Wednesday, December 29, 2010

A year's worth of change = nothing

December 2009 was a particularly robust sales month - compared to most Decembers that is:

December 2009
Net Unconditional Sales: 453
New Listings: 480
Active Listings: 2,557 

December 2010 is what I'd call a perfectly average sales month - again, when we compare it to other December year data we have access to.

Marko Juras, by way of his access to up to the minute VREB MLS sales data provides us with a slightly premature look at December 2010.

December 2010 (as on December 29)
Net Unconditional Sales: 322
New Listings: 491
Active Listings: 3,228

The average reported price for December 2010 is almost $640,000. The average reported price in December 2009 was $651,316. 

A year's worth of change brought Victorians diddly squat. We watched this market tug back and forth between seller's and buyer's market conditions, with two horrific months creating industry panic in August and September, but otherwise flat territory until a rather difficult to explain/understand fall recovery. Listings fell as sales climbed in October, November and December bucking trends established in previous falls' sales data.

It's prediction time again soon. The industry champions will toss press release after press release written to build confidence in real estate buying. We'll continue to debunk their bunk. I'm going to repeat something I wrote this time last year as a prediction:

Until we see a significant economic event, like an interest rate rise of 1% or greater in the fixed products, this market will keep doing what it did this year: bouncing around up and down each month all the while losing value to the effects of inflation.


Lina Zussino - Victoria Mortgage Broker said...

2011 should be bouncing down hill...

As lenders standards tighten because of high consumer debt and government lending standards tighten especially for those with not so good credit.

Mortgage rates will continue to increase as well and the market will turn for first time home buyers making it challenging to borrow.

Leaving the real estate game left to the people with money.

jesse said...

Congratulations on YOY negative. Time to throw a party!

HouseHuntVictoria said...


Do you see lenders tightening up right now?

We just did a mortgage prequal a month ago that gave us more for less than any we'd seen before.

We're low-risk, but all things considered I couldn't believe the TDS ratio they were offering to let us have (over 41%).

Jesse, that's just one month over the previous year's number, and it's not official yet.

I'll throw a party when we see annual averages drop year over year.

kabloona said...

Lina, agree that Carney and Flaherty are doing so much jaw-boning about excess credit growth and tighter mortgage standards it *must* mean they are preparing the public for some sort of action on that front in 2011...but what action and just how far will they go...?

Personally, I don't think Carney will raise the overnight rate until well into the New Year and Flaherty's much bally-hooed threats to tighten lending standards will eventually amount to very little - just like most of what he does.

A lot of sound and fury, signifying nothing...


Now, on the other hand if we get some sort of sovereign default in the Eurozone and bond rates spike, that might have more effect on the housing market in Canada than whatever the Two Federal Blowhards finally decide to do....

Just my $0.02....

Lina Zussino - Victoria Mortgage Broker said...

Not being negative... on the upside we may see lots of new condo purchases from those WITH the money or even higher end properties selling as apposed to middle of the road. (Party over!)

There seems to be a hole in the ground just about every 10 minutes walking downtown with plans of a new development going on. Who is going to buy them if 6/10 Canadians are living pay cheque to pay cheque?

I know my mum is looking to downsizing.

Lina Zussino - Victoria Mortgage Broker said...

"Do you see lenders tightening up right now?"

Lenders are and will continue to look for ways of protect themselves.

I've been looking for lender to finance a property out near Sooke and there is only one lender that will offer financing. However they require a 65% loan to value. Which means based on a $500,000 mortgage they require $325,000 down.. wow. That's pretty tight if you ask me.

Lina Zussino - Victoria Mortgage Broker said...

To add to that comment of 65% loan to value. It is a vacation home and unusual zoning.

DavidL said...

@Lina wrote: Mortgage rates will continue to increase as well and the market will turn for first time home buyers making it challenging to borrow.

Lina - I think that you are "right on the money".

This is going to sounds very pessimistic - but just wait until looming municipal bond market in the US collapses in six months:
60 Minutes - State Budgets: Day of Reckoning (2010-12-19)

Add to this, the US national debt problem and that 48 of the 50 US states are teetering on the edge of bankruptcy, and some interesting dynamics will be playing out in the latter part of 2011.

Either new bonds will be issued at higher rates or the inflation will be allowed to increase (as a way of devaluing debt). In either case, this will increase interest rates in the US. Why do you think that Carney has been "warning against the perils of failing to prepare for higher interest rates"?
Globe and Mail - Tackling the threat of consumer debt (2010-12-28).

I predict a minimum 1% increase in the prime rate, with most of the increments in the latter part of 2011.

HouseHuntVictoria said...

So with interest rate rises looming, we should all rush out and buy quickly before we lose out on this once in a lifetime opportunity to get money for almost-free

Or we can wait till interest rates push the spendthrifts over the abyss and then buy down the road for less (who knows how much) and save a pile of money over the long term even while paying a bit more in interest charges up front.

HouseHuntVictoria said...

first para above was supposed to read as sarcastic

Marko said...

Great thread on kidsinvictoria in regards to 0% down mortgages.

Rhino said...

Amateur landlord prediction for 2011:

"With demand on the rise in 2011, act now and save rent dollars!"

yeah right...

Mark said...

You are Bang on in your assessment Lina!

Leo S said...

From KIV:

"Op, if you both have good jobs and you know you can pay the mortgage, then personally, I would go for it!

I mean even with 5% down, let's be honest, does $25K equity in a half million dollar home really matter that much?

So house values have risen so high that they are now completely meaningless numbers. Heck, you're gonna be close to half a million in debt anyway, so who cares if you have a down payment or not?

Unreal. They can't manage to save a few thousand for a 5% down payment but think a half million dollar mortgage is a good idea.

Olives said...

The 60 Minutes segment on the upcoming municipal defaults in the U.S. is worth watching for anyone not aware of this looming crisis

Mr.4AM said...
This comment has been removed by the author.
Mr.4AM said...
This comment has been removed by the author.
Mr.4AM said...
This comment has been removed by the author.
Mr.4AM said...
This comment has been removed by the author.
Mr.4AM said...
This comment has been removed by the author.
Mr.4AM said...
This comment has been removed by the author.
Mr.4AM said...
This comment has been removed by the author.
Mr.4AM said...

"In either case, this will increase
interest rates in the US."

I don't see US increasing interest rates in 2011, probably not even 2012. They can just debase the currency by doing QE 3,4,5,6,7 etc... Until the world loses confidence in the reserve currency and the US dollar blows itself up.

I see the Macro Economic dangers in 2011-2012 as follows:

1) Massive China Real Estate Bust - 64 Million homes empty & price to gross earnings ratio at something like 20 times! (5-7 in Victoria for comparison).

Impact#1: 64 Million Chinese families are about to see their savings go POOF! If you own any Chinese stocks, get the hell out now! This is like Dubai x 1000. This will likely also result in a Chinese stock market crash, and the Chinese government finally making some use out of the 2.x Trillion in US reserves to bail out their own country. They are now (too late) trying to slow down this totally insane bubble by raising interest rates every other month to curb speculation - but this will be too little too late.

Impact#2: Once this RE bubble pops, China won't have any more $$$ to buy US Tbills, and Japan + UK + Europe won't have enough $$$ to replace Chinese Treasury purchases, so the already white hot Bernanke printing presses will be needing to jump into warp 10 to keep up! In other words, once China goes, the US is next, and then... the world! Kind of like this song. But this may still take a couple of years or more to fully unfold.

2) bEurope is the other major hot potatoe, or should I say dominoes? Most of their debt is owed to each other, so they're trying like hell to extend and pretend, because they all know the second one goes, they all go; only a question of time. The alternative solutions?

a) Create & sell European Bonds - Who has any money to buy this stuff anyway? (aside from Bernanke).

b) Do another Currency Swap with the US (but 3 to 7 Trillion would be required this time) - This might buy them another year, then what?? Also this would result in Bernanke doing QE for Europe - again. At this rate in 5 years Bernanke will own the planet.

c) Borrow from the IMF - Except the IMF doesn't have enough $$ since it's funded primarily by first world nations whom are all in massive debts.

d) Europe to pass a law to allow the ECB to print Euros a la Bernanke - this would be the end of the Euro within 2-3 years . Euro is not the world reserve currency, so there's extremely serious impact to doing this.

e) MASSIVE Austerity for all - PIIGS haven't seen anything yet. Not exactly a politically popular thing to do.

f) Alternative Frankeinstein options - Europe to split into Rich nations & poor nations, and create 2 'Euros'. Or maybe temporarily kick out the PIIGS back into their old currencies, let them print themselves into oblivion and maybe in 5 to 10 years once they've sorted themselves out, allow them back into the EU. This akin to killing your weakest family members to feed the remaining ones.

Interesting times for sure.

Mr.4AM said...
This comment has been removed by the author.
Mr.4AM said...
This comment has been removed by the author.
Mr.4AM said...

(Please excuse all the deleted posts above, my IE had a spasm).

Continuation of the last post...

IMPACT: Aside from the obvious, once Europe goes, so goes China since US purchasing power is continually deminishing. EU in massive trouble = China exports going down.

3) US State Bankrupcies due to budget shortfalls (aka. Time for deficit spending) - As already mentioned by others above, US state bankrupcies, requiring federal bailout or massive law changes to shrink unions and cut pensions, raise taxes [use your imagination here]. This shouldn't come as much of a surprise given this image (see top left ) of this 2009 Sultan's of Swap article prediction).

4) Peak Cheap Oil Crisis - Oh and just in case, we somehow manage to avoid/delay the above 3 Armageddon scenarios, come 2013 to 2015, expect oil prices to double, tripple, quadruple+++.

By the time this is all over Bernanke should get his own super hero comic book & movie series; except I'm not sure if he should be the hero or the villan.

What me panic? Heck no, my Victoria real estate down payment savings is all going into PM's and in a year or so after the next stock market crash, into oil and other energy sectors.

It's been working for me since 2008 - Check out Gold vs Vancouver Real Estate Chart.

Happy speculating!! :-)


Lina Zussino - Victoria Mortgage Broker said...

Yes, money is on sale. If you have an existing mortgage it may make sense to pay out your penalty and refinance. Check your figures.

I just renewed one of my mortgages to secure a lower rate. I also opted for a mortgage product that was portable, which means if I decided to sell as I'm planning - the buyer, should they qualify for the loan, will be more likely to purchase my property with a lower rate and take on the mortgage. Well, I'm hoping..

Aaron said...

Happy New Year!

NY Times article on 2 bedroom Whistler cabin for only $729,000 - because you just can't loose (or if your American you just can loose twice in a row).

kabloona said...

Canadian dollar finished the year above par.....a trend in the making? Patti Croft was predicting a loonie pushing $1.15 on the CBC a few weeks ago...if that happens it will murder Canadian exports but it certainly suggests Carney won't move interest rates higher any time soon, either. I think 5-year Mortgage rates will still creep higher in 2011...

Marko said...

I bet car dealers and certain other businesses are cringing at the thought of the dollar at $1.15

Point Roberts will be packed if this happens! People will be hauling tires, appliances, hardwood floors, who knows what else.

Savings are enormous. Last year I needed a Viking Microwave with trim kit and the best price Trail Appliances could do was $1,200 + HST.......had one shipped (free) to Point Roberts and it was $700 USD.

I feel bad for not supporting local business, but why is the Canadian MSRP on a microwave 50% more than for the exact same microwave in the states? Certainly do not feel like supporting the CEO of Viking.

PS. If you buy appliances from the states make sure you get the CSA certified models.

omc said...

I have heard that the pricing here has more to do with what the market will bear. It is kinda hard for them to hide the bad prices up here when the dollar is around parity. It's too bad that the car manufacturers have put the stops on cross border shopping. In late 2007 I paid $26k cdn for a car that the best I could get locally at $42k. I also ended up paying the taxes on $26k, not $42k.

When we finally end up buying a house and renovating, I guess I will be looking south for lots of stuff. I have heard heat pumps are very cheap down there (less than 3K). The clipper also has a shipping service now at I believe 10cents/lb where you can do your own customs clearances on this end.

jesse said...

Stuff is more expensive in Canada due to higher labour costs. Who's going to buy all those condos if you keep spending south of the border?!?

a simple man said...

Happy New Year to everyone...

Health and happiness in 2011 to you all (you too, BnF).

Marko said...

"Stuff is more expensive in Canada due to higher labour costs."

But most of the stuff we buy in Canada is not produced here, so how do labour costs factor into it? Why is a BMW built in Germany and sold in both the USA and Canada $10,000 more here? Why is a US built microwave $700 in the US, and $1,200 in Canada?

jesse said...

Supply chain takes its cut. How much of a product's cost is the transfer price and how much is sales/warehousing/logistics. I'm not saying buy local but if you don't buy local that's less$ for local incomes.

If I could use a Realtor based in the US for 1/2 the cost I would.

Marko said...

"Supply chain takes its cut. How much of a product's cost is the transfer price and how much is sales/warehousing/logistics."

Might apply to some things, but most of the time the large price difference is due to the MSRP the manufacture sets for the product in a particular market.

My experience with the microwave was Trail sales person called Viking Washington distribution center in Washington State, $1200 CND and 3 to 4 weeks delivery time. Seattle Home Appliances sales person called Washington distribution center, $700 US, 3-4 days delivery time, plus they would ship it to Point Roberts for free once they received it.

Viking is probably charging $600 to Seattle Home Appliance, and $1000 to Trail Appliance and therefore they cannot compete with people going south of the border.

Marko said...

In other news, 314 expired listings today! How many will get re-listed? :)

Animal Spirit said...

Of the 314, 314. of total delisted in the fall - probably 95% + 200% that were witheld by sellers because the market was soft.

As for the cross-border differences in MSRP, what is the bets it becomes a big political issue in Canada this year - and quickly.

Mark said...

In other news, 314 expired listings today! How many will get re-listed? :)

My guess is all of then + hundreds of new listings come the spring....I'm hearing all kinds of folks going on about "we are going to wait til the spring when the market picks up" LOL!

Still too many people in denial for anything significant price reductions. I think this will change as inventory piles up and the Feds grow some (sorry get responsible)and make changes to borrowing rules/qualifications.

*I have seen some big drops in asking prices of 700k + homes. I guess people just can't qualify??? Certainly not because they have finally seen the light and realized they just can't afford it!

Friends went a viewed a home $800k recently. Builder has been sitting on it for months (no offers) and has 3 more lots same subdivision. 1 more house being presently being built and 2 lots sitting there waiting to build on. So the carrying costs must be killing him. I bet there a are a lot of builders in the same boat right now.

In fact the same subdivision has about 10 homes in various stages of construction (all spec houses)that are or will be up for sale in the next couple of months. As soon as one of these builders blinks and drops the asking price, the rest will have to follow. An 800k house can quickly become a 600k house.... and really that is just a 25% reduction. Given these homes are probably 10% overpriced right now, that makes it a 15% reduction. Very possible IMO.

No crystal ball here but stuff like this makes me think maybe we might just get that correction we have all been waiting for.

The kicker is $600K for a 2800 sq ft house in a blue collar neighborhood is till a lot of money! So what does that make a 800k house then???? INSANE!

omc said...

The numbers don't tell everything; houses in my price range have dropped a good $100k since this time last year (a peak). Houses have to be priced right to sell. I have seen any houses that sold within the last 2 years come back on the market to sell. An example would be 1539 Wilmot in Oak Bay sold at $765K, almost $100k than less than 2 years ago.

I fully expect the fed gov't to do something, though small, about mortgage qualifications. Even removing the slack jaws who buy at zero down will cause a correction at some amount. Anyone calling these people qualified at any level is a liar.

omc said...

The owner of the place on Wilmot was another out-of-town retiree. Following a trend that is well established, going back to Alberta. I guess moving away from your family and friends to move to a city where you know no one doesn't work well for most.

omc said...

Boy, do my last 2 posts sound grumpy. Sorry

Devore said...

Just as lower rates and lending standards added buyers (and thus demand) to the housing market and bid up prices, higher rates and tighter lending rules will remove them, with appropriate consequences. I'm cynical, so I think any changes will take effect after an election (although they may be announced early and drive another panic buying splurge?), and Carney is already unlikely to touch rates before May (only has to wiggle out 3 times).

Marko said...

Saturday January 1, 2011 2:30pm:

Dec Dec
2010 2009
Net Unconditional Sales: 349 453
New Listings: 522 480
Active Listings: 3,252 2,557

Please Note

•Left Column: stats for the entire month from this year
•Right Column: stats for the entire month from last year
Look here for updated figures each Monday morning.

seosky said...

it is giood.

webdesign in nepal