Monday, August 8, 2011

Monday market update

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.

August 2011
Net Unconditional Sales: 116
New Listings: 296
Active Listings: 4,783
Sales to new listings ratio: 39%

August 2010 totals
Net Unconditional Sales: 425
New Listings: 956
Active Listings: 4,356
Sales to new listings ratio: 47%
Sales to active listings ratio: 9% or 10.25 MOI

18 sales on the week, my A$$. Even if you narrow the sales area down to only the "City of Victoria," which is not our local market, I doubt the data offered was even close to the truth. Cherry picking stats to serve a meme that doesn't exist to the degree he desires only serves to fuel the arguments of those who seek to discredit the writings of the so-called bears on Canadian real estate. As the writer with the highest profile in Canada, Garth Turner should hold himself to a higher standard.

With that little rant out of the way, August 2011 got off to a rough start. Will it be a repeat of 2010? Likely not. We're looking at a daily average of about 16.5 unit sales. If that continues, we'll hit over 500 sales. If that happens, the spin will be unbearable as the VREB and TC parrots trumpet "Sales increase 15%!!!!!" No matter how you choose to spin it, the truth of the matter is this: even with sales volume in the 500 range, we're experiencing sales volumes in the decade-low range as evidenced by this graph from Double-Agent last year (H/T Just Watching):

And with inventory as high as it stands, we're not in "balanced market" territory no matter what industry tries to tell us. Sellers: sharpen your pencils. Buyers: demand discounts. 

58 comments:

Alexandrahere said...

Morning all here are my stats for the week of Aug 1st - Aug 7th.

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

NEW: 40
SOLD: 19
P/C: 41
OM: 44

Avg selling price: $559K
Med selling price: $556K

32% of homes sold went for under BC assessment.

58% of homes sold were advertised as having 2ndary suites.

Condo's and Townhouses: Min 2 beds & 2 baths, priced between $260K & $585K located in most areas of Victoria (not downtown) & Saanich East, all areas of Esquimalt and Oak Bay and Gorge, Tillicum and Interurban areas of Saanich West.

New: 24
Sold: 3 condo's & 2 townhomes
P/C: 26
OM: 15

One condo went for below BC assessment. The condo's sold for $380K, $267K & $295K and the two townhomes went for $430K and $440K

Just Janice said...

If the rate of listings increase and sales remain steady then the market as a whole is a worse market (from the perspective of the seller) than the market last year.

It would be nice if we could also measure 'shadow' inventory - this measure would parellel the different measures of unemployment in the labour market (ie. part-time for economic reasons, etc.) by measuring the number of houses 'for rent/rented' for economic reasons (a measure of reluctant landlords).

My sense is that there may be a large amount of 'shadow inventory' waiting for better market conditions than what has materliazed since the spring. If the market turns significantly (ie. price declines materialize for a number of consecutive months), these houses may get pushed back onto the market when the owners no longer see the market downturn as being temporary in nature.

I think when I see a surge in listings - I will be fairly confident that things have finally crested as the real estate bulls stampede for the exits.

a simple man said...

or "buyers" become "waiters".

HouseHuntVictoria said...

@JustJanice,

Agreed on the shadow inventory. I think that some of the current inventory was of the shadowed variety from last winter as well. I suspect that so-called stable market conditions led to a higher than normal inventory level late this spring. But I think there's likely a fair amount of sideline sitters waiting to see prices go up before listing... when prices start a noticeable falling trend, that is the media starts pushing that story, then we'll see a rush for the exits.

EagerBuyer(Not) said...

Sales should be lower in the coming weeks as potential buyers fret about the economy and adopt a wait and see attitude. The stock market got hammered last week and today the TSX fell by 491 points - another 4%. Things were worse in the US with the Dow dropping over 634 points and the SP500 dropping 80 points or 6.7% in one day.

BCers are struggling with their debts according to a recent CIBC study.

Vancouver Sun article

It found 37 per cent of British Columbians reported being debt-free, compared to 28 per cent nationally.

Of the 63 per cent of British Columbians who reported holding some kind of debt, only about half (48 per cent) said they were making good progress toward paying it down so far this year, as opposed to 61 per cent nationally.

Forty-four per cent of them felt they were making sacrifices in an effort to manage their debt better, with 49 per cent making at least one lump sum payment toward it and 38 per cent instituting a household budget.

Alexandrahere said...

Hmmm

9 Aug 2011 TSX closed at: 11670
9 Aug 2000 TSX closed at: 10,863

Over 11 years a total gain of 807 points. 73 points per year & 6 points per month. Was it worth all the tossing and turning at night, the headaches and nail biting during the day and the routine spousal arguments of " I told you so!" ?

Just Janice said...

hmmm...today the assets to debt ratio took a bit of a beating...apparently the asset floggings will continue until the confidence fairy comes to the rescue.

Note: confidence fairy refuses to make an appearance until after the real problem is solved (jobs, jobs, jobs - income growth and jobs)...

Just Janice said...

@alexandrahere - so much for the buy and hold philosophy...

Meanwhile if you bought a Fernwood box it appreaciated by 250% providing leveraged returns of an insane amount!!!

...of course what no RE agent will tell you is that "Past performance is not an indicator of future performance..."

patriotz said...

"9 Aug 2011 TSX closed at: 11670
9 Aug 2000 TSX closed at: 10,863"

Add dividends and you have a fairly respectable return even though the starting point was just after the top of the dot-com bubble.

Compare to someone who had bought a house near the top of the US bubble in 2006, 5 years later. And I don't think they'll be in better shape in another 5 years.

If you had done a fair amount of buying stocks near the bottom of the dot-com bust or the financial crisis bust you would be way ahead today.

That's the nice thing about stocks. You can buy or sell in slices. Houses are all or nothing.

pod_x said...

@EagerBuyer(Not)

And 4 in 10 say

their current debt level is an obstacle to reaching future financial goals.

http://ca.news.yahoo.com/cibc-poll-finds-72-per-cent-canadians-debt-133257122.html

Introvert said...

Are there any statistics on how many people are put to sleep reading all these statistics?

Marko said...

"Over 11 years a total gain of 807 points. 73 points per year & 6 points per month. Was it worth all the tossing and turning at night, the headaches and nail biting during the day and the routine spousal arguments of " I told you so!" ?"

If you are tossing and turning at night you really shouldn't be investing.

Also, you can make money in flat or down market you just have to be active. I've traded Suncor 22 times since October 1st, 2010 and probably 200+ trades in total since New Years. So yes I got burned buying on Thursday $300 but overall still up $2,700 on Suncor. I don't depend on investing for income, it is more of a hobby to fill slow real estate days. If I got stuck underwater with a company like Bell, BMO, Telus, TRP, etc...I would just hold and collect dividends until a bounce.


10/01/2010 12:43:18 Sold 100 SU.TO @ 33.92$ 3,387.05$ Executed Detail
09/21/2010 14:46:26 Bought 100 SU.TO @ 32.90$ -3,294.95$ Executed

11/04/2010 11:15:07 Sold 100 SU.TO @ 35.41$ 3,536.05$ Executed Detail
10/27/2010 11:41:29 Bought 100 SU.TO @ 32.68$

11/18/2010 12:07:09 Sold 100 SU.TO @ 34.46$ 3,440.68$ Executed Detail
11/16/2010 13:02:39 Bought 100 SU.TO @ 33.73$

etc..etc..etc..

Marko said...

Same applies to real estate....in a flat market some people take a wash and some people make money.

DavidL said...

@Introvert wrote: Are there any statistics on how many people are put to sleep reading all these statistics?

50% of statistics are made up (including this). ;-)

DavidL said...

Anyone know what is up with Blackberry Lane (in Saanich)? 4069 has been on and off the market three times since the beginning of March, 4060 has been on the market twice, 4049 was put on the market in December 2010 then pulled in February, 4024 and 4016 both sold within the past year and 4005 has dropped $30K since going on the market a couple of months ago. It is like the whole block has been up for sale!

Mindset said...

Sask government intervention to create more affordable housing includes mortgage support and building incentives? Everyone just needs to work together?

Hmmm. Wonder if this strategy work? (sarcasim there folks). Too bad the average Joe probably thinks this is in their best interest and votes accordingly.

http://tinyurl.com/3ss42f5


And as for investing in Suncor Marko, there are some legitimate theories that as the oil supplies dwindle, so will prices, mainly because a lack of affordable energy itself causes economic contraction. Seems counter-intuitive based on simple supply/demand economics, but probably worth a bit of reading if you are going to surf the oil wave.

Animal Spirit said...

Blackberry Lane is a Bear Mountain style development built before the mountain, not on the mountain and has houses packed together like sardines.

Haven't been in any of the places, but I imagine the shine is starting to come off. That and one can probably get a better McMansion for less price on the McMountain, with a side order of sardines.

Jason said...

Somebody (Devore) posted this over at the vancouvercondo blog:

http://sixtyminutes.ninemsn.com.au/stories/8281823/the-big-squeeze

It's perfect. Apart from the nauseating, overdramatized tone affected by the narrator at least. This exact story is playing itself out in many places in canada i think - vancouver especially. I personally know several families in the same bag. And it's sure to become more and more common.

Cheers to renting instead of joining the slavery pool.

a simple man said...

I'll cheers to that, Jason.

omc said...

I wouldn't cheer too loudly about the stock market crash. It probably won't push prices of houses down because interest rates will be forced lower. Even if we get a major smash in the markets, like in 2008, the gov't could very well decide to stimulate the economy again. As it looks right now, rates could stat very low for a very long time.

What is needed for a larger drop in prices is a true economic recovery where interest rates rise and larger returns in the stock market drains some money form RE.

nan said...

Please don't use the word "stimulate", that word has far too much positive connotation.

I stimulate my wife - the government doesn't "stimulate" the economy (or anything, for that matter).

Please call it what it is: the government is stealing value from tax payers in the most covert way they can. If they felt comfortable letting you understand how bad things are and what is actually going on, they would simply tax you.

I would propose that from now on, instead of saying "the government might decide to stimulate the economy", everyone should say "the government might decide to steal your ability to consume later so it can consume now to put on a show they can't afford to remain in power"

There is nothing more to it than that.

a simple man said...

Big news: The U.S. Federal Reserve took the unusual step Tuesday of promising to keep interest rates low until 2013, trying to assure investors that it will act as needed to bolster the flagging U.S. economy.

This will have an impact here as it will be hard for Canada to not follow suit.

Hopefully they tighten lending standards instead in Canada.

EagerBuyer(Not) said...

a simple man,

The FOMC decision makes Carney and Flaherty look like fools with all their warnings to Canadians about rising interest rates. Reminds me of a childrens fable about the boy crying wolf.

You are right about tightening lending standards. With consumer debt at record levels the last thing we need is another pigout by consumers.

But we are just guys yelling into the wind. Flaherty and CMHC will do nothing to stop the bubble from being blown bigger. The banks, VREB and agents will pump the low mortgage rates as hard as they can. I suspect there will be another real estate sales boom in Sept. when everyone gets back from vacation.

Alexandrahere said...

a simple man: I see GIC direct here is following suit. Today one year GIC rates went from 2.05% to 1.95 & 5 yr terms went from 3.05 to 2.95.

Leo S said...

Seems the high inventory might be starting to push prices a little.
My 20 sale median price/assessment dipped below 95% for the first time in the under $550k SFH segment.
The trend in the over 550k SFHs is much less clear

Just Janice said...

@EagerBuyer(not) - actually I think what the statement does is deter people from buying now as it gives some confidence that low rates will be around later. Why would I buy today if the item is not 'on sale' and might be cheaper tomorrow? Further, the level of volatility and uncertainty should give anybody considering making a significant purchase pause for thought - these low rates suggest that recovery isn't just around the corner and isn't expected to be around the corner anytime soon.

The risk of a widespread housing correction increased as the risk of a double dip recession is now quite high. Except unlike in round one, interest rates are already zero, there is no appetite for deficit spending (even though strategic infrastructure and productivity investments would be wise), and increasingly lax lending standards are likely to be met with scorn.

C & F & H might like to believe that Canada is immune, but even the best looking horse in the glue factory is still a horse in the glue factory.

Mindset said...

...even the best looking horse in the glue factory is still a horse in the glue factory

Hilarious Just Janice, well said.

Mindset said...

Nan said: (re: stimulus) Please call it what it is: the government is stealing value from tax payers in the most covert way they can.

Unfortunately, its the tragedy of the commons. Few really care about food in the future trough, they just want to pig out now. We can worry about starving later, my stomach is grumbling right now....

All of this borrowing and 'stimulus' spending is just a stealth tax on our personal futures. I agree, 'stimulus' is too nice of a word for what it actually is.

I suggest we call it what it is, how about 'a huge deferred personal tax burden', or 'astronomical taxpayer gifts to failing and downsizing corporations'.

Mindset said...

EagerBuyer said: (re: low interest rates) I suspect there will be another real estate sales boom in Sept. when everyone gets back from vacation

Nice to see a bold prediction EagerBuyer!

To make it fun, I am going to predict ongoing price corrections and RE market bloat in September (historically compared of course, not compared to the last couple of crappy months).

The US Stimulus and low rates are borrowing from the future, and market investments are all about future returns. I don't think anything exciting is going to happen with our biggest trading partner for some time.

Anyone else want to make a prediction? Someone could always Bob Barker me, and say it will improve slightly....

Just Janice said...

From a strictly economics perspective - now would be a fabulous time to make investments in Canada's future productivity - even if it meant borrowing to do so. Borrowing costs are insanely low and if the investments can pay-off before the loan is due, then the government would be remiss not to spend the money now for the payoff later. Particularly given some of the challenges we are likely to face over the next 20 years....or we can fiddle this time away and face true troubles later....

We steal from the future by not making the most of the opportunities available today and by not recognizing (and mitigating) the risks to that same future.

Just Janice said...

On the prediction side - widespread housing correction initiates (-10% YOY - Victoria, Vancouver and Toronto) by the New Year.

Mindset said...

We steal from the future by not making the most of the opportunities available today and by not recognizing (and mitigating) the risks to that same future.

I agree in principle, but it all seemed to be pretty heavily slanted towards the opportunistic in the last decade if you ask me... I'd say its 1/2 past risk mitigation time now (if it's not completely overdue).

EagerBuyer(Not) said...

Just Janice,

Your logic is very good but many home buyers don't use that to make financial decisions. Emotion is the driving factor. They want bigger and better homes and want it now. Who cares what may happen in the future is the mindset of many. Recession fears and job security fade into the background when while looking at granite countertops and stainless appliances.

Buyers hardly look at the price of big ticket items - they only care about the monthly payment. With fixed interest rates soon to be the lowest ever payments will drop and few will want to wait. Add in friends, coworker and family pressure to buy and "helpful" agents and mortgage brokers and a purchase won't be far away.

The lemmings will be running hard in September and logic won't slow them down....

Mindset said...

Ok, so on the armchair RE forecast sheet we now have:

EagerBuyer: Sept sales boom
MindSet - Continued bloat and decline
Just Janice - 10% down YOY by Jan (2 cities added: Van,Vic,Tor)

Any other back-alley bet takers?

a simple man said...

I say a further 17% decline by New Years Day.

Mindset said...

Updated armchair RE forecast sheet:

EagerBuyer - Sept sales boom
MindSet - Continued bloat and decline
Just Janice - 10% down YOY by Jan (2 cities added: Van,Vic,Tor)
Simple Man - Further 17% by New Years Day

EagerBuyer, as you have a short timeframe, care to elaborate on what you predict by Jan 1 2012?

a simple man said...

How about we normalize all these predictions by giving average sale price for Jan 1, 2012?

I say $481K.

Mindset said...

Sure, subjective is more fun, but normalized is more relevant.

Hopefully no one calls us out for using the average house price as our target statistic.

I'll put my estimate at $545,000 by Jan 1, pegging the correction at about 12% or so by the new year.

patriotz said...

What is needed for a larger drop in prices is a true economic recovery where interest rates rise and larger returns in the stock market drains some money form RE.

They sure didn't need that in the US. Or Japan.

There is simply no scenario where today's prices are sustainable. Even if BoC rates are zero lending overhead costs mean negative cash flow for investors at retail mortgage rates.

Alexandrahere said...

Avg sale price for July 2011 in Greater Victoria was $581K. I say the average price will be $551K at the end of Jan 2012.

a simple man said...

How about Jan 1, 2010 alexandrahere?

To quell the dogs, lets include median. I put it at $470K.

EagerBuyer(Not) said...

Mindset - I don't have a prediction for prices. I believe there will be a surge in buyers in the fall but there is so much inventory it is hard to say what will happen with prices...

BTW - It is very hard to see things in my crystal ball right now. This is because it is very dark here in my basement apartment.

omc said...

I am going to be the contrarian to the contrarians here. I only see more of what we have seen so far in the future. Pretty soon houses start to come off the market and we start a whole new cycle. Many buyers panic as the inventory drops and settle on an over priced POS. Prices start to raise in the winter until things start to swing into the buyers favour in about April. Anyhow, a slow, slow drop in prices.

I have watched this same thing happen year after year now, with the only difference being if the price increases get traction come spring if it is a sellers market. Interest rates are too low, and will stay too low for any meaningful correction.

DavidL said...

Every few months, I re-post my prediction that I first made a year ago:

I predict that housing prices will slowly decline such that in 2014 they will be about 30% less than in the Summer of 2010 - essentially the same as 2005 prices. After that, prices will stagnate until 2018, not keeping pace with inflation (as happened in Victoria in the mid-1980's).

There are many contributing factors for this decline: economic uncertainty, government austerity, high unemployment, wage stagnation, inflation (particularly with food, energy, etc.), retiring baby boomers, unsustainable house prices - oh, and did I mention rising interest rates?

Granted that the current world markets fluctuations may delay a pending increase to interest rates, but there are too many economic pressures to postpone interest rate increases indefinitely.

JustWatching said...

OMC,

In the last 2 years average SFH prices have oscillated from 580K to 650K averaging out around 620K. Your observation of prices bottoming out in the summer and rising in the fall can be seen in this annotated VREB graph.

Victoria SFH prices 2009-2011

Will this pattern continue? Will we see an upwards climb one more time?

Any theories on why we have strong support and resistance price barriers?

EagerBuyer(Not) said...

A couple of Victoria real estate agents want to financially help young couples that are getting married buy a house. Read all about it by clicking here

Nice to see someone helping others with their dreams.

Marko said...

3930 Braefoot Rd sold today for $470,000.

It also sold last year for $511,000!

Auch.

Marko said...

595 Brookleigh Road sold today for $1,375,000.

It also sold in 2008 for $1,925,000.

I can also find reverse examples. What you buy is more crucial because you can decide on what you buy; however, timing the market is nearly impossible.

DavidL said...

@EagerBuyer(Not) wrote: A couple of Victoria real estate agents want to financially help young couples that are getting married buy a house.

Why not skip the expensive wedding and just put the money to better use? When my wife and I got married in 2000, we calculated approximately 60% ROI (return on investment). That is, the gifts were values at about 60% of the cost of putting on the wedding. (I know, we were a bit weird for considering our wedding in these terms - but too much thinking can do this!)

Commenting on the linked article ... whatever has happened to rich relatives just giving cash or a cheque to the couple at the wedding - why pay the 4% handling fee that H4H charges?

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

Commenting on the linked article ... whatever has happened to rich relatives just giving cash or a cheque to the couple at the wedding - why pay the 4% handling fee that H4H charges?

People are weird like that with money. Why not just ask on your registry or invitations or what have you for cash for downpayment on house or some other goal? Same thing, no middle man fee. It's like everything needs to be mediated and handled by professionals these days.

Just Jack said...

In a contraction, what you buy is very important. You want to stay away from properties that are heavily weighted in the land component. Acreage, waterfront, starter homes can be the most volatile.

What you should be looking for is the best house on the worst street. Which is completely the opposite of what you would be buying if the market is expanding.

All properties will loose value, its just that some types of properties are more inflated than others. So that biggish house on a 3,000 square foot lot in Esquimalt or Sooke, would shed less money than a 1,000 square foot water front home in South Oak Bay.

As for timing the market, don't waste your time. Buy, when and at the price that fits your needs. Don't bid, based on what you think someone else will pay. Bid a reasonable price in relation to the current market value of the property that is also reasonable for you. If it's not - then wait or become more reasonable in your expectations.

Your best deals will come - only when you are the sole bidder for the property.

Some people will get deep discounts on some properties. But, there will always be something that is weird about those kinds of properties. Like be a one bedroom home in Gordon Head. The mainstream home should always have a market following.

Or buy a single wide manufactured home in Sooke for $17,000 and wait for the market to correct. At least you'll meet interesting people with facial tattoos.

TC-Parrot said...

Many of you are wondering where the Victoria real estate market is going in the next few months. An in-depth article was posted on the TC Website tonight.

Condo building buoys Greater Victoria market

Edge said with referendum results on whether to keep the tax expected by the end of this month certainty will return to the market. "Whichever way the referendum goes, at least consumers will understand the taxes they will be required to pay," he said. "I believe there is some pent-up demand, people have been holding out for results of the referendum."

patriotz said...

"Condo building buoys Greater Victoria market"

There's one for the oxymoron hall of fame. How does an increase in supply of anything "buoy" a market?

Leo S said...

I don't think there is much point predicting the average price at a certain month. It fluctuates too wildly to make that meaningful. How about predictions for the 6 month average come Jan 1 2012 and July 1 2012?

I'll say 600k at the start of the year, and 570k midway next.

HouseHuntVictoria said...

"There's one for the oxymoron hall of fame. How does an increase in supply of anything "buoy" a market?"

The headline highlights three *things:

1. Writers and editors at the TC have either zero financial knowledge or integrity

2. Cut and paste of press releases isn't reserved for story content only

3. Industry took Andy for lunch yesterday

*possibly

omc said...

I have been watching the market closely since we walked away from it in 2007. At first I was a bit surprised that the prices are at their max in the winter, contrary to the belief held by many that winter is the best time to buy.

Do I think we shall see a rise again this fall? Yes, absolutely; there are too many people who put more thought in what they buy for lunch than buying a house. They will panic as the inventory starts decreasing and selection rapidly falls. Do they think houses can actually go up from here?

I would watch the flips in the Oak Bay area that have been sitting stale. These will magically re-appear on the market as 'new listings' with a bunch of fresh marketing just as the inventory is looking it's grimmest. Even the famous st-anne flip will snag a buyer when simple man envisions that his kids can live happilly in the basement, and the traffic noise isn't really there.

Zidane said...

The market in the UK seems to be on fire:
http://www.thedailymash.co.uk/news/business/housing-market-affected-by-houses-being-on-fire-201108104178/