Two days to go. Can we get there?

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 May 2011 (last week's numbers in brackets)
Net Unconditional Sales: 527 (415) +112
New Listings: 1,381 (1107) +274
Active Listings: 4,666 (4,599) +67
Sales to new listings ratio: 38% (37%)

May 2010 totals
Net Unconditional Sales: 695
New Listings: 1,621
Active Listings: 4,521
Sales to new listings ratio: 42.8%
Sales to active listings ratio: 15% or 6.5 MOI

JustWaiting gave us as good as an analysis as we'll get around here:

Let's take a closer look at the weekly stats VREB has released for May. (+xxx) denotes change from previous week.

May 30 (4 day work week)
- Pending sales 527 (+112)
- New listings 1381 (+274)
- Active listings 4666 (+67)

May 24
- Pending sales 415 (+161)
- New listings 1107 (+336)
- Active listings 4599 (+56)

May 16
- Pending sales 254 (+126)
- New listings 771 (+375)
- Active listings 4543 (+126)

May 9
- Pending sales 128
- New listings 396
- Active listings 4417

The sales/new listings ratio for May is 527/1381 or 38% which is a sign of a buyers market (below 40%).

Sales have averaged about 27 per business day so we can expect around 581 from VREB on Wednesday. This is close to last month's 574 but way down from previous years.

2010 - 695
2009 - 879
2008 - 770
2007 - 963
2006 - 909

You can expect the usual "stable and balanced" market nonsense from VREB and their parrot the TC on Wednesday. Any comparison to last year will say that 2010 was unusually high etc. No mention will be made of the last 5 years.

Agreement schmagreement

Well, who would have predicted this? Competition Board sues the Toronto Real Estate Board (H/T a simple man). We've known the CREA and its members wouldn't easily give up control of the gravy train without a serious fight, and thankfully the Competition Board seems like a willing and capable combatant.

At the center of this dispute is one undeniable fact: the real estate associations refuse to allow their members to share data in an innovative, open manner. They do this for a variety of "reasons," but I suspect (and have no solid proof to back this suspicion up) that the primary reason is time. When a realtor has to spend time looking after clients, they want to be paid for it. Fair enough, I have no issues with this.

But when a realtor wants to automate the way an individual gets information from them so as to free up time, lower costs and serve more clients, look out! here comes the TREB to "remind" the innovative realtor that only "time" can protect the information of the seller. And that realtor better spend the time faxing, emailing, meeting or speaking on the telephone about the information desired with a client rather than create an online system that offers said information in a manner that competes with the realtors who'd rather spend the time to get the bigger money from the fewer clients.

Would the VREB act this way? Who knows. The most innovative realtor I can think of in this town (regular readers will be familiar with him) isn't offering anything like what was tried in Toronto: he's offering full service listings for a fraction of the cost of the "traditional model," offering cash back to his buyers who are willing to do what most buyers are doing these days anyway (their own house hunts online) and offering a flat fee listing option.

Let me be absolutely clear: I've not communicated with this local realtor on this issue, nor will he necessarily endorse my description of his service offerings (although I hope he provides his own in comments). The VREB can't go after agents who operate in this manner because of the laws around price-fixing, but they don't need to either, because time isn't on these agents side. They still put in some serious hours attending to clients, they just happen to charge less than many of their peers for the same types of services.

If a licensed agent, with the capital necessary to pull it off, wanted to design a website that allowed his clients to log-in, do their own searches and see much of the market-, real property (land)- and house-related data contained in the realtor-only side of the MLS (seller's personal information hidden), then is it reasonable to prevent them from doing this? 

The answer comes down to determining who owns the data. The TREB claims ownership and says they have a "legal and moral obligation" to that data. The Competition Board obviously disputes the legal side of that, but that's exactly why the communications experts over at the TREB chose to include the word moral--they're on the side of the little guys, or so they want you to believe.

I couldn't disagree more. Surely real property data is a key component to the economic public good of a functioning market and shouldn't be controlled by a private self-interest group that claims to have the public's interest in mind? And before you start calling me a raving leftist moonbat please consider the theory of economic freedom first. Finders keepers should be a losers' argument in this battle.

Market Update

MLS numbers courtesy of the VREB (unconfirmed, thanks JustWaiting for sourcing these). These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

Month-to-date May 2011 (last week's numbers in brackets)
Net Unconditional Sales: 415 (254) +161
New Listings: 1107 (771) +336
Active Listings: 4,599 (4,543) +56
Sales to new listings ratio: 37% (33%)
Sales to active listings ratio: 9.2 (12% or 8 MOI) [estimated]

May 2010 totals
Net Unconditional Sales: 695
New Listings: 1,621
Active Listings: 4,521
Sales to new listings ratio: 42.8%
Sales to active listings ratio: 15% or 6.5 MOI

Sales activity definitely picked up last week from the prior two. But one week does not a trend make. Will we hit 600 for the month of May? Will we match April 2011's 574? We've been averaging 18 sales per day in May, including the uptick in activity last week. We'll need to see that number jump by 4 sales per day to match April. I won't be surprised if I'm wrong, but I suspect we won't hit that target. It'll likely be close, but it's irrelevant anyway. The bigger story is in the listings volume, which is now extremely high. We're now almost at 2008-like inventory levels. Why is that significant? Simple: from May to December 2008, the VREB reported average price of SFH's in Victoria dropped drastically.

The supply-demand market conditions for a repeat of 2008 are in place. Only time will tell us if recent history will repeat itself.

Of course, this time it's different*

Sales volume is slumping faster than a binge-drinking alcoholic with a 2-4 of whiskey. But all over Canada, the bubble-meter is bubbling. Note the absolute disconnect from sanity that is Vancouver. Where's Victoria in all this mess? We'd be second, right about where the "What now?" question gets asked on the chart.

Read the analysis here, which includes this fine quote: "market risk is palpable." Ya think?

Full size chart here.

* no it's not

Monday market update: she ain't pretty, she just looks that way

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 May 2011 (last week's numbers in brackets)
Net Unconditional Sales: 254 (128) +126
New Listings: 771 (396) +375
Active Listings: 4,543 (4,417) +126
Sales to new listings ratio: 33% (32%)
Sales to active listings ratio: 9.2 (11.5% or 11 MOI) [estimated]

May 2010 totals
Net Unconditional Sales: 695
New Listings: 1,621
Active Listings: 4,521
Sales to new listings ratio: 42.8%
Sales to active listings ratio: 15% or 6.5 MOI

If current trends continue, and this coming long weekend plays out like most with a dearth of sales activity, Victoria is going to be hard pressed to break 525 sales in May. With inventory approaching all time highs (have we ever broken 5000 listings?) and sales nearing 15 year lows, I just don't see how prices can remain as sticky as they have been thus far in 2011. But hey, I've been wrong before and I'll very likely be wrong again in the future.

One thing is for certain, if spring 2011 was to be a good market in Victoria, it played itself out long before now. Sales volume is low, listings are high and any claim of a "balanced market" by the real estate experts salespeople has been exposed for the bunk it is. If you're active in the market today, especially on the buy side, I have to question why? And I really do want to hear an answer, because I'm sure there are a few legitimate ones out there.

Buying: the search and the offer

We've been at it for four long years. This search was very easy. We used a poor facsimile of VREB's Matrix or PCS system and the MLS® website to find the houses we wanted to view. Our REALTOR® scheduled appointments. We gave her a list of 30 houses we wanted to see, 15 each day for two days. After the first day, we asked her to add 5 houses she thought we should see based on our reaction to what we'd already seen.

Day one was very fast. We'd planned to be at it for around 7-8 hours. We were done in four. Let's just say we get to "no" very quickly. Mrs HHV came up with some handy acronyms for our listings sheets:

• NWIH = No way in hell
• NATP = Not at this price
• WAO = Worth an offer

At the end of day one we had two WAOs on our list. We repeated the process again the next day, in almost as little time. We found the home we bought around mid-day. We looked at half a dozen more afterwards. By the end of our two-days of looking we had 5 WAOs on our list and one house we thought we really wanted.

We spent the rest of that day doing what we always do when we have a big decision to make. We compared the status quo to the anticipated outcome of the action taken. Action won out. We decided to schedule a second showing and, if it showed as well the second time, make an offer. It showed better the second time.

Here's an interesting side note: both times we viewed the home, the owners were present. Normally agents advise against this. The mobility of the owners was an issue, so they chose to stay home. We were very glad they were present. They made themselves scarce and weren't an issue for us. But they were a big part of the gut feel we got while inspecting their home. They were the original owners and their pride showed.

When we went to make the offer our agent showed us what had sold in the neighbourhood over the previous six months. Like many neighbourhoods in Canada, prices were on the downswing. The asking price was below the assessed value, only marginally so. The home had only been on the market a few days. Our agent suggested a price. We suggested another.

The negotiation would have been very simple if the listing agent hadn't been trying to take the day off. We had a few conditions on the offer: appraisal, inspection, financing and a change to the possession date. Our offered price was 2.6% below the asking price. We felt it was strong. Did it need to be? Given what we knew about the owners I'd say yes, it did. Given what we knew about the market conditions, I'd forgive you for telling me we paid too much.

So why did we choose to present a strong offer? Simple: the product and the people.

The house is immaculate and gives us the perfect opportunity to make it our own at our own pace. It needs nothing to make it livable today, but its old enough to make updating it worthwhile over the next 5 to 10 years. The layout is flexible. We're a small footprint family right now, but we may not always be. The house meets both those needs.

The lot size was above average for the neighbourhood. But the home built on it was about 90% the size of many of the other houses in the neighbourhood. The price reflected the home size, but not the lot size when we reviewed comparables. We value land. We like houses, but don't value a big house the way many people who choose to buy big homes on small lots seem to.

This house had one thing I always look for in a home: copper. If you've been in a new build in the last 5-7 years you'll often see an abundance of what's known in the plumbing world as PEX. We don't like it and don't trust the long term viability of it. I'd say 60% of the homes we viewed were plumbed with PEX versus copper. That was enough for us to rule them out, "good bones" and all that. All the major upkeep work had already been done: roof, siding, furnace, hot water heater etc.

This home was well-loved. Enough so that I wanted to know how it was well-loved. That was worth something to us: not leaving a distaste in the process of selling the home for the current owners. We wanted inside knowledge and were willing to pay for it.

Our agent suggested an offer price $5,000 lower than what we suggested.

The owner of the home had already decided his final price. It was $5,000 higher than our offer. When that came back we countered a matched price, but asked for some things around the property we knew the current owner didn't want to move (another reason why we were thankful they'd been around for the viewings and we'd had a chance to ask them a few questions). We certainly didn't get $5,000 worth of items, but we did them a service (they don't have to try to sell the lawnmower, yard tools, gas BBQ, spare fridge etc) and we saved a bit of time/money not having to go out and try to buy all this stuff anyway.

When I attended the home inspection 5 days after having the accepted offer in place, the inspector confirmed our gut feel had been right. No home inspection will ever be "perfect," but the total "fixes" necessary to this house are priced out under $500. Even better, the owners of the home showed me everything I had wanted to know about the house: how the sprinkler system works, how to maintain the water system, how to shut down the gas and water supplies, how to run the A/C/heatpump unit etc. We exchanged numbers and they'll be a good knowledge source in the future should anything surprise us.

Much of the time we discuss properties here at HHV, we focus on the financial side of things. We have to in Victoria because the prices dictate us to be excessively prudent to prevent ourselves from getting overwhelmed by the emotional side of buying a home and ending up in a potentially financially ruinous situation. Buying a home is emotional though, you can see that in some of my description above. It's been a positive experience for us thus far. We're not in the house yet and we know there will likely be a few initial "moments" when we are, but we're thankful that the price we paid allowed us to embrace the emotional side of the home buying experience -- there's value in that too. 

Monday market update and a bunch of useless numbers

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 May 2011
Net Unconditional Sales: 128
New Listings: 396
Active Listings: 4,417
Sales to new listings ratio: 32%
Sales to active listings ratio: 11.5% or 11 MOI (estimated)

May 2010 totals
Net Unconditional Sales: 695
New Listings: 1,621
Active Listings: 4,521
Sales to new listings ratio: 42.8%
Sales to active listings ratio: 15% or 6.5 MOI

I don't have much to say about the numbers other than they point to a flat market this spring. This is different from the previous two years, but not so unlike 2008, where there was absolutely zero upwards price pressure on the local market. So while the CREA hikes the forecast for home values in Canada, clearly they are skipping over the effect of Canada's 15th city (when ranked by size) on the national marketplace (H/T happy renter). Whatever, they skipped over all but Upper Manhattan Vancouver's west side when they tried to massage the numbers like Victoria's Secret massages cup sizes under the shirts of the Shark Club girls (OH, no he didn't!). Useless those numbers (I'll let readers decide which is which).

Which brings us full circle to another bunch of useless numbers, this time provided by our very own local board. Each month, the VREB solicits responses from local REALTORS® about who's buying, why and how they're planning to pay. I've seen the dispatch a number of times but never commented on it before, for two reasons: first, it's incomplete; and second, it's internal only, which means it can't be trusted enough to be released publicly in its internal dispatch form anyway. SweetRealtor provided us with some of the data in the previous post's comments, so I feel compelled to provide the HHV filter on the data (please read that as my opinion only).

The last time someone-in-the-know sent this to me was in a month where there were 318 sales. A grand total of 84 REALTORS® responded to the survey. That's a 26% response rate. Given that the scientific polls in Canada's 41st election couldn't have been more wrong about the outcome, I'm compelled to dismiss the "survey" of local REALTORS® without further discussion for the sales tool it's likely meant to be.

This is no slight on SweetRealtor, who's input and commentary I, amongst most of you readers, value greatly, but I simply don't think we should give any weight to the results of an inside buyer's motivation/financing survey when A) it doesn't capture every buyer and B) it is far beyond a stretch of the imagination to interpret these numbers as-given against market sales-related data and attempt to construe one set of numbers into the other to come up with any kind of explanation for the current market state. 

Interesting they are; but definitive they are far from. 

Buying: to REALTOR® or not to REALTOR®

This isn't a bash session. Nor should it be. Please keep the comments section free from vitriol. Thanks in advance.

When we first decided we'd buy in our new city, the first thing we decided to do was start asking around for a REALTOR® referral from people we trust. It might be fitting that we didn't get one. Then again, that may just be because we only know a few people in our new town.

I, of course, hit the interwebs to do my research. The first thing I looked for was a cash-back REALTOR®. Low and behold, the agents offering cash-back schemes in the new town are nothing like the few agents offering true cash back options in Victoria. Granted house prices are approaching 60% of what a similar home costs here so naturally the commissions aren't anywhere near as bloated, but I'd have thought that more would be doing it. The only one I could find was a guy using the scheme purely to troll for buy-side clients. I had to talk to him on the phone to find out what the conditions on his cash-back offers were (and there were many) and once on the phone I knew right away we couldn't work with him.

So back to the drawing board. We asked for a referral from the relocation services company the new employer had contracted for us. We spoke on the phone one evening early in the week, got set-up with their proprietary listings service (think VREBs Matrix or PCS) and started giving them a list for the 3 days we planned to spend house hunting (only 2 days away). We narrowed the list down to 15 homes and asked for appointments all on the same day. We figured it was only one day and if the REALTOR® didn't mesh with us, we really had nothing to lose.

We got through 15 homes in the span of about 4 hours on the first day. Afterwards we provided a list of another 15 homes then requested the REALTOR pick at least 5 more that she thought we should look at based on what she knew about our tastes after the first day: we saw nearly 25 homes on day two, many of which were right for us. Of the almost 35 homes we looked at, at least 5 were on a list for serious, and by serious I mean let's go look again and make an offer, consideration.

We had tossed the idea around of just contacting listing REALTORS® and attempting to do our own deal, but given the circumstances no amount of pros vs cons comparison made enough sense to try to do it on our own. In this kind of circumstance, I recommend using a REALTOR®, it just makes things easier. And things were easier. The HHVs were dream clients: market savvy, knew what they wanted, quick to say no and quick to filter online.

The REALTOR® recognized the situation for what it was, stayed out of our way during viewings, did her best to answer questions when asked and busted her tail to keep up with our schedule. We were flying through homes so she spent much of the time trying to advance the viewing schedule so we could get into places earlier than the original plan called for.

The REALTOR® made very good money from us, that I know. I'd by lying if I said that I was happy about that, but I'm also a realist who well-understands that given the circumstances we found ourselves in and the other choices we'd already made, we were not in a position to act on our own.

The real estate market place, and its trading services industry, are what they are right now. Damn right I want to see it change, but if you're of the mindset to participate in the market at this time (buy or sell) sometimes you just have to hold your thoughts and play the game with the rules its played by at the time.

In the next post I'll outline how we chose the actual house.

So just how bad was April?

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.

April 2011 (percent change from 2010 in brackets)
Net Unconditional Sales: 574 (-24%)
New Listings: 1,577 (-12%)
Active Listings: 4,561 (+8%)
Sales to new listings ratio: 36%
Sales to active listings ratio: 12.5% or 7.9 MOI

April 2010 totals
Net Unconditional Sales: 756
New Listings: 1,783
Active Listings: 4,229
Sales to new listings ratio: 42%
Sales to active listings ratio: 21% or 5.6 MOI

Is it bad out there? Shoe-betcha! If you're trying to sell a home in Victoria right now, there are less buyers active than there were a month ago. And you should have sold last year because there were more buyers active then.

Buying today? Or trying to buy today? Rest assured you won't be involved in thick competition for crappy offerings anyway. Sure, you still see action on East Saanich properties in good shape or under-priced, but for every one of those you'll see a hundred or more other VREB area homes languishing on the market.

I wonder what will happen to prices this month? And the rest of the year?

Buying: show me the money

I'll detail, some details anyway, the process that led to us buying our home (we aren't in it yet, but the subjects are off the sale agreement). It's a bit much to deal with in one post, so I'm going to break it up into several blog posts and intersperse those into the regularly scheduled state of the market updates we do around here.

Today it's all about the mortgage pre-approval. If you're shopping without one, I have to ask why? It seems entirely illogical to me to not know what the bank thinks of you before heading down the long drawn out path of purchasing a home.

When we began our house hunt, over four years ago, we had a period of about 6 months where we were "covered" by a pre-approval. I don't recall what our TDS (total debt service) ratio was back then so unfortunately I won't be able to compare the changes between then and now. We let the last pre-approval lapse in the fall of 2007 as we'd decided we weren't seriously shopping for a home in those market conditions.

Last fall, we undertook the process again. Financially speaking, the HHVs were in an entirely different place from 2007. The mortgage approval reflected this. And I was shocked, as was my wife. TDS was approved at over 42%. I nodded to the mortgage officer and said "I guess this explains the high prices eh?"

Since day one, we've had a total dollar figure target that we felt was a reasonable amount of debt to carry. Back on the day we made "the call" that dollar amount was representative of 3.25 times our annual income.  Even as prices rose, we'd resolved ourselves to stick with that number -- it simply meant we'd have to save more before we bought if prices didn't drop. The amount of money the bank was willing to give us was around 40% more than what we felt we should spend. Another shocker. But once we got over the bank wanting to make us debt slaves to them, we realized if we stuck to our plan of spending considerably less it meant we could do it on one income and further insulate ourselves from interest rate and employment changes.

Our original locked-in rate offer was over 5%. I think it was around 5.4% or so. This time around, last fall, we were offered 3.24% for 5 years. When we renewed that locked-in pre-approval, it had risen to 3.49%.

We didn't use a mortgage broker. Not that we have anything against them. But the connections in our lives led us directly into a retail branch of a big 5 bank and we were happy with the product offering and the service we were provided. Our mortgage contract allows us to double the payments and make 15% lump sum payments annually. What this means is, if our mortgage amount was $100,000, we could drop $15,000 extra onto the principle each year AND if our monthly payment was $400, we could double it to $800 effectively allowing us to pay almost 20% extra off the principle annually without any penalties. Is that a great product comparatively to what else is out there? I'll let the experts judge, but it works for us.

We took out a 30 year amortization. The only reason we did so is because of the perceived flexibility it offers us to adjust payments based on what's occurring in our world financially. We'll be paying on a rapid bi-weekly schedule and adding 15% extra to every payment. That puts us on an 18-year amortization schedule effectively. We may end up making extra lump sum payments onto the mortgage each year depending on how our other savings vehicles perform. None of our regular savings efforts will need to be adjusted because of the mortgage. In other words, the TFSA and RRSP installments continue as is -- it would have been a deal breaker for us if we'd have to compromise these savings efforts.

We had all this sorted out before we even went in to get pre-approved. But the process necessitates you to make these decisions once you have an actual property purchase agreement in place, so these kinds of discussions may not occur with your lender until you've gotten to that stage.