Tuesday, September 6, 2011

September slumber? 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.

September 2011
Net Unconditional Sales: 51
New Listings: 186
Active Listings: 4,590
Sales to new listings ratio: 27%

September 2010
Net Unconditional Sales: 395
New Listings: 1,211
Active Listings: 4,323
Sales to new listings ratio: 32%
Sales to active listings ratio: 9% or 10.9 MOI

No bones about it. September 2011 is off to a slow start. Yes, there's a long weekend in there. Regardless, 10 unit sales per day is a drop of nearly 40% from the averages we've witnessed over the past couple of months. It won't continue thought. Sales numbers will rise, even if slightly. I say this with confidence because this first "week" was really a holiday weekend.

Will September be a good or bad month for local real estate sales? I'm guessing more of the same. Slow sales with a glut of overpriced, crap-quality inventory. There are a few deals to be found in some segments... as long as you define deal as "priced lower than this time last year" and you ignore the fundamentals of price to rent and price to income ratios.

47 comments:

Just Jack said...

Fernwood was hot, hot, hot - now its just hot,hot.

New sale on Belmont, 12 days on the market. But the vendor's accepted an offer less than list price and the property sold for a couple grand under BC Assessment.

The positive point about the home is that it is an old character style house, which is currently in demand in Victoria. Negative point, no suite. Perhaps that's why the home was under a half million.

Still you get about the same living space as a condominium but at twice the price. Economic rent and the monthly mortgage payment is roughly equivalent. The only thing that will sewer most first time buyers are the monthly utility costs and taxes of about another $500 a month.

a simple man said...

if you want an old character-style house then 2086 Byron is your dream - 1892, one of the ten oldest in Oak Bay. Only $850K.

EagerBuyer(Not) said...

a simple man,

Thanks for the tip about Byron. It is listed at assessment value and the photos look great. I am heading out to see it this afternoon and hope I don't get into a bidding war...

a simple man said...

If there is ever a home that I have seen that is worth the lot value minus demolition, it is that home.

EagerBuyer(Not) said...

a simple man,

Are you trying to talk me out of buying Byron? I hope you aren't just trying to scare me off to avoid a bidding war with you...

Just Jack said...

Byron's a nice big house in an average hood. When this property was bought less than a decade ago for half the list price, a family making a little more than average income had a reasonable expectation of paying off the mortgage in 15 years.

But holy crap, this is 30 plus years of payments. All it takes is for the interest rate to go up 2,3 or 5% at any one of the term renewals and all the payments you made won't mean a thing.

Its the Sword of Damocles hanging over your head.

JustWatching said...

Here is a nice summary by Tim Ayres of how much HST you pay on a new house vs. the old GST.

HST Table - Click here

On top of this you pay property transfer tax (PTT) of 1% on the first 200K and 2% on the balance.

So a new 600K home buyer pays 656K after government taxes (46K HST and 10K PTT). What a ripoff!

I think more than one prospective buyer will wait until the HST is abolished before purchasing. They will save 16K and if prices keep dropping even more.

jesse said...

"What a ripoff!"

Here's a zany idea: ask for a discount equal to the GST/PST-HST differential. An investment is an investment and there are lots of other sales tax exempt options out there competing on par.

We should remember, too, that builders pay less for materials so that spreadsheet's comparison isn't completely fair.

JustWatching said...

I was checking out the KIV forums tonight and saw this post by a local agent. This guy gets it!!

This is a reality check for some KIV readers.

Real Estate Market and YOU! How to get a really good deal!!

patriotz said...

As Jesse pointed out, the HST is entirely at the expense of the seller of the new property, because the market is dominated by repeat sales which are not subject to HST.

Take 2 identical condos A and B. A was sold a month ago but never occupied by a buyer who changed his mind. B is a new property. What are these properties going to sell for and why?

Take away the HST and the sellers of new properties would be able to sell for 7% more, i.e. for the same out-of-pocket expense to the buyer.

Just Jack said...

It gets even more confusing with the HST if the condo is bought by an investor or a home owner.

If an investor buys the condo then there is no HST rebate. If the property is bought for home occupation then a portion of the HST is rebated (usually to the builder).

If both properties are never lived in and then re-sold 6 months later would they re-sell for the same price?

Should your bank be lending mortgage money for the HST?

If you're buying a new condominium at 95% financing and the HST is 12% are you not buying at over 100 percent of market value?

The HST is confusing when it comes to real estate. I would prefer the WYS-WYG price. What you see is what you get.

omc said...

I don't really agree with that realtor's post; that the market is slow because rates aren't going anywhere. I think parts of this market are saturated because the prices are out of line with what people can afford - period.

It will be interesting to see what will happen now that rates are staying low for another extended period. Remember last time it was like someone shouted "everyone back in the pool!" after the 2008 correction.

a simple man said...

omc, you are right - prices are out of whack, period.

If they stay stable or increase, just rent.

Far less painful and fully mobile.

Chris said...

rates are staying low for another extended period

Low rate periods are always boom bust periods. Low rates invariably lead to over consumption and over production. Eventually demand vanishes as everyone has enough widgets, and supply surges from widget builders over borrowing. Rates fall even closer to zero as credit bubbles correct.

jesse said...

"The HST is confusing when it comes to real estate. "

It doesn't have to be. Just ask to see the bottom line and make a go-no-go decision. It's only complicated because salespeople make it that way. Don't fall for it.

Two phrases you should remember, courtesy Kevin O'Leary:
"How do I make my money?"
"What's the bottom line?"
Trite? Yep. Useful? Yep.

Alexandrahere said...

Hi all: In the past 3 days I have 8 SFH sales. Seven of the 8 sold for below BC assessment.

Examples:

638 Victoria OB Sold: $500K, assessed at $591K;

4583 Prospect Lk SW Sold: $587K, assessed at $690K;

2505 Arbutus, SE Sold: $586K assessed at $666K.

DavidL said...

@Alexandrahere

Those are substantial reductions below assessment! There must be some desperate sellers out there ...

I see that 2505 Arbutus spent 144 days on the market. I cannot imagine that the interior was in particularly good shape as very few photos are shown on PCS or realtor sites.

NewVicResident said...

I saw the Arbutus place. It was definitely lot value. I thought it would go for closer to $530,000. Busy location, right next to a bus stop and across the street from the new U Vic development (which will have a single vehicle entry and exit directly on each side of the house). Nice lot though, with great sun until about 5pm.

Marko said...

A ton of new listings today.

Once again...the assessments...4583 Prospect Lake went from $450,000 in 2009 to $589,000 for 2011 (did this property really increase that much in value? or did the assessment skyrocket?)....now sure where are you getting this 690k. It only sold 2k below assessment.

omc said...

I agree with Marko on the assessment thing, the tax man went a bit wild in some neighborhoods. Particularly the caddy bay/arbutus area, I rarely see a house sell for assessment in these areas. I often see houses sell for significantly less than assessment here. The oak bay sale is a bit surprising though, I wonder what is wrong with it.

One thing I really notice is that houses in poor locations (busy roads and such) get hammered as markets even become balanced. When the market is over heated you can sell anything. Buying at a peak is a bad idea in so many ways.

a simple man said...

Drink those lattes, drive that bmw, buy that coach bag from uptown, but we know the truth:

"A poll commissioned by the Canadian Payroll Association released Thursday found that 57 per cent of respondents couldn't deal with a one-week delay in their pay. The figure jumped to 63 per cent among workers between 18 and 34 years old. For single parents, it jumped to 74 per cent."

Mindset said...

Drink those lattes, drive that bmw, buy that coach bag from uptown, but we know the truth:

And with Carney holding the rates low, and stories about gold going to 3K floating around, the world appears to be a dangerous place again (if it ever wasn't in the last couple of years).

For those familiar with the 'megatrend' style of research (that has shown that current headline changes are a very accurate predictors of future trends), it would appear Canada is going to be tilting downward for a while as well.

Combine the high debt and recession, and you get a very nasty combo. I feel for the young families and kids just starting out in their careers out there.

With tuition cuts and a potential recession, I would guess that a basement suite next to a school would be a stable cash generator, especially a 2-bedroom where the rent can be split.

Just Janice said...

Still poking around - looked at a place on Vancouver (nightmare - would need a complete gut and reno (and it's a heritage building, so you can't really change the outside)), definitely a situation where it would be worth not much more than lot value (maybe 500k) - asking price 795K - I foresee it sitting on the market a long time.

...I think it might be a very quiet year as people wait for the HST to dissappear...

On the recession front, I'm fairly certain the next quarter is going to print negative...and we'll be in official recession territory.

JustWatching said...

Marko said "Once again...the assessments...4583 Prospect Lake went from $450,000 in 2009 to $589,000 for 2011 (did this property really increase that much in value? or did the assessment skyrocket?)....now sure where are you getting this 690k. It only sold 2k below assessment. "

The owner sure thought it was worth big money. This 1980 house was initially listed for 639K and was eventually reduced to 599K. Someone bit and they got 587K. I was surprised they got this much since the place didn't even have stainless appliances.

TC-Parrot said...

This press release just came into the newsroom. Later today the cut and paste article will be up on the TC Website.

Stats Canada - New Home prices

The New Housing Price Index (NHPI) rose 0.1% in July, following a 0.3% advance in June.

The metropolitan region of Toronto and Oshawa was the top contributor to the increase in July.


What about Victoria - where everybody in Canada wants to live?

Prices YOY are down 1.6%. We are second lowest in the table; just slightly better than Windsor.

You can expect more drops in the months to come as builders lower prices in an attempt to entice those waiting for the HST to disappear .

jesse said...

"people wait for the HST to dissappear"

I think it's rather simple for developers, Realtors, and attorneys to eat the difference, even advertising "we pay the HST". Sales problem solved. You're welcome. :)

"It's nothing a lower price can't fix."

Marko said...

"You can expect more drops in the months to come as builders lower prices in an attempt to entice those waiting for the HST to disappear ."

I really don't think it makes that big of a difference - most developments include net HST as do most builders.

In the Victoria core quality new SFH homes are difficult to come by - judging by the 1.2 million sale of a 2200 sq/ft home on Foul Bay last week I don't think HST will be a huge factor.

Mindset said...

I really don't think it makes that big of a difference - most developments include net HST as do most builders

I agree with Marko on this one. Purchase price HST is 'a' buying factor, but it's far from 'the' factor. I think people are generally priced out of the market or not, or are feeling confident in buying right now (i.e. retirees that have been planning to buy a house for years), or not (renters on the sidelines, or flippers/investors).

The buyers that are planning to buy and can pay the price, still will. Those that are feeling doubtful about buying here or are at their limits of spending, won't.

BUT...let's not forget a very important effect of the HST on Victoria. Taking it out will cost our already broke government an additional 3 Billion dollars, and the government is the stabilizer of our economy here.

I expect some pretty serious hiring freezes and government spending cuts in our number one employer. This probably means both local confidence and financial ability to buy RE is going to decline, which I think we are already seeing on the low-mid end of the SFH market and condos.

Just Jack said...

Just skimming through the condominiums for sale and reading about care condominiums for the elderly where you buy the suite and for another $1,700 per month you get one meal each day in the cafeteria, house keeping once a week that includes vacuuming, sheets and towels, and your monthly strata fees.

This one bedroom condo is up for sale at $65,000 in Fairfield.

The care-a-minium concept seems to be a flop. How about you get rid of the seniors and fill it with 25 year olds, and I think you have a new market niche. (Still might have to keep the staff with CPR training though)

Might just work for those busy young professionals we hear a lot about.

a simple man said...

HST matters little here - the fact that house prices are grossly over-valued, does.

Houses are cheaper this year than last - you can buy a better house with the same money now as compared to a year ago.

And values will drop further.

HouseHuntVictoria said...

HST is the boogeyman... industry seized on this to deflect from the truth: overvaluation and high commissions.

I'd be surprised if HST was a buying factor beyond a prospective buyer of a new property moving into the resale market.

EagerBuyer(Not) said...

Has Flaherty been talking behind closed doors?

Mortgage rules may be tightened, RBC says

Food for thought...

Real Estate Bubble And Pricey Commodities Mean Trouble Ahead For Canada's Economy

Just Janice said...

Krugman has interesting comments at http://www.palgrave-journals.com/eej/journal/v37/n3/full/eej20118a.html - what is particularly interesting is his comments around the housing bubble - "As Robert Shiller has documented — and, crucially, was documenting in real time circa 2004–5–6 [Shiller 2005] — the rise in real housing prices after 2002 or so took them into completely unprecedented territory. It was the clearest market mispricing I’ve seen in my professional life, even more obviously out of line than the dot-com bubble, which at least had the excuse that it involved novel technologies with unknown potential; houses have been with us for 7,000 years or so, and we should have a reasonable idea of what they’re worth." But somehow it's different here....

Just Jack said...

Why didn't economist see this coming?

For me, I started questioning the prices at the end of 2005 start of 2006. I could understand prices rising in Victoria, but when I looked around - prices were rising everywhere on the planet. It wasn't and isn't just Victoria.

The locals bought into the idea that it was the world discovering Victoria. Yet prices in Whitehorse, Spuzzum and Cardston were rising too. This wasn't the norm for real estate. If everyone is moving to Victoria, somewhere people are leaving and those towns prices should be falling. Like in Northern BC, small towns were loosing population to the cities, BUT the home prices in small town BC were rising.

Real Estate no longer was brick, mortar and dirt. A place to hang your bike helmet. It became a race to see how much debt you could accumulate. Today, the numbers are staggering. Over the course of the next 30 years, someone buying a home today will spent a third of their entire pre-tax life time income on this one asset.

That's dumb.

a simple man said...

Sometimes economists are so busy looking in the tide pools they don't see the tsunami coming.

They are all terrific at agreeing a big wave hit after everyone is all wet.

CanSpeccy said...

In comparing the US and Canadian housing markets, you need to consider the bank regulatory environment and how interest rates varied over time.

In the US the Fed:
"... enabled a frenzy of borrowing by dropping the Fed Funds rate from 6.5% in 2000 to a low of 1% three years later.

Bank deregulation, predatory lending, mortgage derivatives combined with Greenspan's injection of low interest stimulant, drove America's private indebtedness to an insane all-time high in excess of 300% of GDP.

Hooverville, 2011.
Then Greenspan's Fed drove a tank through the bubble it had created, imposing 17 consecutive increases in the Fed Funds rate, bringing it to a high of 5.25% in June 2006.

The result?

A property crash that destroyed the saving of many of America's middle class, and launched the Great American Depression of the 21st Century."

If the Bank of Canada drives the prime rate back up to 5.25% in a couple of years, we'll likely see a property crash here as the Americans had in 2005-2008. But, who knows, low interest rates could be around for years, decades even.

I think the future is unknowable, unless your are Alan Greenspan, or one of the other people who make things happen.

patriotz said...

Even with today's rock bottom interest rates, ownership costs in Victoria and most other major Canadian markets are higher than rent.

That's the root cause of all RE busts. It means that RE investing is a Ponzi scheme that must fail.

Canada's RE bubble was later in the interest rate cycle than the US's, but it's still not sustainable.

DavidL said...

@patriotz

I agree 100% ... in a housing market where housing prices more than double in eight years - there is no place for prices to go but down. Add in government austerity, inflationary pressures on consumables such as electricity, oil/gas, and food, systemic unemployment, zero wage growth, unstable world markets, aging boomers wanting to downsize, record personal debt levels (boy, I'm really upbeat today!) ... a market correction is inevitable.

JustWatching said...

Faithful HHV readers know that you always get the latest Victoria real estate news on this blog.

So today's news is that sales have fallen off a cliff, new listings are soaring and lots of price changes!!

Period Sept. 4-11
- 77 pending sales
- 316 new listings
- 239 price changes

Period Aug. 28 - Sept.4
- 118 pending sales
- 279 new listings
- 190 price changes

Watching and waiting said...

After another relist (lost count) a modest $1000K price reduction on the 1627 Hybury Pl flip (ML No: 298096)- now 678,900. Sad thing is, is that the house across the street that sold earlier this year for high 5's is now inhabited by university partiers up/down- another plus for this languishing flip.

JustWatching said...

More interesting news....

Lat month there were 25 sales over 1 million. In the first 11 days of September only 4. At this rate there will only be 12 this month.

This will push the average price of SFH down.

Mindset said...

I know how everyone hates the subjective comments, but I'm going to start this Monday morning by saying that the global outlook is getting downright depressing.

From darling companies like RIM dropping off, full time job losses, oil futures downgrades, to our global competitive rating declines... Even the positive news spinnners appear to be having a hard time finding good news about Canada.

I'd say this can't be good for any segment of RE where there is sufficient inventory already sitting around.

a simple man said...

And the HST being voted down will have to have an impact in Victoria's biggest employer.

I find subjective great if it is taken as such, especially when our objective measures are little better.

a simple man said...

and that is quite the turn in sales, if it holds up.

Marko said...

Monday, September 12, 2011 8:00am:

MTD September
2011 2010
Net Unconditional Sales: 126 395
New Listings: 502 1,211
Active Listings: 4,689 4,323

Please Note

•Left Column: stats so far this month
•Right Column

Marko said...

SFH average MTD = 621k
Condo average MTD = 302k

Alexandrahere said...

Good morning all: Here is a look at what I have for last week.

SFH: Min 2 beds & 2 baths, priced between $375K & $775K in the core municipalities of Vic, OB, Esq, SE & SW.

NEW: 32
SOLD: 18
P/C: 25
OM: 22

Avg Sale Price: $535
Med Sale Price: $515

12 of the 18 SFH sold went for below BC assessment or 66.6%.

The same week last year, i.e. Sept 6 to Sept 12, only 8 homes sold within the same criteria but the average price was much higher at $585K.

50% of the condo's I have been tracking sold for under BC assessment and the one townhome that sold (405K) also went for below assessment.