Saturday, July 2, 2011

Day late, but hey, we broke 5,000!!!!!

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

June 2011 (last week's numbers in brackets)
Net Unconditional Sales: 618 (511)
New Listings: 1465 (1209)
Active Listings: 5,050 (4,845)
Sales to new listings ratio: 42% (42%)
Sales to active listings ratio: 12% or 8.2 MOI

June 2010 totals 
Net Unconditional Sales: 625
New Listings: 1,503
Active Listings: 4,730
Sales to new listings ratio: 41.5%
Sales to active listings ratio: 13% or 7.5 MOI

In the first month that looked like it may match 2010 totals, June 2011 failed to. And we broke 5,000 listings, although expect 300+ to disappear from the market by Monday morning as would be sellers take their homes off the market to wait for more favourable selling conditions; it matters not though as these are market peripherals, dreamers and schemers only attempting to find the "one buyer" willing to value their property at some astronomical number conjured up by owners who's homes are simply "worth more" than their neighbours.

It's not a good time to be a first-timer active in the Victoria market. Crappy offerings still dominate the low-end of the market. We don't have the reported average prices from the VREB yet, but I suspect that prices changes may show slight increases or flat. This isn't indicative of anything other than what's actually selling - there are all kinds of properties selling right now, but sharply priced mid-market homes are dragging average reported prices up. Buyers of these properties probably feel like they're getting deals and the sellers are probably bitter that their "investments" haven't made them a dime in the past 3 years.

The Victoria market has truly been flatter than a Saskatchewan farm for some time now.
Happy Canada Day weekend all.

37 comments:

Just Jack said...

A look back on memory lane of how prices in Oak Bay have changed. A home in the 2400 Block on Cadboro recently sold. A look back on the past sales of this property illustrates how prices have zoomed and stalled.

$206,000 purchase in July 1992
$315,000 purchase in Feb. 2004
$579,900 purchase in June 2009
$582,000 recent purchase

Our prices have increased 283 percent or almost tripled in 20 years.


When you look at the recent sale on Allenby for $811,000. That property sold back in 1995 for $216,000 that would make a current price (excluding the upgrades) for the home close to $610,000 today using the above numbers to form a factor to update this home's price.

The lot value is probably around $450,000 to $500,000. Leaving a residual to the updated improvements in the range of $300,000 to $350,000.

I'm pretty confident that you could build that house today for around $250,000. So in my opinion the premium paid for being the first to live in the home is around $50,000 to $100,000. A premium that disappears in under 6 months.

Yet the sellers could have had multiple offers on that home to get to $811,000.

So what's the real worth of the home? Or better yet, if you were lending your own money as a mortgage to the buyers, how much would you lend?

That's the biggest problem of our marketplace when the bankers lend on the sale price, no matter how wrong that price can be. Then this sale sets the next listing price and lulls the gullible buyers into overpaying for the next home too.

Marko said...

On a site note both of the sold properties you mention above were listed by Fair Realty. The one on Cadboro Bay had a coop Commission of $4,000 and the one on Allenby had coop commission of $8,000.

Morale of the story is I think the listing brokerage is less and less relevant in today's internet age yet the majority of the market continues to go with 6%+3% commissions.

Very interesting.

Craig said...

"Our prices have increased 283 percent or almost tripled in 20 years. "

Actually, 100% is doubled, 200% is tripled so 283% is almost quadrupled.

Leo S said...

Morale of the story is I think the listing brokerage is less and less relevant in today's internet age yet the majority of the market continues to go with 6%+3% commissions.

What the discount brokerages need to do is collect some really solid stats on the difference between homes sold by full commission realtors and those sold by discount realtors.

The full-commission places have plenty of arguments about why they're better: more experience, better service, realtors don't bring clients to 1% places, etc.
However, all that matters in the end is price. So why not just put out some stats? I assume you can get the sale stats by brokerage, divide them into full commission or discount, and then do some analysis.
Time to sell, sale price/start price, sale price/assessed, etc.

So far no one has come up with any good numbers. If you had some really good stats showing that discount commission realtors are just as effective as full-commission realtors, and that got media coverage, I think it would be the best advertising you could ever buy. And yet no one does it..

Leo S said...

BTW, anyone know how many listings we had before the mini-crash in 2008?

Just Jack said...

Right you are Craig our prices have increased 183 percent or have almost tripled in 20 years.

Mathematically challenged on this one.

Thanks.

me said...

Just Jack:

$206,000 purchase in July 1992
$315,000 purchase in Feb. 2004
$579,900 purchase in June 2009
$582,000 recent purchase

The problem is not the 50% increase from 1992-2004. That's about 3.6% per year. When you consider maintenance, taxes, and inflation, that's normal.

However the 85% increase from 2004 to 2009 is highly abnormal. It's 13% per year. I am surprised that such a price can be maintained.

omc said...

Simple man,

I am not necessarily giving up on Victoria, but I am giving up on Oak Bay. A readjustment in the areas I am looking is all. When a gussied up bungalow on the flats just a few houses from Fernwood sells for $811k, things are irrational. The Arbutus, ten mile, caddy bay area is still correcting.

Just Jack said...

Fleeing to the best neighborhoods in order to protect your house investment.

Does it safeguard your investment?

Or

Does it over inflate a neighborhood that is within an already inflated marketplace?

Say you are the average real estate guy. Let's call him Joe Dirt. Well Joe, has been a very busy guy over the last decade. He's been buying and selling and buying and selling and buying and selling real estate. He is now reached the point of being a self proclaimed "expert" because he has made handsome profits on almost every flip, renovation and pre-construction condo.

But now Joe is starting to become uneasy. Real Estate has not been so good for him over the last year or two and he is getting nervous. Joe sees the writing on the wall along with his declining bank balance. But, Joe is not willing to diversify into unknown investments like stocks, bonds or rare Pez dispensers.

So what does Joe Dirt do? He does the only thing he is comfortable with doing. He buys real estate in the best neighborhood, because he knows the three pillars of real estate are location, location, location.

But what happens when all the Joe Dirts are doing the same thing? Up goes Oak Bay, down goes View Royal. Up goes West Vancouver, down goes Burnaby.

It's the last hope of a man clinging to a sinking ship. For awhile the ship keeps him afloat. All Joe has done has been to swim to the dry end of the boat. But the ship has to sink and it will take him down with it.

Swim away Joe, swim away.....

Marko said...

"A recent survey by the Organisation for Economic Co-operation and Development (OECD) found the average Canadian home boasts 2.5 rooms per person, more than the 2.3 room average in the U.S., and the highest among the 34 OECD member countries, where the average was just 1.6 rooms."

"More impressive is that Canadians have managed all this while working an average of just 1,699 hours a year. That’s well below what the average American works (1,768 hours) and the OECD average (1,739 hours)."

DavidL said...

Interesting, Marco. My wife and I, our two children and my father-in-law live in a house with 10 rooms (excluding the garage) - equaling 2 rooms per person. However, if (when) my father-in-law moves out, we will be exactly the Canadian average.

Marko said...

I've been saying this for a while on the blog...people in Canada have really high expectations as far as living accommodations. A family of 4 should be able to live in 1300-1500 sq/ft but the norm seems to be more like 2000 sq/ft.

I showed a 603 sq/ft condo yesterday to my client and I could see myself living in it (obviously not with kids) but plenty for a single person or young couple.

Not only is the size a problem so is energy consumption. The average household consumes 2 X the electrical energy an average German household does.

Jay said...

"More impressive is that Canadians have managed all this while working an average of just 1,699 hours a year. That’s well below what the average American works (1,768 hours) and the OECD average (1,739 hours)."

Less impressive is the productivity of the hours we work.

GDP per hour worked measured in purchasing power parity:

Norway 76.8
USA 59.0
Ireland 54.0
Canada 47.2
Spain 44.3

MC said...

I thought Europeans received more holidays/year than Canadian/Americans?

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

"The average household consumes 2 X the electrical energy an average German household does."

The average house in Canada is also not German engineered, does not run on less heat wasting 240V, nor does Germany span 20+ lines of latitude like Canada all the way to the North pole, although I hope that research study excludes igloos. ;-)

jesse said...

Canadians don't have any expectations, at least the ones who rent that is. They pay market rates for what they need or want.

Until rents go up I'll kick and scream like a three year old for my 2 car garage. Sorry if that angers y'all

Leo S said...

Forgot the most important part of that section of the report: But before we get too cocky, it’s worth recalling that we got here largely by borrowing a lot of money. Canadian household debt levels now sit at 146.9 per cent of income. That’s significantly higher than the 130 per cent reached in the U.S. prior to the crash (it has since fallen to 113 per cent).

backinVictoria said...

Our old friend 828Hampshire has dropped their price again today to 689,900. I think this is at least the third or forth drop after initially offering it(fsbo) a few months ago for 739,000(I think).

Someone mentioned the property was bought for 660,000 last July.

Marko said...

"Canadian household debt levels now sit at 146.9 per cent of income."

Is this partly due to low interest rates? One example is car loans...you would be pretty foolish to pay cash for car. Most of the best selling models you are better off taking 60 months financing than the cash incentive.

Another example is student loans. The interest is relatively low and tax deductable, and every few years the government steps in with some sort of initiative and reduces the amount. Probably not the smartest debt to pay off? Better off investing the money.

Leo S said...

For sure interest rates have a big effect. However I think the vast majority of people carrying high debt don't have the option of paying it off if they wanted to. Usually the debt is there of necessity and not because of wise leveraging.. but it would be interesting to see stats on this.

One example is car loans...you would be pretty foolish to pay cash for car. Most of the best selling models you are better off taking 60 months financing than the cash incentive.

This is interesting to me because we are currently looking at buying a new car. Top contenders are the new Hyundai Accent, Honda Fit, or Toyota Matrix.

Financing on the Fit is 5.9% for 60 months. That is a heck of a steep rate, and I can't say I have much confidence that I could beat that return before taxes, let alone after. On the Accent it's a more reasonable 3.6%. No cash discounts advertised on either of those.
Toyota has 1.9% on 60, but also has a $1000 cash discount.

Common wisdom is you can negotiate harder with cash, but I have heard that if a company handles their own financing, you can choose that, negotiate a lower price since they'll be making money on the financing, and then pay it off immediately.

Thoughts?

Just Jack said...

With money so cheap, you would be silly to buy with cash.

Yeah, that's true but most buyers don't have $30,000 in their bank account to spend on a car. They might only have a down payment.

The low interest rate persuaded them to buy a new car and make 60 payments rather than buy a used car with what they saved.

Now the smart buyer has the $30,000 in investments that earn the money to pay the 60 months of payments. The not so smart buyer, bought too much car for their needs and financed it over too long a period.

But I hate making car payments. And five years of payments seems like it never ends, when servicing, repairs and insurance cost. Because in year four, you're probably want something new. No more than 36 months financing on a car and no more than 6 months gross income for the price of the car.

If more people did this, then the price of cars would come down.

Reid said...

I do not agree with borrowing at cheap rates to buy a new car. IMO this is simply a ploy for the financially incompetent. Tease you with low interest rates to buy an overpriced asset. We laugh at home buyers who are doing the same thing. Buy a good used vehicle with low kilometres and pay cash – far better deal. Any well built car today will easily go 300,000 km without major problems if you take care of it.

As an example I recently bought a lease return full load Japanese built SUV with 25,000 km on it for $27,500 and that vehicle sells new for close to $50,000 new once you add in freight and PDI. Yes I paid cash but I used that cash to negotiate a deal on a lease return from a leasing company (they wanted $33,900 after discounting from $36,000). You have to be willing to low ball, stand firm but cash talks if you are willing to use it.

The car before this was a well appointed off lease Martix with 40,000km. Retail was $21,000 and I got it for $9,000 – now this was the middle of the economic crisis, so it was really easy to low ball on this car.

The car before this (I buy a lot of cars as I drive aminimum 50k per year) I bought a high end off lease Volvo retailing for $55,000 and bought it for $26,000 including a bunch of extras. This car had 55,000km. Again I paid cash and low balled the guy – this was during economic boom and yet it is amazing how they cave if you just stand your ground, talk cash and ignore all their talking.

Sweetrealtor said...

@Leo S. I love my Matrix. Great car!

Alexandrahere said...

Hi all...here are my stats for June 27 - 3 July:

SFH: Min 2 beds & 2 baths, priced between $375K & $775K in the core areas of Victoria, Oak Bay, Esquimalt, Saanich East & Saanich West.

New: 32
Sold: 25
P/C: 29
OM: 24

Avg selling price: $550K
Med selling price: $568K

Out of the 25 sold, 9 or 36% went for below assessment & 9 or 36% had disclosed 2ndary suites. This past week had the 2nd lowest avg price within this criteria since the beginning of the year. The lowest was the first full week in Jan at $521K as there were only 6 homes sold.

Condo's and Townhouses:

Min 2 beds & 2 baths, priced between $250K & $585K in most areas of Victoria (not downtown) and Saanich East, all areas of Oak Bay and Esquimalt and Gorge, Tillicum and Interurban areas of Saanich West.

New: 15
Sold: 6 condos & 6 townhouses
P/C: 20
OM: 19

Avg condo selling price: $370K
Med condo selling price: $365K

Avg t/h selling price: $431K
Med t/h selling price: 450K

2 of the condos and one townhome went for less than assessment.

Marko said...

"But I hate making car payments."

It took me a while to get use to it as well....

I sold a paid off Acura for $15,500 and then took over a lease on 2008 Civic Si and the owner gave me a $4,000 incentive. At the time the car was 28 months into a lease and only had 10,700km. I had 32 months left (now maybe 18?) at $330/month taxes included.

So yea, I am making payments every month but the $19,500 I invested as a result of the deal is over 25k now plus 4% dividend.

Also my projection is that the car will be worth approximately $1,500 more than the lease buyout so I can sell the rights to someone at that point.

The buyout on my Acura (another lease takeover I had) was 14.2k, drove it for a year after the buyout, and sold it for $15.5k.

If it wasn't for lease take-overs I would probably buy with cash in the states.

patriotz said...

"Also my projection is that the car will be worth approximately $1,500 more than the lease buyout so I can sell the rights to someone at that point."

You're speculating on your car?

And I thought things couldn't get any crazier.

jesse said...

"You're speculating on your car?"

LOL it's only speculation if you don't try to return it at the end of the lease.

And patriotz, it's not speculation if you buy at a discount. It amazes me how desperate some people are to sell perfectly good cars. ;)

Dave said...

Its official now.....It is a buyers market, its on Chek news 5pm.
Time to buy

Dave#1

Leo S said...

Heck of a deal on this Fit if anyone else is in the market... Not quite the one we're looking for though.

Mindset said...

And now for some more VREB regurgitations....

http://tinyurl.com/3h8ad5p

Is anyone else noticing the snake oil pattern?

Interest rates are going up? It's a good time to buy.
Interest rates are going down? It's a good time to buy.
Inventory is at record highs? It's a good time to buy.
Inventory is record lows? It's a good time to buy.

Just put any statistic here, then follow it by, you guessed it, 'it's a good time to buy'.

Is there anyone left who actually thinks VREB is a credible source of housing information?

happy renter said...

Sadly, Mindset, I think that the average Joe considers the VREB an authority and wouldn't question any statements that it releases. I've spoken to some very smart people who can't seem to think critically when it comes to VREB opinion pieces. Either that or they're so scared that their $700,000+ house might drop in value that they refuse to acknowledge the possibility that the market might not be stellar.

Mindset said...

I agree happy renter, and it's sad.

If we are only willing to hear the 'convenient' truths that justify our current position, we are very easily manipulated.

With the powerful able to tell us the stories we want to hear and have us voluntarity put on our own blinders, it's no wonder the rich are getting richer, and the middle class is shrinking so quickly.

High debt is nothing more than a set of handcuffs, and people line up to stick out their wrists?

Psychologically, this reminds me of Philip Morris telling everyone for 40 years that there was no link between smoking and cancer, and the population just believing it. Or people today who agree with the 1% manipulating the media that there is no way that we are effecting the environment. Really? We're not effecting the environment?

Do people not realize that when we don't have freedom to change our beliefs, or at least weigh the options, we don't have personal power, freedom or choice any more?

It's the leaders of the lemmings that win big, not the lemmings.

happy renter said...

“What’s happening is no one’s borrowing any more, because everyone’s loaded up with debt,” said Peter Routledge, an analyst with National Bank Financial. “So the banks are competing more – not only for deposits, but also loans.”

Banks Compete Fiercely for Borrowers

Mindset said...

Interesting article Happy Renter. Pulling into the broader view, this appears to point at the fact that the Banks and the Canadian Government are both at minimum Interest rate levels.

For those unfamiliar with the banks tactics in the last few years; the banks used the risk of the 'recession', the governments low interest rates, the buyers hype around housing, and the governments slack lending policies to increase their market spreads on mortgages.

I dug up this URL on a simplified comparison model to give everyone a bit of an idea of what I am referring to.

http://tinyurl.com/2uh3vlq

TD fixed 5 year rate is 4.29%, the 5 year bond yeild is 2.1%, which following the simplified math in the URL is still a 104% margin today. Check the purple line in the graph out, thats still a very big spread.

Looks to me like Banks are still sitting at historical highs for margins.

I wonder if this article is just the banks playing with the media to make it look like 'tough times'?

Sure, the market isn't what it was 6 months ago, but the banks still appear to be charging a fairly high premium for mortgages based on even what they made just 5 years ago (the spread was 55% in 2007).

Now if the people stop making payments and taking out new loans? We'll be swimming in bank sweat while they downsize and get more strict in their own lending patterns.

Alexandrahere said...

Just Jack: re: leasehold condo's. My understanding is that when the lease runs out on the building, you as the "tenant" of your condo must then vacate. Many of the leaseholds in our area are 100 year leases. That is why the closer you come to the end of the lease; the less valuable your unit is. The builder is the leaseholder and the condo "owner" is the long term tenant.

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