Wednesday, May 4, 2011

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.

86 comments:

Just Jack said...

Thanks for your posts about your buying process HHV and Mrs. HHV. I'm enjoying them and finding them very helpful. Keep them coming.

S2

DavidL said...

Very interesting to read about your house hunting process using a Realtor®, HHV. I think that if I were in your situation, I would have used a realtor as well.

In 2002, my wife and I were renting our house. When the owner indicated that they wanted to sell - we offered to buy. Once the asking price was determined (through independent market appraisals), we calculated the the owner would receive $9000 less if the house were sold through a realtor. Thus, we deducted $4500 from the asking price and the previous owner received $4500 more than if sold through a realtor. We covered the $800 in survey, layers and legal fees.

Obviously this approach won't often work - but in this case everyone was happy feeling that they got a "good deal".

DavidL said...

"layers" = "lawyers"

Sure wish I could edit after posting!

jesse said...

I'm glad your homebuying experience was so rewarding. Look at your statement:

"Of the almost 35 homes we looked at, at least 5 were on a list for serious ... consideration."

This constitutes a "what a normal market looks like" moment. Something for readers to remember in the coming years.

Reid said...

HHV, thanks for the feedback on your approach to searching for a property. I have always taken a much different approach when moving to a new town (I have done this five times in the past 12 years). I always rent until I fully understand the different areas, schools, parks, etc. I also ensure that I understand the real estate market better than the realtors (not very hard). The soonest I have bought a house after moving was three months (Okanagan) and longest was 18 months (Victoria). Victoria was the hardest as there are so many places we could live and each area offered something different. We rented in Fairfield, Oak Bay, Cadboro Bay and downtown before we finally bought.

I mention this to people and they say that it is too much hassle to rent and I got too much stuff to keep moving around. What we do is move everything into storage except only what we require to rent a basement suite or apartment. We usually do short term rentals for three months (cheap) and keep moving. It may seem like a lot of work, but it pays off as this allows you to fully understand the new town and ensure you buy in the right neighbourhood at the best price.

HouseHuntVictoria said...

@Reid, that was our original plan. We're fairly familiar with the town we are moving too and felt confident we knew enough about the neighborhoods we wanted to search in to eliminate many others. I did a buy versus rent analysis and we decided the numbers were close enough together to mitigate the risk as well as the incentive of not having to move twice (or more). We've moved around a fair amount over the past few years. Emotional I know, but at this stage we were ready to just be done with it. Lucky for us, we found a gem... Which I will chronicle next.

Reid said...

HHV, it is great that you know the new city well. My experience is that it costs $40k to $50k every time you buy and sell a house in BC so you better ensure you buy one you are happy with for the longer term.

Dave said...

Love these posts HHV, keep 'em coming.
Dave3

Just Jack said...

Well last month, one could buy a home for under $350,000 in the urban core districts. This month it looks like we may see the first home in a long time sell for less than $300,000.

I can hear the poo pooing already. Yes, it will probably be in Esquimalt (afterall there's over 50 homes for sell in this tiny community) and it will be a war shack (probably from the Boar War).

But for Principle, Interest and Taxes on a high ratio mortgage with a nickel down - that's about $1,500 per month in payments.

So why have only 3 homes in Esquimalt sold in the last 30 days? Well that's what a local market looks like in decline.

Meanwhile just a few klicks to the east, people are paying hundreds of thousands of dollars more - just to say that they don't live in Esquimalt.

The market is contraction from the outside to the inner core with only a thin Blue Bridge as the line of defense.

Introvert said...

Why must we use "Realtor®" instead of "realtor"?

Is CREA going to come after us if we use the generic word?

Now, if you'll excuse me, I'm off to McDonald's™ to buy myself a Coke™.

©Introvert Industries. All rights reserved.

HouseHuntVictoria said...

I write it that way because it looks stupid and they ask me to. I'm happy to comply whenever anyone asks me to do something that makes them look stupid.

Alexandrahere said...

JJ....you know how I enjoy your comments.....except about Esquimalt. The majority of people that buy in Esquimalt....already live in Esquimalt.....and they love Esquimalt. Esquimalt has many "low end" war time houses around the Workpoint and Colville road areas and so they of course sell for much less than a 1960's home. But if you really compare a nice home in a nicer area of Esquimalt (and there are many including Saxe Point, Rockheights, Upper Old Esquimalt Rd, Selkirk, Parklands etc.), with a similar home in Maplewood, Gordon Head, or Colwood, the chances are the Esquimalt home will sell for more. Why? Because people who live in Esquimalt love Esquimalt, they have gorgeous well looked after parks, they are close to town, they have boulevards and sidewalks and the best bus transportation. You have obviously never really lived or walked around these wonderful senior and childfriendly areas.

Just Jack said...

I lived on Lyall Street for five years.

Just Jack said...

I enjoyed living in Esquimalt.

The Saxe Point neighborhood association was even going to allow me to join, even though I did live on a busy street, that technically would not put me in "Saxe Point".

They changed their minds when I said I was in favour of development of a parcel of land for low income housing.

I could see my application bouncing off the wall into the garbage pail as I walked away.

I rescued a kitty in Saxe Point once and fed it warm milk till it regained its health and cleaned and bathed it from mites and fleas.

I caught seven Sockeye Salmon (my personal record for the first and only time I have ever fished) in the harbour and gently hand released them back into the waters, so that some other fisherman would have a good day too.

I climbed over the rocks, disposed of other people's dog poo and jogged along the water path to the pub and stumbled back home again.

I liked my neighbors who always had a cold can of beer ready at the fence to chat away an hour in the summer.

I sang show tunes when I went to work, patted stray dogs and bought week old flowers that nobody wanted - because they need a home too.

And then......

Alexandrahere said...

Yes, Esquimalt and Victoria does indeed do their part in providing much needed low income housing for those in need as well as for seniors. Oak Bay does not. Victoria and Esquimalt have gas stations so the people living in that area can fill up; Oak Bay does not. They have good schools and good teachers as does Oak Bay however many of the parents of those children cannot afford to give out the extras for after school and weekend tutoring, extra money for fancy band uniforms and instruments, extra money for library books, extra money for sports equipment and excursions and the lists go on. So, yes, I guess people rather live in Oak Bay where they don't have those unsightly and crummy low cost housing complexes and the street people, and their children don't have to feel "uncomfortable" buying their school lunches and wearing their designer jeans around children much less fortunate. Such a sorry lot.

Just Jack said...

Fernwood is an absolutely amazing neighborhood for prices.

A home just sold on Roseberry for 645 large. I happened to drive by the house a few days back and noticed the sign. I now know why the listing had no front picture of the home.

So why and what are people buying? Are they buying for location or are they buying for the improvements?

I'm guessing that today's buyers are not looking for homes that need updating. They have neither the time nor the finances to do so. Instead, they want the updated home and are willing to pay a premium even if there are better locations to buy in.

So, this is why you find someone shelling out more of the banks money to live in Fernwood, when they could be buying in Fairfield for $90,000 less. Ouch! that's going to hurt when it comes time for future re-sale on the Roseberry home.

Thank Gawd, its the banks money and not the home buyer's being spent. Ooops, it is - the buyer loses on the re-sale price - not the bank. So for the next dozen years the bank will get twice the amount of rent for the property and today's buyer losses all of their equity.

Seems fair.

DavidL said...

Gee Just Jack, were you sampling your roommates brownies while you were living on Lyall Street? ;-)

I agree that there are some very nice "undervalued" neighbourhoods in Esquimalt.

DavidL said...

Just Jack: nice update to your profile photo!

Just Jack said...

I think that almost all of Greater Victoria from Port Renfrew to Oak Bay, from Sidney to James Bay are good places to live. There are some seedy areas like around the car lots along Burnside and then there are areas that if you squint alot almost rival Point Grey or Shaunessy in Vancouver. Mmmmmm, not really.

Like they say in Vancouver. "You can swim in English Bay in the morning and ski in the afternoon" Nobody does it! - but they keep on saying it! In fact - I bet you can't do it - the traffic wouldn't let you.

Or as they say in Victoria. "You can walk anywhere in 15 minutes. Nobody does it! they all still drive 3 blocks to the coffee shop - but they still say it.

I like the way Victorian's take pride in their city by telling people what we don't have a lot of:

like snow
"at least it doesn't snow here"
or that it doesn't rain here as much as Vancouver. It's still a rain forest! If Vancouver is like living in a car wash, then Victoria is like living in a dishwasher?

and the sense of importance and independence from the rest of the world.

We're kinda like Tasmania. People have heard of it - but there not to damn sure where it is or what people do there when you get there!

Sometimes when I'm travelling I like to say that I'm from some exotic city like Moose Jaw, Flin Flon, Osoyoos. When they ask me where that is I just say
its near Victoria. What do I care - there mostly Americans anyway if they know what coast Victoria is on, I'm amazed. Once one asked me where Victoria was and I told them British Guinea. He told me that he was there once. I asked him if he had any problems with the road signs written in Eskimo. Nope, no problem he had the GPS.

a simple man said...

In OB some interesting events today - a 14,000 sq ft lot with a 3100 sq ft house in the Uplands for under $1 M, a bigger house on Sandowne for $639K (bad shape, apparently) and a price drop of 40K on one of the Musgrave houses. Quite a few price drops in the past few days.

Speaking of OB - I have to say, the number of rats here is unreal. They are OB's dirty little secret. It is a full time job keeping them out of your house. Hate them. Wife hates them doubly. Anyone else with too many rats around?

Watching and waiting said...
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Watching and waiting said...

simple man .. we lived in OB; Cadboro bay/estevan area for about 15 years early 70's/80's. Lots of rats then (and racoons). I recall my dad ripping into a wall to get to a decaying rat.Yup, lots of rat traps around the house at that time.I'm out in Gordon Head these days and I have yet to see one rat; except the odd canvassing politician the past few weeks.

On a different note, is it me or did the house on 981 Tulip just go up in price.We did the open house. I think it was the owner on behalf of the realtor (realtor likely given up) at the house that day hovering about. Felt bad for the fellow. He really put a lot of work into the home but not exactly finely finished work.Lots of shortcuts.Now the property is languishing and judging by his increase in price, he feels the spring buyers will rescue him from his winter listing doldrums.

Moving to the ever poplular topic of 828 hampshire, given he has removed the price ("Please call for a price on this beautiful home.") I can only assume he will be listing on MLS shortly. I'll place the listing at 689k to start with on MLS. 828 if you are reading this (and we all know you are), list with Marko! Get that house sold in this declining market. Move on, rent for a while. Enjoy the life as a renter:), get out while you can.

Animal Spirit said...

981 Tulip has been on and off the market since at least the beginning of January. Horrible flip job, way overpriced and has the wierdest suite in history.

Has he at least touched up the paintwork yet?

Musn't been easy sitting there and hoping that someone, just someone will come and buy the house before the bank takes it over.

a simple man said...

feeling bad for silversurfer right now. Silver down 25% in the past week. Coming down the backside of the wave - tough.

Keep your chin up.

Watching and waiting said...

animal spirit: we did the open house by accident back in January or so. I agree, whacky suite.Half kitchen/half bedroom if I recall - ideal for a murphy bed.At that time he was still in the midst of touch ups with his paint cans/mitre saw hidden away in the furnace room.We had just come back from an open house on Iris which turned out to be strata despite being advertised on MLS as freehold.I hate it when realtors do that; lure you in then spring the strata fees/title on you.Then getting them to admit it's strata is another story with that one (one's actually; Indo-Cdn father and son team) trying to feed me the line:"you own the house, only the road is strata" and of course the introductory $10 month strata fees which would not even cover a bucket of water from the shared costs of this new strata. But I digress....

Animal Spirit said...

a simple man - what goes up, must come down. The only difference between housing and silver is that silver is a lot more slippery than housing, which is real sticky.

Ok, that and some people try to eat silver - haven't seen anyone eat a house yet. Except in fairy tales.

Just Jack said...

A friend bought 10 ounces of silver for her son's 13th birthday present last week.


When shoe shine boys buy......

Mindset said...
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Mindset said...
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Mindset said...

Hi all,

Was watching an MSN video this morning that led me to the economic forecasting group capital economics. The Canadian economist made the general point (that I believe) which is the housing market, when rising, is the tide that floats all boats... but when it goes down, so does nearly everything in an economy.

There are a number of interesting free articles on their web site, but the one of most interest here is likely their take on the Canadian housing market.

Web site:
http://www.capitaleconomics.com/canada-economics.html

Article on Canadian Housing:
http://www.capitaleconomics.com/canada-economics/canada-economics-focus/house-prices-likely-to-fall-for-several-years.pdf

Marko said...

Just looking at 2747 Roseberry Ave - sold for $645,000 a few days ago and went for $111,500 back in 1989 -- not bad.

Sweetrealtor said...

@watching and waiting

981 Tulip listed in Nov 2010 at 572,900 and ended this listing 101 days later at 544,900.

Listed again Mar 2011 at 559,000 and ended this listing 35 days later at 549,900.

Listed again now, with another agent, at 559,900. At least this agent has some decent photos of the house. I have a big issue with cheap, unprofessional photography on listings. It's like showing up to a wedding in torn jeans.

BTW, it's much easier for me to say "agent" then go through the hassle of typing REALTOR® (which is actually supposed to be all caps).

Marko said...

Torn jeans are actually in now buddy.

Introvert said...

Just looking at 2747 Roseberry Ave - sold for $645,000 a few days ago and went for $111,500 back in 1989 -- not bad.

Yeah, not too shabby. Seems just a bit better than investing over 100 grand in silver and then watching it slide 25% in a matter of weeks. We won't be hearing from that guy for a while.

dave said...

Today's TC has Conference Board putting Victoria in last place.

http://www.timescolonist.com/business/Slow+growth+expected+Victoria/4738299/story.html

Mindset said...

Marko Said: Just looking at 2747 Roseberry Ave - sold for $645,000 a few days ago and went for $111,500 back in 1989 -- not bad
'not bad'.. I think you mean 'not sustainable'... or maybe 'not attached to reality'...

These timeframes are important, you are quoting roughly the last trough after the 80's housing bubble (1989) and top of the current housing bubble peak.

Not that there wasn't serious money to be made in real estate. In fact I have over doubled my money on my real estate investments myself in the last decade. But, like my neighbour who kept talking how he was going to retire on Nortel based on historical trends, and held on too long, its important to remember that there are good times to buy and sell.

I could have bought gold at 400 an ounce just 6 years ago, and each ounce would be worth almost 1600 today. A 4x return (and beating housing by 200%)! But should I buy gold today?

You posted a good historical example, but I don't think that this is relevant if buying a house today

I think this just shows that if you are a retiring boomer sitting on your family Victoria home, now is a good time to sell.

Just Jack said...

Fernwood is an incredible sub market to watch. Prices in this community just sizzle.

Its unbelievable how much money a young couple will spend to live in this neighborhood. Prices eclipse parts of Fairfield and Oak Bay, especially if the home has a suite.

Is it because the Mayor lives there? Is it the boulevard common gardens? Oaklands school? Is this the new 30 something neighborhood, the Orange County housewives of the north?

My thought is that its one of the few areas where prices are going up. And if you are going to buy a home, you follow peer pressure and buy in a neighborhood that is going up in value with the assumption that your "investment" will be safe.

Kinda like buying bars of silver.

Introvert said...

I think this just shows that if you are a retiring boomer sitting on your family Victoria home, now is a good time to sell.

No, a good time to sell would have been a few years ago, when prices were at an all-time high and bidding wars weren't uncommon. Now is not good. Selling now, with so many others also trying to sell, only contributes to downward pressure on overall prices, which is negative from the seller's standopoint (positive from the buyer's). Unless one absolutely needs to sell, one shouldn't do it nowadays. Wait three, five, ten years (who really knows) until the market (for whatever unsustainable/goofy reason) starts going up, and then sell.

Phil said...

I think that it's still a great time to sell. Maybe not as great as a year ago, but better than a year from now and so on. We are still near the peak of the bubble, and it's a long slow grind down.

Japan still hasn't recovered from their real estate bubble, 20 years on. The market moves VERY slowly.

Sweetrealtor said...
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Introvert said...

Didn't sell at the beginning of the year after 80 days at 549k. Must have been priced too low. I'm sure they'll have success now at 569k?

Probably the same principle at work here as the time I couldn't sell my laptop on UsedVictoria for $175 so changed it to $225 and sold it right away. The principle is: wait for a sucker and/or just get lucky.

Mindset said...

Introvert said: No, a good time to sell would have been a few years ago... ...wait three, five, ten years (who really knows) until the market (for whatever unsustainable/goofy reason) starts going up, and then sell.

I was referring to housing as an investment, and profit taking, which is what Marko was eluding to with his example. If you never sell, you've never made anything. And when your biggest investment is doing 'nothing' (which everyone thinks is the best case scenario for current real estate), trust me that is 'something'.

Buy when things are cheap, sell when they are overpriced. This is the golden rule of investing and why Canadian and Australian money is shifting into the US housing market, folks are currently taking flight from commodities, and emerging markets are booming.

Are you willing to say that selling a house in Oak Bay today for $600,000 (near the peak), and buying 2-3 strategic houses the a repressed US market with positive rental income to maximize our market differences and our strong dollar wouldn't be smarter than just waiting out the Victoria market owning a home you have no use for or are renting at a loss? How about $600,000 in diversified emerging market investments? What’s that worth in 6 years? I’m not telling anyone what to do, but just to be aware of the opportunity costs here.

Sitting 5-6 years with $600,000 is a real investment opportunity.

Even the old testament has a story about three guys given a bag of cash, one squanders it, one invests it, and one buries it. The investor was the hero of that story…. And that was over 2000 years ago.

Doing nothing is a choice.

Marko said...

The only problem is most people buy a place to live.

a simple man said...

I think the real problem is that too many people don't buy a house as just a place to live.

I could be wrong. have been before, will be again.

Mindset said...

I have personally witnessed a lot of speculative buying here, and rents are relatively cheap and abundant (compared to owning), but fair enough.

Let's explore buying a home to live in Victoria for a first time home buyer that is not independently wealthy...

..what if your 'place to live' eats most of your monthly cash flow (making you house poor) and interest rates go up making you even poorer? I would say that that's not a good reality to have to deal with.

...what if you end up making a huge investment only to watch it lose value? That’s a hard one too....

...now stack the two together and... well, I'll stop here.

I personally experienced both with real estate in the late 80's early 90's. It took me a whole stressful year to sell and taught me a good lesson in market realities.

Maybe we can agree that now is not a great time for first time buyers that are highly leveraged, or for speculative investment?

jesse said...

"The only problem is most people buy a place to live"

Most... such a wonderful word. We will find out why.

pod_x said...

@Mindset: or as an income investment? Victoria is cheaper than Vancouver, but is there a selection of cashflow positive SFH/condo, or providing a good cap rate. In other words, is there a reason to buy residential real estate today at all, since:

a) renting still cheaper than buying,
b) renting out likely to be cachflow negative (highly leveraged buy), or provides bad returns (low leverage/cash buy),
c) low chance of speculative capital gains for forseeable future?

Mindset said...

Pod_x asked: is there a reason to buy residential real estate today at all

Me, I wouldn’t buy now, but to keep this conversation balanced, let me put forward a reasonable scenario where buying here today might make some sense when you consider human factors and not just market economics.

Let's say I just sold my house in Toronto for 800K, that I bought in 2001 for 425K and it is paid off. We’ve always wanted to live in Victoria, so we buy a house here for 800K today, that in 2001 was worth 425K.

Now, my house money is completely separate from my investments and retirement income and I don't need it to live. My wife and I are people that really feel the need to 'own' our own home and dislike the idea of 'renting'. We understand the current market risk, and believe that even if the housing drops back to 2001 levels (like so many other countries), we are exactly where we would have been if we just sat in our house in Toronto, so ‘who cares!’. We also never wanted to live in Palm Springs or Florida, so we are not attracted at all to the discounts down in the US retirement zones and our strong dollar.

Sure, people could tell us that we are throwing money away ($375K) on paper, or we could have had more cash by moving to the US, but we never really earned or planned our lives around our house investment anyways and now we live in Beautiful Victoria.

Alexandrahere said...

MLS 282050 at 1404 Tovido Ln just sold for $532,500. By todays prices, I would say this seems to be a nice house at that price. It has been somewhat updated and has a nice suite on the lower level. Of course it has great views and I have always been a sucker for that. What do you think?

pod_x said...

@Mindset: then it's just a consumable, and no CMHC/taxpayer money at risk. You're free to do with your money as you like.

Leo S said...

Both of those places look pretty decent on Tovido lane. Always wondered why they didn't sell for so long.

Mindset said...

Agreed Pod_X, that last scenario was a non-investment transaction by someone that didn't need to borrow to execute it.

Societally, that means no taxpayer guarantees (i.e. CMHC), no future potential for bankruptcy (which costs us all at the banks and hits the tax base). There was also no hype in the deal, just an informed personal purchase decision to move from one high end market to another.

I think with the level of wealth of some of the retired that move here and where they are moving from, that a ‘lateral house sale/purchase’ is not that rare of a scenario when it comes to the mid-upper end of the market here in Victoria. Some even move from Europe where Victoria prices are reasonable.

Of course, it’s good to keep in mind main buyer segments driving the real estate escalation (local first time home buyers and speculators), so once the market becomes unattractive for both, I’m guessing the impacts could be quite significant.

Just Jack said...

As immigration to Victoria slows and the number of Baby Boomers parents now into their 80's no longer cast a shadow on this side of the ground accelerates, will there be a change in buyers purchasing decisions?

Well today there were 118 houses listed for sale in Victoria - population 83,000 One house per thousand.

And there are 91 houses for sale in Oak Bay - population 18,466
One house per 200 hundred. Which is about double the rate it has been for the last decade or more.

This might be a future trend for heavily weighted retiree neighborhoods. Which might actually make a shift in prices with Oak Bay loosing its premium.

As the governments stop supporting youth activities and education in retirement areas will that cause Oak Bay neighborhoods to be less desirable than areas like Fernwood or Fairfield?

It could.

Just Jack said...

Ooops, sticky calculator keys and fat fingers make a bad combination. Note to oneself - keep cheeses away from keyboard.

1 house per 700 in Victoria.

Leo S said...

Which might actually make a shift in prices with Oak Bay loosing its premium.

I think the price premium will stay, but the turnover rate will increase.

In other news, SFHs 550k-900k in the core areas had a strong week with 25 sales so far, and median price to assessment reaching 109%.

Just Jack said...

I think the price premium will stay too, because Oak Bay is a better place to live than Victoria City.

There will just be more for sale in Oak Bay and fewer buyers than in Victoria. Gentrification works only in one direction as the wealthy populate less desirable areas and drive those prices up. How can you have poor people populate wealthy areas and drive prices down.

I don't think there is any evidence to show that once affluent neighborhoods have ever declined. The wealthy always pick the choice areas and the others have to make do with what ever is left over.

MC said...

Question- If a house has a suite, does that generally increase the value of the house or decrease the value of the house?

I just wonder, since if I ever get to the point of being able to buy, I would be ecstatic that it will mean not having to deal with other people sharing my space (upstairs or downstairs tenants etc.) and would like to have full use of the space in my house. So for me, a house with a suite would not be as ideal as a house without a suite.

a simple man said...

For me a house with a suite costs me extra cash because I would need to firstly pay for it to be there and then secondly pay to rip it out and put another space in.

Mindset said...

Just Jack Said: As immigration to Victoria slows and the number of Baby Boomers parents now into their 80's no longer cast a shadow on this side of the ground accelerates, will there be a change in buyers purchasing decisions

I'm generalizing, but I would say that the trends of the last 30 years were driven by a majority population (boomers) moving upwards into peak earning years, an increase of laisez-faire economics (loosening greed-based capitalism), a transition of core industries to emerging markets, and incredible gains in the price and importance of oil.

It is my opinion that the future will see a contraction in boomer spending as they move to fixed incomes, an increase in protectionist economic policies (that drive inflation by putting our wage costs back into things), an increase in taxes and focus on social issues (i.e. health care), fierce competition for jobs with the emerging markets, and energy taking a greater share of our wallet.

How this is relevant to housing discussions? Well one thing I predict is that those upper-middle-class priced (boomer targeted) 3000+ square foot (unnecessary wasted space), 80 year old (unpredictable maintenance), very inefficient (high monthly energy cost) homes with no suite potential are going to become about as easy to sell and as attractive from the street as a Hummer H2.

jesse said...

Mindset the "gentrification only moves one way" argument is not borne in the data I have seen. You just don't know who is swimming naked in current market conditions.

Higher income areas take longer to drop but that is more to do with low UE than any magical force.

Just Jack said...

The value added for a suite should be not be more than the cost of constructing a suite less accrued depreciation.

But,

If, prospective buyers are short on cash they may to choose to pay substantially more for a home with borrowed money as the don't have cash to build after the purchase. The prospective purchaser is paying a premium over market value for the suite. A premium that is lost upon re-sale during normal market conditions.

So you should not pay more than the cost to build the suite, however, if you have to buy in a "hot" market then you're going to pay a premium and lose on the re-sale of the home. So you lose by paying a little more each month in mortgage payments and the premium over market you paid for making an irrational decision in a hot market.


The cost between a finished basement and a finished suite is kitchen cabinets, appliances and some other items. That could be $10,000 or $20,000 - not a hundred grand or more. But if you don't have the 20K in cash, then you end up financing the 100K in price.

Yet another reason why Victoria homes with suites, in some areas, are over priced.

a simple man said...

Anyone go to the Sandowne open house yesterday? Impressions?

Waiting said...

I didn't go to Sandowne but I'd be interested to hear about it too.

a simple man said...

My wife and I went to Sandowne this afternoon. It is a property that has been neglected for a long, long time. You could pour a lot of money in this house to try and make it right, but would need to have very deep pockets.

The value is the lot minus the money to remove the debris.

Mindset said...

Jesse said: the "gentrification only moves one way" argument is not borne in the data I have seen. You just don't know who is swimming naked in current market conditions.

Interesting good point. Care to elaborate a bit on what this could mean for all of us here who are trying to make sense of it all?

jesse said...

Mindset, in the US, unemployment is concentrated on the lower socio-economic tiers, those with only high school diplomas or less. Those with university degrees, and especially those with graduate degrees, are near full employment.

The US also experienced price drops starting with lower-tier and outskirts areas first, with the higher tier and more central areas lagging. I don't believe these artefacts of the recession are unrelated.

In terms of Victoria, I would expect the lower quality and outskirts areas to fall quicker than the central areas, probably by a year lead or so. It it too soon to tell in parts of the US, but many high-quality areas like San Fran proper are set fore more drops.

In Vic this looks to be a similar pattern so I would expect higher end properties to "hold their value" for some time, at least compared to lower end stuff, but the end result is a slower drop, not permanently higher prices.

That's if you think Victoria will mirror experiences elsewhere...

Mindset said...

Thanks for the elaboration Jesse. I believe we're seeing some significant outer ring price drops already here (Sooke, etc), which could be the canary in the coal mine...

As for expensive areas holding their value and dropping later in the game, in my general observation the timing appears to also depend on regional factors.

San Francisco has a world-class long-term differentiating economy (technology) and what seems to be a bright future, where Vegas is speculation-based, depends on the discretionary income of tourists and has a less certain economic future (RE was hit quicker and harder in Vegas than San Fran).

San Francisco is young, entreprenuerial and educated, and Florida is mainly a retirement zone (RE was hit quicker and harder in Florida than San Fran).

Just a couple of thoughts, but we do live in quite a 'tourism' and 'retirement' city. So maybe some RE areas of Victoria fall into a speculative/tourism 'Vegas' camp, and others might fall into the Retirement 'Florida' camp? Maybe our beautiful city falls somewhat into both?

BTW, I haven't experienced very many areas here that fit in the 'vibrant young educated world leader' camp (at least nothing like like San Fran).

So although the general concentric ring pattern is likely predictive here in Canada, is a nice central home in the city of Victoria a stronghold like a nice central area home in San Fran surrounded by a strong vibrant economy? Or when it comes to RE safety, are we talking central/riverside Calgary here where they have had a world class product (oil), young smart educated people abound, and the future looks nothing but shiny?

Just some top of mind ramblings... feel free to correct or comment on anything.

jesse said...

Mindset, one thing to keep in mind about even San Fran is that its prices are still overvalued compared to its incomes. It is able to maintain a bubble longer because people are employed and will usually devote less of their net worth to real estate investment.

That does not mean SF is immune to drops but it will take a bit longer. Now in the case of certain cities, where economic growth is highly real-estate dependent and ultimately illusory, a crash could happen faster than people think.

Waiting said...

Anyone have Monday stats?

Just Jack said...

The number of listing retracted to 116 (1 per 715), while Oak Bay inched up to 93 (1 per 200).


Meanwhile, out in the real world of the western communities (population 67,676) the number of single family homes has blossomed to 625 or one house for sale for every 108 person.

Mindset said...

I think there are a few big questions that might be meaningful to everyone here and that would keep this discussion locally relevant.

How good is our economy, and how good are the future projections in our dominant labour markets (i.e. govt budgets for employment and contracting growth? Local construction growth? Tourism increases? Retirement immigration increases?). I think that the Navy and Universities aren't going to change much so I left them off the list. I think gov budgets will be flat, tourism will be flat, construction will reduce, and retirement will hold steady or show moderate increases.

How much did the last 7-10 years drive up our real estate compared to other cities? Are we grounded to reality today, even if our core industries stay strong (like San Fran)? I think we went up a little too much. Saskatchewan and Alberta don't see our prices, although they have seen incredible economic growth and immegration in the comparison period.

How many people here are 'on the edge' with their current financial leveraging should the economy or interest rates change? This I am not sure about, I personally don't know many on the ropes here in Oak Bay, but I could be wrong. The newly developed areas seem to have a much higher amount of risky mortgages.

Thoughts anyone?

Marko said...

Monday May 9, 2011 8:15am:

MTD May
2011 2010
Net Unconditional Sales: 128 695
New Listings: 396 1,621
Active Listings: 4,417 4,521

Please Note

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

a simple man said...

Looks like low sales to start the month. The trend continues.

Is a house that has been on the market 5 months still a new listing? If not, please take down the sign saying that it is.

omc said...

Thanks for the stats Marko. I am still seeing demand for quality, well priced houses. I am only rarely seeing selling prices that are crazy. If it is over priced or junk it rots on the market.

Mindset,

The conference board of Canada just released a report that put Victoria in last place for potential growth for the coming year, compared to other cities across Canada. It acknowledged how a dropping housing market here will have a feedback effect on our economy, where most jobs that had been created were in construction. This is also a reason why almost all posters on this blog agree that staying out of the western communities is a good idea.

happy renter said...

Two interesting articles in the Globe and Mail:

CREA Hikes Forecast for Home Prices

What kind of house can you get for $600,000 in Canada?

I find it intriguing that in nearly every article I've read lately that forecasts a rosy economic future for Canada, the West Coast is often listed as an exception, or as an area that no one is quite sure about yet. It's also singled out as being at high risk of suffering from a housing bubble:
"He said while sales have softened across the country, the risk of a sharp correction is 'highly concentrated in geographical terms.'" This kind of repeated singling out of Vancouver (and by extension Victoria) in the media is, in my opinion, excellent. People need to start realizing that this won't last forever. (On a side note -- how Vancouver RE prices have managed to go up by 30% in the last year alone is just beyond me.)

Mindset said...

Marko, I just have to say, agree or not on the future here, you are obviously responsive to change with your comission structure and are valuable to this blog with the ongoing statistics. Keep up the good work.

OMC, if our future economics are dire (which I have to admit seems right), I wonder how retirement might offset an economic downturn when it comes to housing?

I'm guessing the nice homes in nice areas close to amendities will probably get hit last both due to the interest in these types of homes I've seen on this blog, and my feelings on positive country-wide retirement interest (subjective as these statements are).

Now a run-down house, in a moderate location, in a floundering economy? I think they will be hit harder for two reasons, 1. less buyers demand, and 2. the types of sellers generally behind these properties (first timers, speculators, renters, forclosures, estate sales, etc)

Sweetrealtor said...

VREB sent us poll results today from the member market survey. Agents who represented buyers between Jan and April this year answer a series of questions and this makes up the poll results. I thought I would give you a few to chew on. Typed this out once already and then the blogspot crashed out on me. Second try here...

Primary motive to buy?
First time buyer: 23.36%
Wanted larger home: 11.39%
Wanted smaller home: 12.74%
Wanted different neighborhood: 11.97%
Revenue property: 7.34%

How was it financed?
20% or more down: 52.36%
less than 20% down: 25.11%
Cash: 22.53%

Buyer description:
Single male: 14.71%
Single female: 13.65%
Couple with no kids: 26.01%
Two parents with kids: 21.54%
Single parent: 3.84%
Retired: 16.84%

Buyer from where?
Greater Victoria: 73.13%
Up Island: 3.62%
Lower Mainland: 5.76%
BC outside island and LM: 2.99%
Canada, outside BC: 12.15%
Outside Canada: 2.35%
(so much for immigration)

Area purchased?
Metro Victoria (incl Saanich): 58%
Saanich peninsula: 14.29%
West community (incl Sooke): 18.98%
Highland/View Royal: 2.77%

How did the buyer learn of the property?
PCS/agent auto email: 38.83%
informed by agent: 35.07%
REALTOR.ca: 11.27%
openhousesvictoria.ca: 2.3%
other website: 1.04%
Sign: 4.18%
Relative or friend: 2.71%
Real estate tabloid: 1.04%
(adds fuel to my fire that print ads are a waste of $$)

In your market you are seeing?
More deals collapse due to financing - 80.77%
(guess those new mortgage rules are having an impact)

a simple man said...

Sweetrealtor - thanks a lot for bringing us those stats - that is what makes this site great - open dialog and real information.

happy renter said...

Yes -- thank you Sweetrealtor! Very interesting stuff.

Leo S said...

@SweetRealtor

Thanks for the stats.

For the primary motivation to buy, the numbers add to only 66.82%. Is there a line missing?

Outside Canada buyers are certainly lowish, but 12% outside BC is a significant chunk. Hard to glean any info out of that without equivalent numbers for outflow.

Why don't we have these numbers for Vancouver though??? That would immediately prove or disprove the HAM theory if we had that data for the various areas. Should ask Agent Will.

Sweetrealtor said...

There are more stats for that one, I just published a few of interest.

More for motivation:
Wanted closer to family: 3.86%
Family reconfiguration: 6.56%
Work related move: 6.37%
2nd home for family use: 3.47%
2nd home for future retirement:4.25%
2nd home for vacation use: 1.54%
Revenue property/investment: 7.14%
Other: 7.34%

omc said...

mindset,

real estate is about location, so a better location will always do better in a downturn. However, I live in south oak bay, the center of the retirees. Sweet realtor's post mimics what I have been seeing these last few years; less out of town buyers. Specifically, less out of town retirees.

I have also been watching the same little, fixed up bungalows sell year after year. It seems that for most, leaving family and friends and relocating to an island is not a good idea. They don't integrate into the neighborhood, don't tend to make friends at that age and could have a family change back home(grandchild). I am under the impression that a good # of out of town retirees only last 1 or 2 years before selling and going home. I wonder if the out of town retiree market is actually neutral to the over all market.

jesse said...

What the heck is "family reconfiguration"?

backinVictoria said...

I'm guessing divorce?

DavidL said...

"family reconfiguration" = birth, marriage, divorce and death, etc.

Mindset said...

Leo S Said: Why don't we have these numbers for Vancouver though??? That would immediately prove or disprove the HAM theory

I have had a couple of chats with Vancouver home/condo owner friends. They are temped to move from Vancouver and cash out because they swear that Asians are descending on Vancouver to hide money offshore this has made prices in the urban core ridiculous. One said he went to look at the demographics of a condo presale lineup himself, and based on what he saw, he's now he's a believer in HAM.

Mind you, someone seeing nothing but incredible upside on their RE investment for several years in a market that statistically defies gravity does tend to keep those rose colored glasses on.

Oh, and thanks for sharing the info SweetRealtor. This blog is a rare good source of information and interesting discussion due to contributions just like yours.