Monday, February 21, 2011

Can we get to 500?

This is panic buying month. The news media tells us so (Times Colonist link warning). With mortgage rule changes less than 30 days away, those buyers desperate to use the 35 year amortization should be out snatching up properties as if they're not making any more land. Coupled with creeping interest rate rises, you'd think the feeding frenzy on homes in the provincial capital would be incredible right now. But it's not. In fact, it's far from a feeding frenzy out there. It's down right eery how quiet the local market is.

Here's your Monday market update, MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

Month to date February 2011, last week's numbers in (brackets)
Net Unconditional Sales: 315 (195)  + 120
New Listings: 919 (637) +  282
Active Listings: 3,526 (3,435) + 91
Sales to new listings ratio: 34% (30%)
Sales to active listings ratio: 9% or 8 MOI approximated (6% or 8.8 MOI approximated)

February 2010 totals 
Net Unconditional Sales: 621
New Listings: 1,460
Active Listings: 3,280
Sales to new listings ratio: 42.5%
Sales to active listings ratio:  19% or 5.3 MOI

We've been averaging about 105 sales per week this month. If the trend continues, we'll hit 440 sales in February 2011. The last time we had February sales this low was near the bottom of the mini-crash in 2008/2009. We don't have the listings volumes and the sky-is-falling-consumer-sentiment now that we had then, so prices are much stickier and "the deals," if you can call any individual sales that right now, aren't nearly as good as they were.

Keep in mind that everyone agrees the mortgage rule changes are pulling buyers forward, not scaring them away. If this turns out to be true, this foreshadows a dismal spring shaping into a potentially troubled year in the local Victoria real estate market. It would seem potential sellers agree with this outlook: they're not listing their homes at a normal rate. That said, no one should claim current inventory of over 3500 available units for sale is anything other than untypically high volume, perhaps 20% higher than what was the February normal for much of the past decade.    


jesse said...

Does anyone here know of anyone who is buying before the March 18th deadline? Just asking. I don't know any.

Just Jack said...

We are breaking price floors. Like a condo in Bear Mountain that just sold for $235K after 125 days (gawd that's a long time to sell). At one time this condo was listed as high as $345K.

In relation to other new condominiums in other areas, $235,000 in Bare Mountain seems reasonable. Even for 560 square feet. Will this be the sale that sets the market for the area?

Will this start a panic to sell?

Who knows.

Just Jack said...

Or how about the rancher that just sold on Forrester in the Camosun area for $505,000.

Last week, people were paying nearly the same for home on Shelbourne!

It's goofy out there. The coke machine is a rocking.

DavidL said...

Just Jack: love the new "great face for ..." profile photo! LOL

Leo S said...

I was just going to post about that place on Forrester. That is $79k under the 2010 assessment.
I always wondered what was wrong with that place..

DavidL said...

On the weekend I was skiing at Mount Washington (weather was stunning, snow was fantastic).

I was stunned by the about of real estate that is for sale on the mountain. In some condo buildings, 50% of the suites are listed for sale. Many of the chalets are on sale. Here's the interesting thing ... only a minority of the suites/chalets have actual "for sale" signs out front. Likely, it would cause mild panic and buyers would be more likely to bargain shop if they were fully aware how many units are actually up for sale. Only by checking out Web sites for various agents who specialize in Mount Washington properties (example) can you get a full appreciation of how much is for sale. In my case, the condo I rented was listed for sale - and after checking the listing agent's site, I found another 80 listings! Recreational properties are the tip of the iceberg ...

Just Jack said...

Let's not overlook the new Cook Street condos "Essencia Verde"

The court says sell and budda bing, budda boom

10 condos get sold.

You get a new condo in Cook Street Village for an average price of $285K including HST.
There still 500 square feet bamboo floor and granite counter top shoe boxes - but you can walk to the booze store, laundry mat and trendy second hand stores.

But Victoria wouldn't be Victoria if it were not for the wild rogue independent minded home owner that bucks the trend. Such as the fellow who lives in a trailer in View Royal who, after 231 days on the market, RAISED the price of his home by 5 grand to $120K. I wonder if he has nutters on his truck?

Mr.4AM said...

If you think Victoria buyers are skittish now, just wait till:

a) Oil spikes back to $150/barrel due to Arabic protests spreading to Iran and Saudi Arabia

b) Watch the $150 Oil further compound the massive food inflation.

c) Watch the massive food inflation result in even more wide-spread 3rd world country revolutions (Think 90% of Africa and 1/2 of South America, and 1/3 of Asia)

d) Watch Portugal and Ireland having to take a loan from the IMF because Germans just told Merkel "no more bail outs!!". Aka, no ECB bonds!

e) Watch the IMF not have enough money to bail out Spain or 1/5th of the other failing 3rd world countries.

f) Watch China not step up to bail out Spain, because they will be on the verge of their own inflationary spiral and MASSIVE real estate crash.

g) Watch the Euro fall like dominoes because all the countries owe money to each other.

h) Watch Bernanke put out QE3,4, 5 and beyond (if we make it that far), because if he raises interest rates, the US deficit becomes even more impossible to pay off and result in loss of confidence in the US dollar as a reserve currency.

i) Watch the stock markets do an even MUCH bigger comodity rally, until all hell breaks loose and global markets crash.

j) Watch the IMF push the G20 into SDRs backed either by absolutely nothing (aka. only other failing fiat currencies), or include gold at 20% plus in terms of basket size.

l) Watch the COMEX and LBMA experience their first ever Silver collapse (may occur in 2011), as JP Morgan is forced to cover all their naked shorts and PM ETFs are raided for their physical by the big boys in Asia.

k) Watch Gold & Silver do a moonshoot while all this is happening.

l) Watch people in Victoria Real Estate come to a grinding halt and then a serious decline, as people's wages aren't keeping up with inflation, as the BoC is forced to raise interest rates due to the Bond Market, watch another liquidity crunch forcing banks to tighten lending, watch Oil @ $150 and beyond crush people's budgets who do 1 hour commutes into town in their 0% down purchased BMWs.

All coming at you in 2011/2012.

The end of the fiat ponzi scheme is fast approaching people. It wont be the end of the world, but it may very well be the end of your economic stability if you don't prepare yourself and your family.

And now back to your regular scheduled programming of reading the Times Columnist, watching Justin Biber's newly release song (already
with 5 MILLIOn hits on youtube), laughing at the Superbowl ad re-runs, and PVR'ing 'So you think you can Dance'.


Mr.4AM said...

PS. Forgot to mention today's news:
- New Zealand Currency tumbles after large Earthquake
- Japan downgraded from AA2 stable to negative
- Ivory Coast joins the civil protest revolution
- Iran sails military ships through the Suez Canal (where 40% of exported global oil passes through) for the first time since 1979.
- South Korean banks begin to experience bank runs.
- Yemen protests escalating
- China witnesses Internet organized protests in multiple cities.

Hope you had a nice day in your Victorian Paradise!

Animal Spirit said...

yes, I'll wear my tinfoil hat.

Some of Mr. 4AM's list will come to pass, however armageddon has always been around the corner.

If it comes, I'll move to our family's 10 acres of farmland, build a few greenhouses and eat a few raw chicken.

a simple man said...

Animal Spirit - if I can come to the 10 acres with my brood, I will bring fire to cook the chicken and split wood.

Just Jack - would be happy to be your neighbour.

and Mr. 4am - I don't have a PVR.

Waiting said...

I know 6-7 families (myself included) who are looking to buy at some point. We are all looking for essentially the same thing. 3 bdrm family home, quiet street, OB, Fairfield, SE. None of my friends are in a rush though as we are not maxing out in terms of mortgage and therefore the upcoming changes will not affect what we can/are prepared to pay. My friends who believe things can only go up in Victoria have already purchased, the rest of us are waiting awhile longer to see what the spring/summer/fall brings! Here's hoping it's a 25% decrease!!

omc said...

I am seeing crap.

Crap as in the same crap that was overpriced on the market last year. That and flipper junk. I guess that is why it seems to me that there is nothing on the market, yet the #s tell differently.

It looks to me that others are seeing the same, as there does appear to be competition for the few interesting houses that show up right now.

I have to ask...Who would be stupid enough to buy a flipper shack. You always pay way too much for a painted turd. Very little of the work that needs to be done is done, and whatever is done is usually done cheaply.

When this years houses start showing up, things will get interesting. Fall/winter should be about right for things to start to sink in to the seller's sticky prices. I can't see much of a drop before then.

Mr.4AM said...

@Animal Spirit - I'd make that a Silver hat if I were you, hehe, it's already up 11% in 4 days. Tell you what, I'll supply everyone with silver hats if I can eat some of simple man's roasted chicken :D

All kidding aside, farmland and strong family and neighbourhood bonds are the best hedge against any inflationary spiral cuz you can only throw so many silver bricks at the looters.

DavidL said...

@Waiting wrote: We are all looking for essentially the same thing. 3 bdrm family home, quiet street, OB, Fairfield, SE.

Just curious ... why are you (and the various families you know) ruling out Saanich West? Houses in the Glanford, Strawberry Vale and Royal Oak areas cost about $100K less than counterparts in the Saanich East neighbourhoods of Gordon Head, Cedar Hill and Broadmead. If you work downtown, the commute from Saanich West is about 10 minutes less each way ...

DavidL said...


I agree that energy and food prices will be driving inflation much higher. My investments in alternative energy (CAM400) have been averaging 35% growth over the past three years. How does this compare with silver? ;-)

HouseHuntVictoria said...

"Who would be stupid enough to buy a flipper shack. You always pay way too much for a painted turd."

I think for a lot of people using 5% down mortgages this is the best alternative to "sweat equity." Sweat equity inevitably costs materials money, money which a lot of people with 5% down payments don't have. If someone's using a 5% down payment, they're highly likely cut from the "have your cake and eat it too" cloth, meaning they're not "settling" for what they can "afford" rather they're buying a house and they damn well deserve to have a "nice" place for the first time.

I agree, most of the flips I see are utter crap. Why anyone would pay top dollar for that versus paying less than half the update costs to do the work themselves is beyond me. At least until I came up with the above theory.

Mr.4AM said...

DavildL, see this ~10 year silver chart. It got killed in the 2008 crisis. That's when I got in, near bottom @ ~$11.20, but due to various fees it ended up costing me closer to $13.

I added to my position last week, cuz I see/saw a high probability of a massive short squeeze. 3 year potential is $80 to $300+. I'd be stoked with $80 :)

Leo S said...

Oh dear, this blog is gonna go the same direction as victoriastruth. Prairie boy had to eventually change the name of his blog it was so infested with gold bugs! :)

a simple man said...

I am finding all of the recent flips I have seen in Oak Bay to be of questionable quality, and that is what I can see without looking into the walls or digging deeper into the flip - the fact that the lipstick has been poorly applied worries me. It is disappointing, really.

And the markups that these flippers are looking for is out of touch with what is happening. I guess that is what happens when the market changes in the year you are flipping the house.

a simple man said...

and Waiting - I am there with you. We are waiting as well, patiently.

However, we are the only ones we know doing so. On the other hand, we know a lot of folks in dire straights when it comes to their finances and their homes. We know numerous families in Oak Bay that are living month to month and worried about losing their houses but somehow managed to finance trips to Mexico or the Caribbean for 7-10 days in Dec or Jan. When asked how they are affording it, all say line of credit. And they "deserve the vacation".

All is not well in Oak Bay.

SilverSurfer said...
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SilverSurfer said...
This comment has been removed by the author.
SilverSurfer said...

FYI, ^^^^^^^^ My new alias (no longer Mr.4AM). I'm tired of logging in and out of blogspot everytime I want to post something between blogs.

Simpleman, that sounds like most of my friends, except I would believe most of them aren't doing it via LOC (I hope!), but I seriously get the impression that all their "savings" go towards Hawaii, Las vegas and New York vacations. Me, I only do inter-continental travel on air-mile like points about once every 2 or 3 years for "free" (minus $300-$500 in ticket taxes).

Their main (excuse for a) philosophy is "you only live once". The irony of that is that many of their parents are from asian countries where buddhism and other Eastern religions have precisely the opposing philosophy (you will be reborn over and over and over again until your karma is paid and you get enlightened.). Not sure if you could extrapolate and associate that relationship for this analysis... Most Western nations are now debtors, and most Eastern nations are (and have usually been) savers...but is sure appears to align.

Just Jack said...

I know that buying a home will probably be the worst investment that I will ever make in the next decade.

But, like purchasing a car, I will eventually do it.

However, I can make it the least hurtful by only spending 20 percent of my income and amortizing the mortgage over 15 years. To me, this is the only economically viable option to owning a home without being a slave to a mortgage.

So until then, I will continue to build a portfolio of investments that pay me and rent a home.

Waiting said...

I have two main reasons for looking in OB rather than the areas you mentioned. One, we are trying to avoid areas with lots of suites, and two, sentimentality. I grew up in south oak bay and have fond memories. I like the quiet tree lined streets and think it is a nice area to raise kids. We already have established friends in the neighbourhood and our kids are involved in schools, activities etc. Neither my husband or I work downtown so that isn't an issue for us. We did consider Broadmead/Cordova quite seriously but ultimately decided it wasn't for us.

@ a simple man
Sorry your friends are struggling but perhaps it bodes well for me!!

I would never consider a flip. I agree that they are generally done poorly and I have no interest in paying for someone else's taste in upgrades. I'd prefer to buy something original and have it reno'd to my liking.

Robert Reynolds - HMR Insurance said...

$100,000 price increase
MLS 289006

I am also digging the fish-eye lens trickery. Look at the size of that fridge!!!

Just Jack said...

Most of the properties that are listed have been bought within the last three to five years. And I believe that home prices have rolled back to what they were around the first quarter of 2008. On the assumption that, none of us wants to take a loss on Real Estate, I can see why prices have been a bit sticky with only minor price reductions.

Most of these properties have also been listed over the winter and are about to be joined with new offerings that may not be as constrained for price reductions. The longer the low sales volumes last, the more price reductions there will be and the longer it will be before a spring market forms.

Some times you're the Pigeon and sometimes you're the statue.

Leo S said...

Thinking back to the question of how much the availability of credit has been reduced.. I wonder if it has been that significant.

After last year's changes to make people qualify at the posted rates, the banks lowered the spread between posted and discount rates to mitigate that rule change, and rates went down even more. Now we say goodbye to the 35 year mortgage, but suddenly every bank is offering the option to just outright skip one payment every year. Conveniently, that turns a 30 year amortization into a 35 year.

If I was Flaherty I'd be pissed off at this circumvention of regulations. Credit is being tightened a bit, but the rules are certainly having much less bite than they were intended to have.

HouseHuntVictoria said...

"but the rules are certainly having much less bite than they were intended to have."

Are we certain the rules were intended to have any bite at all?

These aren't stupid people at the helm of the banks, CMHC and Department of Finance.

I believe these rule changes were meant to have zero effect on the market (except short term buying stimulation) while giving the appearance of acting on a perceived economic problem. No government will lay a negative economic hand into a market that 70% of their electorate has the bulk of their money tied up in.

Just Jack said...

I had not heard of the skip-a-payment every year plan.

Every person getting a mortgage should be shown the affects of this plan on what they pay back over the course of the mortgage.

We need controls over the mortgage industry when the taxpayer is footing the bill. We need an independent watch dog overlooking CMHC that is responsible to the Canadian taxpayer not to the politics of the day.

Flaherty - WAKE UP!

Just Jack said...

Thinking it over, the skip-a-payment a year plan might only be offered to bi-weekly mortgages. That would not extend the amortization to 35 years. It just gives an option each year to not pay down the mortgage quicker under an accelerated 26 pay periods (one extra payment a year) versus 12 monthly payments.

So, Flaherty you can go back to sleep.

SilverSurfer said...

The effects is that everyone gets to go on a guaranteed trip to Hawaii every year, come on, what's wrong with that?



Leo S said...

The RBC calculator has an option "Skip-a-payment" that you can add into the calculation.. On a $400k mortgage at 4% with 30 year amort, monthly payments, adding this option extends the amortization to 35.3 years.

From that site: "Once every 12 months you have the option to skip the equivalent of one monthly mortgage payment (principal and interest). You will still be responsible for paying your usual insurance premiums and property tax installments, where applicable."

Here's the option for TD (only 4 times total) and Coast Capital ("Skip a payment once a year, no questions asked.")

Just Jack said...

The same banks wanted tighter rules, but were quick to circumvent them. Obviously, the new rules are not tough enough.

5 percent down was too easy to get around. That money could be lent as a loan or be part of sweat equity in a new purchase if you finished the landscaping.

A reduction from 35 to 30 was short changed by the skip-a-payment plan.

So what Flaherty wanted to reverse, was reversed on him and us.

This spooks me into thinking that the lending industry must be in serious sheep dip if they need to climb over each others bodies to get cash flow. Is there a bank failure coming to Canada?

So, now what happens? Do we go to DEFCON 3, which would be 10 percent down and a 25 year amortization, or back to where we started half a dozen years ago when the Canadian Banking industry was following prudent lending practices.

Reilly said...

Conference Board of Canada just released their economic forecast for major cities. Vancouver’s economy is forecast to nose-dive this year (2.8 GDP, down from 3.7 in 2010). Calgary is the only major city forecast to grow this year over last (3.7 GDP, up from 3.5 in 2010). Victoria’s forecast is for a feeble 2.4 in 2011.

Perhaps the migratory trend back to Alberta begins to shift into high gear this year, like the period between 1996-2001. Good jobs, no provincial tax, no health care premiums, half-price housing, cheaper fuel & food, cheaper snow-bird flights to escape Canadian winters - makes you wonder?

Introvert said...

However, I can make it the least hurtful by only spending 20 percent of my income and amortizing the mortgage over 15 years. To me, this is the only economically viable option to owning a home without being a slave to a mortgage.

Just Jack,

Are you hoping to accomplish this feat once home prices drop 20+ per cent, or is this doable for you today?

Waiting said...

Have you ever lived in Alberta? I lasted 4 very long winters. Bad traffic, winters that don't seem to end, kids bussed long distances to school, and WAY too many cowboy hats in July!

Al said...

We had a trip to LA recently with flight exchange in Calgary. Boy oh boy, it was the heaviest security checking point for the whole trip, even worse than in LAX. That makes you wonder (am I in Canada?), what's really going on?

Shamus Baier - RE/MAX Camosun said...

You are of course right, but this really shouldn't be a surprise to anyone that has been paying attention to Victoria's market over the last 2 years.

The 35 year amortization rules are changing for those buyers with an insured portion of their mortgage (ie. less than 20% down). The people that this is going to affect the most are the first-time buyers with no previous home equity to draw upon and those people that barely qualify with their current monthly debt-servicing ratio.

The thing is, most of these people have already acted. First-time buyers made a real push into the market as interest rates dropped and prices stalled out, making a mortgage an affordable option when compared to rent. The few people that are in this position now are only the tail end, it's unreasonable to expect people have ignored these low interest rates for the last 2 years to only be pushed into action by a change in amortization rules (of which we still have 3 weeks to act upon before these changes come into effect).

How quickly we forget last February and March when the rush for houses with suites was so insane we were seeing multiple offers the first day on market an everyday occurence.