Tuesday, August 2, 2011

July sales data

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.

July 2011 (last week's numbers) [previous week's numbers]
Net Unconditional Sales: 523 (380) [270] [140]
New Listings: 1,374 (1,062) [763] [407]
Active Listings: 5,094 (4,902) [4,856] [4,756]
Sales to active listings ratio: 10% or 9.7 MOI

July 2010 totals
Net Unconditional Sales: 527
New Listings: 1,119
Active Listings: 4,477
Sales to active listings ratio: 12% or 8.5 MOI

There's no way to spin these numbers positive. But look for the VREB and parrots over at the TC to try regardless. Active listings are at all-time highs while sales volumes are at decade lows. It's a game of supply and demand, and clearly the supply side is lopsided.

So why aren't prices falling? There's a whole bunch of things going on here, but the first thing you should know is that prices ARE falling. Anyone who tells you they aren't is either using a micro-segment of the market to prove they're not, or is, well, telling you what they think you want to hear to get you to act in the market in some manner--in other words, they're blowing smoke up your kiester.

Your money buys more house in the Victoria market today than it did just a few short months ago.  Average reported prices are misleading, because the average depends more on the type and make-up of unit sales from one month to the next... they're easily miss-representative of the market, both on the way up and the way down. They should be viewed with a grain of salt.

There's a few "deals" out there if you only compare today's prices to what some people got for these places four and five years ago, especially if you look out in the Westshore and Bear Mountain. But there's no deals to be found when it comes to looking at the standard fundamentals of price versus rent and price to income ratios over history; we're still trending well above the historical ratio of Victoria.

The core tells a different story; but mostly in the single family home category. Demand is isolated in the CRD to the east and the south for the most part. There is little demand for the crap that used to sell in bidding wars; I'm talking specifically of tear-downs and ex-rentals in the depressed neighbourhoods to the west of the city core. And there is a lot of crap on the market, which is evidenced in the difference between sales to new listings and sales to active listings.

Yes, there's plenty of evidence suggesting well-priced quality offerings are selling quickly. But there's far more evidence of a bunch of low-quality offerings having to lower their "shoot-for-moon" original prices just to drive people to an open house.

UPDATE: VREB spin is out (H/T a simple man). And the standardized TC cut and paste job is up already too... (I won't link there). Forgive me for having a little fun, but hey, it's my blog and all that:
Victoria Real Estate Board President... noted that despite the drop in the number of sales last month compared to June, market activity is now very close to what we saw at this time last year. "In the coming months, we anticipate that market activity will remain relatively stable and similar to what we saw during the summer and early fall months of last year."
I get such a kick out of these baseless statements. So July sales volume nearly matched one of the worst July sales volumes in over a decade? And because sales numbers didn't sink lower (even though inventory is substantially higher), readers and market watchers should be happy that the "bottom" has been found; except that we don't know that, nor can we, because we can't predict the future.... but he who shall not be named apparently can.
...added that the increasing inventory means sellers need to be realistic in pricing their homes in order to attract qualified buyers. "A REALTOR’S® expertise can be invaluable in today’s market to help sellers price their homes to best advantage"
Or you could simply scan your neighbourhood and surrounding areas for homes on lots just like yours and price your property in and amongst the lowest priced offerings. That's the best advice you're likely to receive anyway if you truly want to sell.

Remember this little ditty I wrote in July: Victoria home prices to fall $79,900? Guess what? We've shaved off  $48,175* in just a few short weeks since that post was written. Can we get another $31,725** off over the next 4 weeks? Better suit up, cuz that will be awesome!

*That's what those damned average numbers say anyway

**If you're making offers on properties these days you can help achieve this dream by starting all offers at 8% below asking price, which is what the average dropped last month!

104 comments:

Just Jack said...

Probably an immaterial point for those wondering why the boards numbers do not match exactly what others may show here.

The board's sales for July, include all sales of all kinds of properties both real estate and non-real estate (ie businesses, floating homes, fractional ownerships, etc.).

The numbers are not from July 1 to July 31. The numbers are back dated one week, so for July they would cover the period June 24 to July 25. Obviously, this is to allow for the time the agent takes to enter the sale.

Marko said...

Bear Mountain is hurting really bad as far as condos and homes over 800k go.

Just Jack said...

Looking at condominiums in the core districts, both the average and median indicate prices are 2.5% lower than this time last year.

Re-sales of the same condominium show twice the decline or 5% from this time last year with our current prices at 2008 levels.

With only around 100 condo sales, I personally would place more weight on the re-sale method as the better indicator than averages or medians. The average is still above the mid-point in sales which suggests to me, that the market for above average or better than typical condos in the core areas is still doing well or it could mean that selling an older condominium is a lot tougher today. You can interpret the data in so many ways.

Just Jack said...

Condominium sales in the Western Communities are quite low with 23 sales in the last month and 192 listed. Most of the condos in Langford are near new, so its hard to get a handle on prices because the GST/HST really screws up any calculation.

However, it appears that prices for condos in Langford are back to 2006 or 2007 levels. While the market for condominiums isn't dead in Langford, it's certainly stumbling around in a desert of sales activity. In this case the average is below the median which suggests that the vultures are hovering over the herd of sellers waiting to swoop in on the first to stumble. With most of the herd bleeding from big price cuts in Bear Mountain.

Just Jack said...

CMHC insurance most certainly gave market prices a boost. Well, let's be honest CMHC gave this market the trajectory of the Space Shuttle.

But, what happens on the way down?
What happens when CMHC has conduct of sale, and the previous owner has moved on, the bank has been paid out, and the market is overwhelmed with listings.

Well that would be the recent sale on Dover in Sooke. Where a house bought for $365,000 in 2007 and assessed for close to $400,000 today sells for.....

$294,000

CMHC may have been the hand up for a lot or people entering the marketplace, but when the market turns CMHC can only do one thing to stem the red ink in its liabilities - and that's sell quick - and with so few buyers, like in Sooke, that's deep discounts. In these outlying areas, CMHC will be leading seller of properties.

And that's not good.

a simple man said...

from vreb. Love the part where he says that prices have "declined somewhat". $50K is a lot of somewhat.

"A total of 523 homes and other properties sold in July through the Victoria Real Estate Board’s Multiple Listing Service® (MLS®), down from 618 sales in June but very close to the 527 sales in July of last year. Overall prices, meantime, declined somewhat across all major property types.

Victoria Real Estate Board President, Dennis Fimrite, noted that despite the drop in the number of sales last month compared to June, market activity is now very close to what we saw at this time last year. "In the coming months, we anticipate that market activity will remain relatively stable and similar to what we saw during the summer and early fall months of last year."

Fimrite added that the number of properties available for sale continued to increase at the end of last month with inventory levels currently 14 per cent higher than a year ago. "The available choice for buyers increased further last month with 5,094 properties available for sale at the end of July, up slightly from the 5,050 properties available for sale at the end of June." Fimrite added that the increasing inventory means sellers need to be realistic in pricing their homes in order to attract qualified buyers. "A REALTOR’S® expertise can be invaluable in today’s market to help sellers price their homes to best advantage," added Fimrite.

The average price for single-family homes sold in Greater Victoria last month was $581,117, down from $629,292 in June. The median price also declined to $535,000 while the six-month average declined to $615,439. There were 13 single family home sales of over $1 million in July including two on the Gulf Islands. The overall average price for condominiums last month was $315,371, down from $320,172 in June. The average for the last six months declined to $327,762. The median price for condominiums in July also declined to $289,000. The average price of all townhomes sold last month declined to $412,178 from $444,768 in June. The median price also declined to $385,000 while the six month average declined to $443,341.

MLS® sales last month included 283 single family homes, 147 condominiums, 47 townhomes and 19 manufactured homes."

a simple man said...

So quiet on a day that is ostensibly a significant point in the turning of the market here. Record level inventory, historically low sales and a near $50K drop over a one month period? Come on, where are all the balloons?

Animal Spirit said...

Interesting sales and price data. What we seem to have is a broad based decline across different sub-areas, but could it be a distributional change in what is selling vs. what sold in the past months? Only time will tell - give it three months of the same pattern (or just holding at 535 for the median) and I'll call it a trend.

MOI is the most interesting thing. Hovering around 10 months - this puts downward pressure on prices, for sure. This combined with the broad-based price decline makes sense.

But why the increased sales in the last week of July?

Balloons? No, not yet. Besides, they always pop.

nan said...

The difference between June & July saved my wife and I 1 year of time In our quest to pay cash for a house! Keep up the great work, realtors!

a simple man said...

I guess I celebrate small victories as often as I can - so I will celebrate this one, for the consumer that decided to save instead of spend.

Animal Spirit said...

somehow I think everyone is on vacation - except me :(

Just Jack said...

Obviously, from the number of posts today, I'm bored. So the mind wanders and I think to myself what if there was no financing or financing was very difficult to get. Would prices be what they are today? But, its an imperfect world and how could anyone try to quantify such a thing.

Well,

This week a Co-Operative condo sold on Beach Drive. For those who care to know in a Co-Op you own shares in the complex, unlike a strata where you have a legal title to a thingy called a strata lot.

Banks for the most part, do not lend on Co-Ops because they can not foreclose on shares. So if you want to buy one of these puppies then its all cash or you have to use other things as collateral.

Back in June of 1989 this water view, 1200 square feet Co-op condo sold for $205,000. During this time the median price for a "strata" condo went from $87,500 to $300,000 or 243%. The typical strata condo more than tripled in value.

But, the Co-Op after 22 years of inflation, sold this week for $380,000 an 85% increase or almost twice the original price.

Which may mean that the ability to finance a condominium makes up about half the price you pay for a condominium today.

Like I said, nothing much to do today.

HouseHuntVictoria said...

TC's follow up story today goes hard after the first time home buyers angle. Word to the wise: if the industry and media are saying sales are strong in the FTBer segment, it means they're not and they're panicking.

a simple man said...

And I love how they will not allow comments after that "article". The media are treading in dangerous territory.

a simple man said...

At what point does media spin become too much? What about the family that invests ten years of savings into a market that is plunging on the advice that everything is fine by the media and the agents. Where does fraud and misrepresentation for personal (not client) gain enter into it?

I am speaking from an altruistic standpoint and I know that many say that if they are dumb enough to follow that advice then that is their lot. But buy paying the realtor and buying the paper, isn't there some expectation of the truth?

Just Jack said...

Well Simple Man, maybe when telling the truth becomes more profitable than telling a lie.

a simple man said...

or some people get sued a lot of money for being a paid advisory and providing the truth.

a simple man said...

ok - two typos in a row - I do wish there was an edit function, but I suppose that is what that blue button below is for.

Just Jack said...

Great, now I'll spend the next half hour looking for a blue button.

Just Janice said...

TheEconomicAnalyst.com has some very good (Canadian) discussion on the housing bubble...

I knew the market was sick but the degree of the disease is truly outstanding. Mortgage debt as a percentage of GDP should be plummetting as the boomers enter their retirement years...but instead it is skyrocketing. It currently stands at 65% of GDP...that's nutty.

The housing sector as a share of GDP is also scary - any economy that is that dependent on housing is at serious risk.

Lastly, I can think of far too many engineers, health science professionals and teachers who have given up their trained for professions to pursue real estate. Truly, this must be an indicator of a market completely out-of-whack as people are giving up legitimate professions to pursue the higher paycheques of real estate. Only in some perverse alternate reality does this happen.

a simple man said...

Just Janice - I agree on all fronts. The market is seriously twisted and the breadth of professions funneling into the "easy" money as a real estate agent is astounding. I say "easy" because I think it is easy for those at the top to make a good, even a ridiculous, income, but for the vast majority I think they struggle to survive, working crazy hours.

Perhaps soon this will all correct itself, as irrational behaviour always does.

a simple man said...

New listing on Woodburn, $3K less than the awesome home I wrote about a few weeks back (it is still overpriced, but an awesome home nonetheless).

Well, the new listing is not even comparable. It should be at least $100K less than the other one. Well, at least it will make the original Woodburn house look like a steal.

Homebase said...

I was wondering what everyone's thoughts were on The Hudson? They dropped their prices substantially, but I'm wondering if they would take offers on their sale prices.

a simple man said...

You can always offer and they can either say yes or no. It is worth trying. but if you do so, be ready to walk away to show them you mean business.

Just Jack said...

A couple of suites in the Hudson are listed at 369,000. Similar condos, but five years older are selling for $330,000 in that area.

Are they worth another $30,000 to $40,000 for being new? It seems a bit rich to me.

I could see maybe another $10,000 to $15,000 for not having had anyone living in the home before and never used appliances? But that premium you paid will be gone after you've lived in the place 6 months. You can't expect the next purchaser of your condo to have the same feelings.

HouseHuntVictoria said...

Patriotz linked to this Economist article over at Van Condo... it's a must read.

Fiduciary said...

Interesting HHV, thanks for the link. It took me a little while to realize it was written in 2005. :)

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

JJ Said (in response to realtors and agencies pumping the RE markets and when it will end): Well Simple Man, maybe when telling the truth becomes more profitable than telling a lie.

Well said Jack.

The quick buck these days is almost always made by a middleman (middleperson?) that can control information, and it is done by telling each side what they 'want' or 'need' to hear to close the deal. The biggest issue these days, is that the middleman gets to walk away with their 'commission' for brokering the deal, no matter how the deal turns out.

Let's face it though, with how complex the world is becoming, there are a lot of people that can provide 'misinformation' in their own best interest.

I'm with Carl Sagan who said, "what everyone needs to develop is a good BS detector".

That's why blogs like this are important, lots of crowd-sourced BS detection going on here.

And simple man. I think everyone should all have a piece of cake to celibrate our ability to see past the BS. With the way this RE market is shifting, it's probably that rare cake that you can have and eat it too.

pod_x said...

So many gems in that article:

"Investors are prepared to buy houses they will rent out at a loss, just because they think prices will keep rising—the very definition of a financial bubble."

"unlike share prices, house prices tend to be somewhat “sticky” downwards. People have to live somewhere and owners are loth to accept a capital loss. As long as they can afford their mortgage payments, they will stay put until conditions improve. The snag is that eventually some owners have to sell—because of relocation, or job loss—and they will be forced to accept lower prices."

"contrary to conventional wisdom, it does not require a trigger, such as a big rise in interest rates or unemployment, for house prices to decline."

A worthwhile read for anyone.

Homebase said...

I will take another look at the Hudson before throwing them an offer. I'm willing to walk away from it seeing how prices are falling. Thanks guys!

Just Jack said...

I think that "we" know a lot more about real estate now, than the author of the economist article did back in 2005.

Sometimes, I imagine that there is a shriveled up economist in some government basement office who is cunningly manipulating the masses and coming up with devious ways to take over the world. Then I realize that I've been watching too much Pinky and the Brain.

Animal Spirit said...

Homebase - take a look at the thread on the Hudson over at vibrantvictoria.ca - apparently there are quite thin walls between some of the suites - and quite a few rentals available as well. Might get something cheaper and better without having to buy.

Animal Spirit said...

Just Jack - that is me.

a simple man said...

and the "bubble" debate has begun again at vibrantvictoria. Nice to see the TC spurred on some action!

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

Homebase,

I don't if you are aware but if you hired a buyer's agent to represent you at the Hudson that agent would be paid 3.0% 100k + 1.5% Balance, or $6,000 on a $300,000 unit. What I do is give back my buyer 70% with a $3,000 minimum to buyer's agent. On a $300,000 unit I would give you back $3,000 after completion. On a $400,000 unit you would receive $4,500, $6,000 cash back on a $500,000 unit and so on...

This is no meant to solicit if you are working with an agent.

patriotz said...

"and the "bubble" debate has begun again at vibrantvictoria."

Obviously they don't use the same definition of "bubble" as this, because if they did there would be no debate:

"Investors are prepared to buy houses they will rent out at a loss, just because they think prices will keep rising—the very definition of a financial bubble."

Fiduciary said...

I hope no one minds if I ask a stupid question... what happens with the commission when buying a new condo without a buyer's agent? Does the selling agent take 3%, or 6%? Should the buyer be attempting to negotiate another 3% off the price?

Just Jack said...

At times, the marketplace will act in an irrational manner, that is contrary to generally accepted economic theory. An example would be rising home prices with falling sales volume.

I think a lot of the debate about "bubbles" is around the word bubble itself.

If property values fall 25% in 6 months is that a bubble?

If property values fall 25% in 6 years is that a bubble?

Clearly two things are important about "bubbles" how fast they occur and that have to had popped to see them.

Of course one could say "If it walks like a duck, quacks like a duck and swims like a duck then its a duck." But what we are really arguing about is what kind of a duck it is. Most people would consider Victoria's home prices very expensive and should come down over time.

Its just how much, how fast and when? And you need data and established trends to see that which also assumes that other things in the economic and political arenas remain the same.

What I find interesting of late is how the outlying areas of Sooke, Shawnigan Lake and the Gulf Islands are already in a downward price trend with prices rolling back, while the inner city has held up with mostly stable prices.

But, Victoria's marketplace used to track Vancouver too. And Vancouver's prices are still increasing while ours have muddled. If the mantra of real estate is location, location, location. Clearly the location is now Vancouver, not Victoria.

The real estate board covers a large geographical area and the low sales activity couple with the high inventory is not evenly spread out. Nor is the market strong in all sectors ranging from starter homes to McMansions. If the marketplace is a rope, then its a rope that is splintering and unwinding under the weight of low and slow sales. Its a marketplace that is becoming shallow and dysfunctional in certain geographical areas and price groups. The question is will the rope snap or continue to fray over a long time.

CanSpeccy said...

"But what we are really arguing about is what kind of a duck it is. Most people would consider Victoria's home prices very expensive and should come down over time."

Prices have risen, first, because declining interest rates increased affordability and hence demand from those wanting to own a home, and second, because the rise in prices due to increased home-owner demand, drove speculative investment.

But interest rates cannot fall below zero, or near zero, as at present. At that point affordability must fall with rising prices. At some point, the weakened demand causes prices to turn down. That kills speculative demand and accelerates the decline.

Expectations about the economy are another factor. Many are now expecting a second dip to the recession. The stock market is down, unemployment is up, which means that affordability is further depressed, and demand reduced.

The property market is fundamentally unstable, driven by many factors, although speculative activity tends to accentuate trends both up and down.

So trying to define what a bubble is and then trying to decide if the current market fits the definition is not, in my view, too helpful.

Better to look at the fundamentals, which suggest that until the recession is over the market will continue trending down.

How long will recession last? Ten years perhaps, although if it ends sooner, interest rates will likely rise, so either way, the outlook for house prices is not positive.

CanSpeccy said...

Mish reports: Eighty-Five Australian Building and Construction Firms Go Under in a Month

Mish writes:

'"Peter Jones at Master Builders Australia is blaming "uncertainty". The irony is that it would make far more sense to blame "certainty".

It is quite certain that Australia's housing bubble is now in crash mode. It is equally certain there is not a damn thing the Reserve Bank of Australia or any of the home builders can do about it.'

Would it be surprising if things turned out the same way here?

a simple man said...

thanks for your input, CanSpeccy. Appreciated.

Just Jack said...

Interest rates play a greater role today, than they did 10 years ago. A decade ago an increase in the interest rates would spark a buying frenzy as people wanted to lock in at the pre-approved rate. But as prices continued to rise, the importance of a low interest rate has now become paramount in most buying decisions as the percentage of gross income to service the debt has steadily risen. A decade ago, maybe only 25% or your income went to house payments, today that figure could be closer to 40 percent, hence the necessity of having a suite. Which is why Fernwood homes with suites can be more costly than South Oak bay homes without suites. Another signal that the market has topped out.

As for speculation in the marketplace. In my opinion, the drop in sales activity since the changes in CMHC rules has been from speculators leaving the market. I am also sensing that some recent buyers of homes in the city have also become unintentional landlords having to rent out their previous homes. Which means a lot of one year leases, that could have a stabilizing affect on inventory???

A lot of people are watching interest rates. An increase in rates would have an immediate affect on purchases but not right away on existing property owners. But an increase in unemployment, vacancy rates, falling rents and a net loss of population would have an immediate affect on existing property owners. You might have the best interest rate for the next three years - but if that rental goes vacant, you're going to be forced to sell.

For the last decade, construction and construction related industries have been the strength of our market with high paying jobs, tight vacancy rates and low unemployment. An economic slow down in these areas would have a more immediate affect on the market than a small rise in the interest rate.

Who knows?

Just Jack said...

The best deal in Saanich sold this week.

-Listed as a "pre-foreclosure" for 112 days starting at $474,900. Tax assessed at $451,000.

-Sold in May 2008 for $390,000
-Sold in March 2005 for $313,000

And today the property sold for $365,000. That's close to a roll back to mid 2007 prices.

Just be glad that this is not happening in waterfront properties in prime neighborhoods. Ooops it is! Like the recent sale on Crescent road in Oak Bay for 1.3 million. Assessed at 1.7 million and they were asking 2.5 million last year.

Life's a beach!


So where the heck are all the buyers?

Just Janice said...

I'm trying to wrap my mind around the routing the markets have taken today (and over the last week). I was expecting a melt, not a melt down or at the very least more of a precipitating event (ie. Bear Sterns). Double dip seems certain...the question is will the second dip eclipse the first?

There isn't much ammunition left - interest rates are in the basement. There appears to be little room for QE, and governments are talking austerity. This might be the tipping point for RE in Victoria, unfortunately it looks like the tipping point for the economy as a whole as well.

Batten down the hatches, we're in for a ride.

a simple man said...

Just Janice - you are absolutely correct. This may be the big tipping point. A lot of suffering already today.

Marko said...

The month has started with some very large sales....current SFH average is 763k...

I bought some more Suncor today at 33.15 and BCE at 35.80 (5.8% dividend).

There are some good companies out there with solid balance sheets and decent dividends.

Zidane said...

@JustJack "And Vancouver's prices are still increasing "

Not sure about that - G&M (paper edition, couldn't find the link online) had a chart today showing that Vancouver's prices dropped in the last month. So "still increasing" is at least debatable now!

pod_x said...

Suncor @ 33? Back up the truck!

Rhino said...

BCE @ 36? Drive away!

Animal Spirit said...

Likewise to Just Janice, the economic events of the last week spook me, not the least because the worst thing to do in a recessionary environment is to enter into an austerity program. Hopefully our governments understand this basic economic principle (luckily Harper should and likely does understand this).

There is a reason why I chose 'Animal Spirit' as my identity - the rational market does not account for human behaviour, particularly beliefs that something is going up in price (e.g. tulips) or down (e.g. European economoy). This can lead to both bubbles and spectacular crashes as fundamentals are ignored. A good summary is available at Animal Spirits

So, what does the new? economic quagmire meaning for Victoria housing. Who knows, however the animal spirit confidence fairy upon which prices seem to be currently based is starting to look like a fool's spirit, or Yertle the Turtle for that matter.

For those who don't know about Yertle, at some point Just Jack will hopefully share a story or two.

Introvert said...

There is a reason I chose "Introvert" as my identity: I'm an introvert.

Just Janice said...

Yertle is one of Juno's favorites... A good read!

Marko said...

5-year fixed appears to be heading down again....

a simple man said...

Why do I rent? Scroll down to the
Victoria data and you will see.

Zidane said...

Anyone know anything about 2535 Scott St - it looks like a flip?

Just Jack said...

I think rents do play an important part in a person's decision to buy.

Say, you have approached the bank and have been approved for a mortgage and accumulated a 5% down payment. And you expect prices to continue to rise. If the rent and the monthly mortgage payment are close then most would buy. How much of a premium over renting would depend on how fast you think property prices will continue to rise.

And if you expect prices to fall, then you would want your mortgage payments to be less than your rent. How much less depends on how far you feel the market will fall.

This is true for most people buying their first home, because money is scarce. Far less true for those buying up with lots of equity in their current home.

Of course as in all economics, this requires the individual to choose only one option at the cost of not receiving the others. But this really hasn't been the case for the last decade. With falling financing costs, it was possible to have the house, the boat, the car and the gold watch.

And that's why I think the price/rent ratio is only creditable for homogeneous housing in first time house owner's neighborhoods,like Westhills, Happy Valley or Mill Hill. And of no use in acreage, waterfront, custom built homes or most of the crap (sorry character homes) in Victoria. The difference between new and old homes that are otherwise identical in size and utility will not be the same even if the rents were the same because of the energy savings to the renter. Or comparing the price rent ratio of ten years ago to today without adjusting for increased taxes, more energy efficient homes or the typical costs of maintenance.

Over the long run, a steadily increasing price rent ratio will provide one of the many measures needed to gauge the health of the marketplace, but it's not the "Holy Grail" of determining how far prices may be overinflated.

Just Jack said...

LEASEHOLD Condominiums.

A Co-Op Condo is when you own shares in the entire complex. Conventional financing is difficult to get and can be expensive.

A leasehold condominium is when you own the suite but not the land the building rests on. Conventional financing is available from some banks, you just have to find out which ones. The land lease runs for a specific period of time and at the end of the lease term the suite reverts to the land owner. Who could either extend the lease or crush the complex and build a new one. So a mortgage can never be amortized longer that the lease term. Which is okay when there is 60 years left. Not so okay when there is only 20 years left on the lease.

With the strata condominium the only limitation is the economic life of the building which for argument purposes could be a hundred years. At the end of the buildings life - you still own the strata lot and would receive a share in the land value upon destruction.

Most leaseholds began as a 99 year lease. So the difference in value between a leasehold and a strata at the start of the lease was the future value of the strata lot discounted over 99 years. ARRGH! Layman's terms a leasehold and a strata are almost identical in price at the beginning of the lease.

But now, almost all leasehold condominiums have about 60 years left in their lease and will sell at a discount from strata condominiums.

Such is the case of a recent sale of a leasehold on Michigan which was bought back in 1992 for $98,000 and just sold for $180,000. That's an increase of 84% over almost 20 years. While strata condos have increased some 120 percent between the two time periods.

Those, looking for capital appreciation might want to think twice about buying a leasehold condominium.

Marko said...

"Anyone know anything about 2535 Scott St - it looks like a flip?"

I don't think this is a flip.

Just Jack said...

The market at a glance. Active listings in relation to the number of sales in July for detached homes

Victoria
136 Active listings compared to 20 house sales for 6.8 Months of Inventory

136/20 = 6.8 MOI for Victoria
9/1 insufficient for Vic West
90/19 = 4.7 for Oak Bay
55/13 = 4.2 for Esquimalt
54/5 insufficient for View Royal
270/57 = 4.7 for Saanich East
147/23 = 6.8 for Saanich West


262/18 = 14.6 for Sooke
244/26 = 9.4 for Langford
39/6 = 6.5 for Metchosin
74/12 = 6.2 for Colwood
31/1 insufficient for Highlands

117/13 = 9 for North Saanich
41/10 = 4.1 for Sidney
93/14 = 6.6 for Central Saanich

388/16 = 24.2 for Gulf Islands
254/16 = 15.8 for the Malahat

Craig said...

Is it just me or are there a lot of listings in the last few days?

a simple man said...

Craig - i was just going to write that - in fact, I had written it but got pulled away by a project for a couple hours.

Just Jack said...

A good looking fourplex sold in Fairfield that brings in $4,750 a month in rent and sold for $1,016,000 which is a price rent ratio of 214. More commonly expressed as a gross rent multiplier of 17.8.

Which doesn't seem too bad, until you realize that there is another $15,000 in taxes and other expenses to operate the building. That's a return on your investment of 4% before mortgage payments are made.

You should always mortgage revenue properties to the hilt and keep your principle dwelling mortgage free for the tax deductions. But man, there is close to zilch return on the equity invested here.

I've said it before, people are uneasy about the stock market and want to stay with what is comfortable for them - and that's real estate in the better locations. In my opinion, buying revenue property at this price is all about people trying to find a safe haven for their money.

But what a great time to sell.

Just Jack said...

A nice chunk of waterfront in Ten Mile Point had a nifty price reduction to 2.6 million. Down from 3 million.

Better than what the previous owner bought it for in February 2008 at $3,125,000.

Too hilly for riding the bike, and no safe moorage for the cigarette boat for those midnight runs to Seattle, so I'll pass on this one.

Zidane said...

Thanks Marko

Zidane said...

Time to play the "Pick your house, pick your price" game again? The one I would have picked just disappeared from listings, so I'll wait to make my choice. Any players?

Still_Waiting said...

I have been away for a few days and just had a chance to read the VREB spin. VREB compared the 523 sales in July to last years 527 and says things are OK. But last year was the lowest level of sales since 2002!! You can see this in a graph that DoubleAgent posted last year.

Victoria MLS sales 2002-2010

As usual the TC republishes this nonsense without any fact checking.

And inventory is at a 15 year high. Anyone looking to buy now needs to really consider if they want to lose some serious equity.

patriotz said...

"And that's why I think the price/rent ratio is only creditable for homogeneous housing.."

The main reason why price/rent matters is that it determines whether investors get a positive or negative cash flow. If investors rent at negative cash flow in expectation of gains on sale it's a bubble by definition as the Economist pointed out. It's also a Ponzi scheme which must eventually fail, because the more a house sells for the greater the cash flow the next investor loses, and eventually there will be no greater fool.

It doesn't really matter whether a homeowner is willing to pay more to buy than to rent the same property (or even knows whether it is more), nor does it have anything to do with how homogeneous the market is. If the total number of properties investors are willing to hold decreases -i.e the supply of greater fools runs out - there is nobody to sell to except renters, and these people are not able or willing to buy at the current market price. So prices have to go down, no matter what owner-occupiers do.

Animal Spirit said...

interesting. re-ran some analyses of houses <575K not in Westshore or too far out in the peninsula. A month ago, median list price was 104.0% of assessed. For the last week, it was running at 102.7%, or a 1.3% drop for the 70 houses in my Matrix. This is the first drop that I've seen since spring.

Just Jack said...

I agree with that Patriotz, only those prospective purchasers and properties listed for sale determine market prices. And that's only about 3 or 4% of the population at any time.

The other 96 or 97 percent are home owners who do not have their homes listed for sale, and people not actively looking for a home to buy. This last group has absolutely no affect on house prices.

As the market matures the group of prospective purchasers are made of more and more risk takers. In this great real estate casino, the two and five dollar tables are now closed and only the high roller table is left playing. Eventually that table will finish too.

And for the casino stakeholders to make money again, they have to entice the two and five dollar players back into the casino - and that means lower prices for homes.

For Victoria, the casino started closing down tables in 2007 when sales activity peaked. Since then the number of players has been progressively getting smaller. The government stepped in a for a time, by offering free drinks and lap dances to the masses to get them back to the tables, but now these stimulus packages are not working.

Anton said...

Just Jack has shown that based on July sales the MOI of the Gulf Islands is 24.2. My PCS is set up for Gulf Island properties. If the Gulf Islands is showing us the future, prices could be very sticky on the way down. Despite the listings piling on and very few sales there has not been a crash in prices. Even new listings often show up 30% above tax assessment. Maybe the Gulf Islands real estate market is a totally different animal, with a large discretionary (second home) component. Just as one doesn’t need a second home, perhaps a smaller proportion of the sellers need to sell their second home. Good thing because finding a buyer is like winning the lottery over there.

I am also spending some of my house down payment cash buying into the declining stock market. I’m a sucker for things on sale.

Craig said...

I'm not sure about that, Anton. I'm watching houses from 600 grand to 1 million between Oak Bay and Cordova Bay. There have been plenty of price reductions this week along with a slew of new listings.

Just this morning, there were 8 price reductions.

We were planning to move to a rental this month as my son prepares for school but we have decided to defer for a year as the quality and availability of housing has been dismal. But I am very encouraged by the price movements and are looking to pick off an outlier perhaps early next year.

SilverSurfer said...

Garth on Victoria's real estate market today. (Don't click the link, I think he's now sourcing his pics from people of walmart.)

" Yes, poor Victoria, capital of BC, the canary in Vancouver’s coal mine and a harbinger for Toronto where (I am told) about 100% of new condo sales last month went to speckers.

So what happened in Victoria? Cue the crickets. In the last full week there was a grand total of 18 residential sales, only seven of them single family homes. Yes, I know this is August and BBQ weenie time, but this is a market where there are more than 5,000 listings (and 1,000 real estate agents). At this rate, a total of 100 or so houses could sell in August – which would be an 80% decline from July.

That’s hardly likely, but it’s quite possible sales could be halved. And after that, prices. Of course, average asking prices already tumbled about $50,000 last month, so the canary’s squawking. And, I can report to you, the inevitable is spreading."

happy renter said...

Friends just bought way too much house relative to their income in OB. The reason given for spending so much money?: their income will only increase over time, so eventually the house will seem cheap compared to now. I had to try really, really hard not comment on that piece of wisdom.

Alexandrahere said...

I love it...."the canary of Vancouver's coal mine.

And the canary is binging his last pathetic bell. Help.

a simple man said...

Craig - I hear that logic all the time here in OB - along with "I am with gov't, so I am secure".

a simple man said...

that is, @ Happy Renter. Sorry.

a simple man said...

Are Garth Turner's numbers accurate?

Have there been under 20 sales last week? If so, wow.

Craig said...

31 Wellington in Fairfield went for $600,000. That's $94,000 below assessment.

HouseHuntVictoria said...

Over all of July, we averaged just 16.8 unit sales per day. Over the last week of July, we averaged slightly more than that: 17.8ish.

GT is suggesting that "over the past week," essentially the first week of August, which is more likely reporting sales from the last week of July given how pending sales gets reported, have plummeted to "18" or just slightly more than 1 day's worth of unit sales. And note how he doesn't attribute this data to anyone or anywhere: not even an "unnamed local agent" etc.

Now, we did have a long weekend in the "last week" so it's very likely that sales volumes are down from the previous weeks, which is often the case in the first week of the month regardless of whether or not it follows a long weekend.

GT does us all a disservice IMO by trying to sensationalize an un-provable data set. There's no doubt in my mind that Monday's numbers will show declining sales volume from the last reported numbers we have. I'll peg the numbers in and around the 100 unit sales mark, which is a slow start to what looks like it's going to be a slow sales month.

It's entirely unreasonable to suggest, even entering his own seed of doubt into the suggestion, that August sales volumes will drop 80% from July's.

JustWatching said...

a simple man,

Nope - Garth is out to lunch.

Here are the numbers for the period July 31 to August 7.

Pending sales - 120
New Listings - 297
Price Changes - 246
Sales/New Listings Ratio - 40%

BTW - I have changed my name from Still_Waiting to JustWatching. Too many "waiting" names being used on this blog.

JustWatching said...

HHV,

The numbers from Marko (VREB) may be slightly lower tomorrow. My stats are from last Sunday until 9 AM today. VREB will calculate from Monday to Monday and won't include last Sundays month end updates by some agents.

HouseHuntVictoria said...

@JustWatching...

Thanks for that.

Average daily sales volume is then 20... or actually up from July.

I've screen grabbed GT's post. May choose to have some fun with it later...

Craig said...

Just watching

Two price changes for every sale is an attractive ratio.

JustWatching said...

HHV said "Average daily sales volume is then 20... or actually up from July."

According to my calculations it is 120/7 = 17.1 which is the same as July.

I expect things will slow down as the month progresses. Pending sales are not reported until the subject conditions have been removed. The actual offer to purchase is typically made 1 to 2 weeks earlier. With the nice weather we have been having lately, all the folks now taking vacations and the stock market turmoil I suspect not many offers have been made in August.

JustWatching said...

Craig said "Two price changes for every sale is an attractive ratio."

This ratio has been around 2:1 for some time now. Prices are dropping...

June 26 to July 3
- 126 Pending Sales
- 281 New Listings
- 210 Price Changes

July 3 to July 9
- 116 Pending Sales
- 336 New Listings
- 253 Price Changes

July 10 to July 17
- 121 Pending Sales
- 339 New Listings
- 253 Price Changes

July 17 to July 24
- 113 Pending Sales
- 312 New Listings
- 235 Price Changes

HouseHuntVictoria said...

@Just watching, I did the math wrong prior to your post about when you collected the data from... I'd assumed first six days of August.

Regardless, same volume isn't 80% plummet.

a simple man said...

JustWatching - thanks for your detailed stats - I really appreciate them.

a simple man said...

that said, I am not seeing much of anything sold in Oak Bay in the past week, under $1M. Perhaps Garth was quoting for just Victoria the municipality?

HouseHuntVictoria said...

a simple man.... he could have just been quoting for Victoria Avenue in Oak Bay... It doesn't make much difference when your data need not be accurate, market-purposeful or honest and is just meant to whip up a frenzy of nonsense.

Alexandrahere said...

So far this week i.e. August 1st til now, in the core municipalities of Vic,Esq,OB,SE&SW up to $775K, I have 19 SFH sales, 40 new listings 41 price changes & 44 OM's. Condo sales are extremely low perhaps the worst week in sales this year.

Just Jack said...

It's been a long time since sales were this low. Prices were this low way back in 1996 when BC was in a recession and the only thing being built was Glen Clark's sundeck.

Mindset said...

Wow, just caught up with the financial news. Gold hit $1700 an ounce today? and the Asian markets were pounded

Wonder what the TSX is going to do tomorrow?

This is starting to feel like 2007 all over again.

Marko said...

Monday, August 8, 2011 8:00am:

MTD August
2011 2010
Net Unconditional Sales: 116 425
New Listings: 296 956
Active Listings: 4,783 4,356

Please Note

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

a simple man said...

Thanks Marko - those are some lower sales. Not Garth Turner low, but low all the same.

Mindset said...

Sure, sales are 'not too low', but I would personally add a 'yet' to that sentence.

If current stats are made up of pending sales that were initiated in previous weeks then my guess is that the current financial and global market downturns will prove significant (like 2007). The most telling stats are going to be in the coming weeks.

Robert Reynolds - HMR Insurance said...

oww my downpayment

a simple man said...

A lot of people losing a lot of "money" in the past week - this will impact house sales as confidence is shot. I agree, yet is to come.

SilverSurfer said...

@simple man,

I agree; however, it will also likely keep low interest rates pinned down a while longer, until Canada has a debt/bond crisis of its own. All these economic news are likely to scare house buyers. It may also have the reverse affect on a few people. I.e. stock markets are too scary, so lets dump our money in over valued real estate so we can be handed our heads later.

@ Mindset, it's a little different than 2007. Back then it was consumers going broke. Then in 2008 we saw banks and large corporates going broke. In 2010 it was small countries going broke and in 2011 its slightly bigger countries (spain, italy) starting to go broke, in 2012 it will be bigger countries (UK, France, China), and in 2013 it will be entire continents (Europe, North America) and a global currency crisis.

Believe me, Gold @ $1,700 is still very cheap. Same with Silver @ $39. Both could easily double from these prices, perhaps much more. In fact one way 'out' of this mess is for central banks to re-value gold north of $8,000 to eradicate most large sovereign debts, or include a significant % of gold as part of whatever the next global reserve currency is going to be. It's the only real money left - you can't print gold.

As we escalate from small countries to bigger countries, people will be fleeing to precious metals, especially in areas like China and Europe where for thousands of years precious metals is considered real money.

Real Estate in Canada will be declining as soon as Interest rates go up, and very likely even before then as global economies falter.

Grab some popcorn folks, the fireworks we'll see in the next couple of years are going to be the best of your life time!

JustWatching said...

Thanks Marko for posting the Monday stats.

I went back in the archives and looked at DoubleAgent's graph of weekly sales and new listings for August 2010. Looks like sales this year are running a little higher but so are active and new listings. The next few weeks may trend lower for the reasons I gave in an earlier post.

Weekly sales August 2010

Weekly active & new listings August 2010

Readers should know that last August was the worst in 10 years as shown below.

MLS sales by year

What is worse this year is we have another financial calamity to make sellers and buyers nervous. Prices are already falling and even the TC and VREB are reluctantly publishing this fact.

EagerBuyer(Not) said...

Here we go again! Banks expected to goose the market with ultra low 5 year fixed mortgages.

5-year Yield Dives Past All-time Closing Low

Will it work one more time?

Christopher J. said...

SilverSurfer, I'd be careful in thinking "you can't print gold." Miners are 'printing' over 100 million ounces out the ground each year. I agree the price could still double, but all bubbles end at some point, most often violently.

I also have to disagree with "Real Estate in Canada will be declining as soon as Interest rates go up". Real estate will rise once nominal interest rates rise (long ways off). You must always look at 'real' rates to understand. For instance, one of the main reasons stocks and real estate have been falling hard lately is 'real' rates are jumping even as the nominal bond rates everyone hears about are falling. The reason, inflation is now falling much faster than nominal rates, thus real interest rates are rising.

DavidL said...

Also from CMT:
Money market traders are now placing odds at 60% that the Bank of Canada will cut its key lending rate by May 2012.
Link: http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2011/08/boc-rate-cut-huh.html