgage on a $250,000 place with 5% down is $88,000. For a $300,000 place it would be over $100,000. That's your answer for single-income families in a city with a median lone-parent income of $41,430?

Marko said...

What? Really? I just punched in $88,000 income before tax, $1,500 annual property taxes, and $300 monthly condo fee and it is telling me on a 25 year, 5 year fixed, 3.79% you can borrow up to $383,072 plus 5% down = about 405k purchase price

Marko said...

Today I put in an offer for clients well over asking price, only go get outbid by an unconditional offer significantly higher.

Frustrating!

My girlfriend's comment: "what?, unconditional?? So even if there was mould, asbestos or terminates they would still buy the house"

My response: Yes.

Mark said...

Blogger Marko said...

Today I put in an offer for clients well over asking price, only go get outbid by an unconditional offer significantly higher.

#1 your clients are idiots
#2 you are irresponsible for letting them do it (I am assuming you didn't discourage them)
#3 the people that outbid them with an unconditional offer are beyond idiots!

No wonder this market and the world is such a friken mess!

Animal Spirit said...

Marko's post saying that an income of 88K (gross), 5% down can afford 405K purchase price (for a condo) tells me what is so effing wrong with our prices in Victoria. That the average two income family cannot afford the lowest prices for a house in Victoria is asinine.

No, I don't count a condo as a house for a family. A townhouse is possible, but a high rise condo is stupid for a young child.

Prices are too high. Period.

Animal Spirit said...

Does anyone know how much mortgage fraud is propping up this market?

Leo S said...

So even if there was mould, asbestos or terminates they would still buy the house??

Marko said...

The average two family income in many countries can barely put food on the table let alone have a SFH, two cars, 2 vacations per year, and enroll kids in hockey.

Animal Spirit said...

Marko - I'm curious - what is your point with the last post? That people elsewhere cannot afford proper food on an average income would seem irrelevant to discussions of housing in North America.

Leo S said...

The average two family income in many countries can barely put food on the table let alone have a SFH, two cars, 2 vacations per year, and enroll kids in hockey.

Damn straight! All you whiney DINKs quit your complaining. Forget about 10 years ago, this is the new, 3rd world Victoria. If you're lucky you might be able to get a yurt on Pandora St.

Introvert said...

#1 your clients are idiots
#2 you are irresponsible for letting them do it (I am assuming you didn't discourage them)
#3 the people that outbid them with an unconditional offer are beyond idiots!


Easy now, Mark. Guess what? The market is doing what the market does. Realtors aren't supposed to be moralists and buyers are allowed to be idiots. Moreover, no one forces a buyer to retain the services of a realtor: it's a choice.

Animal Spirit said...

How Sweet it is to be an Idiot

(sorry, couldn't resist)

Marko said...

"Marko - I'm curious - what is your point with the last post?"

My point is people have very high expectations of what the average family should be able to afford.

Secondly, I don't think the average household income and real estate prices are a particularly strong correlation.

Someone should do a regression model!

Animal Spirit said...

In other words, it is different here.

Please prove why.

Marko said...

Didn't someone already post some stats showing the typical buyer in Victoria had a household income of 100k?

dub said...

"Didn't someone already post some stats showing the typical buyer in Victoria had a household income of 100k?"


LOL

Lina Zussino - Victoria Mortgage Broker said...

@Animal Spirit

The most common type of mortgage fraud in today's market is obtained through a series of sales and resales where the fraudster and someone working in cooperation with them. Mortgages are then secured on these false figures.

We don't see this here in Victoria.

As for obtaining someone's information through fraudulent false identification - there is great due diligence required by brokers and banks that it is very unlikely to happen.

Animal Spirit said...

Lina - thanks for the input. Based on what happened in the U.S. and the cases in Calgary, I would expect that some mortgage fraud will rear its ugly head in Victoria once prices go down a bit more (or remain flat for a few years). The fraud (and potential foreclosures for that matter) are hidden by the rising prices on the way up.

Unfortunately there will have been shady players in the market here - sellers, buyers, mortgage specialists, appraisers, RE agents, bankers, etc. Most will have been truthful, but where there is money to be made, some will not have been.

All a bank would need to do is look for high ratio mortgages combined with buyers with questionable income, combined with several transactions on a property in quick sucession, prices rising well above assessed from below assessed dissimilar and then cross-correlate names of invididuals involved in the processes in their databases. To further fine tune, just look at the worst house on a good street that meets the other criteria.

HouseHuntVictoria said...

Animal Spirit, from some of the numbers tossed back and forth re: mortgage qualification and income, I can speak from anecdotal experience that the income to mortgage offer amount is significantly understated. I'd be willing to wager that many households with incomes under $80 are being offered amounts in excess of the $400kish discussed.

I know of one couple who were recently offered a variable rate mortgage (2%ish), over $425K, at 35 years AMS, with less than 10% down, with over $35K of existing debt and an additional $30K of available consumer credit, and based on a reported income under $70K per year. By a Big5 bank. This is exactly the reason why prices are where they are. If you have a job and a pulse, the lenders will lend you enough to get into the market.

Leo S said...

3691 SAANICH RD. Assessed for $385,000, they started at $469,000. After 77 days on the market the price had been dropped to $399,000.

Sold for $350,000.

Animal Spirit said...

HHV - Thanks

Anyone - what mortgage could our family get:

90K gross income
no debts
125K downpayment

both 35 year variable and 25 year fixed (for 5 years).

how much more than our monthly rent of 1135 would it be

Marko said...

About 600k without a suite.

HouseHuntVictoria said...

Animal Spirit,

Here's the calculator I use

Here's what I get, using your numbers, both 35 yrs AMS with monthly "household expenses" of $320ish:

Variable (2.1%) = $620,141 @ $2,083/month

Fixed (4.4%) = $448,380 @ $2,083/month

Lina Zussino - Victoria Mortgage Broker said...

Depending on lender.

Rough figures.

$685,000

Based on today's 5yr fixed and 35yr amort. approx - $2,300/month

or with a 25 year amort. 2,800/month

omc said...

That is horrific! If there ever was proof of a housing bubble in Canada, that would be it. Anyone who takes anywhere near that ratio on a mortgage deserves what they will eventually get.

Just Jack said...

A decade ago, the value of the property was a significant portion of the mortgage approval. Today, the person's ability to pay is the most important. On new mortgages, its best to get the mortgagee signed up, and worry about the collateral securing the loan only if the person goes into default.

So you can see why house prices have risen so high. Its the people's ability to pay more for a home that causes the home prices to rise. A decade or more ago, home prices rose because of positive net migration, falling unemployment rates, and rising incomes.

Today you can have rising prices with rising unemployment, increasing mortgage defaults, dropping sales volumes and a net loss in population. All you have to do is keep consumer confidence high. Tell a lie, often enough it becomes the perceived truth.

The thing with real estate is you don't have to convince all of the population, you just have to convince the 3 or 4 percent of people that are actually buying or selling real estate. So you just have to fool some of the people all of the time. Having the main stream media pimping the market certainly helps a lot.

Olives said...

Re: Ability to Pay being important

Why is an average-type person with $35,000 in debt given a mortgage at all? Isn't this kind of debt a bit of a red flag for banker?

When I bought my first house in the mid/late 1990's, my partner had to pay off a car loan before we could proceed, even though there was only a couple thousand dollars remaining and the amount didn't affect our qualification value - there was plenty of room to spare in that regard.

Just Jack said...

In my opinion, I would not put that large of a down payment on the house. Put as little of your money into the deal as you can. You want as little skin in the game as possible. Better to lose the CMHC insured money than your own.

So put 5% down or 35K and keep the remaining 90K in other financial assets that will make you money. Because when the interest rate goes up, you are going to need a lot of money to buy down that mortgage. And the more that CMHC is into the deal, the better bargaining leverage you have.

I would also bet, that when tens of thousands of Canadians are defaulting at the higher interest rate, the government will step in to defer their losing their homes, like the USA has done.

I don't know if CMHC can strip you of your RRSP's because that may be a safe place to park the money where they can't get at it. Remember this is all about protecting yourself. The banks are doing it, you should be too.

Just Jack said...

The 35K they owe should be at a higher interest rate. The bank will set them up with a line of credit on the mortgage. Under the premise that house prices always go up, the lender knows that the applicants will roll the $35K unsecured debt into the insured mortgage either because of mortgage paydown or that they will refinance (at a nice fee for the lender) and roll it into the higher mortgage.

But, it is essential to get the deal first! So leave your morals at the door, and get them to ink the contract.

Reid said...

Looks like the discussion is now focusing on the real reason house prices are so overvalued. It is all about how much money the average person can borrow and how easy it is to secure the loan. IMO there should be a policy that one cannot borrow any more than say four times household income for a mortgage regardless of the interest rates and amortization periods. Personally I would never borrow four times income, but at least such a policy would mimimize the nightmare that many are going to be facing.

Just Jack said...

Why should there be a policy to protect people from themselves. The marketplace will take care of itself. We just have to live with the boom/bust cycle. If you have patience, then there will be cheap prices in the future. You just have to prepare yourself through diversification of your wealth and get prepared. Were lucky that a rental market exists, where you can wait out the market. I know, it's frustrating when your sitting on cash, not to buy, because you want to get this part of your life finished.

But when the republicans (bless their little black Cheney soles) got control of the senate, both me and my stocks were doing a happy dance. And I slept very well in my rented home that night.

Reid said...

Just Jack why did the Fed's change the policy to allow 35 and 40 year mortgages. We did not need this policy. This just fueled the fire and helped create this boom from which many families are going to get hammered. I know it may be their own doing, but if a policy was in place to limit the damage the boom and bust cycle would have been mitigated. Now it is too late and it becomes a multi-year waiting game for those that understand what is happening.

Introvert said...

Looks like the discussion is now focusing on the real reason house prices are so overvalued. It is all about how much money the average person can borrow and how easy it is to secure the loan.

Reid: a person can borrow the same amount in Saskatoon. So why, then, aren't their house prices above $500k like ours?

Reid said...

If you live in Saskatoon you have choice to lever yourself to the max and buy your dream house or borrow at a realistic level and buy a moderate home. Many choose to live in the moderate home and are able still able to fulfill their desire to own a home.

In Victoria most have to maximize their borrowing capacity to simply get into the market. The alternative here is a condo, but many people really desire a home. So lever yourself up and borrow to the max as the option is available to you.

Leo S said...

The marketplace will take care of itself.

Alan Greenspan does not agree.

Just Jack said...

I believe that the Fed's were under a lot of pressure by the Americans to make our system more like theirs. Particularly Genworth Capital wanted to get a greater market share in Canada.

When the Feds are talking Canada, they don't see anything outside of the Windsor - Quebec corridor. They had to save the economy by stimulating consumer consumption in this area through home sales and home equity lines of credit. What happens to Vancouver or Victoria is just collateral damage.

Because, Canada's economy is that stretch of highway that houses 16 million people which will elect the next government.

Also, Canadian banks don't lead - they follow. So if American banks in Canada start something, the Canadian banks follow. So at first the Canadian chartered banks were not going to go 40 years, but when they started losing market share, they were at the trough with the rest of them.

I don't think Canadian banks or Canadians are any smarter than the Americans or the Irish. CMHC and Fannie Mae in the states operates pretty much the same. If Fannie Mae is in the bidet, so is CMHC. Canadians just don't get a good look at their books as the Americans do.

But when the American people lost confidence in real estate, nothing could save them. Probably the worst thing that could have happened was Paulson and Bernake doing the scare and hard sale tactics during the US election. Someone should have duct taped their snouts, the American people lost confidence each time they spoke. At least Carney rarely speaks and when his picture is in the paper he is always gazing upwards looking for divine intervention.

Eventually some economic adviser is going to get the governments ear and explain that its better for the economy to sell two homes for half a million a piece than one home for a million.

mln said...

Reid: a person can borrow the same amount in Saskatoon. So why, then, aren't their house prices above $500k like ours?

Introvert, this is a good question. I think Paul Krugman's famous 2005 article "That Hissing Sound" answers it very well:

Then there are the numbers. Many bubble deniers point to average prices for the country as a whole, which look worrisome but not totally crazy. When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone.

In Flatland, which occupies the middle of the country, it's easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can't even get started.

But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions - hence "zoned" - makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles.

Just Jack said...

Prices are not as high in Saskatoon as Victoria because we started our run up in prices sooner than they did. It took several years of double digit increases in our real estate market to get where we are today. Give them time, they'll be maxing out too. Or maybe they don't have HGTV.

Today, you can buy the equivalent Victoria fernwood home in Windsor, Ontario for $140,000. Starter homes are at $80,000 or the price of a Dodge truck. And now, Windsor is now marketing itself as the place to retire to. I bet they aren't arguing about 500 square foot condos, garden shed housing, or the shortage of land. Do you think they compare themselves to Paris and London like we do? Or maybe they just go to Arizona and Florida in the winter with all the money they save on housing.

commuter12 said...

What about Vegas then? What about Pheonix? Aren't these in the "flatland"? You would think Vegas would be the epitome of a flatland zone.

Just Jack said...

Really, it seems every guy and his dog has become a real estate super star in this town. Its a no brainer. Buy a home - wait, buy another home - wait, buy another home - wait.

Its been too easy, that is until 2008. Now, the super stars have three homes and are still waiting and are bleeding cash, but there still waiting for the spring market, the summer market or the next market.

Just Jack said...

Here's a question.

From Port Renfrew to Oak Bay, you are hard pushed to find a home on a regular sized lot for $300,000. The cheapest starter home I can find in Esquimalt is $337K and the cheapest starter in Port Renfrew is about $300K.

So, is $300,000 the new zero. Is it that the cheapest rental accommodation for a family of three will cost a grand a month, and so does the cheapest mortgage payment?

There are 12 houses up for sale in Port Renfrew. I don't even think there are a hundred homes in the whole area. So what is up with the 300K thing? You would think that of all the places on the island this would be where a house would be worth a case of Lucky and a pack of Camels.

I would trade a new truck for a house in Port Renfrew, but nothing more than that. I mean its like living in Windsor but with fewer jobs.

Introvert said...

Reid: yes, but you still didn't provide a reason for why our prices are $500k+ and Saskatoon's are not.

mIn: your Krugman excerpt is as solid an answer to the question "is Victoria different?" as anyone has ever proffered on this blog. Kudos to you.

I actually think Krugman is right. The next logical question, though, is: when a market in a housing bubble eventually corrects itself, does the market stay corrected forever? In other words, when Victoria prices come down to "sensible" levels, will they stay "sensible"? After Victoria's market eventually corrects, I don't think the market will maintain its correctness, because, as Krugman says, we are prone to housing bubbles because of "a combination of high population density and land-use restrictions"--things that aren't ever going to change in Victoria. So I think Victoria is consigned to a future where we see bubble after bubble occurring. The market corrects, then 5-10 years later (or whatever the timeframe is) we're back to insane prices, then the market corrects, and so on.

So the real geniuses will be/are the ones who buy super low, wait patiently until prices invariably go nuts, then sell again (and rent instead) just before the market tanks. Then the genius repeats this process once more, and then, with millions in hand, retires to a gorgeous, spacious, highly-affordable house in the Flatland, as Krugman calls it, where prices never inflate nor fluctuate.

Leo S said...

Port Refrew is a distorted market due to the tiny size. I wouldn't think too hard about why there aren't any cheap places there.

Look at something like Campbell river. Plenty of starter homes below 200k.

Introvert said...

The cheapest starter home I can find in Esquimalt is $337K and the cheapest starter in Port Renfrew is about $300K.

Just Jack: that's effed up! I'm with you: I honestly have no idea why a house in Port Renfrew costs that much. Other commenters on this blog probably think I'm nuts for being somewhat "bullish" on Victoria's market, but I cannot be "bullish" on PR's market. I just can't.

Are we missing something here? Is it an acreage? Is it sitting on a copper or gold mine?

Jack said...

I keep reading in this particular thread of comments about how this bubble is different because of x,y,z factors. But if you look back to the top and LeoS's graph, you see it's not different at all. In fact, in terms of relative change, it's pretty much the same or even smaller than the previous 2 bubbles in the last 30 years.

So to answer Introvert's question, no, when this market corrects, if the past 30 years are any indicator, it will not be corrected 'forever'.

omc said...

Some very bearish news on the economy and the debt/housing market. I find it so frustrating having my tax dollars supporting CMHC to inflate a housing bubble.

Rhino said...

Must say I am a bit surprised by the CMHC rental stats released today.

Vacancy rate in Victoria barely budged from Oct 2009 to Oct 2010 going from 1.4% to 1.5%.

kunwak said...

Renfrew: I think there is a certain degree of long term speculation going on there. The town is trying hard to become the next Tofino and the developments such the wild coast cottages (?correct name?) add to that hype.

It's their own little speculative bubble :)

Marko said...

"Vacancy rate in Victoria barely budged from Oct 2009 to Oct 2010 going from 1.4% to 1.5%."

That is pretty shocking considering the % of new homes that have a 1 bedroom suite and most 2 bedroom suite.

Maybe the new garden suite policy will help increase affordable housing.

Wonder if the $5,000 suite rebate applies to garden suites as well?

Just Jack said...

Well, strike me pink, that CMHC rate is a surprise. Just by driving around the town, I would have put the rate higher, a lot higher. Really, I could walk out my door and in less than 30 minutes have another place to rent.

Just a couple of days ago, I was speaking with some property owners and while they all are hurting over increased vacancies in their buildings, there big complaint was the quality of the prospective tenants was scraping the bottom.

I would have put the rate at double the published CMHC rate, because I have never seen so many vacancies in Victoria. Maybe a lot of the Albertans are moving to Victoria to find jobs? or escape their winter?

Just Jack said...

The garden suite has to increase the affordability of housing. Just by adding another another grand to the household income.

Of course the affordability will be short lived as the price of the home increases. So a year later, we are back to where we started.

But then we can allow two basement suites to increase affordability...

Then we can allow garden suites to be stacked on each other to increase affordability....

You really wonder if politicians can think past the next election.

I mean this is getting nuts, the city will not let me build a 10' x 12' storage shed or park my RV in the driveway, but they'll allow me to build a 400 to 600 square foot motel in my back yard!

I suppose progress means that Victoria will eventually grow into a city like Calcutta.

Just Jack said...

Marko, the one and two bedroom basement suites are not counted in the CMHC vacancy rate.

CMHC, mostly canvasses the property managers like Devon and Brown Bros. to get there perspective. As well as looking through the newspaper.

I don't know if they use Craigslist or other sources. The validity of the vacancy rate has eroded over the years as more landlords use non traditional methods to list their rentals. That's another reason why CMHC's rental rates are so understated. CMHC is basically only looking at apartment buildings that are 50 years old now. And these suites tend to be the lowest rung on the rental ladder.

Nevertheless, the rate does show trends over the long term or comparison of one city to another. There probably is a relation between the vacancy rate and rental rate and how economically well the city is performing. For instance comparing Windsor to Vancouver and Vancouver to Victoria. The higher the vacancy rate and lower the rental rate the worse the local economy.

The study is far from perfect, but it's the only thing we've got.

Ryan said...

"you still didn't provide a reason for why our prices are $500k+ and Saskatoon's are not."

Speculative bubbles are not rational. Are you asking for a rational explanation of an irrational behaviour?

Just Jack said...

Trying to decipher what the new CMHC report means is mind boggling. I'm suspecting the insignificant change of 1.4 to 1.5% means that amount of first time buyers has significantly slowed from the year before when the vacancy rate had a dramatic increase from 0.5%.

That would stand to reason as shown in the 30 percent or so drop in sales volumes in relation to last year. So fewer first time buyers are taking the plunge and are staying put in their rental homes.

I'm wondering if this may also mean than migration into Victoria's CMA is slowing too. Because with fewer buyers taking the plunge and staying put in their rental homes and assuming migration levels of the past our vacancy rate should have noticeably gone down.

So, Victoria is a place where people want to live, just not so so much as they did in the past. This really doesn't bode well for spring sales in 2011. It would have been better to see some build up in pent up demand rather than stagnation in these numbers.

Just Jack said...

Port Renfrew is out there. It's a long trek to get there. Will this mean that it will become a destination holiday resort is tough to say. It doesn't have the beaches of Tofino and it is hampered by development because of the first nation's land. And the road out there really needs an upgrade. And heck, we already have a Tofino, why do we need two?

So as a micro community, separated by distance, so that the affect of it being a commuter city to Victoria is negated. It does provide an insight as to what people perceive the value of a home is, and maybe not including the added layer of an investment?

Looking at the sales in the area, it seems like nothing much has changed in prices going back five years or so, to about 2005. Can Port Renfrew be used as a barometer of where our prices should be without speculation of property appreciation?

That would put the typical Victoria condominium back to the price of $205,000. And a detached home in the city at $425,000 assuming the same interest rates and mortgage policies as today just without the anticipation of price speculation in the immediate future.

Probably not.

Introvert said...

Speculative bubbles are not rational. Are you asking for a rational explanation of an irrational behaviour?

Ryan: it seems like you're implying that we shouldn't even think or ask questions about bubbles because they're based on irrational behaviour. Sorry, but this is silly.

Paradoxically, there often are rational explanations for irrational behaviour. Believe it or not, many persuasive explanations for housing bubbles exist, one of the most cogent being the Paul Krugman one.

Just Jack said...

In order to have a gambling problem, you have to have had enough success that it clouds the failures.

So, the people in Saskatoon have yet to have enough back to back wins in real estate, that the thought of a loss has become unthinkable.

Unlike Victoria, where real estate is a "sure thing" and not a gamble at all. So the people in Saskatoon are just a little bit more timid in their betting on real estate. Give them enough back to back wins and eventually they'll be at the high stakes table with us too. Betting their single half million dollar chip.

All bets are down,
no more bets.

SPIN

TICKETY, TICKETY, TICKETY .......

Introvert said...

Just Jack: so why aren't the folks in Saskatoon stringing together many back-to-back wins? Same in Kitchener. Same in Halifax. Again, it's Vancouver and Victoria (and maybe Kelowna?), and that's it. Why do we, on the West Coast, get the back-to-back wins? Why is it a "sure thing," as you say, in Victoria? What has made it that way here and not in other places?

Just Jack said...

Here's another thought.

We are always talking about affordability and how do we make homes affordable to people.

So, why are used homes so expensive. Why don't they depreciate as fast as used cars? Because if they did, then we would have affordable housing.

I think its because, we build homes too well. A car lasts a decade or two. A home last a few generations. So the theory is, if we built homes that only had a life expectancy of 25 years rather than a hundred wouldn't used homes be as cheap as used cars?

So instead of building micro suites we pass a bylaw, that all homes have to be demolished when they reach 25 or 50 years of age. We wouldn't have boom bust cycles anymore, the builders would always be busy, steady employment and a steady economy. And a family could buy a 20 year old four-bedroom Dutch Colonial at 85% of the cost of a new one.

The new home warranty program would be replaced with the:

C-ommercial
R-esidential
A-ncillary building
P-rogram

Just Jack said...

Well Introvert, we started sooner than they did.

So we have had more wins which increases confidence. If you've made 4 bets over the last decade and each one gains you a hundred grand. Chances are that your going to make another bet and its gonna be a big one.

In Sasakatoon, they may have had only two good wins. Not enough of a track record to gain the confidence to go for the big money bet yet.

Alexandrahere said...

I was wondering, does anyone know if one in three houses in Windsor and Saskatoon have in-law suites? Or are most of their homes truly Single Family Dwellings?

Mark said...

@MarkoJuras
Order prescription glasses from www.clearlycontacts.ca and use my email markojuras@shaw.ca to receive 10% off and I receive $25!
about 3 hours ago

http://www.jurashomes.com/

ARE YOU KIDDING ME MARKO??? YUP THAT LOOKS PROFESSIONAL. NOW YOU'RE PIMPING EYE GLASSES!

WHAT'S NEXT....AMWAY?

Rhino said...

^give it a rest. He is obviously very entrepreneurial and isn't trying to hide it. Just take his commentary with a grain of salt.

Mark said...

Hey Rhino IF the kid wants to be taken seriously, he might want to start with trying to project "professionalism" on his website.

It's called constructive criticism.....just trying to help even if he is wet and has a lot of maturing/learning to do.

Either way, he seems too nice to be a realtor, so maybe pimping glasses is more his thing?

HouseHuntVictoria said...

^ are you guys kidding me?

Please leave Marko alone, especially when the criticism is only vaguely linked to real estate via "professionalism."

Without Marko we wouldn't have access to the timely stats we do. If you think I'm affording him preferential treatment, or?, consider the repercussions to not having him active on this blog.

HouseHuntVictoria said...

here's a little "light" reading on this rainy winter's night: MACRO-CANADA: We Stand On Guard For Thee (warning PDF)

a simple man said...

A total of 40 single-family houses were started during November in Victoria -- less than half the 94 that were built in the same month a year ago, according to the Canada Mortgage and Housing Corp.

Read more: http://www.timescolonist.com/business/blamed+slow+building+prices/3956857/story.html#ixzz17jHhO7kW

Just Jack said...

A strange word, professionalism.

It can be used to convey knowledge and experience while keeping your finger nails clean - as opposed to a tradesman who has knowledge and experience but not clean finger nails.

It can also be used as a way to discredit another person or inflict some kind of emotional hurt on someone else. Such as they are not acting in a professional manner. I suppose that would mean that they are not acting in a way that the other person deems as being professional. But by what standard is that person being measured?

For example, a structural engineer would consider a house inspector not to be a professional. And a house inspector would consider the home owner not to be a professional.

I for one, think that if Marko is selling houses or selling eyeglasses he is acting as a professional salesman.

That is as long as he has clean finger nails.

happy renter said...

Apparently someone thinks that 450sqft apartments are livable. These will be rental units, but it's still interesting to see what developers deem "affordable" both for them to build and their renters to rent.

Apartments Pitched for 4-Storey Fort Street Building

mln said...

Check out these maps of foreclosure listings in Florida... unreal!

Google Map Foreclosure Tricks

HouseHuntVictoria said...

The sad thing is the quote used by Mark was from Marko's Twitter feed. He streams them into his website like millions of other twitter users do, and it was likely auto-generated text from Clearly Contacts to begin with.

Hardly the "professionalism" gaff it was made out to be.

Marko said...

Since is posting comments on a blog like this professional in the first place?

If you want a realtor that will pick you up in a Jag and wear a suite please don't call me.

Leo S said...

Is it raining in Florida yet?

A&J said...

"Just Jack said... A decade ago, the value of the property was a significant portion of the mortgage approval. Today, the person's ability to pay is the most important. On new mortgages, its best to get the mortgagee signed up, and worry about the collateral securing the loan only if the person goes into default."

Fully agree. I think a decade or so ago most people knew their bank manager and that manager had real pull.

In my small home town in central BC, many of the larger banks have closed. The remaining branch managers are just figureheads with the lending decisions being made at the corporate head office (usually in Ontario). No one ever actually visits the property and bank "assessments" are based on paper submissions.

The days of the banker walking out and looking at your property (soon to be his property) are long gone. The days of the banker knowing his customers is also gon.

Maybe some local, first hand knowledge would have curbed the insanity?

A&J said...

Just ran into MapsKreig. It's a cool tool for mapping Craigslist ads on google maps (like rentals in Victoria).

Checkout the Craigslist "Real Estate For Sale" ads in Phoenix.

kunwak said...

Mark has no credibility and has documented that amply with his comments for quite some time. I would ignore him. Completely immature, starting with his language...

Leo S said...

A@J: Good find. That's a handy tool. Too bad it doesn't have more options to filter the results though.

happy renter said...

Region's Property Values Keep Climbing

Bitterbear said...

So....last night, I'm flipping...fun Friday night indeed. I settle on Global because now that I drive the Malahat six times a week, I like to see the weather.

The weather map has a ReMax logo on it. !?!?!?

No conflict of interest there... nahunh...So much for journalistic integrity...

Introvert said...

No one ever actually visits the property and bank "assessments" are based on paper submissions.

The days of the banker walking out and looking at your property (soon to be his property) are long gone.


A&J, my experience was different from the generalization you make. My credit union sent an employee out to look at my (his) prospective property, to make sure everything was in order. In addition to checking the property, he made notes about the neighbourhood, the condition of the other houses in the area, and the like. My credit union was very thorough and demonstrated that they took the purchase/mortgage very seriously.

I just don't think one should be so quick to make sweeping generalizations. Moreover, I think a healthy percentage of both buyers and bankers enter into purchase and mortgage agreements with their eyes wide open. It's popular to make casual remarks about how clueless and irresponsible most folks are, but I think the number of clueless and irresponsible is a lot smaller than the popular narrative would have us believe.

Leo S said...

So Victoria assessments will increase by an average of 12%? With sale prices averaging just a couple percent above last year's assessments, they must be expecting some big price jumps.

Al said...

I think there are probably two separate things: 1. The banks use income/debt level for pre-approval of how much one can borrow (too much these days); 2. They use house value to decide how much they will lend for a particular house.

When we sold our old house Oct 2009, the buyer, who already had pre-approved mortgage before starting house hunt, contacted both BMO and CIBC after we accepted the offer, both of them sent local agents to see the house, not only the outside, but the inside as well.

We knew these as we wouldn't take any offer from people who have no pre-approval, and we had to let the appraisers into the house before the deal was done.

Just Jack said...

I for one, would like a human being assess my property, rather than a computer program. Unfortunately that is not where the banks are going. To reduce costs and improve turn over times, lenders are using automated valuation models (see EMILY at the CMHC internet site). Eventually, 90 percent of all residential mortgages will be secured by the use of AVM's.

And there is no reason why the AVM's have to be maintained in Canada. The AVM work can be outsourced to other countries at even cheaper costs.

The value of these programs is not the cheaper costs, since most home appraisals are born by the mortgagee, but the turnover time reduced from a couple of days to a few minutes.

In a world of consumer choices and aggressive competition by many lenders, it is the hare than wins the race and not the turtle.

The mortgage deal is lost as soon as the applicant is two inches off their seat and on to the next mortgage broker. Of course speed comes at the price of due diligence, but that is a calculated risk with acceptable losses - for now.

Marko said...

www.zoocasa.com has some really cool features.

Check this out ->

http://www.zoocasa.com/en/area_details/24313-Victoria-British-Columbia/demographics

Marko said...

Oak Bay

Average Household Income - $122,850
Top Ethnicity - 35% British Isles
Population By Education - 60% University
Above 64 Years Old - 25%
Average Property Price - $962,042

Fernwood

Average Household Income - $57,991
Top Ethnicity - 27% British Isles
Population By Education - 39% University
Above 64 Years Old - 9%
Average Property Price - $488,408

Al said...

Just Jack,

It is the buyer who chooses the lender. So if the buyer wants the bank appraisal done by a person, he/she can always demand one. It is protection for both the bank and the buyer. In case the appraised value is lower than the accepted offer, due to house interior condition, the buyer can walk away (put that as one of the contract conditions) or re-negotiate a new price.

In today's condition, what is the hurry?

A&J said...

Introvert - I'm pretty sure I said "big banks". I think Credit Unions are a whole other ball game.

My last big bank mortgage (BMO) was sight unseen for over 500k on a rural property. No one came to verify. Just a chat on the phone with the agent in Toronto.

I also deal with the local Credit Union and they are quite a bit more strict.

DavidL said...

When I bought my house in 2002, it was a private sale that I financed through the Bank of Nova Scotia (BNS). They didn't do an onsite inspection and we're quick to finance with barely an income verification. When I transferred/renewed in 2005 with ING, they were much more thorough with the income verification and did a "drive by" assessment. ING offered much better rates than BNS, so I guess it pays to be more thorough.

Alexandrahere said...

I like those stats you gave Marko for Oak Bay and Fernwood areas. Are you able to give us the same numbers for other areas such as Gordon Head, Esquimalt, Fairfield, Lanford etc? It would be interesting and informative for us all. Thanks.

Leo S said...

@Alexandrahere
Just click on the link Marko posted. Interesting stuff. Wonder what the source of those stats is.

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

Somewhat suspicious of that site though. Look at the map area for langford.

a simple man said...

based on that data for Oak Bay and Fernwood, it takes 7.8 times average gross annual income to afford a home in Oak Bay and 8.4 times in Fernwood.

Insanity.

Marko said...

The difference in ownership is also staggering, 73% of households in Oak Bay own, and only 41% do in Fernwood.

"based on that data for Oak Bay and Fernwood, it takes 7.8 times average gross annual income to afford a home in Oak Bay and 8.4 times in Fernwood.

Insanity."

Playing into these numbers is in Oak Bay you have a lot of retired people with very low incomes, and no mortgage; therefore, the typical buyer buying in Oak Bay right now probably has a family income well in excess of $123k the typical household income.

HouseHuntVictoria said...

AlexandraHere:

Gordon Head: income = $101,048 price = $724,213

Esquimalt: income = $68,070 price = $480,817

I don't trust the data completely, not that it matters much. It's broken down into neighbourhoods within regions too, like you've seen the Langford Lake area indicated as Langford.

It's a neat tool though.

omc said...

You think you guys are bears, you ain't nothing compared to these guys

Marko said...

Monday, December 13, 2010 8:30am:

MTD December
2010 2009
Net Unconditional Sales: 163 453
New Listings: 305 480
Active Listings: 3,425 2,557

Please Note

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

Al said...

One thing about the housing price in Victoria, it probably has been discussed before here, is the high land assessment value.

For example, 1776 Albert Ave, lot size is only 2759 sqf, total assessment value is $328,400 with $302,000 for the small land. Not sure about Halifax land value for similar size in similar location, but it is definitely more expensive than in Ottawa.

Could this be one of the reasons that Victoria houses are *always* more expensive even with the same building cost, compare to, say, Halifax?

a simple man said...

Wake up call...finally

"Bank of Canada governor Mark Carney repeated warnings Monday to Canadian households and businesses: don't be caught off guard by current low interest rates and that a rate hike could be swift.

In a speech to the Economic Club of Canada in Toronto, Carney said efforts by various governments to stimulate the economic recovery are keeping borrowing rates low.

But when rates do begin to rise again, Carney said, the increase may be swift and fierce and has the potential to catch many with debt loads they can no longer afford.

Carney's warning came the same day Statistics Canada released data showing the ratio of Canadian household debt to disposable income rose to a record high in the three months ending in September.

On Dec. 9, the Bank of Canada warned that the risks of another recession are growing, given Europe's debt crisis, widening gaps between exports and imports among countries, and that Canadians, with their high levels of debt, may not be prepared for it."

http://www.cbc.ca/money/story/2010/12/13/carney-interest-rates-warning.html

happy renter said...

Interest Rate Rise May Be Sharp

happy renter said...

Sorry for the redundancy - A Simple Man beat me to it.

a simple man said...

happy renter - news like that needs to be heard more than once!

And yours has a hyperlink...which I am sure is appreciated.

Just Jack said...

While your BC assessment show separate values for the land and improvements that may or may not be an accurate indication of the value of them separately. The assessments are for "taxation" purposes. BC assessment also gives or sells the information to other parties that need a rough indication of the break down between land and improvements. Ever wonder how the fire chief estimates the damages to a building? Or how these internet companies can estimate the value of your home from their office in Calcutta?

Having said all of the above, the underlying land value of properties is the largest difference between Victoria and Halifax. Followed by builder's profit, labor costs and lastly materials.

Land costs are the most volatile component of a property. If a house can be rented, the whole property will have a value to an investor. Vacant land derives no income, so when an economy goes belly up, so do land values. But if land values have dropped the odds are really good that builder's profit is now zero (contractor is just working for his own wages), and both labor and materials have also become less expensive.

When the land value is excessively large in comparison to the improvements you may have an overheated real estate market. The larger the prices, the bigger the potential fall.

As for small lots being so expensive. You shouldn't get caught up with the size of the lot, but rather than it is a building lot. Because a house can be built on the lot, is what gives the site value. If a house can not be built on it, or the economy is depressed so much that the demand for new homes is quite low, then the lot value would be low as well.

And land values can actually go negative. If the site has had over a hundred liters of oil spilled, then the cost of the clean up and buyers reluctance has to be deducted. That's why you see decommissioned gas stations being left vacant for 20 years or more before being sold. The oil company is allowing time for the oil to migrate off the site and hopefully higher future prices for the land.

Mr.4AM said...

Not to be outdone by Carney, Flahery warns... Canada could [further] tighten mortgage rules"

"Canadian Finance Minister Jim Flaherty warned again on Monday the government could tighten mortgage rules further if needed, after a report showed the country’s household debt levels have soared."

Tick tock, tick tock.
Mr.4AM

Just Jack said...

F, is only looking at the Windsor -Quebec corridor of 16 million voters. He has seen what 35 amortization periods have done in overheating the BC market and he will not want that for Ontario-Quebec. I think you will see him lower the amortization period which should slow down the market in the corridor.

However, in BC it will cause a serious contraction. We are too far gone to save. Its economic triage and we're being left outside on a gurney.

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.