Tuesday, October 11, 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.

October 2011
Net Unconditional Sales: 131
New Listings: 340
Active Listings: 4,562
Sales to new listings ratio: 38.5%

September 2010
Net Unconditional Sales: 467
New Listings: 976
Active Listings: 4,046
Sales to new listings ratio: 47%
Sales to active listings ratio: 11% or 8.7 MOI

We're averaging 13 unit sales per day, including a three day weekend in there. Low, high or about right for this time of year?

Resilient seems to be the word best to describe this market these days--if you focus on average reported prices only. The truth is anything but. With abnormally high inventory for October, and sales volumes at decade-lows, there is significant pressure towards lower prices, and zero pronouncements from industry players calling for higher prices.

65 comments:

Marko said...

SFH average so far this month: $601,575

Condo: $338,690

Just Jack said...

A type of home that really sucks in a market downturn, like the one we are having now, are half duplex homes. Add a location with too many properties for sale and you get some interesting price anomalies.

Why would you buy a half duplex home? Unless there is some kind of hook, such as a view or oil well in the back yard. The answer is price and price alone.

Way back in the pre boom days 11 years ago in 2000, a half duplex on Hansen sold for $186,500. Today after a little slap and tickle of paint and floor coverings the home re-sales for $349,000. A respectable 87 percent increase over nine years.

But, an under achiever when you consider the median price for detached homes in the Westshore moved up from $195,000 to $470,000 or 141 percent in the same period.

True, prices for half duplex homes started to rise later than detached homes, but they also began falling earlier in this demand driven market downturn.

In my opinion, half duplex home prices are ahead of the curve and show the direction and magnitude that detached home prices would follow.

Strata properties, freehold, leasehold homes are all part of the residential market. If one sector of the market is falling faster than the others, the affect of this sector's lower prices will have an affect on the remainder.

The problem with buying any kind of strata property today, is that prices have not bottomed and this market will tend to take a longer time, than detached homes, to recover during our next price upswing.

Just Jack said...

Yeah its 11 years.

Phil said...

And in the post bubble wasteland of Tampa, (Florida - where 1,000 people move to every DAY) you can lock in for 30 years and pay less than $600/month for your own home. Not to mention it's sunny and 29'C today... $99K in FLA

HappyHouseHunter said...

According to VREB stats, in 1993 the average house price for Victoria and area was $246,727. Real estate has historically appeciated 5% per year in the US and Canada. So plugging those figures into a compound interest equation you get $593,777. Pretty close to the current average of $601,575.

It seems like many people like to focus solely on the years 2001-2011, while conveniently overlooking the 90's where real estate languished for years. You have to look at the whole picture to get an accurate view of where prices should be.

Trilobite said...

@HappyHouseHunter

You are of course right that one needs to look at the whole picture ... but then why do you start in 1993 after a terrible bout of inflation ... . The notion that long term after-inflation real-estate returns in a fully developed market are significant when compared to the rest of the overall economy is tenuous at best.

Leo S said...

Real estate has historically appeciated 5% per year in the US and Canada. So plugging those figures into a compound interest equation you get $593,777. Pretty close to the current average of $601,575.

That is one heck of a circular argument you've got there.

Schiller determined that in most places, housing appreciation equals inflation. Where's your source for 5% appreciation?

patriotz said...

"Real estate has historically appeciated 5% per year in the US and Canada."

House prices cannot possibly rise faster than household incomes in the long run, because if they did price/income would increase towards infinity.

Suppose house prices appreciated 3% faster than incomes. That would result in a doubling of price/income every 24 years, or an 8 fold increase in a century.

As Leo said, in the long run house prices have tracked consumer price inflation. With a lot of bumps along the road.

Michael said...

Not only do they track inflation closely, but keep in mind most of us only recall the economic seasons of inflation and disinflation (seventies to present). Very few of us have any recollection of the deflationary season we are entering - unless you are really old and have a good memory.

the economic calendar and real estate

Marko said...

The tear down on Scott Street went north of 350k (I'll post the official number once it is entered into the system)...unconditional offer, there were 10 offers all in all.

Lot prices continue to climb while the SFH market remains relatively flat.

Leo S said...

The tear down on Scott Street went north of 350k

Goes to show that the "price it low, incite bidding war" doesn't really work anymore. 10 bids, but all of them apparently miserly.

Remember when this strategy was getting 40-80k over asking? Now they get half that, and the final selling price is still 10k under the assessed land value (and close to $100k under the total assessment).

Cycle said...

210-2529 Wark Street finally sold. Does anyone happen to know what it went for?

Marko said...

"Remember when this strategy was getting 40-80k over asking?"

So you would say if they priced it $299,900 and got north of 350k their strategy worked?

"10 bids, but all of them apparently miserly."

I wouldn't say so; a lot on Forbes sold for 330k and one on Shakespeare last year for 340k so I don't know on what bases you are calling the offers miserly?

Assessments

2009: $375,900
2010: $423,200
2011: $447,200

Yes, it is way below 2011 assessment, can't argue that one. The assessment is totally off.

Marko said...

210-2529 Wark Street for $242,500.

Marko

Marko said...

A girl from BC assessments called me the other day:

Paraphrased:

Girl: Hi, I am calling from BC assessments and I've noticed you have a property listed and the seller bought the lot last year for $xxx,xxx. Did your client pay HST when she bought it?

Me: I don't think HST was applicable in this situation.

Girl: HST applies to all new lots.

Me: I am pretty sure it doesn't.

Girl: So without HST the price seems way to low for this area. Did she buy it from a family member?

Me: No she did not buy it from family as far as I know; I think she paid market value give or take. I am involved in construction and follow lot prices closely.

Girl: No, price seems way too low for the area.

Me: Yea, but the lot is only 3,000 sq/ft.

Girl: Lots in Oak Bay go for $600,000 - $800,000.

Me: Well, this is not Oak Bay, and when was the last time there was a 3,000 sq/ft lot in Oak Bay? A good comparable would be the lots on the corner of Runnymead and Foul Bay; they went for similar to what my client paid and are bigger.

Girl: Well your client's lot is closer to downtown.

Me: Yea, but the other lots at almost 50% bigger and almost in Oak Bay.

Girl: I see lots in this price range in Saanich but not so in this area.

Me: Yea, but you are comparing a typical 7,000 sq/ft Saanich lot to a 3,000 sq/ft Victoria lot. If this lot was 7,000 sq/ft it would have been a lot more money as it would be duplex zoned in Victoria at that point.

Anyway....I got the impression she did not comprehend lot size and her logic was very very poor. She will probably raise the assessment on a lot that went right at market value.

I always question assessments.

Marko said...

It is pretty interesting in Ferwood you have lots which are 42' x 115' and they are assessed a similar amount for land value as lots that are 50' x 92' or 50' x 110' (both common in Fernwood); however, there is a huge difference between a 42' wide lot and 50' wide.

The offset in the City of Victoria is 15' so a 42' lot can only accommodate a 27' house which is a substantial difference from a 35' wide home which can be placed on a 50' wide lot. That 8' in width is huge in both curb appeal and interior design.

Anyway, one of the many reasons I don't place much weight in assessments when looking for personal interest. When working for clients I analyze assessments closely as it seems very important to most people.

Leo S said...

So you would say if they priced it $299,900 and got north of 350k their strategy worked?

Nope. I'd say their strategy worked if it sold for above what you would expect it to sell for without the gimmicks.

Yes, it is way below 2011 assessment, can't argue that one. The assessment is totally off.

Yep. Every time something sells for below assessment you question the assessment.

I'm not saying it isn't off in this case, I really don't care either way since individual sales are meaningless. The point is that overall the sales to assessments have undergone a big shift. Whether or not the assessments are off base is irrelevant. They've always been off base, but the overall sales also always exceeded them. Not any more.

Marko said...

"Nope. I'd say their strategy worked if it sold for above what you would expect it to sell for without the gimmicks."

I think it did sell for above what it would have if listed at market value to start. There are two very obvious comparable sales that are both lower. In my opinion it was very well played on the part of the sellers and the realtor. Their "gimmick" got every last cent out of the property - at least in my opinion it did.

As far as assessments - they have gone up and now we have more and more homes selling below assessment, so yes I agree with you in that there has been a large shift. We are in a flat market - at some point it had to get here.

Leo S said...

I think it did sell for above what it would have if listed at market value to start.

So which is it? You said lot prices are going up. So if they are, then you would expect the Scott lot to sell at higher than the other two. So a $10k increase in a year seems like well within the range of market value.

Or lot prices aren't rising after all, and the "price it low" strategy works.

On another point, we walked through the Shelbourne teardown last year and it really was just that with no hope of renovation. Assuming the realtor summary is accurate on Scott, then this one might actually be renovatable. I'll make a point to drive by it in a couple months to see what happened to it.

Just Jack said...

Lot prices can go up and properties with built homes can go down.

Two different target markets working in different directions.

One is for builders and those looking to have a new home built.

The other is someone looking for a re-sale home.

For example, in general those looking to buy the garden variety Gordon Head box are not looking at vacant land sites too.

The separate allocation of land and home price in your BC Assessment is to show a reasonable breakdown between land and improvements. The Assessment Appeal board will only hear arguments on the total "Actual Value" and will not arbitrate on just one portion of the assessment.


As for the conversation with the assessor. Victoria is used as a training area for new assessors. If you feel your assessments are wrong, launch an appeal as soon as you get the assessment in the mail.

Just Jack said...

Sometimes it is wise not to tear down the home. Especially if the home is larger than what would be allowed by the current zoning bylaw.

Then it would be far better to strip it down to the studs and re-built it. Giving you a larger home than if you were to build new. Double check your insurance policy in case of loss.

Because in real estate

- Size does matter.

Marko said...

Just Jack,

It is extremely rare to see a teardown that is bigger than the zoning Bylaw allows for.

For example, you can build up to3,014 sq/ft home on a 5,500 sq/ft lot in Victoria, and over 4,000 sq/ft on a slightly bigger lot...when was the last time you saw a 3,014 sq/ft teardown?

It only makes sense in certain situations. For example, there is a waterfront tear down on Lochside right now; however, if you tear it down including foundation an archaeological study has to be performed; whereas, if you leave the foundation and rebuild on it you don't have to go through the very huge cost and risk of an archaeological study.

Just Jack said...

Point taken Marko,

But as your post goes on to say, there are other reasons why the home is not torn down.

James Bay had a lot and still some large older homes in relation to small lots where the homes have been renovated and not torn down. The older homes don't meet the setbacks or the floor space ratio requirements of the current zoning bylaw, so if you demolish and build new you will have a much smaller building footprint and home that can be built. Then there are the encroachments and easements. So, it is not as uncommon as you imply.

The size of the home does not necessarily determine if the home should be demolished. It's the contributory value of the home in relation to the lot value. So, yes 3,000 square feet and even 10,000 square feet homes are torn down when their contributory value to the property as a whole is under say 15%. Unless....see above.

So saying that you've never seen this, only implies that you haven't lived long enough yet.

As for the waterfront property on on Lochside if you change the landscaping a study may still have to be done. But you have to weigh the cost of the study with the increase in value of the property. Sometimes you just have to pay off these special interest groups. Because, better placement of a new home on the property that would maximize the view should have a significant impact on value. Maybe they just got bad "off the cuff" advise. I see that a lot in this town.

Then there are registered and designated "Heritage" homes. Like the sale of the old character registered heritage home of around 10,000 square feet situated along Fort Street and on a double lot in area of commercial offices, that was used as an antique store for generations. Interesting to see what happens to that one.

Will it be torn down? Partially demolished? Relocated? Or will it be renovated?

And how about the property that most thought was bulldozer bait near the 4 Cats Art studio. Last time I went by the house was still there and people are living in it. For a home to be a demolished in this town, it generally has to have a higher value if the site was vacant and available or the house is uninhabitable to the point that today's cost of repairs make the project economically unfeasible.

Renter said...

... must remember to refer to Marko as "boy" in the future. The BC Assessment agent may have been new, but I seriously doubt she was 12.

Zidane said...

Sorry Marko, but you're guilty as charged on that one. I also am sure that the woman (young woman is ok) you spoke to is old enough to vote.

Ms. Zidane

Marko said...

Well my apologiezies, I guess you learn something new every day. She did sound very young; however, looking at the online usage notes obviously I was in the wrong.

"Usage note
Just as many mature men, even young men, resent being referred to as boys, many adult women today are offended if referred to as girls, or the less formal gals. In business and professional offices, the practice of referring to one's secretary as the girl or my girl, as in I'll have my girl look it up and call you back, has decreased but not disappeared entirely. Such terms as the girls in reference to a group of women, girl or gal Friday in reference to a female secretary or assistant, and bachelor girl in reference to an unmarried woman are increasingly regarded as offensive, and working girl in the sense “a woman who works” is declining in use."

Renter said...

Thank you, Marko.

Mindset said...

Marko pointed out:
Assessments

2009: $375,900
2010: $423,200
2011: $447,200

Yes, it is way below 2011 assessment, can't argue that one. The assessment is totally off.


Marko is raising a very important point here. If assessments in an area have creeped up over the last few years, and now RE is selling at 'assessed' where it wasn't before, then this is a percieved market change, not a real market change.

Maybe checking current prices against 2007 assessments is a better approach? You can get the assessments for known addresses at eValueBC eValueBC

Chickinvic said...

Just for the record, I'm a woman (who works) and I certainly took no offense to anything Marko said. Lighten up people. The politically correct start to annoy after awhile too.

Chickinvic said...

Also, she sounds like a moron. Would that have been a less offensive thing for her to call her? It's among the terms I might have used.

Chickinvic said...

Grr, "him" to call her, not her to call her, lol. Wish I could edit after pressing the button.

Renter said...

@ ChickinVic

I didn't say I was offended by what Marko said, I just said that I needed to remember to refer to him as boy. As you seem to feel there is no problem with referring to grown women as children, you shouldn't have a problem with me referring to a grown man as a boy.

And if you think one of those things are okay but the other isn't, maybe you should ask yourself why you feel that way.

Personally, I'd have called the BC Assessment employee "Agent" or "BCA", but I write for a living so I'm up on the recommended styles.

Zidane said...

Mindset, I was hoping I could see assessments from previous years, but I don't think it shows this?

a simple man said...

@renter - you get paid to write here? I am contacting my agent!

I would recommend you never watch MTV or listen to any rap songs.

patriotz said...

"Maybe checking current prices against 2007 assessments is a better approach?"

Well if that's your POV wouldn't 2003 be even better?

How about comparing current sale prices against past sale prices for the same property, as JJ has done.

Assessments are statistically based, and statistics can mislead, but facts don't lie.

Leo S said...

Mindset, I was hoping I could see assessments from previous years, but I don't think it shows this?

PCS shows that. Click a property, click Tax Data. Usually shows the last 7 years of assessments broken into land vs building.

Leo S said...

I would recommend you never watch MTV or listen to any rap songs.

That's just plain good advice for everyone.

MC said...

All I can add to this is that what comes to my mind with the use of girl by a grown man in this case is "Girls have cooties!" Other than that, I am generally comfortable with people saying 'girls' in a social atmosphere. NOT in a professional atmosphere. I use 'girls night out' all the time.

When I stop to think about it though there are often times where people will use the word 'girls' as a source to create a sense of power.

a simple man said...

you go, girl!

Just Jack said...

I suppose "Cougar" is way off base then.

hp said...

2213 Windsor:

Sept. 7: $1,040,000
Sept. 27: $1,025,000
Oct. 13: off the market
Oct. 14: $869,000 relist.

a simple man said...

My favorite part of that Windsor listing was that the initial price was without HST, and then they dropped it an added HST - is was more expensive for the buyer after the drop!

a simple man said...

Lots of recent flips sitting for a long time in Oak Bay (St Ann, Dunlevy, Windsor). Does this change the willingness of flippers to try and get in and out for a fast buck?

I hope so. They drive the price up for all of us.

Mindset said...

Re checking house assessments against 2007: Well if that's your POV wouldn't 2003 be even better?

It might, but aren't 2003 assessments pretty irrelevent today? I can't see Victoria house prices rolling back that far. 20-30% seems more likely.

This sub-discussion is about buying a house today and getting the feeling that you got a deal based on it's assessed value.

With the market basically flat since 2007, it is important to watch for RE that has assessments that have shot up over the past 3 years.

I'm still an advocate for Case Shiller. That is still the best information source, but not widely available here in Canada or for homes that have had an original owner for the last 50 years.

2213 Windsor...

I drive by that one on my way home. That's one crazy overpriced piece of RE. Maybe they spent over 300K on the upgrade and need to get the asking price? Is it a bad flip?

Chickinvic said...

Renter - no I don't have a problem with you referring to a grown man as "boy" if that's your choice. You sound like a pompous arse.

I don't really care what you do professionally, but clearly you are right up on all of the PC crapola.

Zidane said...

Chickinvic, there is a way to edit your comments after posting: you will see a garbage can icon next to all your own postings. Click that to delete, then repost.
You might want to try that with your latest post, it was pretty off base.

Leo S said...

With the market basically flat since 2007, it is important to watch for RE that has assessments that have shot up over the past 3 years.

Assessments don't creep up for no reason. They're based on the sales. They always lag prices so comparing to 2007 assessments doesn't really make sense, you're just going to get further away from the current valuation of the neighbourhood.

Of course, the market is flat in terms of average prices, but average prices can be distorted easily by a different distribution of properties selling. The point of comparing against assessments is to avoid that.

Of course a case-shiller index is better, but without it we do what we can.

Just Jack said...

The historical resale analysis of Case-Shiller is not without its problems. You're trading quantity of data for quality.

A median analysis of the home you are looking to buy and the last sale of a similar home on your street, adjusted for date of sale, are also good economic indicators. Also, the last sale price of the home your looking at, again adjusted for time, would also be helpful.

So, I thought that I would try all the above on the property on Windsor and see what happens.

The historical re-sale analysis of the property itself did not provide any help as it was bought recently in April for $550,000. Then gutted and re-built.

Looking at 3 years of sales of similar homes having between 1,900 to 2,900 finished square feet and located on 5,000 to 8,200 square feet non water view lots in South Oak Bay resulted in 42 sales with a median price of $725,000 with a high low range of 15% or from $615,000 to $835,000. The Windsor home value, because of all its renovations would lay at the high end of this range.

The last sale of an updated home on Windsor street was a couple of homes down from the property and sold back in March 2007 for $680,000. Since median prices have increased some 12 percent since then, the current price of this sale could be adjusted to $765,000. Because the property is recently renovated, the property should get a slightly higher price than $765,000.

All of the difficulty in guessing a price for a property such as this, is the extensive renovations that have been made. There have been a few incredible prices paid for extensively renovated homes in South Oak Bay, but they are anomalies and do not fall within the generally trend for the neighborhood. Could the property on Windsor also find a buyer that would pay a price of $869,000 plus HST. Absolutely, they are out there - just not as many as there were in years past.

Reviewing the sales of homes in the area, the thing that pops out is that homes that sell in the range that this property is listed, are typically of a two storey and basement design, rather than a main level with basement design such as this one.

Which leads me to believe that the renovation should have been to enlarge the home by adding a second floor. In fact, I think it may have been better to destroy the old home and do a professional rebuild with a custom home. The cost to build new would most likely have been a lot less than the cost to renovate allowing for a larger profit. And I think the better design of a new home would have lead to a quicker sale.

Disclaimer
The above analysis cost you nothing - and that's most likely what it's worth.

Just Jack said...

Re-reading my comments, I thought I would jaw away at building designs.

One of the most common building designs that Victoria has is the one with a main living level and full height basement underneath. It's a Bi-Level home.

There is also the design of a home with a main living level and another floor above that usually has the bedrooms. That's a two-storey design.

The bi-level design allows an option to finish the basement as additional living area for the home owner or with a suite. Generally speaking, it is considered to be an inferior design to the two storey home. It's what the "poor" people buy. The one's that need help with their mortgages because they were to damn lazy to get a proper education and become hedge fund managers or system analysts.

The difference between the poor and the rich being another story (pun)

happy renter said...

Thoughts on 1561 Earle Place (listed at $599,900)? It looks to me like that's a nicer house than is typically on offer in that area for that price.

Just Jack said...

It's questionable if the sunroom should be counted as livable square footage in the main floor area. It looks more like an enclosed deck that isn't heated.

That's another 120 square feet in the main floor.

MC said...

Does anyone get that Boulevard magazine? In the October edition, there was a really nice custom built house featured (Fit for a Princess, p. 42-49). It is a bit of a dream home for me. If I ever have enough money to do so it would be great to custom build a house.

I was wondering how people get into the business of designing houses. Do you have to have a certain certification in order to design custom built houses?

a simple man said...

took advantage of the nice day today and walked to four open houses in Oak Bay - 3 were flips. I can't believe the low quality materials used in these flips. It is like they were spoiled from the past ten years in Victoria where anything would sell - they are not even trying anymore. But, the momentum is shifting. The realtors all had hungry looks in their eyes and desperation in their banter.

If you flip a house, please, use quality materials. The stuff out there will last 1-2 years and then you will be paying to have it redone.

My wife said she is happy renting forever if that is the market out there. I was proud of her.

Marko said...

987 Falkland Rd just came on market - looks like another flip.

a simple man said...

Indeed it is - but they claimed to have used high quality materials. At $10K short of a million for only 1880 sq ft ($527 sq ft), they better have.

a simple man said...

really hoping they put a railing on that back deck as well. Odd-looking from the back - looks like an addition for a garage with the deck on top.

Leo S said...

The lower end SFHs keep weakening

While the higher end is more resistant.

Very low sales this week as well. Last year there was a significant ramp up in sale prices from here until the end of the year. Will be interesting to see if the same thing happens again as inventory drops. Definitely more houses coming off the market now.

Alexandrahere said...

Makes you want to yawn:

SFH priced between 375K & 775K min 2 beds & 2 baths in Vic,OB,ESQ,SE & SW:

Oct 11th-17th 2010, 11 Sales; AVG Price: $540K

Oct 10th-16th 2011, 11 Sales, AVG Price: $540K (Med also $540K)

6 out of the 11 sold this week went for below BC Assessment and 6 out of the 11 sold came with 2ndary suites.

Within my criteria in the core municipalities, all the condos sold went for under assessment and one of the two Townhouses sold (6) went for below assessment.

Alexandrahere said...

Sorry, 6 condos sold and 2 townhouses.

a simple man said...

Leo S - once the legs go out in any market it is doomed to drop. If lower prices houses drop in value, the expensive ones will follow.

Animal Spirit said...

Leo - thanks for the sales to assessed analysis. From my look at it, the below 550K has only dropped 2-3% more than the higher range from the beginning of your time series. This makes sense to me as the higher end started to drop last year, while the lower end was resilient until the spring.

In terms of total listings - I now have 1160 in my SFH tracking - same as the maximum in September. Perhaps there are more being de-listed, but this would mean more new listings as well.

a simple man said...

Builders sure are a whiny bunch when they are not getting money hand over fist for largely inferior products.

Marko said...

Monday, October 17, 2011 8:00am

MTD

October
2011

2010

Net Unconditional Sales:

231

467

New Listings:

556

976

Active Listings:

4,569

4,046

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

Trilobite said...

Hi Marko,

Many thanks for the update. It's greatly appreciated! Doesn't seem to look like things are going either way in a hurry ...

Marko said...

sfh average = 594k
condo average = 355k