Tuesday, May 24, 2011

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.

103 comments:

a simple man said...

First budget of a majority gov't coming very soon. I suspect some things in it may change the RE game once again.

Hopefully gov't intervention will this time act in a prudent, responsible way instead of further propping up values that are destined to plummet.

Make the hard decisions in the first two years of a term.

a simple man said...

2741 Dewdney drops $100,000 this morning. Reality slaps.

Waiting said...

I almost wonder if they priced Dewdney so high in the first place so that they could drop the price significantly and make it seem like the owners have already made a major concession in price. Marketing tactic perhaps? It is still priced well above assessed. Has anyone been in it?

Just Jack said...

Condo sales are down month over month and year over year. The new CMHC guidelines for investment properties seems to have had a substantial affect on volume. It would appear at least one out of every four condominiums, up until April 18, were bought for non owner occupied purposes.

Now that the inventory for re-sale condominiums in the core municipalities has skyrocketed to slightly over 7 months what does that mean to the person selling a condominium today?

About an even chance that they will not receive any offers during the 90 day listing contract. A far cry from years past when everything was selling in just a few weeks.

With only about 100 condo sales in the last 30 days, the low level of condominium sales also translates into lower detached home sales in the core municipalities for the upcoming months.

You gotta sell something before you can buy a detached home in Victoria and that is getting more difficult everyday. Today's problem, unlike years before, is not finding a home to buy - its selling the one you own. The 20 to 25 percent drop in this months condo sales should carry over to a similar drop in future June house sales.

omc said...

I was wondering about that one on Dewdney also. There is another one that also just dropped by $100k on mount doug x-road, after another short time on market.

I haven't been in Dewdney, but from experience looking at others similar their price is still high.

omc said...

One on smugglers cove road just went from 1Mill to $860k. This time after a month on market.

Just Jack said...

You can't see a bubble when you're in one.


That's why I like to look at the fringe of the market. Where the bloom is no longer on the Rose and real estate has become a burden of ownership.

Like on Salt Spring Island where there are 198 homes for sale and only 14 have sold in the last 30 days. That's 14 months of inventory. Prices have rolled back to 2006 levels with some indication that they will fall to 2005 price levels. So much for our Hot American Market (HAM).

But, that could never happen in Oak Bay? Well, yes it can and yes it has. The million plus properties are suffering a very slow market too. Like the one in Uplands that sold in 2007 for $1,150,000 with another $250,000 spent on renovations. After eight months on the market the property just sold for $1,300,000.

Marko said...

Testing

Marko said...

My blogger wasn't working this morning...but if you want the "offical stats," lol..here they are...

Tuesday May 24, 2011 8:20am:

MTD May
2011 2010
Net Unconditional Sales: 415 695
New Listings: 1,107 1,621
Active Listings: 4,599 4,521

Please Note

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

SFH average is running about 632k at the moment.

EagerBuyer said...

Repost from last topic with clickable link.

Interesting study of first time buyers over at Mortgage Trends:

Click here for article

Excerpts:

first-time home buyers accounted for about half of all homes sold in Canada in the last two years.

Of all the government's recent changes, the reduction in maximum amortization carries the biggest impact. 41% of home buyers in the last 16 months have chosen extended amortizations (> 25 years)

As a rough ballpark, dropping from 35 to 30-year amortizations cuts the average buyer's maximum purchase price by 6-7%

Shorter amortizations are bound to push many buyers into cheaper properties (until prices adjust) or defer people's home buying to some degree.


So.. How will this affect Victoria?

a simple man said...

thanks for bringing that here, EagerBuyer (not too eager, I hope).

I think the report described what we are seeing here - the bottom fall out of the lesser priced homes and the mid-priced homes are languishing. Condo market is quickly wilting and is a foreshadow of things to come in the SFH market, I suspect. No one to move up to SFH...or fewer to do so, anyway.

I think that the changes will affect Victorians more than the average Canadian as our mean income is certainly "mean" for Canada, but our housing is far, far higher that everywhere but Vancouver.

Therefore, more Victorians needed that stretched amortization period to make ends meet for properties. And because prices are so high here, it just isn't the first time home buyers that needed it.

Just Jack said...

First time home buyers will be concentrated in the condominium market. In Victoria the median price of a condo is around $297,000 which is at the maximum of affordability with today's interest rate for first time buyers. Which is the most important reason why condominium prices have been flat lined for several years in this city. The first time buyer just ain't got the money and are extended out to the maximum in amortization to pay anymore.

Investors and speculators also played heavily in the condominium market, especially in the pre-built condo market. The more investor/speculators were involved, the higher the prices climbed. The first time home buyer had to follow by paying the high prices which pushed them over the edge of sustainability When the investor/speculator dropped out of the market, and over burdened buyers fell into mortgage default prices for condos tanked. In the states, areas that were heavily dominated by new condo construction were the most devastated when the market corrected.

Its called a "marketplace" and while condos and detached homes, and Sooke and Fairfield neighborhoods appeal to separate market segments they are in fact inter-related.

The reason our prices are so high is not the weather, or the sea shore or that we have brighter teeth than people in Moose Jaw. Its because we had a lot of construction that encouraged speculation and a banking industry that supported it. Prices are no longer a factor of tangible brick and mortar - prices are set by how many buckets of cash the bank will let you carry out the door.

jesse said...

Just Jack, re condo sales indicating lower SFH demand: is this true? Would someone sell a condo before buying an SFH? From my experience more than a few buy SFH and only try to sell condo subsequent. That condos aren't selling fast may indicate some stress for those with bridge loans to SFH.

Just Jack said...

That someone is putting an offer on a house before receiving an offer their condominium is more to do with their being more choices for buyers than selling opportunities.

Bridge financing is when you have made an offer on a home and have an accepted offer on the property you are selling - but the different dates of possession mean that for a short period of time you have two properties.

If you do not have an accepted offer on the property your selling then that is NOT bridge financing, that's owning two homes.

In the past, lenders have been bending on this point, but with the slowing market, I would not expect that bending of the rules to continue. You may not have the income for owning two properties and that will cause your deal to collapse and you could lose your deposit. In today's market it is important to make any offer subject to the sale of your current home.

I would be reluctant to deal with any agent that would advise me differently or make the time limit to remove the subject clause so short that it negated the intent of this clause by having you lift the clause prematurely.

That does not mean that I would not deal with the agent, it just means I would be more vigilant on my own self interest.

omc said...

If your deal collapses because you can't sell your home or can't get financing, you do not lose your deposit.

Sweetrealtor said...

I don't think many condo owners would bridge finance to buy a SFH. I don't think many owners would think of bridge financing right now - period - they know it isn't a smart move.

But there are a lot of subject to sale offers out there. I've booked a lot of viewings lately and we keep running into houses with time clause offers on them. And the listing agents with subject to sale offers are stating "bring us another offer, I have no faith in the "first" buyers being able to sell their property."

This reminds me a lot of 2008. Sales always hovered around 10% of active listings. (i.e. 4000 listings, 400 sales/mo.) The extra effort to make your property as attractive as possible - paint, prep, staging, pricing - has never been more important. Prep, prep, prep, and then list.

Very curious to see how the May numbers stack up. Only 28 pending sales over the long weekend but that's not surprising. Not many people remove subjects on the weekend when the banks are closed, etc.

Will likely offer 180k on a condo listed at 210k today. And I think it will be accepted too.

Just Jack said...

You don't lose your deposit if you don't meet one of your clauses such as subject to financing or subject to the sale of your home that prevents you from completing on the sale.

Your deposit will become non refundable if you do not complete on the sale. The sellers can sue you to complete or if they were to sell the home to someone else for less than your offer, the sellers could sue you for the difference.

a simple man said...

$60,000 drop on house on King George Terrace (to $800K). Big drops becoming more common.

Waiting said...

I've noticed some bigger drops lately too. The prices are still crazy though. Most of the major drops are on things that were way too high in the first place. I went through Dewdney yesterday. It is a lovely location but the house is not great. It has been very cheaply finished and updated and the kitchen is poorly planned. Lots of wasted space. Only one small bathroom (aside from the toilet in the closet upstairs and the sink in the bedroom - very bizarre) The basement adverstises 7'3 and perhaps if you stood at the lowest point (of the uneven floor) and measured to the highest point of the unfinished ceiling it might be that high. Most of it is about 6'6 though. Nice, private back yard, but very small. I don't think it is a steal $799,000. Perhaps if they dropped it another $100K it would be more appealing.

omc said...

We are fastly aproaching the end of the housing season for this year. The houses that were poorly priced will either sell for less than if they would have listed more reasonable in the first place, or eventually be taken off the market. Summer is almost here, and the vultures start circling. Not that I think it is a time to buy; still more drops to come.

A quick look at the houses that were recently sold, and where the buyers are trying to sell again in Oak Bay doesn't look to promising. One has sold on Monterey for the same price as they bought it last year (458 Monterey, I think it sold for 790k lasy year) and all of the others have gone stale.

Just Jack said...

Super location for that Monterey property.

I am always surprised how much people will pay to be close to water. Kind of like Darwin's theory in reverse. As we age we try to go back into the water.

I suppose it depends on if your a house or a location man.

I'm a house man, I prefer them older, but not one that has too many past owners either. Not to small but not too big. I like low maintenance, but one that looks good dressed up too.

The problem with being a location man is that its almost entirely for show. A trophy to hold up to your friends. The home is usually older and needs a lot of maintenance and ongoing costly repairs - structural and cosmetic. These properties have higher annual costs that can bleed your bank account quickly. And you can't just own a regular car, it has be a new Range Rover or some other monstrously expensive vehicle. Then there are the upgrades like a set of perky new stainless steel appliances for your buddies to ga ga over or a new rear deck that you can mount your BBQ on. Luckily you can put most of these costs on your line of credit.

Of course if a better location comes along - you can find the previous location very costly to get rid of too.

Marko said...

There were a total of 70 price drops yesterday which is significant; however, nothing caught my eye as a good deal post drop.

DavidL said...

Re: "house or a location man" - just brilliant JJ!

a simple man said...

From the TC today:

"An Investors Group survey released Wednesday shows that 75 per cent of respondents describe themselves as being in debt. Most of them, however, also said their debt will do them good in the future.

Going into debt to purchase a property was the most common reason for borrowing, cited by 54 per cent of those who said they had debt.

Other common reasons were home renovations (37 per cent), attaining cash for a financial investment (28 per cent) and paying for education or training (18 per cent).

"The reality is that almost everyone has consumer debt," said Jack Courtney, assistant vice-president of advanced financial planning for Investors Group.

"But accumulating debt with purpose and putting thought into how debt will be repaid is very different than spending beyond one's means and without foresight."

The survey had 73 per cent of respondents with debt saying they have "some idea" of how they will pay it off.

That doesn't mean everyone is completely OK with their debt. The survey had 58 per cent of respondents who owe money saying they feel uncomfortable with it, 33 per cent have lost sleep over it, 30 per cent are embarrassed by their debt and 25 per cent said it has triggered disagreements with their partners."

omc said...

I'm with you Marko, just because it is reduced doesn't mean it's a good deal.

Just Jack said...

Good debt versus Bad debt.

Bad Debt
-Buying a depreciating asset, like a car or a boat.
-financing any asset longer than its physical life. Such as buying a car with your home equity line of credit.
- inground pools, tennis courts, detached garages that only add a fraction of their cost to build to your home, even before the paint is dry.


Good Debt
- retraining and education that will lead to an increase in your income.
- buying an asset that will provide you with a positive return on your equity invested and/or a reasonable expectation of future appreciation.
-perky set of stainless steel appliances

pod_x said...

@omc

You would not lose your deposit if sale of your current house is a condition on your offer. Then it's just like a home inspection condition. If not met, the offer is dissolved and there is no contract to buy.

However, do vendors actually keep the deposit if conditions do not fall through but the buyer backs out, or is it customary to return some/all of it? Something I always wondered.

JustWaiting said...

Kevin Falcon announces his “bold, responsive, fair and balanced” changes to HST.

http://tinyurl.com/4y3jmen

Finance Minister Kevin Falcon unveiled long-awaited “fixes” to the tax Wednesday, including cutting the provincial portion one per cent on July 1, 2012, and another per cent in 2014.

Families with children under 18, along with low-income seniors, will receive one-time payments from government worth $175 per child.


No changes to HST on new houses or assistance to restaurant industry.

I can hardly contain my excitement

JustWaiting said...

How much would you pay to read Carla's in-depth articles on Victoria real estate?

Well.. Today the TC announced that they are going to start charging for Website access.

http://tinyurl.com/3kc97dm

The Times Colonist is committed to providing the best coverage of local stories that impact your life with first-rate reporting, compelling photos and insightful commentary.

You can view 20 articles a month, including videos and photo galleries for free. A message will appear before you have reached the limit inviting you to subscribe.

Monthly online subscriptions are $9.95.

Introvert said...

The reason our prices are so high is not the weather, or the sea shore or that we have brighter teeth than people in Moose Jaw. Its because we had a lot of construction that encouraged speculation and a banking industry that supported it.

Right and wrong. Yes, we had a lot of construction, speculation, and a supportive banking industry--all of which influenced our high prices; however, here is where JJ is wrong: Moose Jaw is a sh#t hole with terrible weather and no scenery. For reasons only of weather and scenery, housing demand will always be higher in Victoria than in Moose Jaw. This fact plays a role in house prices. JJ seemingly thinks it doesn't.

Just Jack said...

"However, do vendors actually keep the deposit if conditions do not fall through but the buyer backs out, or is it customary to return some/all of it? Something I always wondered."


When the "subject to" clauses are lifted there really is no reason to back out of the deal. The sellers of the home have a reasonable expectation that your buying their home, so they would be looking and putting offers in on other properties.

Now if you were to back out of the deal after removing the subjects, I think the original home owners have a right to take your non refundable deposit. Because you're basically giving them the shaft.

The initial deposit is just to show good faith between parties.

Later the deposit can be increased and become non refundable and form part or all of the mortgage down payment.

There is a good reason for the deposit to be increased when the subject clauses are removed. If the deposit is too low, that may make it easier for buyers to back out of the deal. The deposit should be increased to at least the amount of the agent's commission plus HST. Since this amount is held in trust, it makes it easier for the agent to be paid.

Now, if the non refundable deposit is too low, and you are willing to walk away from the deal and risk a law suit, then you could always try to get a lower price, once you find out the home owner is committed to a new purchase. The day before you take possession, just say that you're not willing to pay $600,000, the new offer is $580,000.

The moral of the story get a big non refundable deposit, it keeps temptation away.

Just Jack said...

Is there a co-relation to high prices and weather/scenery? Is weather and scenery a fundamental of market value?

Fort MacMurray?

Miami Florida?

Moose Jaw? aka "little Chicago"

Its nice to have pride in where you live, but not at the expense of some 35,000 Moose Javians. You don't want to wake up with a Moose head in your bed.

The problem with calling a place a sh*& hole just because prices are lower is that it would mean by Manhattan or Toronto prices, Victoria would be a sh*& hole. Clearly Victoria is not and clearly Moose Jaw is not either.

a simple man said...

Introvert - I agree that the scenery and weather here are worth a premium - brought me and my family here and we are willing to pay more for it (a bit more).

However, SK is booming and there are a lot of jobs out there. I would not be surprised if Moose Jaw had far better job prospects than here. And look what $650K buys you in the Jaw.


http://www.realtor.ca/propertyDetails.aspx?propertyId=10558766&PidKey=628694357

a simple man said...

To the owners out there - for your house:

1.) Would you buy it at todays value?
2.) Could you buy it at todays value?

Marko said...

The home for 650k in Moose Jaw kind of sucks.

You can get this in Victoria for 950k. Newer & bigger house, much better quality, two awesome ensuites, bigger lot, right on the golf course.

http://www.realtor.ca/propertyDetails.aspx?propertyId=10401753&PidKey=-1179338240

I honestly don't know if that 650k Moose Jaw home would go for that much in Mill Bay/Duncan.

Introvert said...

The problem with calling a place a sh*& hole just because prices are lower is that it would mean by Manhattan or Toronto prices, Victoria would be a sh*& hole. Clearly Victoria is not and clearly Moose Jaw is not either.

Just Jack, you need to read carefully. I specifically did not call Moose Jaw a sh#t hole because its prices are low; I called it a sh#t hole because it has terrible weather and no scenery.

Just Jack said...

Oh sure, Introvert

You change your story now that the Moose Javian mafia knows who you are. I'd watch for those SASK license plates if I were you. They may be from the friendly city, but any town that has an anatomically correct 25 foot high bull moose for a mascot has gotta have a big set for themselves too.

And you say there's no scenery in Moose Jaw - you're just standing at the wrong end of Mac the Moose.

As Little Chicago's own Capone said "You sleep with Mooses tonite"

or was that meeses?

Just Jack said...

The more I look on the web at Moose Jaw the more interesting it gets.

Half a million tourists visit Moose Jaw each year! That's pretty incredible for a town of only 35,000 people.

Its a retirement city an hours drive from Regina and the Royal family has visited the city several times. Art Linkletter was born there! It has four museums and 15 elementary schools. (Obviously the locals have found something to do, during those long cold dry winters.) Did I mention DRY winters.

Other good things about the "Jaw"

You can learn to fly a plane without worrying about hitting a mountain.

If you live five miles out of town, you can still see your home from downtown.

And if your at a party and say your from Moose Jaw, the pretty girls all want to talk to you.

Heck even saying your from Moose Jaw, gets the crowd around you smiling.

The Moose is loose! So if your a hip, hop, happening guy then MJ is the place you wanna be - not some girly town named Victoria.

Introvert said...

Just Jack, trying to have a dialogue with you is like trying to have a dialogue with a monkey who has attention-deficit disorder.

EatMe said...

...and compared to Manhattan, Vancouver, Paris, etc. Victoria IS a sh*thole! Sorry, it's pleasant enough but nothing too special.

Just Jack said...

Ouch

DavidL said...

@a simple man wote:
To the owners out there - for your house:

1.) Would you buy it at todays value?
2.) Could you buy it at todays value?


I bought my SFD for $217K in 2002 - now assessed (but likely not worth) $511K. Could I buy? Yes. Would I buy? Absolutely not. I would rent, save my money and wait until the house price drops to $350K (2005 prices).

Just Jack said...

Actually that's a nice house in Moose Jaw. Surprised about the $650,000 price tag though, but that seems to underscore that even in semi-rural Saskatchewan where there is no shortage of land, properties are still expensive.

Because, its all about financing, not brick and mortar. Its how many buckets of cash the bank is willing to let you walk out the door with.

Now, if Moose Jaw had a bonanza of construction in condominiums, that could have had the speculators pushing prices up to or beyond Victoria's prices.

And high prices are what is defining Victoria these days. Because if it weren't for our prices most people in the real world would never think about Victoria.

Because just as Greater Victoria is about ten times the size of Moose Jaw. So is Vancouver about ten times the size of Victoria.

We are in fact Vancouver's Moose Jaw.

a simple man said...

Yes, the prices in some of the prairie cities are no screaming deals. When we moved from the prairies we were able to do so because for the first time in forever, the property from the city were were in appreciated so much that we could actually consider selling to come here. So we did.

But, for small town homes in SK - you can have one for $10,000. Liveable, but isolated. My brother-in-law bought one for his studio for a toonie from the hamlet. My father-in-law paid the unthinkable $1000 for his studio there, but it was a far nicer place.

Animal Spirit said...

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happy renter said...

I spent the weekend in Kelowna and things are grim there. Condo prices are down 20% and SFH prices are down 10% (2006-7 levels). I went to a few open houses just out of curiosity and the realtors sounded pretty desperate.

Introvert said...

I would rent, save my money and wait until the house price drops to $350K (2005 prices).

Waiting until prices drop to $350k will mean renting for your entire life. The $350k ship left port six years ago and she ain't coming back.

Mindset said...

Waiting until prices drop to $350k will mean renting for your entire life.

Last time I checked 500K to 350K is only a 30% decrease. Based on the statistics from everywhere else in the world, I wouldn't think that this is impossible by any means.....

DavidL said...

@Introvert wrote: Waiting until prices drop to $350k will mean renting for your entire life. The $350k ship left port six years ago and she ain't coming back.

How can you prove that prices won't drop to 2005 levels? Do you know something I don't ... ;-)

I've been observing boom and bust cycles in Victoria real estate over the past 30+ years. For at least a year, I've been predicting a 30% price correction for SFD by the end of 2014 and a stagnation of prices (not matching inflation) through 2018. If I'm wrong, no loss to me. If I'm right, it means a lot of loss for people who have recently bought a house. What worries me is all the money that is spent on servicing mortgages instead of being spent in the local economy - keeping professionals, skilled labour, retailers, artists (and even baristas) employed.

DavidL said...

$500K is about 3.5 times my family income - so it certainly is within my ability to pay.

However ... I also want to be able to save for my children's RESPs, contribute to RRSPs, TFSAs, and save for a "rainy day". I even want to save up for improvements to my house (new windows), kitchen renovation, etc. Someday, I may want to save for a retirement property. Occasionally, I even want to go on vacation. With a $400K mortgage, these goals would be much harder to achieve.

If nine years ago in 2002, I bought my house for $500K, I would still owe close to 80% of my mortgage. Instead, I owe less than 30%. Another way of putting it in perspective in that in 2010, I paid less than $1800 on interest to service my mortgage. Compare that to a "typical" mortgage of $400K @ 5% which is $1667/month just in interest payments.

I don't feel smart or smug - I just worry about family and friends who are finding that it is no fun treading water in the deep end of the debt pool.

a simple man said...

DavidL; Thanks for the info. I know a few people that bought around the time you did - that was the wise money.

And I am exactly the same page as you - don't be afraid to buy, just buy when it makes financial sense.

Lots of listings piling on every day now.

Mindset said...

I don't feel smart or smug - I just worry about family and friends who are finding that it is no fun treading water in the deep end of the debt pool.

And that right there is the 'big point'. Last time I checked, we live in a group of other people that are all dependent on each other for our safety, stability and opportunity. We also have children (well I do), that are going to have to make it in the world. Creating economic instability around us through bubbles, or inflating pricing to such crazy levels that our children are shackled to lifetime levels of high monthly debt (like Europe) are both very big and negative societal consequences to our inability to take off our greed goggles.

Nice to see someone not just thinking about themselves here DavidL.

Based on well-documented history, hype-based bubbles are the fodder of robber barons and were usually created by them. Hype on the way up, rob on the way down... and make money both ways.

Just look at who is paying the price today in the USA, its folks like us and their future generations.

a simple man said...

I agree - this is what I keep describing all around me in Oak Bay - so many of our friends and acquaintances are at the breaking point. It is not enjoyable to watch and it does not make for a vibrant community.

Sweetrealtor said...

If a buyer backs out and does not complete the sale of a property (unconditional offer but they can't/won't complete), the buyer is in breach of contract. However, the deposit does not automatically go to the seller. From the contract of purchase and sale: "if the sale does not complete, the money (deposit) should be returned to such party as stakeholder or paid into Court." The fate of the deposit will be decided by the lawyers/courts and some or all may be released to the seller for damages as a result of the breach of contract.

Just Jack said...

"returned to such party as stakeholder"

who's dat?

Sweetrealtor said...

The party who receives the deposit - Lawyer or Notary.

a simple man said...

2337 Heron St just dropped $75,000..down to a paltry million.

Waiting said...

@a simple man Now it just needs to drop another $250K and it might be reasonable. It is only a 2 bdrm up house. It won't appeal to a lot of people because of that.

a simple man said...

@ Waiting - I agree whole-heartedly - a million dollars is tow much for a two-bedroom up house that while extensively renovated, is still half a century old. Similar to St Anne's 1 bedroom up for $839K. That house is really starting to look stale.

There comes a point where you don't want to invest that much money into a house to become one of the most expensive on the block - you can never get your money out.

There is a house on Florence that was lifted in the past year and is about finished - I heard to total bill will be up around 1.3 million. They will never, never get their money out of that house.

Buy the cheapest house on the block and make improvements - that is the way to go.

Waiting said...

@a simple man - Agreed! Like DavidL, according to salaries and the 3x rule we can afford to buy something nice but I just can't bring myself to pay so much for a an old box house that requires a lot of updating. I also think the 3x your salary guideline isn't the same as it used to be. Back in the day when my parents purchased they had a mortgage 3x their salary, but it was 3x one salary as only one parent was working. This meant they only maintained one car, had no childcare costs (which for us with two young kids is about $2000/month), no cell phones, etc etc. With two working parents there is a higher income but there are also additional costs that come along with it. Many of today's families spend a lot more $ on other things so when you take a mortgage of 3x (or more) your combined incomes and then factor in 2 iphones, two cars, childcare, internet, cable, etc etc. it doesn't leave much disposable money at all. Personally I'm more comfortable with having a mortgage that is 2-2.5 x our salary rather than 3-5x.

Just Jack said...

I think,

that 3x's rule was only meant to be a quick estimate by the bank rather than drag out the amortization tables to calculate a loan. It was only a rough estimate based on 10 to 13 percent interest rates.
It also does not account for a larger deposit on the home either.

Maybe the 3x's rule only works on condominiums? Today's, low interest rate might then make that a 6x's rule?

I think, that during a housing recession people are far less likely to over extend themselves in both the percentage of their income going to a mortgage and the length of time they are willing to have that mortgage.

Maybe right now, that small (3 to 4%) of people active in the market are flush with cash. But eventually the market runs out of those buyers and the market must correct to the level where the risk adverse single income person with only a small down payment are the majority of buyers. The only way to get these people to buy is by reducing the price.

I don't think that would be the norm in areas like Fairfield or Oak Bay, but certainly in Esquimalt and parts of Saanich. But you can't have a large difference between the have and have not neighborhoods. Areas in Oak Bay may always have a 20 percent or more premium over Esquimalt. But, Esquimalt could be half the price it is today too and that would halve Oak Bay too.

Just Jack said...

Back to the non refundable deposit.

So now the "stakeholder" or lawyer has the deposit. What happens to the deposit if no one sues for breach of contract?

And if there is a law suit are we talking years for this to come before the courts?

Why would anyone willing want to go there by making an unconditional offer, if they are not in position to do so. Like they haven't sold their home yet? Or the home has carpenter ants, or the house is 400 square feet smaller than advertised or the oil tank is so old that the oil company will not fill it anymore, or a half dozen other different reasons.

Just Jack said...

If you're not living in the real estate "hot spots" like Fernwood, Fairfield and Oak Bay the chances are good that if you bought after 2007 you will be taking less for your home today.

Like in Dean Park in North Saanich. A property bought nearly five years ago in September 2006 for $635,000 and having had some updating since then, now sells for $675,000.

Yet a home bought on Scott street in Fernwood sold back in September 2006 for $400,000, now sells this month for $470,000 without any updating.

Things that make you go hmmmm!

Just Jack said...

I keep asking about the deposit, because a friend has bought a home with an unconditional offer and has yet to sell his house.

In five days he is suppose to take possession of his new home. He's a single dad with a good salary, but not enough to own two homes with a combined value of over 1.1 million dollars.

He refuses to lower the price on his current home as he is not going to give it away to someone when the home is worth more. Despite the fact that since he has had his home up for sale, seven properties have sold around his house, three of them for less than his.

Hopefully, the weather will be good this weekend.

JustWaiting said...

My PCS covers about 640 properties. There have been quite a few price reductions with some coming after only a week or so on the market. New listings are definitely at a slower rate than last week.

So far this week I have only had 13 sales! It appears the market has slowed down from last week.

What are other readers seeing on their PCS?

JustWaiting said...

Just Jack,

Your neighbour must have bridge financing or he would be panicking. This type of financing carries a high interest rate. Sadly, he will be feeling the pain as the months go by.

He will also find that he might not be able to keep the insurance on his present house. Insurance companies don't want to insure vacant houses. I know this to be true because they pulled the insurance on my mother's house after she moved to assisted living.

Just Jack said...

No bridge financing, he doesn't have an offer on his property to bridge himself between two different possession dates.

He needs to get an accepted offer on his property with a clear possession date for the bank to bridge. Otherwise he has to qualify for owning two properties and show proof that the rental income of his home and his income will cover both mortgages.

a simple man said...

JustWaiting;

I am seeing listings pile up and sales the exception.

Anton said...

JJ,
Does your friend have much equity in house number one? If so maybe he could get his house reassessed by the bank and get a HELOC (the kind with no minimum payment) and use this as a down payment for house no. 2. Maybe he could also convince the bank he plans to rent out part of house no. 2 as well.

Sounds like he might be getting squeezed by the new eligibility rules - no 35 year mortgage, eligibility calculated at the 5 year fixed rate, and any rental income is added you one's own income(instead of being subtracted from the mortgage payment).

Are the banks not in a merciful mood these days? You'd think it is in their interest to give him bridge financing. Maybe he could ask for an extension of the closing date. That may be preferable to the seller than pursuing legal action etc. to complete the sale.

This is not my area I am just throwing out some ideas.

a simple man said...

this is a common story I am hearing these days - the two-house tango. Dangerous moves.

This is starting to come apart. A lot of people are going to be suffering financially soon.

Time to invest in something other than housing. I choose to put it towards starting a business (financial literacy courses?).

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

Just Jack,

I'll state the obvious and say your friend doing the two house tango is dancing on the fault line.

It is very rare for a sale not to complete. Obviously, if this happens, the seller is a total bind, perhaps he/she purchased another property - and so on, and so on... The buyer is in breach of contract. But the deposit does not automatically/immediately go to the seller. Whether or not this has to go to court to have the damages accessed and rewarded or if it is handled by the lawyers without court, I don't know.

We need a laywer to comment on the process in this situation. Any lawyers reading this? Care to share some wisdom?

It certainly isn't a real estate agent's territory if a sale doesn't complete (although they may find themselves trying to sell the property... again). Once the conditions are removed, the agent's job is almost done and the legal team takes over.

Sweetrealtor said...

76 pending sales over the last 3 days. It's picked up a bit after the slow/long weekend.

pod_x said...

An uncompleted sale is then a breach of contract, and falls under contract law. So it could be settled out of court, via mediation, in court, or dropped. You'd have the seller, buyer, lawyers and agents involved (who may also want a cut for their work?). A deposit is someone's real money (ok, it could be from a HELOC) so no one's gonna give it up without a fight.

Regardless, a potentially very messy matter, something we may see more of as people get caught in the middle of two house tango when music stops.

a simple man said...

I have had it happen twice and twice we were able to retain the deposit (we were the sellers). No lawyers were involved.

Marko said...

Lots of high end properties moving - SFH is above 640k now.

Marko

JustWaiting said...

Here is a Victoria agent with a new angle. You can sign up with him and get notified of every price change in the Greater Victoria area. His MLS database is updated every day.

http://propertypricechanges.ca/index.html

Anyone tried this out ??

Anton said...

Re: Just Jack's friend.

The stakes are high in this game. That's why this blog exists. I guess the take home lesson from his predicament is if you plan to upgrade/downsize in this current market sell your current house first, or only put in offers subject to your own house selling. If you are not going to do one of those then make sure that the bank doesn't think you are swimming naked when the tide goes out and you are carrying two houses.

jesse said...

Just Jack whatever you want to call it people are getting 2 loans for a temporary time and banks will lend this at a slightly higher rate. I had friends who did this. They called it "scary" when they had two mortgages for a month. I am almost sure this is going on right now or almost every offer would be subject to sale, and this is simply not the case. The "good quality" properties are still too competitive and subject to sale is a non-starter.

a simple man said...

My free access to the TC has already run out for the month after less than a day. They are going to lose a lot of viewers. I won't pay for bad journalism.

I have already added the Oak Bay News icon beside the cbc on my toolbar to replace the TC icon that was there until yesterday.

I see their online revenue dropping.

Just Jack said...

That a conditional offer is a "non-starter" shows that the market is still hot in select areas. Which is a good enough reason to hold back from buying in those same areas until more properties are listed.

while the number of houses for sale in Victoria is up considerably from this time last year, there are only 131 homes listed for a population of 83,000 or one home for every 635 people. In Sooke that drops to one home for sale for every 45 people. Where you can get comparable homes for $150,000 to $200,000 cheaper than Victoria (must be the weather and scenery).

Clearly a conditional offer will be readily accepted in Sooke these days where vendors ARE motivated.

I see the trend today, of people leaving the western communities and buying in Victoria. However, the smart money finds out what people are doing - then does the opposite.

EagerBuyer said...

Simple Man,

It is easy to get around the 20 article limit. Just delete your TC browser cookie. This is easy to do with any browser.

Leo S said...

Or for those who know greasemonkey, you can get a 4 line script that removes the pay wall. here

Marko said...

I lost one of my listings for a year. Client randomly put up the place on usedvictoria for rent at what she thought was a wishful price ($2,500/month) for a 1450 sq/ft home in the Highlands and ended up leasing it the same day for one year with two back-ups.

Will bring it back on market next year again if clients don't extend the lease after one year.

Just one story obviously.

a simple man said...

Sorry to hear about that, Marko.

Mike W said...
This comment has been removed by the author.
Fiduciary said...

I recently took a little gander at houses for rent in Victoria, considering an upsize from my $1100/mo small condo rental. After reading this blog for awhile, I was a little surprised to see that rents weren't as low as I expected them to be. Keep in mind I'm no expert, so I'm happy to be corrected if my expectations are off, but I thought that rents were supposed to be around 50-60% of a mortgage payment in such an inflated market. I'd think a mortgage payment on a 1450sq. ft. home in the Highlands would be around $3000/mo?

We saw a $1500/mo rental for a full house on Derby, but the place was a murder hole and the last tenants treated the place so poorly that they stole the washer & dryer.

Our experience was after looking for a very short while, we decided to stay in our small (~750 sq.ft.) condo and keep saving the difference for a down payment. Saving $1700/mo sure adds up quickly.

a simple man said...

@Waiting - have you had a look at that rental on Nottingham? 5 bedrooms and in the Uplands for $2300.

@Fiduciary - there are hell-holes and there are mansions and everything in-between. We live in a really nice 4 bed home near Willows Beach for far less that the Highlands rent. Keep looking.

Just Jack said...

For rents in Victoria, I find that we max out around 2,500 to 3,000 per month as a single occupancy. It doesn't seem to matter if the property is Highland acreage, 5 bedroom homes in Oak Bay, waterfront homes or 2000 square foot water view condominiums.

That's just seems to be the limit for Victorians. In Manhattan, they probably pay that for a bachelor suite but then a lot more people make a lot more money there than they do in Victoria.

Most middle income homes will rent to middle income families for about $1,500 to $2,000 a month. But expect a high turn over as these people will be making the move to home ownership if prices drop 20 percent.

Rents in Victoria are high, as are prices in terms of household income. The kicker is the vacancy rate. Sure you can get $2,000 a month for a home in the Gorge area, but the home will go vacant more often and take two months each time to lease up.

And tenants hate rate increases. Two years in a row, my landlord has increased our rent. We are still paying under market, but I'm thinking that it may be time to move on to a different home, even though we would pay a little bit more. There is a lot more variety of rentals available and living a year in the Highlands doesn't sound too bad to me - just for the change of scenery.

JustWaiting said...

It is not surprising that average sales prices are rising in Victoria. That is because there are fewer first time buyers able to get into the market. With fewer low end sales the high end sales push the average sales price higher. That does not mean that actual house prices are going up. On the contrary anyone with a PCS account sees daily price reductions and many houses selling for less than they would have a year ago.

The shortage of first time buyers is primarily due to two factors: reduced amortization and recent mortgage rate increases. The entry buyer that could have got a 500K mortgage a few months ago can now only get 450K. This is detailed in the graphic below.

Mortgage Calculations

Anton said...

"($2,500/month) for a 1450 sq/ft home in the Highlands"

Grow op?

a simple man said...

@ Anton - that was my first thought as well. Hopefully the landlord checks in monthly.

Kelly said...

Funny story for the day. Was chatting with an older teacher who said he bought his house 25 years ago for 88 thou. I checked later and the average in 1986 was about 100 so his story jives. He said he's worried about his twenty something son whos a teacher being able to buy a house. I said something like “yeah but he would make more than you did”. He said something like “well yeah, i was only making around 30 when i bought, he’s already at 40 something”. So as i‘m looking up prices i ‘m thinkin yeah old timer, now I see your concern! Your already embarassed to try and get someone to pay over 8 times what you paid so you can retire to a beach in hawaii!

Just Jack said...

From speaking with the cops, the scenario for most grow op's is that the property is bought by a non-Canadian residing out of the country and rented to a grow operation. The property is fully leveraged, so the non resident has very little skin in the game. You don't want landlords dropping in unexpectedly.

The amount of cash these basement can make is amazing around $40,000 a month for a standard basement. Oh, the gentle muffled purr of generators on a warm summer's night in the Highlands.

Another scenario is that Gangs will actually approach immigrants and offer to pay for their home if they run a grow op for five years out of the basement. So they will be mortgage free in five years, or if they get caught they'll have free accommodation for the next 10.

Why so many don't get caught, is that the cops are too busy to get around to them.

BCAccountant said...

Wow, $2500 for 1450sqft, I pay $1900 for 1900sqft. Wonder if I'm getting a deal or maybe this house has top of the line finishing?

Reid said...

I think a big factor going forward may be that government has simply not hired people out of university over the past two and a half years. And given that most government employees I know are currently lucky to be operating at 50% capacity, it is very unlikely there will be any new hires for a number of years. As a matter of fact there should be massive layoffs coming, but government seems to cut programs and forget to eliminate the people who used to manage them.

In any event it seems that these younger government employees were ready to enter the real estate market three or four years after being hired (pay off some student loans). This pool of first time buyers will dry up soon given the lack of recent hiring and will likely remain empty for many years (say until three years after we actually see a mass of baby boomers retire).

This will help to kill the low end of the market which is vital to a healthy real estate market.

Fiduciary said...

BCAccountant, what area of town?

BCAccountant said...

Fiduciary... In Maplewood, if you know where that is. I didn't know it was called that until I moved there.

Fiduciary said...

Yeah, I just looked at a place last weekend in Maplewood, 1650 sq. ft., which included a lower 480 sq. ft. suite. A friend of ours was gonna live in there, but it 480 sq. ft. was too small for her. They were asking $2000 for the whole house, but really it wasn't finished nicely at all, and the yard was a) huge, and b) a huge mess.

DavidL said...

@Ried

Interesting analysis ... Both the provincial and federal governments are planning on substancially reducing their workforce through retirement and attrition. For example, 60% of the 1500 person civilian workforce at DND (CFB Esquimalt) will be eligible for retirement by 2015. No layoffs needed!

Unfortunately, governments are loathe to create transition plans, so a lot of the domain knowledge and skills of seasoned public servants will not be passed along to the younger ones who will eventually fill their shoes.

I agree that less of these "middle class" public service positions can only have a negative effect on real estate prices.

DavidL said...

Whoops: "Ried" should be "Reid". I guess I took that "I before E except after C" lesson from grade school a bit too seriously!

a simple man said...

Awesome....coming to a city near you soon (from cbc.ca):

Canada's Competition Bureau is suing the country's largest real estate board for anti-competitive behaviour that the bureau says keeps the costs of buying and selling homes artificially high.

The bureau has launched an application with the Competition Tribunal against the Toronto Real Estate Board, or TREB, which represents 31,000 realtors in the Greater Toronto Area and controls access to the Multiple Listings Service system.

The bureau says TREB's anti-competitive practices "are denying consumer choice and the ability of real estate agents to introduce innovative real estate brokerage services through the internet," which could result in lower prices for consumers.

Cycle said...

Re: gov't hiring

On the face of it, hiring has certainly dropped off, but there's still quite a few MBA/MPA/LLB students that manage to work their way in through co-op programs and internships. Nonetheless, in terms of local opportunities, we're still well below previous levels, which can't be good for the lower end of the real estate market.