Tuesday, November 15, 2011

Turns out Victoria is different

RBC released a new report today on the near-future of housing in Canada. They predict house sales volumes and prices will rise next year from coast to coast to rocky mountains. If you live on the left side of our great nation, where you've likely been told for a generation that everyone wants to be and will pay a premium to live, and for the last decade or so you've know it as The Best Place on Earth!, you should expect your home to drop in value, statistically anyway, as fewer people plunge into this over-inflated market.
The average price of a detached bungalow is forecast to rise in all regions, expect [sic] B.C. alone, where prices are projected to slip by 1.7 per cent.
Too late to re-think that best place slogan? How about "The best place on Earth to be a renter"? Or "The best place on Earth not to buy a home"? Or my personal favourite: "The best place on Earth to blog about real estate."

71 comments:

a simple man said...

Best place in Canada to rent, for sure.

Has the winter hit your new home yet, HHV? How are you dealing with it?

Just Jack said...

I don't know about HHV, but I dug out the stanfield long underwear last weekend along with the rain pants.

Went and saw the Salmon run at Goldstream on the weekend and had a chance to speak with some people from Alberta, that were not happy to be outside in the rain. They thought it was too cold to be outside, because days like we had this weekend, they would have stayed indoors.

Another person was not impressed with the salmon run, and did not see the reason for people to come and see a mass fish suicide. Jonestown of the fish world.

Anyway, We had a weenie roast and loaded up on gluten and mechanically reclaimed meat and have now bloated up like a dead Salmon. And that's why I live in BC.

Just Jack said...

After several consecutive quarters where the months of inventory has been close to 2 years, is the Salt Spring Island market in collapse?

A property that sold, along Long Harbour, in February of 2003 for $280,000 has just resold for $320,000.

That's a roll back in prices of nearly 8 years!!!!

If Salt Spring Island prices can roll back to 2003 levels - can Victoria? That's a drop of 48 percent from today's prices!

Introvert, help me out here. Tell me that it's because Victoria has better weather than Salt Spring!

But it not just Salt Spring, other areas in BC are in a fast retreat to 2003 or even 2002 prices. Even Whistler is not immune.

Leo S said...

Introvert, help me out here. Tell me that it's because Victoria has better weather than Salt Spring!

Don't be silly. Unlike Salt Spring we're not isolated on an island here in Victoria.

Jason said...

What typical Hogue drivel this is. It's always the same unimaginative message he puts out, which is clearly what the banks want - reinforcement of the status quo. As for regional differences it looks like a very topical revert-to-the-mean analysis.

I wonder how many senior economists, from how many banks, said anything bearishly dissimilar to this report in the US, Ireland or any of the other of the many, spectacular RE blow-ups around the world.

It's different here of course, and so too are our banks and bankers.

HouseHuntVictoria said...

@ a simple man, I've had to "shovel" about 3 cumulative centimeters of the white and dusty stuff thus far. I suppose I could have busted out the leaf blower and saved myself the shoveling, though that seemed like more effort. TBH, we've been blessed with the best fall weather I can remember enjoying in a long time, it's been relatively warm (5-10 degrees most days) and very sunny; we've been more active into the evenings (seems to stay lighter later, but maybe that's just wishful thinking or revisionist history on my part).

a simple man said...

Terrific - as you likely know, we have had a very cold fall, from my perspective. I have had to scarpe my windshield for 6 mornings now. that si high for this early in the year, I think.

let me know how you are making out Jan, Feb and March. Feb is the killer month on the prairies, from my experiences.

MC said...

King George Terrace house in news again:

http://www.timescolonist.com/life/Sisters+slain+wife+seek+proceeds+from+sale+murder+suicide+house/5710086/story.html

Could you buy a house with history like this? Too much bad energy for me.

Just Jack said...

My initial thought was that the stigma of the crime would dissipate with time and each successive transaction. Four years ago, I thought the best thing to do was to demolish the home and sell the land.

But, the property has sold twice since the murder-suicide. The first time at a discount of between 10 to 15 percent of market value and the last time at a discount of 15 to 20 percent once again.

Will that continue? How long should prospective purchasers be informed as to the crime? Or should the agents have to disclose it at all?

If the property's market value was $1,100,000 without the stigma. What would you be willing to pay for the property knowing of the crime? Would you still discount the home after two different owners and 4 years?

a simple man said...

I would never live there. It is a place of so much pain.

Just Jack said...

Would you buy it for the land, and then demolish the house? Or would the stigma still be there?

a simple man said...

I once went to a piece of land that was for sale. The seller had started to pour the foundation but you could see he abruptly stopped. It was 80 acres by a beautiful river. When he was showing us the land he would not go down to the house site - he just stayed on the overlooking hill - said we could go down if we wanted. My father-in-law would not go down to the site and he didn't know why at the time - was strange to us as he is the very curious type. My wife and I went down and quickly came back up. We didn't talk about what we felt until later that night - but we both said we never could live there - something horrible had happened in the past - you couldn't help but feel it - it was pervasive. I still can't explain it.

So, no. I could not just demo the house.

Watching and waiting said...

after multiple relists/price drops and a year or so for sale,the 1627 Hybury flip finally sold for $645k.I am sure the seller is breathing a sigh of relief tonight ....

Marko said...

There are just way too many people flipping homes right now. The particular segment of the market is oversaturated.

People have been watching too many reno TV shows the last few years.

Leo S said...

On the other hand, 3449 Plymouth sold for 30k over asking... after 60 days on the market.. ???

MBComm said...

There are just way too many people flipping homes right now.

The main motive why too many people are flipping and building is low interest rates. While low rates lead to one last hoorah, they always leave an acute supply/demand imbalance. Simply put, low rate periods create over-consumption - pull forward future demand. As well as overbuilding - flippers and builders overbuild due to cheap financing. Regardless where rates go from here, it will take many years to restore balance. The Hayekian Triangle displays the reasoning nicely, if anyone wants to Google it.

Just Jack said...

Now that fall is here, its time to think about expired and canceled listings and how they affect the market.

Last month 90 house listing in the core districts expired. Median days on market 93. And 75 listings were canceled with a median days on market of 74.

And as we enter the winter holiday season, the months of inventory declines because of the increase in expired and canceled listings. In the past, that shortage of listings has had people buying homes that were overlooked by buyers for months before when the supply was higher.

So, it's not unusual to have a home listed for 60 days and then in the winter months have it sold above the list price. All it takes is to have two prospective buyers duke it out to see who has access to more financing.

Just Jack said...

How do you define a flip?

Well, if you're an economist for the real estate industry, you would use 6 months or less as a guide. If the home was bought and re-sold in less than 6 months then you would deem it a flip. That is so restrictive, that very few properties would be counted as flips.

Some use 1 year, because that's what someone told someone that told someone that Revenue Canada uses? And when you talk to those that admit they are flippers, they tell you that's why the live in the home for more than one year. Total BS, because CRA will still get them.

So, how about 2 years or less then? That sounds good to me, but it's not very scientific. I think you would have to know the turn-over rate in your city, to really answer that question.

So, how long does the typical Canadian own a home? And is your neighborhood turn-over rate higher or lower than the average?

Leo S said...

We've been hearing a lot about the high percentage of investors in the Toronto condo market. Wonder how they got that data and do we have anything similar here?

Just Jack said...

A key phrase for any prospective purchaser is sold "as is - where is".

From what I've seen this can mean a previous Marijuana grow operation in the home. Before buying one of these homes you should have an indoor air quality test done. The city can also condemn these homes too and then you are SOL.

And for all you tooters out there. No, a grow op isn't a plant growing in your bedroom window. A grow op means that the home has had significant alterations, usually without permits, to the home where heat and water vapour may have caused moisture damage which may include toxic mold.

Agents are suppose to declare if the home was a grow op. BUT, if the previous owner is gone, then there will be NO completed property disclosure statement. That probably gets them off the legal hook.

Just Jack said...

The amount of investors is easier to determine. You just have to find out if the BC Assessment is sent to a different address. Which would define an investment property as not being your principle home.

Just Jack said...

Sale today of a house less than 2 blocks from the water in Fairfield for $570,000. Which should make those who religiously believe in LOCATION, LOCATION, LOCATION drool.

And yet, the other week, a similar home in Fernwood (actually a slightly smaller home) sold for $600,000.

The difference - the home in Fernwood has a basement suite.

Maybe the new mantra should be:
SUITE, SUITE, SUITE

Fernwood is beaucoup cuckoo.

mrmike said...

Man is it slow out there right now.
As a journeyman carpenter\builder in vic since 94 this is shaping up to be the worst fall i've seen, more so than 08.

Laid everyone off (3 guys) now its just me on the tools, might give a few hours a week to a guy if i'm running behind.
My builder buddies have laid their guys off too and most not all are sending their warranties back to get the deposit and rid themselfs of the paper work expense.
No sense keeping a warranty (HPO) if you aint building new and dont think you will for some time.

Feel sorry for all these young guys (apprentices) out of work,I really dont no how they can afford to live in this town.
They graduated high school right at the start of a boom, got into trades thinking it would last forever...bought houses,cars,quads.
Now they're in big trouble selling anything they can.

This is happening right here in this town right now. This is gonna get ugly, I see a bunch of houses going back to the bank even if they dont raise rates, what do you do?

If you wanna survive these times in the trades you best be self employed,get rid of any overhead, work solo when possible, and keep a very sharp pencil.

Marko said...

The home in Fernwood is much nicer with more upgrades, has a suite, basement height of 7'8'' versus 7'3'' and the lot is almost 50% bigger and more usable.

Also with a lot over 6,000 sq/ft such as the one in Fernwood you could turn the basement suite back into the main living area and apply for a 600 sq/ft loft style garden suite.

Fairfield lot is too small for a garden suite application.

There are a lot of variables that might not be evident on first look.

Marko said...

"Man is it slow out there right now. As a journeyman carpenter\builder in vic since 94 this is shaping up to be the worst fall i've seen, more so than 08."

I guess it all depends on how the chips fall. I sold a home on Players Drive a few months ago for a builder who is a carpenter by trade and he had to hire more guys. Framing two large houses, one in Saanich one in Oak Bay.

Ran into another carpenter I know at Home Depot two days ago said all the chips fell into place this year as far as lining up houses to frame. Made $90,000 give or take.

Mind you drywall is down to about $1.05-$1.10 per sq/ft. However, if you are working 8 hours per day you can still make good money.

While there is less new home construction tons of renovations out there.

Anton said...

The people I run into in the construction industry say business is really slow. There is still some commercial construction but very little residential going on. The renovators say they are having to drum up business where previously they were turning it away. It's pretty obvious to most of us the boom is over.

happy renter said...

Does anyone have a sense of what downtown condos that were bought in 2007-ish are selling for now? Higher price, same price, or lower price? I get the feeling that there are a lot of condos on the market right now, but maybe I'm wrong.

Marko said...

Depends, I've seen condos bought in 2007 sell for $50,000 less than purchase price and $50,000 more than purchase price.

Renter said...

I'd say construction was slower. A few years ago, we invited Downs Construction to provide a quote on refurbishing the balconies for our 58 unit building (26 balconies). They wouldn't even come over to look because the job was too small. Now they're advertising on the radio looking for any size of home reno work.

happy renter said...

Thanks, Marko. What about in the Wave or the Juliet or one of those new buildings from around that time?

Marko said...

A lot of units in the Juliet were bought in 2008 during the boom. Recently one sold for $38,000 below what was paid in 2008.

It all depends when you buy. Pre-sale prices are typically much more attractive than mid-construction prices.

Just Jack said...

It depends if the condominium was bought from the developer in 2007. Pre-construction purchases and condominiums bought from the developer may or may not have been at fair market value. And why should they be - people were completing on an option to buy that may have been made a year or more before the sale closed. So some made equity - some lost.


But, if you just look at re-sales of condominiums in the core areas bought in June of 2007 in relation to today's prices then prices are up about 11 to 12 percent from the summer of 2007. With today's condominium prices at about the second quarter of 2008 price level.

But, beware when you assume that the previous purchase was at fair market value - it may not have been - then you're SOL.

Just Jack said...

How about a little more in depth look at the Juliet.

8 sales out of 96 suites in the last year making a turn-over rate of roughly 8 percent per year. Which is indicative of a complex with a lot of initial investors. With the typical one-bedroom suite selling for around $500 per square foot today. But, because of the changing views and locations within the complex, there is a much wider range in prices of +/- 25% just on the more common type suites compared to non view complexes. For those reasons, prices on most of the one-bedrooms suites can range between $250,000 to $430,000 with the average days on market just a smidge over 30 days.

Months of inventory averaged out over the last year at around 4.5 which together with the days on market that the general condominum market is experiencing, indicates that this complex is in greater demand than the typical condominium complex in the downtown core which has 6.8 months of inventory and days on market just under 2 months.

It's very unlikely that a prospective purchaser would be able to get any significant discount from fair market value in this complex. The demand is too strong in relation to the rest of the market.

Just Jack said...

I've been trying to think of ways to "short" this market. Shorting may not be the right term, some might call it being a male body part.

The Juliet may be a good example. What you would want to do is rent a suite in the complex with no less than a 3 year lease.

If the market continues to slide, the owner of the property will likely be strongly motivated to sell or face a bigger loss in the future. The cost of him breaking your lease and the agent's commission might just be used in your favor?

What do you think?

happy renter said...

Great info and analysis, JJ. Thanks! Can you possibly do the same for the Wave? Just curious - still in no danger of losing my happy renter status.

Just Jack said...

The Wave is much the same as the Juliet.

happy renter said...

Thanks. Interesting... anecdotally I'd heard that some units in the Wave have been selling for right around the amount that the developer had them listed for when the building was completed (in 2007, I think). Even if prices for the units are up 11-12% in 4 years, that's still not the kind of "profit" I suspect those buyers were hoping for when they purchased.

Just Jack said...

That would suggest to me, that the people back in 2007 over bought.

Think of it this way. Your a developer trying to sell pre-construction condos that will not be finished for two years. The market is hot and Condo prices have been increasing at the rate of 10 percent a year.

Do you market your condos at today's price or what you think they will sell for 2 years from now? And then hype the crap out of them.

Animal Spirit said...

Marko, Alexandrahere - either of you have the average and medians for SFH to date in the month.

Seeing quite a few low end sales and fewer high end ones.

Marko said...

Average is about 599k and median about 530k for SFH. Average for condo is 316k.

Sales have picked up a bit this week.

Alexandrahere said...

A Simple Man: Within my criteria, ie SFH in Vic,OB,Esq,SE & SW with a min of 2 beds and 2 baths, priced between 375K & 775K

31 Oct - 6 Nov: AVG:$544K, MED:$564K

Total Sales: 19

7-13Nov - AVG: $565K, MED: $558K

Total Sales: 22

So far this week: AVG: $594K with total sales of 20.

Sales are picking up this week compared to the last few.


Out of the 20 sales this week, 60% have gone for less than BC assessment and about half had secondary suites.

Alexandrahere said...

A Simple Man: Another little stat if you are interested; so far this week, 11 SFH out of the 20 sold have been in Saanich East.

Leo S said...

Interesting article about the Spanish bubble

christa said...

Does anyone have any comments re 2150 Windsor? Looks like a nice reno with a 1 br suite. I can't tell from the MLS whether it's 3 beds up with a 1 br suite? Anyone know what house in this condition and location would rent for?

Marko said...

Only two bedrooms upstairs. It was bought for $645,000 in March of 2009. They have since then done some renovations and but the clues in the pictures it does not look like they cheaped out. For example, the fridge is counter-depth (an extra $500 to $800)....you don't buy a counter-depth fridge if you are trying to flip a house.

If you would like the floorplans feel free to email me at markojuras@shaw.ca

Marko said...

but = by

a simple man said...

thanks alexandra here - interesting sales.

Just Jack said...

It seems that there has been a drop in the number of recent sales of homes that were originally bought five or less years ago. My personal observation is that the majority of today's sales are of homes that were originally bought in the 1990's.

Homes bought in the last five years may have sticky prices, but not today's sales. The sales of homes bought in the 1990's can trim more off their asking prices.

Just a personal observation, that can be shown to be reversed next month. I don't know if it is a trend or not.

Logically, it makes sense to me, as new construction has to compete with homes that are just a few years old. And by extension homes that are just a few years old have to follow the older home sales that have begun to set lower prices.

Fascinating to watch the market moving in reverse from how it began in the early 2000's.

I also think markets that had ballistic price increases over the last decade would also be the markets with the largest declines. There are a lot of potential sellers that bought pre boom and have a lot more ability to trim their price to make a sale happen. If prices had only been increasing a steady 5% every year, then this would not be the case.

"the bigger they are - the harder they fall"

Mindset said...

RE article... not sure how relevant to the west coast but thought I would pass it along

Will Canada's Real Estate Bubble Eventually Burst?

vawr said...

Any thoughts on 50 Howe, now listed @725 and on the market for a long time with several price reductions?

CanSpeccy said...

See Mish: "Canadian housing bubble makes US housing bubble look bush league."

Leo S said...

Not that I don't agree that there's a bubble, but Mish's article was very unconvincing. Some places in the US you can buy a house for $50k? So what, I'm sure you can find one in Canada for that too. Doesn't have any relevance to Vancouver prices.

And 75% drop in Vancouver? I will eat my shorts if that ever happens.

a simple man said...

My brother in-law in Saskatchewan bought one house in his hamlet for $2000 - needed a few renos, but was a solid house.

He bought a second house for a studio from the hamlet for $2. This was 6 years ago, of course, so now it may command $2.50.

patriotz said...

"Doesn't have any relevance to Vancouver prices."

The relevance is that household incomes and rents in the US are practically the same as in Canada.

In particular, Seattle has comparable incomes to Vancouver and house prices that are 1/2 as high.

But as Mish said, in Bizarro World it's different.

Just Jack said...

Last month the urban core districts of Esquimalt, Victoria, Saanich East and West, Vic West, Oak Bay and View Royal comprised 64% of all the sales in Greater Victoria. The Western Communities came in at 23% and the Saanich Peninsula including Sidney had 13%.

That's 2/3rds of all the sales were located within a 10 mile radius of downtown Victoria.

And in those areas strata homes and single family homes were about 50/50 in sales. 210 strata homes versus 222 single family home sales.

Saanich East and West lead the single family home sales with 137 or 53% or the total sales of detached homes, Victoria followed with 25% and for all of those who care Oak Bay had 9 percent.

HouseHuntVictoria said...

But Patriotz, Seattle isn't the Best Place on Earth, it's just next door to it.

Just Jack said...

I'm expecting the upcoming BC Assessment on individual properties will be lower than last years values.

BC Assessment are for tax purposes and are fun to look at and give a general indication of what your property is worth. For most of us reading this blog we have other more valid ways of looking at value than what one overworked assessor with a portfolio of 20,000 separate properties to value each year thinks your home or any person's home is worth.

But, for a lot of people - this is all they have to judge their wealth and self worth by. The psychological affect that their home is loosing value may be devastating to some. Incredible that it seems, in some parts of the USA, people are mad as hell with their lower property assessments. They feel that the lower assessment will bring lower prices.

The lower assessments also cause a lot of problems with lenders too. Before, the assessments were used to set the low end of a loan. A bank would lend you 75% on your BC Assessed value, under the belief that market value is always greater than the assessed value.

Today, it is becoming more common that the BC Assessment sets the higher value of the property. So if the lender is still lending on 75% of the assessed value, the lender may be lending at a much higher rate. If I were a shareholder of the bank, I'd want some changes made. That's irresponsible lending practices.

Leo S said...

I'm expecting the upcoming BC Assessment on individual properties will be lower than last years values.

I wonder. In 2009 they stayed the same.. I suspect that it might be the same this year, and maybe even some increases for the higher end places. They are still selling consistently above assessment, so a couple percent raise would be justified. Isn't the snapshot in July?

Leo S said...

Wow. Just speechless at this article.
Mingles moving housing market

“They’re not getting married, so they should get on with their financial lives,” he says. “They have cash flow increasing and they can afford it, plus financially it makes tremendous sense.”

HouseHuntVictoria said...

@Leo S,

That article confirms it: the mingles stopped buying in 2010. The next article will talk about Boomers buying investment properties for teenage Trump wannabes; it's time we teach our children about the quick-road to richness that is real estate investment in Canada.

Leo S said...

I'm just amazed that there was not a single word lost on the risks of teaming up with your roommate to buy a place. Or the fact that if the only way to buy even a condo is by pooling money that might be a danger sign. Nope, it just makes "tremendous financial sense" and that's the end of it.

Just Jack said...

OMG! Just keep pushing and pushing and pushing that market.

I'm trying to teach my daughter to not fall for crap like the well, everyone else is doing it so you should too.

Arrrrgh!

S2

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

Rent vs. Buy question. In our case, it would cost an additional $20K to rent for two year compared to a mortgage we feel comfortable with (> $20% down).

The question to this blog is, Should we rent? Part of me wants to rent, but it may take longer than 2 years for prices to correct significantly. Your thoughts?

JustWatching said...

Bob,

The answer to your question is not a simple one. In the upper right hand side of this blog page is a link to download a Wait vs. Buy excel spreadsheet. Try it out....

Just Jack said...

Bob if you want to buy a home, just do it. A home that you like in a neighborhood that you can grow with over the long term.

It's your personal circumstance that's important, not what this blog says, rants or raves about.

This blog informs you about the risk involved with buying real estate at today's prices and shows the trends and direction of real estate.

To me, your question's is all about time. It sounds like you place more importance on buying a home in less than two years than worrying that the market prices will continue to decline. That's good, because there will be a lot more homes for sale this Spring and you should have a good selection to decide where you want to live. You just have to accept that people buying after you, in your neighborhood, will be paying less and less for housing and these same people while buying after you, will likely pay off their mortgage before you can.

And that's what you are giving up in the future in order to buy today.

Marko said...

Monday, November 21, 2011 8:00am

MTD

November
2011 2010

Net Unconditional Sales:

314 479

New Listings:

570 722

Active Listings:

4,218 3,723

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

Fiduciary said...

From that "Mingles" article:

"Much of the desire for homeownership is driven by fear of being priced out of the market."

Bubbles are driven by fear and greed, simple as that.

patriotz said...

"In our case, it would cost an additional $20K to rent for two year "

Er, you're saying it would cost $800/month MORE than ownership costs to rent the same property?

Care to show us all the numbers?

Bob said...

"In our case, it would cost an additional $20K to rent for two year "Er, you're saying it would cost $800/month MORE than ownership costs to rent the same property? Care to show us all the numbers?"

The reason it is that high is that relocation benefits are on the table. I can have legal fees and transfer tax covered should we buy until Mar/12.

JustWatching said...

Bob,

Those legal fees and transfer tax may be covered but there might be tax implications so you might not see as much benefit as you expect.

If you are using CRA moving rules to lower your taxable income then you are only saving about half of what you claim (i.e. marginal tax rate x amount claimed).

If your employer is reimbursing you it might be a taxable benefit and you will pay tax on whatever they give you (check with an accountant).

BTW - how do you end up with 20K of property transfer tax and legal fees? You would have to spend about $1M to pay 18K in PTT. If you are buying in that price range there is bags of inventory and it is a real buyers market. Prices will drop faster on these high homes and 20K is not a big factor (one price reduction easily covers 20K)