Wednesday, February 9, 2011

Bidding wars on condos?

That piece of baloney press release that led to an even bigger festering pile of poorly researched and written advertorial in the local rag yesterday got me thinking. I'm over calling out the crappy local written journalism, so that's not what I was thinking about, but I was thinking "do people really want to buy condos in such volumes that there are actually bidding wars right now?"

The answer is no. ReMax took the one manufactured bidding war caused by underpricing a home to the market (assumed) and held it up as evidence that people are tripping over themselves to buy affordable Victoria condos. And the media didn't even bother to cast a shadow of doubt on their number one source of advertising revenue (assumed).

Here's the data:
  • At the end of January 2011, there were 808 condos listed on the VREB, an increase of 13% from the 715 listed last year. 
  • 90 units sold in January 2011. That's almost 9 months of inventory. Hardly a "seller's market" that produces bidding wars. 
  • Coincidentally, that volume of sales is off 20% from a year ago too.
  • It's true that average prices rose slightly year over year, 3% to be exact. 
  • But to get a sale, sellers had to wait 68 days, 20 more than they did a year ago.
So just to reiterate, demand down, listings up, and we're meant to believe there's bidding wars on condos in Victoria priced under $350,000? When we dig a little deeper, it turns out that the desire to own a condominium is extremely low outside of the area of Victoria most of us call downtown:
  • Of the 90 condo sales in the VREB reporting area, 56 or 62% sold in Victoria/Vic West
  • 3 sold in Oak Bay
  • 4 in Esquimalt
  • 7 in Saanich West
  • 3 in Saanich East
  • 9 in Sidney 
  • 7 in Langford
  • 1 in Central Saanich
  • the other municipalities didn't sell any... including that new development on Conard near VGH in View Royal
Even more interesting is the breakdown of the kind of money being spent on condos in Victoria. Downtown condos are typically marketed to the newly weds and nearly deads Victoria is so famous for. It's understandable that these demographic pools wouldn't have, or be looking to spend, a ton of dough on a shoebox in the sky. The price point numbers seem to support this:
  • Almost 69% of all condominiums sold in the VREB area last month sold for under $325,000, roughly the average reported selling price of all condominiums.
  • There's roughly 200 active listings in the core priced under $325,000, about 40 sold, making this market segment fairly healthy at 5 months of inventory, some consider this balanced territory, but you'd be hard-pressed to find a credible analyst claiming these market conditions lead to anything other than flat, stable prices.
  • When we look outside the core, only 6 condos sold for more than $325,000, there's over 250 available, making the MOI a staggering 41 - hardly the makings of a bidding war environment.
  • The next biggest chunk of the pie are downtown condos priced between $325,000 and $400,000, making up a grand total of 9 sales out of about 72 active listings (8 MOI).
  • 5 sold outside the core in that price range of the 130ish available, giving us another doozy of an MOI at 26.
  • 15% of the condo sales volume last month we could reasonably call "luxury" market sales: 13 of them in total, 1 in Sidney, 1 in Esquimalt and 11 in Victoria/Vic West.
  • 1 condo sold over $1 million dollars, in Sidney of all places.
No wonder there was no real data in that press release or the subsequent "news article" (please read that slowly again with a Dr. Evil voice and use your fingers to make quotes in the air). If there was, we'd all recognize it for the steaming pile of dung it is.  


Animal Spirit said...

LeoS (for the last thread): cool, property values for Oak Bay Border are down to 425K. House looks nice on the outside, but it is basically two tiny suites.

Animal Spirit said...

HHV - the RE community is trying the same line over in Vancouver right now. Looks like they are trying to prop up or push the lower end condo buyers who need 35 year amortizations before the March 18 deadline. Nothing better to get people to buy than for them to fear scarcity.

HouseHuntVictoria said...


I'm not surprised, the marketing focus on first time buyers in the fall of 2008 worked well as shown in the data from the early months of 2009. It's a completely different game now though, I doubt if the storyline will produce the intended effects.

25% of sales last month in town though were attributable to FTBers.

Mark said...

25% of sales last month in town though were attributable to FTBers.

I am amazed there are any of those left! More sheep to slaughter....a bright future indeed!

jesse said...

HHV can you cite the article for the record? thx

HouseHuntVictoria said...


Interestingly enough, it looks the the TC has removed the original article from it's website.

Here's what the CBC wrote

And here's what the TC rewrote, which actually contains a bit of balance, published yesterday.

Here's the "offending" statements:

"He agreed with Re/Max, which said there are multiple offers coming in on more affordable housing falling below the average price in communities such as Langford, Colwood and View Royal.

Buyers are eager for mid-level condominiums, running between $250,000 to $350,000, the report said. Also popular are single family homes priced at between $400,000 and $500,000, below the average and median prices in Greater Victoria. "Much of the high-density product coming on stream in 2011 will cater to those seeking affordability - where demand is greatest."

Jack said...

If anyone was curious, here are the figures for condos/townhouses North of the Malahat:

Condos: 22 MOI
Townhouses: 34 MOI

Just Jack said...

The PCS and ml systems are primarily advertising space for real estate board. The listing is to entice prospective purchasers to make inquiries and hopefully a sale will occur.

While the real estate board may set minimum reporting standards it's up to the buyer to make further investigations as to the accuracy of the listing information.

Proposed construction is not "real estate" - yet. Only when BC lands, Titles and Surveys issues a legal description does that condominium become real estate and would then fall under the real estate act. Because of this, the agents, do not have the same level of reporting standards.

So statements like 80% of the condos sold in the first day, maybe be correct, but also misleading. Those condos may have had accepted offers months before, but only on the first day that complex is offered to the public are they marked as a pre-sale or option to purchase. Nor, does the agent have to disclose that he/she bought half a dozen of the condos in order to get the contract to sell the remaining suites. And some may show all of the options at full price, because the buyer may still change things or make upgrades during construction that would change the option price before the title is registered.

All you're told is six condos sold in less than an hour on the first day at full list price.

Also, the agent is pushing to get 60% of the condos pre-sold in order to get financing to build the complex. No one is verifying the buyers ability to pay or that they can get a mortgage. All you want is a credit card imprint for a deposit equal to the agencies commission and a signed option. Some of these options to purchase will not blossom into a sale, but the public has been enticed, the mine has been salted and the commission has been paid.

Pop the cork, Rennie

Craig said...

The problem with journalists is that they have degrees in journalism, with perhaps a minor in history, poli sci or some other cushy program. So, the reality is that most of the people on this blog know far more about local real estate than the journalist who covers it. This goes for any subject in the paper. In seconds one can find a link-rich analysis of current events that makes the Sun or Times Colonist look like a Grade 4 writing project.

The one thing papers have going for them is the resources to cover local events and breaking news, but even this has gone to rot as far too many journalists see their mission not as reporting, but as shaping the narrative with the limited worldview they picked up at school. So they're squandering even this one edge they have over the Net.

HouseHuntVictoria said...

Of course this is all relative, but there's been some action this week in the low-end SFH market. Quite a few sales under $500K and even an over-ask ($535K sold for $550K) in GH.

Perhaps this is the last gasp of the 35 year amortization FTBers starting?

Taigaa said...

Let's not forget to compare selling price to assessed value when looking at what sells how fast. That gordon head house is assessed at 568k(2011), and sold for 550k. It was priced below assessment so it sold fast, no magic there. If all the others were priced below 2011 assessment they would sell as well, but often they are 100k over assessment!

Leo S said...

Deal of the week: 1679 Cedar Rd.
This clean, almost not mouldy at all, expansive 1200sq ft mansion could be yours for only $515,000.

Assessed for $567,000! Act now!

Animal Spirit said...

Take a load on the flood damage in the basement of that one - just like the description says - "just needs some TLC"

Just Jack - what kind of TLC would you give this one?

On another note, my better half went in for a chat with a bank financial planner today. He used the word 'crash' when she asked about buying a house.

Watching and waiting said...

Does anyone one have a spare $560k to loan this guy?

Here's his craigslist ad:

and here's his MLS ad:

talk about laying your cards out on the table. Desperate times demand desperate measures I suppose.

markoj said...

Sales have picked up in the last few days, about 25-30 per day. Lots of price drops in addition.

happy renter said...

"[My family] probably feel a bit robbed or a bit cheated," Sarmiento said. "Usually, as the years go on, the prices go up."

Olympic Condo Prices Cut Up to 50%

Just Jack said...

Time to salt the mine, errr I mean leak inaccurate information of price slashing in the Olympic Village in order to stimulate interest.

When I see and hear a couple, like this on the news clip, I think to myself, these people are a con man's dream. They deserve to be separated from their money. It's just a Darwinian thing to do. Anyone who believes that list price is market price, should be separated from the herd and torn to pieces by the commissioned wolves. This couple entire purpose of life has been to feed a pack of wolves in Maui for a weekend or to mask an advertising coup as an informative helicopter ride over White Rock. (Heck of a lot cheaper than making a commercial and buying air time)

Once you see the gleam in the older gentlemen's eye that he is willing to make a profit at someone's expense, he becomes fair game. I say sink your teeth deep into the flesh of his wallet, feel the warmth of the home equity line as it flows like a river into your bank account or puddles at the Shell station under the gas nozzle of your new BMW 7 series. And the remaining bones of their savings crushed to make the walk way to your Yaletown townhouse.

Let the feeding frenzy begin.

Just Jack said...

Wanted to take a rudimentary snapshot of the months of inventory for just single family homes.

The three major areas are:

Victoria Core with 4.57 MOI
Westshore with 7.41 MOI
The Peninsula with 7.17 MOI

So the core municipalities are doing the best of the three major areas. Let's break down the core areas to:

Victoria City - 4.11 MOI
Vic West - no sales
Oak Bay - 3.61
Esquimalt 7.5
View Royal 4.14
Saanich East 4.1
Saanich West 6.77

So, now let's look at the neighborhoods of Oak Bay

Estevan 3.0 MOI
Gonzales 4.0
Henderson 1.57
North Oak Bay 5.0
South Oak Bay 5.0
Uplands 9.0

So the Henderson neighborhood in Oak Bay is the "hottest" market. But which street is the hottest. We would then have to look at the days-on-market with the clear winner being Swanson Place which didn't even last a day to market.

This is where that phrase "location, location, location" comes in to play. It seems that Oak Bay is the location. Henderson is the, location, location. And Swanson Place is the location, location, location

So the next time someone says location, location, location. You know that they are speaking about Swanson Place in Oak Bay.

So, I'm glad we finally got that cleared up.

Marko said...

A bunch of developer units reduced in the Falls...559k for 1407 sq/ft, not bad, under $400 sq/ft.

Marko said...

137 Joseph just went big time under assessed!

HouseHuntVictoria said...

^ big time under 2010 assessment too. 2011 assessment was $758,000, sold for $680ish.

Ah, Fairfield. Where everyone wants to live until a house sells for under assessed value.

Catherine said...

@Watchingandwaiting - if the owner is looking for $550k for second mortgage, would it be safe to assume he is holding a mortgage of twice that (half is his, half his wife's share)?

Leelan said...
This comment has been removed by the author.
Watching and waiting said...

Catherine, i read the ad as stating he's seeking a first mortgage meaning the house is clear title/mortgage free and looking to pay out the wife. Wonder if the 560k payoff is to balance out the assets/liabilities. Doesn't leave him with much if the house is in fact worth "760k" as he states despite the fact it's been on mls for a while at 725k with no price drops..

Marko said...

Character homes going for big money in Fernwood in recent days...

2254 Belmont - $749,000
1811 Belmont - $780,000

Watching and waiting said...

is it me or is this a listing from last year: 1498 OCEAN VIEW RD/mls 288175? I recall back then they were asking 599k? Can anyone tell if this is a relist or a resale? Bit of a busy street/corner location. I missed the open house- anyone go? any feedback?

Marko said...

Last year on the market for 524,900, never sold.

Cheers, Marko

Animal Spirit said...

Jack Knox
goes off on housing cost in Victoria.

Just about time the TC did a relatively balanced story. Too bad the conclusion is that Victoria is different...

patriotz said...

"A bunch of developer units reduced in the Falls...559k for 1407 sq/ft, not bad, under $400 sq/ft."

Not bad for the seller, that is. Someone was trying to rent out an identical unit for $2375 on Craigslist last month. Cash flow negative even at 4% financing.

And that, folks, means there is plenty to come off the price.

Introvert said...

Just about time the TC did a relatively balanced story. Too bad the conclusion is that Victoria is different...

Victoria is different. Right now, I think we're a little too different--our prices probably are unsustainably high--but we are different. Victoria real estate will always be more in demand compared to most other places in Canada.

Just Jack said...

Victoria is different.

We are a small town with low sale volumes and low listings. Most of the jobs created in the last decade are related to housing construction or repairs. The construction and home repair industry are well paid and are a significant source of the homes being bought.

When construction stops, like it did in the 80's and 90's, Victoria will be hit much like Windsor (almost the same population with a lot of government workers) was when the biggest single industry employer with the best paid jobs went belly up.

So, do I think Victoria's home prices could be 2 or 3 times the median income. You bet I do. Because that's what home prices were before the construction and repair industry took off in Victoria.

Prices are set at the margin which means the actions of only 2 or 3 percent of our population support these prices. Namely those that are buying and those that are selling. Conversely, 97 percent of the population have no, zippo, nonna affect on prices at all. All they can do, when prices fall, is clench their collective sphincters wishing they had sold.

Mindset said...

I have to say Just Jack, you crack me up. Gotta love good analytics wrapped up in a sense of humour.

Funny stuff lately.

patriotz said...

Victoria real estate will always be more in demand compared to most other places in Canada.

Then why aren't rents higher?

Bubble 'n Fizz(le) said...

Then why aren't rents higher?

Simple. There are two classes of people in Victoria: renters and owners. Within the owners class there are two subclasses: people with lots of money and people without lots of money. The renters are almost exlusively working people who fit into the Victoria average-income bracket, and therefore, as a market, won't support rents above the present levels. The owners sans-money provide a lot of the rental suites, and they have to price their suites to the market because they need the rental income and can't afford to let their suites sit vacant.

You might be able to find a few exceptions, but people with lots of money don't live in rental housing and don't rent out suites in their houses. These people keep prices high through demand, and of course this affects the prices of properties for the other subclass of owners.

There are a lot of people in Victoria with lots of money (more per-capita than in most other small Canadian cities). The price-to-income ratio argument doesn't work here because it assumes owners with lots of money are subject to the same constraints as other (average) people--they aren't.

Having said all that, the market in Victoria is cyclical like everywhere else and because it is trending sideways or down slightly right now, it might be a good time to buy--if you have lots of money, that is. If you would depend on a large mortgage and rental suite income, it might never be a good time to buy in Victoria.

Just Jack said...

Those people buying at the margin appear to have lots of money to spend on housing and thereby keep Victoria prices up. Conversely, most (96 or 97 percent) of the public are not influencing prices at all.

So, when you look at these median to price incomes, it may mislead you to believe that these ratios apply equally to 100% of the population, they don't.

Over the short term this small group can strongly influence house prices and stretch these ratios way out. However, over the long term these high ratios are not sustainable, because the market needs fresh meat (newbie buyers) to feed itself. Think of the market being pyramid shaped with the lowest level being newbie home owners.

So, when do these prices correct?

The rate of appreciation has to slow and inventory has to grow. More "For Sale" signs on the lawns for a longer time. Not to convince the masses that real estate is about to fall, but to convince that 3 to 4 percent of the population. Eventually, newbie buyers can not pay the prices and slow down in purchasing. The market changes from a pyramid shape to a circle shape as home owners sell and buy from other home owners. And because they have lots of dough from their home sales they appear to be rich. But their not, they're just roofers and plumbers with $750,000 homes that have been playing a snakes and ladder game with properties. Now, you have rising prices with falling sale volumes.

In the past, this is when the government stepped in and stimulated the market, to get fresh meat in the game and sustain the pyramid shaped market.

Without government stimulus the market becomes goes circular like a snake devouring its tail. Eventually sale volumes drop so low, that the market becomes shallow and dysfunctional and duress sales set market values.

In a nutshell. The success of our market was measured by high prices. Those high prices will also be the markets destruction. The key is sale volumes - not house prices.

Just Jack said...

Q. So were do first time home owners come from?

A. They mostly come from the rental market.

Renters want to minimize their rent and save for a down payment, while owners maximize their monthly payments at the cost of their savings. So there is a relationship between rents to prices - but only indirectly making any comparison between the two very squishy.

But not all renters want or are able to become owners. Over the last decade, home ownership in Canada has grown at the expense of the rental market. So the pool of prospective purchasers has been dropping.

As long as monthly payments and monthly rents are close to each other, you would see renters moving to purchase housing. But an increase of 1 or 2 percent in the interest rates, alters that dramatically. Without the specter of inflation in house prices, renters stay renters and that is bad for the marketplace.

Because if you can get one renter to buy, that will spark many others to move up the property ladder. Stimulate renters to purchase and you have a multiplier affect in the marketplace.

Lose that same prospective buyer and you have a serious contraction in the marketplace which will be shown by a drop in the volume of sales, collapsed sales and homes back on the market. A domino affect.

So, those that are seeing stability or a chance of rising prices may be a false dawn.

Just Jack said...

So, those that are seeing stability or a chance of rising prices may be a false dawn.

Should read.

So, those that are seeing stability or a chance for more appreciation in values may be seeing a false dawn affect.

Just Jack said...

Of all the market segments to choose from, I find the new condominium market to be the one that people make there worst buying decision.

It is so easy to over buy in the new condominium market when you have a single seller/developer. While I can understand the appeal of not wanting to have a home that someone else has lived in, I really think people contemplating buying a new condo have a third unbiased party perform an analysis and opinion of the value. I don't know, how much Marko would charge for something like that? $500, a grand? It could save you tens of thousands down the road in lost appreciation. You're going to pay for a home inspector, why not an independent assessment before you buy?

I bet those people who bought in Bear Mountain wish they had done this!

Leo S said...

There are a lot of people in Victoria with lots of money (more per-capita than in most other small Canadian cities)

Proof? That sounds somewhat logical, but whether it has any effect on the housing market is another thing. If the rich here are 2% versus 1% in other cities that isn't going to have much of an impact.

It would be nice to have the full stats though. Income distribution for renters and owners separately.

Having said all that, the market in Victoria is cyclical like everywhere else and because it is trending sideways or down slightly right now, it might be a good time to buy

How do you come to such a nonsensical conclusion? The market is at the peak and trending downwards, therefore it is a good time to buy?

HouseHuntVictoria said...

"The price-to-income ratio argument doesn't work here because..."

It really wouldn't matter how you finished this statement because it's irrelevant when you make a claim that any kind of fundamental economic measurement is somehow not applicable to a local market, be it here or anywhere.

I think JustJack is far closer to the truth when he says "Over the short term this small group can strongly influence house prices and stretch these ratios way out. However, over the long term these high ratios are not sustainable..."

The issue in Victoria, IMO, is not the wealth breakdown of households, nor the income breakdown, nor the influence of the few luxury properties that sell, but rather the fact that Victoria experiences fewer sales than it's similar sized Canadian city-cousins per housing unit.

Prices are supply and demand driven, the ratio favours the few buyers active right now, all things being equal, prices will drop according to how long and how far the ratio favours buyers, something we can only witness as the months ahead play out.

Waiting said...

I've tried posting this a few times but it doesn't seem to have shown up - apologies if you now get it several times.
An interesting article on Seattle here.

happy renter said...

The Seattle article is fascinating. They were saying the exact same kinds of things there just a few years ago that people in Victoria and Vancouver are still saying now. Seattle is, in my opinion, just as "world class" (to take Vancouver's ridiculous city slogan -- if you have to say it, then...) or "exceptional" as Vic or Van. If it can happen to Seattle, it can absolutely happen to us.

Pia's blog said...

Oh' I never imagine it can end up in such like this. I think they just want to get many properties that's why they end up on this. Thanks for sharing. Looking forward for your next post.

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sanjali sharma said...
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