Wednesday, December 14, 2011

Double counting

US home sales, for the past 5 years, seem to have been, in some cases at least, double counted. WOW. So the NAR misreported already weak home sales, on the upside. Who would have thunk it? A weak market is weaker than they tell us. Sheeeeeeeet.
Early this year, the Realtors group was accused of overcounting existing homes sales, with California-based real estate analysis firm CoreLogic claiming sales could have been overstated by as much as 20 percent.
Could this also be happening locally? Now don't get me wrong, I'm not making an assertion that monthly data released by local boards across the country is nefariously manipulated to misrepresent the strength of the market. I'm just asking a question: why do we put so much trust in data so jealously safeguarded against third party verification? Is the Landcorp info, or the Teranet info, enough to allow a firm like the US-based CoreLogic from exposing issues with the reported data?  

181 comments:

a simple man said...

I have asked repeatedly whether any of the data released from VREB is audited as they have a true vested interest.

Who really knows? What we do know is that they will twist the numbers any which way. But those are the ways of scoundrels and statisticians.

Leo S said...

Sheeeeeeeet

Senator Clay Davis approves!

HouseHuntVictoria said...

Was hoping someone would catch that!

Animal Spirit said...

This could quite easily be tested in Victoria.

1 - set up enough PCS accounts to track all SFH, condo and townhouse sales (separately)
2 - extract all pending sales into a database or spreadsheet
3 - test agaimst reported VREB numbers

I seriously doubt if numbers are being intentionally fixed - the market is simply too small. If anything, errors could be being made when sales fall through, foreclosure sales occur, data is typed in incorrectly, things are summed manually and the like. Could also be a few issues with new home sales sneaking into the reported repeat sales stats.

Leo S said...

What did Hanlon say?

"Never attribute to malice that which is adequately explained by stupidity."

I currently have 2 PCS accounts, one up to $550k, and one from there to $900k. Sometimes a house will start at over $550k and sell for under $550, which makes it show up as sold on both lists. I'm too lazy to remove them so I count the odd sale twice. Looks like something similar happened here.

Sweetrealtor said...

Sales are reported once. There is no method to report it twice. If it shows up on two separate PCS accounts it doesn't matter, it's still only one reported sale.

Leo S said...

Of course here PCS accounts have no bearing on reported sales. That was just an example from my own stats that matches the description in the article.

VP said...

I am having 80's flashbacks reading the news this morning. I remember these type of resource routs back then too. If I was a gambler I would say everything will be half off in our near future - timber, metals, oil&gas -- homes? If memory serves houses almost dropped in half where I lived in the 80's. Even as Trudeau and friends started slashing interest rates it did not seem to stop the slide.

JustWatching said...

Everyone wants to move to Victoria - especially criminals....

TC article

The most dangerous cities in Canada are in the western part of the country, according to the latest rankings from Maclean's magazine.

As was the case last year, the two most dangerous spots in this annual list were, Prince George, B.C., and Victoria. Prince George earned the dubious distinction of most dangerous.


Macleans ranking

Wonder what all those retiring boomers will think when they read this?

Fiduciary said...

JustWatching: Wow, I didn't think we were nearly that high. Definitely makes you think twice about the appeal of this city.

happy renter said...

What do you think it is about Victoria that puts us so high on the crime list? Vancouver comes in at #18.

Alexandrahere said...

McLeans Report: True, the stats look bad at a glance. But then they are saying number of crimes/per population.

Victoria at number 2 with population of 104K

Kamloops at number 16 with population of 85K.

Anybody been to Kamloops? That population figure pretty well encompasses the entire Kamloops area. Whereas the stat from Victoria includes just Victoria....not Saanich and the rest. But many of the crimes, especially those in the downtown areas here are committed by either our street people (that come from everywhere), or drunks after a night out.....but the individual actually lives in Colwood.

JustWatching said...

Alexandrahere,

If you look at the list you will see Saanich is #76.

The truth is the city of Victoria has high crime. It doesn't matter where the criminals come from the fact is the crimes are happening in Victoria.

This shows the problem with having eleven municipalities in the area. If they were all amalgamated we would save tremendously in overhead (one mayor, one police force etc.) and crime statistics would be over the entire CRD. The stats for an amalgamated Victoria would be much lower. An amalgamated police force would be much more effective as well.

As it stands now this article in a national magazine will have an effect on boomers perception of Victoria as a place to retire.

Introvert said...

As it stands now this article in a national magazine will have an effect on boomers perception of Victoria as a place to retire.

Doubtful.

patriotz said...

"What do you think it is about Victoria that puts us so high on the crime list?"

First of all, it's comparing statistics for a core city (City of Victoria) against metros which include suburbs (all major cities outside BC).

The other problem I have is the categorization itself of "most dangerous" as though violent crime were random, when it's anything but. An ordinary middle class person has about the same risk of being a victim of violent crime everywhere in Canada - about zero. Cities with higher violent crime rates have larger underclasses who inflict violent crime on each other.

Al said...

"As it stands now this article in a national magazine will have an effect on boomers perception of Victoria as a place to retire."

The stats is for Victoria core area only. But when outside people refer to Victoria wrt moving, they normally mean the whole CRD area, including Saanich, Sidney, Brentwood, Langford, View Royal and of course, Oak Bay. The Inner Harbor and the Store St area are for people to visit, not to live.

We have visiting friend being robbed on Douglas St during day time, and yet the very same person feels very safe walking alone in middle night on our home street near UVic.

Victoria downtown core does have a problem wrt homeless people, lots came here for the same reason as others (the mild weather), except that they are not impacted by the housing price. The city just have to manage it and we all chip in (via taxes) to help them (shelters, training, etc)

Marko said...

Demand for brand new homes continues to strong...

323 Windermere just sold for $2,162,500!

JustWatching said...

Al said "The stats is for Victoria core area only. But when outside people refer to Victoria wrt moving, they normally mean the whole CRD area, including Saanich, Sidney, Brentwood, Langford, View Royal and of course, Oak Bay. The Inner Harbor and the Store St area are for people to visit, not to live."

To most outsiders Victoria is the area that residents know as the CRD. I used to live in Ontario and before I moved here I was not aware that the city of Victoria was such a small metro area and the outlying areas were under different governments. I had never heard of the CRD. I would imagine that many people who have never been here or only visited as a tourist would not know this either.

So to the typical Maclean's reader the crime stats will be interpreted as being representative of the entire region. An incorrect perception but not good for tourism or attracting new residents.

The statement that the inner harbour and Store street is not where people live is only partially true. Look at all the new condos in the area. I used to live in James Bay and any resident there can tell you about the crime in that area. Fairfield gets a lot of B&E's as well.

A lot of folks that move to town want to live in Oak Bay. I suspect one of the reasons is that you don't have to walk by poverty and misery every day or look over your shoulder at night.

omc said...

I think we should all congratulate SimpleMan on his purchase of his house...

omc said...

...I noticed that the flip on st Anne has sold.:)

JustWatching said...

Patriotz said "An ordinary middle class person has about the same risk of being a victim of violent crime everywhere in Canada - about zero."

Totally false. Try telling that to all the women who are victims of sexual assault in Victoria and across the country. It is not safe for them to walk the streets alone at night in any metro area.

a simple man said...

omc - you are right - St Anne has sold after just a little over a year on the market. For $760K - a full $110K less than first asking and about $150K more than it will be worth in a couple years.

Don't think they made much on that flip and I am sure they will not try it again.

a simple man said...

JustWatching - you are right - there is still a sad fact of life in Canada that most women cannot walk outdoors after dark and feel safe.

This time of year always makes me remember how unjust our "civilized" sometimes is.

If you are a man, stand up for those women around you and make their world a safer place.

relativelyspeakin said...

It's a Christmas miracle.

Someone finally bought 727 Princess Ave.

JustWatching said...

727 Princess was a court ordered sale. The seller got a haircut. Originally listed for 355K; reduced to 275K in September and finally sold for 270K after 135 DOM.

Was it really a deal? BC assessment is 184K

The next door neighbour is for sale. Only 495K for this gem...

MLS 299680

..

omc said...

Numbers are very misleading right now. Lots of listings, but most are junk. I find most homes look much better on the computer than in person. The market is following it's yearly cycle towards higher prices as many buyers panic as the decent listings disappear and settle on a lesser property. It's no coincidence that lots of junk moves right now and lots of flips come to market.

Time to sit back and enjoy the holidays. It will be a sellers market in reality until about march.

a simple man said...

omc - that has certainly been the trend for the past few years when before that you could get a bit of a deal in the winter rainy months.

From the national blog, a local tale:

"On the day they went to their bank (TD Canada Trust) in Victoria to arrange a home equity loan for more renos, the local daily ran a story on the country’s real estate market. “Canada’s housing market is still chugging along steadily as sales activity nudged higher and prices continued to climb in November, data from the Canadian Real Estate Association said Thursday,” the CP article read. Added CREA’s crafty economist Gregory Klump, “Current trends for resale housing and new home construction suggest that tightened mortgage regulations are working as intended and fostering economic stability.”

And this was the story’s conclusion: “Despite economic turmoil in the rest of the world, Canadians continue to see real estate as a sure thing: A total of 432,048 homes have traded hands across Canada between January and the end of November, up 2.1 per cent from the same period last year, CREA says.”

Sounds good, right? Well, not in the bank.

Writing on this blog ‘Victoria’ said, “our house has already decreased 8%. TD will lend us only half of what we asked for.” So after investing $75,000 already in renovations, the place is worth about what they paid. “Mature neighbourhood, Mature trees, 1/2 acre. I am sick to my stomach.”"

Leo S said...

The market is following it's yearly cycle towards higher prices as many buyers panic

That's the thing though, this year I don't see it.
In 2010 and 2009 we had a strong rally in the last 3 months. Nothing like that this year. Sale/assessment is at/near record lows for the high and low end.

Looks like no one is panicking this year and overpaying for houses. Some of the crap is finally being picked off, and that's about it.

patriotz said...

"Try telling that to all the women who are victims of sexual assault in Victoria and across the country."

Most victims of sexual assault, like other violent crimes, already know the perpetrator or are engaging in risky behaviour. It's usually not a random crime, which was my point about violent crime in the first place.

Now I'm not saying that the victims "deserve" it, nobody deserves to be a crime victim, particularly kids who are not in control of their situations in the first place. But the fact is that your lifestyle has a great deal to do with whether you are likely to be a victim of violent crime.

Any amount of violent crime is too much and I think it's terrible that any woman should have to fear for her safely. But it's not my fault any more than your fault.

By far the greatest threat of violent death and injury to ordinary people is from traffic accidents. I have had a close relative killed and friends seriously injured. But aside from people like MADD, you don't see many campaigns against it. That's because cars are such an ingrained part of our culture we think this carnage is "normal". And also because the people who behave in ways that lead to this carnage are people like us - or maybe even politicians or their kids - not creepy guys who aren't.

Just Jack said...

In the core municipalities we were around 5 to 6 months of inventory. However, just in the last 30 days the months of inventory has dropped to 3 to 4.

Most of us realize that this is because vendors are taking their homes off the market during the winter.

But for someone looking to buy, it causes a panic because of the short supply.

So the best time to sell the low end homes, like the residences on Princess, Scott and Alder, is at Christmas when supply is short.

That could also be happening in the high end homes too. And that's why you may see some million plus homes sell around Christmas.

The winter is the worst season to judge how a market is performing as the volume of sales and listings are shallow.

In the "good" performing years of real estate our market rocketed through the winter season without the aforementioned instability. That we are experiencing this current irrationality is indicative of a precarious market going forward.

Flip Flop said...

O/T but I figured you guys are probably the crew to ask.

I'm looking at moving to vic and wondering if there are any decent natural grocers close to the DT core. Somewhere with lots of bulk and local foods, fresh produce, friendly knowledgeable staff, etc.

Any ideas would be appreciated.

FF

Fiduciary said...

Flip Flop: I don't think we have exactly what you're looking for. I wish we had a Whole Foods in Victoria...

There's a Market on Yates that ticks a couple of those boxes, but really it's the only big(ish) grocery store walkable from downtown, so it has to be relatively generic. There's a place like you describe called The Root Cellar, but it's about a 10-15 minute drive from downtown.

a simple man said...

flipflop - there are quite a few local delivery services that specialize in this type of food as well, and they are relatively affordable. Root cellar is great and an easy 15 minute bike from downtown.

omc said...

Leo S

I guess it depends what part of the market you are looking at. It seems that the lower end is a bit healthier and the gordon head box seems to be loosing it's shine, but mid/high end is showing the usual spike. The latest sales in oak bay and caddy bay have been flips, and that is pretty much all there is left.

a simple man said...

still can't believe St Ann sold - seeing that sign daily was like a beacon of stability. Still lots of flips for sale in Oak Bay.

Leo S said...

but mid/high end is showing the usual spike.

Isn't this the range you're looking in? Cause we are exploring new depths here. Or are you looking above $900,000?

Same for average prices, instead of jumping up $50,000 in the last 3 months of the year like in past years, we are down significantly so far.

Marko said...

SFH average for the month is running at 581k and the condo average so far is 346k.

Paula said...

“Most victims … already know the perpetrator or are engaging in risky behaviour. It's usually not a random crime”

It depends on the crime, and unfortunately Victoria has plenty of fine upstanding middle-class citizens who are victims, like any other city.

According to Stats Can, home invasions are on the rise, and these specifically target the elderly, and 63% are committed by total strangers. Also, 90% of robberies are committed by strangers, and some can be quite violent. Recently two friends have been assaulted by strangers while walking near their home (attempted muggings) in broad daylight.

Then when it comes to the “victim knows the perpetrator,” the definition is quite far-reaching. The attacker often knows the victim via work or friends, eg., a drifter in Winnipeg posed as a client to attack a realtor. Sadly, that's too common.

Anyway, I wonder if all the new condo developments in the downtown core have helped make the area safer simply by having more people walking the streets at night.

Just Jack said...

There is Ingredients Health Food Store and Apple Cafe at 2031 Store Street. They're new.

S2

happy renter said...

I live downtown and usually feel pretty safe, but I know that my female friends who also live in the area don't feel great about downtown at night. One has lived in both Toronto and New York and says she'd feel far safer in either of those cities because there are always people around at night.

Paula said...

happy renter, Funny you mention that. I also felt much safer in downtown Vancouver than downtown Victoria at night, and I wonder if it's because of the larger % of residents vs. drifters in the bigger cities.

backinVictoria said...

I agree that Vancouver feels safer at night. We moved to downtown Victoria (Harris Green area - not View Towers) last year after living in different parts of downtown Vancouver and we definitely notice a difference.

We attributed it to the number of dogs in Vancouver(only kinda joking). At any given time it seemed like there were half a dozen dogs and their owners out cruising around each building, plus all the other normal people coming and going.

Just Jack said...

I have a friend from Vancouver who had to come to Victoria for a business trip mid-week. After all the government workers clear out of downtown it gets pretty quiet down there during the week. She didn't feel safe walking around at 7:00 on a Tuesday night. She said the streets were pretty empty.

S2

Al said...

"After all the government workers clear out of downtown it gets pretty quiet down there during the week."

Sounds like Washington DC? So we do need more people living in downtown, more downtown businesses open late, and more downtown condos allow dogs.

A2

happy renter said...

Downtown is pretty dead after 7pm. But it is of course very alive at 2am when the bars close.

Flip Flop said...

@ Just Jack;

Thanks for the suggestion. Ingredients looks pretty cool. I'll check it out next time I'm over there.

Good little clip about the store on youtube.

http://www.youtube.com/watch?v=mbhP9q7Ty6g

FF

Marko said...

"Sounds like Washington DC? So we do need more people living in downtown, more downtown businesses open late, and more downtown condos allow dogs."

The City of Victoria is not development friendly and in particular does not like height. They also don't understand basic economics. You have councilors like Pamela Madoff who come out saying the city needs more affordable housing while at the same time voting against every single development proposal because it is "too tall."

Yet they keep getting re-elected somehow.

Paula said...

“City of Victoria is not development friendly and in particular does not like height.”

Yes the Official Community Plan calls for increased density in distant “town centres” without developing the necessary density in the downtown core first. With a denser core, there’d be a more active community filled with businesses serving local residents year-round and around the clock, not just tourists during the summer. Otherwise, we’ll just have more urban sprawl of low-rise buildings further out of town.

SilverSurfer said...

All that urban sprawl is going to look a heckuvalot less desirable when gas prices shoot up above $2 or $3/liter in a few short years. We'll either get there through wars over oil (will Iran be next?), or through hitting the brick wall of global oil output capacity, otherwise known as 'peak oil'.


The 'End of Suburbia' (trailer)wasn't just a (52 min) documentary. This film highlights the impact of the latter scenario.

After the global economic rout settles down, global GDP growth will recover, China and India poor will continue wanting to rise to the middle class, no major oil fields will be discovered, and thus oil demand will exceed OPEC output capacity.

When that day comes, and the oil price remains elevated above levels we've yet to see, its effects will eventually result in distant suburb housing prices to decline, as people begin to clue in on what driving to work every day is costing them. Perhaps in Victoria outskirts this will not be as bad, but in other parts of the country where people already drive 1 to 2 hours to get to work, over time this will have a visible impact. The first to be impacted are of course the lower middle class and poor, who had to buy a house in the suburbs already because the prices were low, and currently may be driving long distances just to earn minimum wages. As oil price increases, there comes a breaking point where the cost to drive to work rises above what's left of these poorer worker's disposable income.

chris said...

Silver surfer, you may want to reconsider peak oil theory.

In a landmark speech given in Riyadh on Monday, the head of Saudi Arabia's national oil company acknowledged that new technology has transformed the world energy outlook from scarcity to plenty.

"Last year, even as the world consumed nearly 30 billion barrels of oil, not only was the industry able to replace this production, but global petroleum reserves actually increased by nearly seven billion barrels..."

I beginning to wonder if all the people paying large premiums for energy-efficient real estate in core areas will end up being disappointed.

HouseHuntVictoria said...

If you subscribe to peak oil theory, I suggest you read a UofA prof's take on it here.

There's a lot of reasons to want to live centrally in a walkable neighbourhood close to work, but I'm not sure I'd subscribe to the theory of rising transportation costs as being high on the list.

Leo S said...

Peak oil or not, rising transportation costs are pretty much a given. Maybe fracking and the oil sands will save us from some of the more dire effects of declining cheap oil, but costs are definitely going up. No amount of technological advancement can make extracting bitumen from oil sands just as cheap as pumping crude out of the ground.

So if you're going to be buying out of town and commuting, better calculate your costs at $2/L gas at the minimum. That's not peak oil, that's just the natural progression of where things are going.

chris said...

"rising transportation costs are pretty much a given"

I would say "falling costs are a given". For instance if you live in the burbs and are tired of paying over a buck a litre, just trade in your old Honda for one of these Hondas
and fill up on your way out of town at the Mohawk on Quadra (more stations coming soon).

Even Exxon CEO's were getting it wrong as recently as 5 years ago.

From article "The facts are that gas production continues to decline, and will start to decline even more rapidly. By the time we get to that period (2010-2012), we'll need it badly." It would have been funny to see the look from that CEO if you said natural gas prices would be $3 per Mbtu in Dec of 2011, when they were around $10 then. As funny as it is to say to people now that oil & gasoline prices will fall just as dramatically in the near future for the exact same reasons.

Leo S said...

So at a nat gas price of $3/mbtu, you end up paying only 30-40% less at the pump compared to regular gas.

Natural gas conversions have been around for ages but it isn't really that big of a difference to make the pain worth it for the regular joe. Used to be fairly common conversion for cabs, but now the hybrids make a lot more sense.

As funny as it is to say to people now that oil & gasoline prices will fall just as dramatically in the near future for the exact same reasons.

Not gonna happen. But this is off topic. An argument for another site.

Marko said...

The natural gas Civic is 10k more than the base regular gas which starts are $14,990.....good luck making up the difference.

chris said...

The price of Honda's natgas cars and natgas at the pumps will fall quickly as we transition, new competition etc. US is further along than us. Think of any new product line (engine) when it's first introduced - flat screen TVs? now a quarter the cost. Btw, these aren't conversions, they come off the assembly line with the latest engineered natgas engines.

I suppose bottom line, natural gas is now 5 times cheaper than oil per energy equivalent. Whereas a few years ago they were similar cost per energy. Those same technologies are now being adapted to extract oil. Stands to reason oil supply will follow a similar path to natgas over the next 5 years.

I figured I was spreading good news. Imagine filling up for 30 cents a litre again, like we did about 10 years ago, with our energy companies still making a profit. Hurrah. Maybe 40 cents, taxes will still go up.

Back to real estate.

JustWatching said...

Oil documentary is now over. Back to our regular programming.

Here is a weekly stats update before tomorrow's "official" VREB numbers. Numbers obtained from database this morning. Last weeks numbers in ()

Unconditional sales: 79 (94)
New listings: 144 (133)
Price changed: 93 (109)
Cancelled: 45 (59)
Expired: 115 (75)
Back on market: 9 (9)

Sales have dropped as one would expect but new listings increased from the previous week. This could be due to the large # of expired listings. Some were probably relisted with a new MLS number.

DavidL said...

The costs of transportation and real estate are intertwined. It is no surprise that the commute distance from Victoria and the cost of real estate are directly proportional. Increased costs for transportation (for whatever reason) will depress resale values in outlying areas.

Incidentally, in 1977 when gasoline was sold in litres instead of imperial gallons: it first sold in Victoria for 24.6¢/litre. With the exception of a "gas price war" in the late 1980's, gasoline has not been sold below 30¢/litre for close to thirty years ... and that 30¢ is just over 70¢ in 2011 dollars.

chris said...

You're probably right David L, I must have been thinking about the conversion when we would slip across the border to fill up the slip tanks. Somewhere between 25 to 30 cents per litre sticks in my memory. I think there's 4 litres per gallon. Makes sense that it would be above 40 cents up here with all our taxes.
Looks like it hovered around a buck a gallon (25 cents litre) in the US from early 1990s to early 2000s. Believe we get back there again. But I suppose unless you got a big boat with spare tanks, Victorians will be stuck paying BCs extreme gas taxes.

Marko said...

Monday, December 19, 2011 8:00am

MTD December
2011 2010
Net Unconditional Sales: 230 349
New Listings: 361 522
Active Listings: 3,784 3,252

Please Note

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

Alexandrahere said...

The Imperial gallon (Canada/UK)has 20% more volume than the US gallon.

My stats for last week 12-18 Dec:

SFH: Min 2 beds & 2 baths, priced between $375K & $775K in the areas of Vic,OB,ESQ,SE&SW

Avg Price: 531K
Med Price: 488K

This week 15 homes sold and only two of them were in the $500K bracket. The week before, same thing: 17 homes sold and only two sold in the $500K bracket. Last week half of the homes sold had secondary suites, and all but two (both in Esquimalt by the way), sold for less than BC assessment.

Condo's pretty well in the same area having min 2 beds and 2 baths, priced between $260K & $575K:

Avg priced condo (3) $374K
Avg priced t/h(2) $345K

DavidL said...

Royal Bank warns on housing market
The Royal Bank is issuing a cautionary alert about Canada's over-extended households and the hot housing market ...

Trex said...

Globe and mail reports classic real estate bubble in Canada:
http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/merrill-classic-bubble-signs-in-canadian-housing-market/article2276241/

National Post now forecasting a nationwide drop in real estate values next year:
http://business.financialpost.com/2011/12/19/look-for-5-to-10-drop-in-home-prices-in-first-half-of-2012/

SilverSurfer said...

Look for 5% to 10% drop in home prices in first half of 2012 - Merrill Lynch


"...for next year, their base case scenario, to which they assign a 50% probability, is for a soft landing for the housing market. They see home prices dropping by about 5% in the near term but rebounding in the second half of the year to end 2012 about flat.

[HOWEVER...]

If mortgage rules were reverted back to where they were in 2000 and the maximum amortization for an insured mortgage was 25-years, instead of the current 30-years, we believe home prices would be almost 20% overvalued,” the authors said.

If we removed both of these effects [low rates and longer amortization periods] on our fair value model, home prices would look about 35% overvalued."

omc said...

I don't know if the local market follows the national market that much. Last year showed a fair rise in the national market, but I think that we had about a 5% drop here. Every where except Oak Bay that is, gravity doesn't seem to be applying there.

I see that the Gordon head box isn't rebounding this winter, so I will believe Leo S's thesis on a flat winter market. The stuff I am watching (Oak Bay and even caddy bay) does seem to be following the usual trend though. If this holds true we should see the 5-10% drop in much of the market come June/July.

patriotz said...

"if.. the maximum amortization for an insured mortgage was 25-years, instead of the current 30-years, we believe home prices would be almost 20% overvalued,”

That's the one of the stupidest things I've heard, and from an investment brokerage yet. That's like basing an acceptable P/E for stocks on margin requirements. Whether a stock is fairly valued has nothing to do with whether you pay cash or how much money you borrow and the same goes for housing.

a simple man said...

Marko - sorry O/T - I need a few business websites - how do you find studiopress for your website? Are you happy with it? Did you need an external developer?

SilverSurfer said...

patriotz,
Maybe what they meant is that at 25 years, the downpayment requirement would be bigger, which would cut more people off at the knees in terms of not being able to afford X threshold price, which would have an eventual effect of price declines due to less demand.... but that's a lot to extrapolate from their statement.

On another note, while they mentioned "Canadian Realestate" as a whole, possibly considering averages, if their overvaluations have any credibility, then in theory the Victoria/Vancouver market would see even greater deterioration in pricing.

a simple man said...

Victoria down 30% in a couple of years. It is happening now.

Marko said...

I really like the studiopress website. If I had to rate how happy I am with the website I would say 9/10. The advantage with studiopress is they have a development team and a forum to answer questions which I frequently use when I encouter problems. They also sent me version 2.0 of the template I originally purchased which I am currently testing out on www.834sales.com

The template cost $79.00 (one time cost) and I host multiple websites on one GoDaddy hosting account. My costs on www.markojuras.com are less than $2.00/month.

I've done all the work on the website myself and I have no IT background. Down the road if my business grows I might look at getting an external developer to sexy the website up but right now it does the job. I am trying to keep my operating costs to a minimum so I can maintain a massive price advantage over the competition.

a simple man said...

thanks Marko - I appreciate your response. And thanks other posters for your patience of my indulgence.

JustWatching said...

Marko said "I am trying to keep my operating costs to a minimum so I can maintain a massive price advantage over the competition. "

Keep up the good work!!! The full commission agents get far too much dough for what they do...

I only wish there were more guys like you so that the traditional business model of selling real estate would die quickly.

Iggy_12 said...

Marko,
Why do the cash back thing where the buyer has to pay money to the seller, the seller pays his realtor, the realtor pays you and then you refund the buyer? This triggers extra taxes through HST for Realtor fees and PTT. Couldn't you negotiate a lower sale price where the seller, seller's Realtor net the same amount and the government gets less in taxes?

Marko said...

"I only wish there were more guys like you so that the traditional business model of selling real estate would die quickly."

I think the traditional model is here to stay for a very very long time. A lot of people just don't get it...

A decent portion of sellers that go with a discount agent set the price too high. Then they attribute the lack of offers/sale on the discount agent. Subsequently they re-list with a full commission agent with a lower listing price...doesn't really make much sense!

Same with the buying end...most buyers think of it as "the seller pays my buyer's agent so it doesn't cost me anything." What they fail to realize is that they are the only individual the brings cash to the transaction which pays the seller and both agents.

Marko said...

"Marko,
Why do the cash back thing where the buyer has to pay money to the seller, the seller pays his realtor, the realtor pays you and then you refund the buyer? This triggers extra taxes through HST for Realtor fees and PTT. Couldn't you negotiate a lower sale price where the seller, seller's Realtor net the same amount and the government gets less in taxes?"

Listing agents don't like this as it complicated the process a lot (the initial MLS listing contract has to be amended, etc.)...I tried this a few times for family and friends - it didn't work out at all.

I know exactly what you are thinking. Go to the seller and say "we'll take 10k off the commission on the buying end which means you'll actually save $11,200 when HST is factored, you drop the price by $10,500 and we all benefit." Unfortunately real life does not work like this.

Plus from a negotiation standpoint you would get burned. Very few sellers are running the net numbers in their head. The majority are always looking at the price in the offer and making decision based on that.

JustWatching said...

Today there were 3 stories posted about real estate prices falling in Canada. Victoria has some of the most expensive real estate in the country with Vancouver holding the lead position.

This might make someone planning to sell in the spring nervous. Recent buyers with 5% down might even feel uncomfortable after hearing this on the nightly news. But everyone can rest easy now because Dennis Fimrite, president of VREB, says we won't be affected by Canadian or global economic conditions..

You can read all about it in this TC article:

Victoria safe from bubble

Key highlights

The capital region is largely insulated from economic factors affecting housing in other parts of the country

"The important thing to remember is that real estate is local,"

"If you look specifically at Victoria, we haven't seen any slowing of the economy here, although there's a little bit of government downsizing.

Victoria's economy is protected because this is a retirement town, a government centre with a strong high-tech sector and an attractive place to live, he said.

Leo S said...

"The important thing to remember is that real estate is local,"

He's right of course. While Vancouver prices are heading skyward and Toronto condos are being snapped up as fast as they can be built, Victoria has languished for 3 years and is now declining.

Animal Spirit said...

y = 106.14 - 1.0428x, r2=0.9194

Any guesses what this is?

Leo S said...

Linear trendline of our market or some segment thereof.

Iggy_12 said...

Thanks for the reply Marko. My next question is why not offer a flat rate? If one buys a 500k house with 70% cash back, he pays you $3000 but if he spends 600K, he pays you an additional $1350 or a 45% raise.

Is it not the same amount of work to buy a 500k house as it is a 600k house?

Doesn't that seem backwards? Shouldn't the buyers negotiator make more money if the buyer pays less? (i.e. you have an monetary incentive to get a lower price or better deal for your buyers)

patriotz said...

"Shouldn't the buyers negotiator make more money if the buyer pays less?"

Only in the real world, not the Bizarro world of RE where the buyer's "agent" gets paid more the more the buyer pays.

Imagine an employer hiring a negotiator who gets paid more the bigger the raise the employees get. Or hiring a lawyer to defend you in a lawsuit who gets paid a % of the judgment against you.

The very idea is absurd.

a simple man said...

animal spirit - that r2 is very high. Great fitting model. Any more details?

Marko said...

"Thanks for the reply Marko. My next question is why not offer a flat rate? If one buys a 500k house with 70% cash back, he pays you $3000 but if he spends 600K, he pays you an additional $1350 or a 45% raise."

Not exactly sure where you got the numbers on a 600k home.

On 500k I make the $3,000 minimum minus my transaction deal fees. Buyer is rebated $6,000.

On 600k I make $3,150 (30% 0f $10,500) minus my transaction deal fees. Buyer is rebated $7,350.

My gross only increases by $150 between 500k and 600k.

Marko said...

50 Howe just sold for $685,000...it was purchased in 2006 for $660,000.

Jason said...

Wow. Wasn't 50 Howe listed for $800k back in the summer?

Marko said...

Started at 889k early last year...

Introvert said...

Having read a few “desperate landlord” anecdotes here in the past few weeks and months, I wanted to pass along my contrary experience.

Partly due to the feeling that house prices in Victoria will never ever decline significantly, our lovely tenants of 19 months decided to pack up and move to the snowy pastures of the East coast, where one of them is originally from. We were quite sad to see them go; they were exemplary renters. After about a week of searching for new tenants, we were successful. Once the credit check was complete (and looked good), we negotiated on rent. Did we end up dropping our price by 20%? No. 15%? Nope. 10% or 5%? Not even. 4% is the answer. That is, we agreed on 96% of the original asking rent.

What is more, our previous tenants were acquaintances of ours and thus we offered them a discounted rental rate. The rent our new tenants agreed to pay is probably closer to the “market rate” of our suite. So how much of an increase in rent is that? 28.5%! (Boy, our previous tenants were sure getting a deal!)

So that’s my (contrasting) tale of good fortune. It’s not all doom-and-gloom for every homeowner/landlord in Victoria right now. (Knock on wood.)

a simple man said...

Good for you Introvert - I am glad you were able to find someone for your suite quickly - good places will always rent. Sad we are people to the unaffordability of housing here.

Leo S said...

Yup, a work colleague bought a new place and is renting the old house out. Didn't have an issue finding renters.

Anecdotes only go so far though. Vacancy rate is up, but still low, so unless your place is overpriced you shouldn't have an issue finding people.

a simple man said...

shoudl have said:

...good places will always rent [for the right price]. Sad we are LOSING people to the unaffordability of housing here.

December 20, 2011 12:49 PM

Jason said...

The probably didn't tell you about their pet goat and plans to run an after hours speakeasy.

Alexandrahere said...

I see a condo at #101-1021 Collinson sold for $233K today. That is a pretty good buy. It has over 900 sq.ft. with 2 beds and 2 baths. The master bedroom is fairly large and it also has an enclosed balcony. The strata fees are only $168 per mo. It certainly needs another coat of paint but otherwise looks ok. The place is close to town/Cook ST Village, Park, transport....everything. Also, there are some rentals permitted and it looks like there are no age restrictions.

Leo S said...

The blue beauty 1220 Alturas went for $455k today.. $70k under ask, and over $200k under assessment.

Al said...

We just sent in an offer today to buy a bank owned condo in AZ, as our son is in a graduate program there and will be living there for another 4 years. Very nice neighborhood, 1km from university gate, 2bd/1.5ba,1200sqft, second (top) floor, very well maintained complex with a year around pool. If things move smoothly, we probably would get it for less than half price of the previous owner paid 3/4 years ago, back to 2000 level. We are not sorry for the bank, but do feel sorry for the one for sale unit there, as bank/our price would cut 1/3 off what they are asking which is not much higher than last sale in the complex.

Could this happen in someplaces in Canada in future? Sadly yes.

a simple man said...

Leo S - thanks for bringing that one to our attention. Is this a picture of things to come?

a simple man said...

Just delivered to my in-box:

Dramatic Year-End Price Drops
on Oceanfront and Ocean View Estate Lots
at Silver Spray on Vancouver Island!

Thank you for visiting us this year either on site or by
checking out our website at www.silverspray.com.

We know that you're probably very busy at this time of year
but you can never be too busy to save tens of thousands of dollars!!!

This is YOUR time to SAVE BIG !!! Take advantage of
unprecedented year-end price reductions that will
save you up to $100,000 or more on one-of-a-kind
ocean view and oceanfront estate lots!

If you're serious about owning prime recreational property,
dreaming about retirement on Vancouver Island, or looking
for a solid long-term investment, this is YOUR time!
interest rates are at historical lows,
construction costs are way down,
and we are doing deals at 2007 prices!

Leo S said...

When are the new assessments usually released?

Animal Spirit said...

y = 106.14 - 1.0428x, r2=0.9194

Where,

y = month, starting in May
x = list price to assessed price, monthly median for all SFH <575K, core areas, <1000 sq ft
r2 = amount of variability accounted for by linear trend line

Disclaimer: previous performance does not necessarily indicate future investment yield.

Animal Spirit said...

oops, got my x's and y's backwards in that last post

JustWatching said...

Leo S said "When are the new assessments usually released? "

I am pretty sure it is around mid-January.

Leo S said...

Thanks, JustWatching.

patriotz said...

Thanks for the great charts and analysis, Animal Spirit.

"this is YOUR time! interest rates are at historical lows"

I never fail to get a laugh out of that line. Of course, the worst time to buy is when interest rates are at historical lows.

Marko said...

"I never fail to get a laugh out of that line. Of course, the worst time to buy is when interest rates are at historical lows."

That is if you believe interest rates will significantly increase in the next 5 years....

a simple man said...

Victoria featured on the national bear blog:

greaterfool.ca

As a result of the VREB president`s statement that everything is just fine here with respect to real estate.

Just Jack said...

Anytime that you are heavily leveraged in a property, you are at risk to an interest rate hike at mortgage renewal time.

Unless you have had sufficient paydown on your mortgage and you can extend your mortgage amortization period. So, I would say that isn't five years - but more likely 10 years. Assuming that you don't increase your mortgage, that puts the risk of loosing your highly leveraged home, to foreclosure, because of an interest rate hike at renewal, for the next 10 years - not 5 years.

There's affordability and then there is risk. Only lately have we heard lenders address how risky real estate has become. Real estate is basically just as affordable as a year ago - but risk has sharply increased.

a simple man said...

$104,000 drop on 816 Linden Ave listing price.

Different winter?

Leo S said...

Last year and the year before we had strong increases in the median in the winter months, and a slow decrease throughout the year.

Monthly SFH Medians

Will be interesting to see what happens if we don't get that strong increase this year.

patriotz said...

"I never fail to get a laugh out of that line. Of course, the worst time to buy is when interest rates are at historical lows."

That is if you believe interest rates will significantly increase in the next 5 years....


Rather, if you believe interest rates will significantly increase in your lifetime. Because if they do, prices will have to come down, a lot, and if that ever happens - not just in the next 5 years - people who buy now will lose, big time.

If you buy when it's more expensive than renting even at rock bottom rates, you are making a huge bet that rates will never go up and prices will never go down.

Introvert said...

Buying a $500k house outright with cash notwithstanding, there is no ideal scenario: Either prices are high and interest rates are low, or prices are low and interest rates are high. You can take your pick.

mln said...

Introvert, your statement is only correct if you lock in your rate for the entire length of the mortgage, as is common in the U.S.

patriotz said...

Even then it's only half correct really, if you have locked in the rate for the whole amortization as in the US, you are protected against rising rates, but not against falling prices which would be the result of rising rates.

Being upside down on your house for a decade or so can put a crimp in your life plans.

DavidL said...

@Introvert

How about buying when interest rates are average-to-low and prices are very low - like in 1968, 1986, 2002 and in 2018 (I predict)? Note the approximate 16 years cycle ...

Marko said...

"How about buying when interest rates are average-to-low and prices are very low - like in 1968, 1986, 2002 and in 2018 (I predict)? Note the approximate 16 years cycle ..."

Are you worse off having bought in 2004, 2007, 2011, etc? than having waited until 2018.

caveat emptor said...

"50 Howe just sold for $685,000..."

From what I saw on the listing and biking past that seems like a decent price assuming not too many skeletons in the closet.

Friends recently paid 90% of that for 1/3 of a house in a character conversion in an almost as good location.

patriotz said...

"Are you worse off having bought in 2004, 2007, 2011, etc? than having waited until 2018."

If buying is not cheaper than renting you are clearly worse off buying today than at any future date when prices are lower.

If buying is more expensive than renting it's worse than that, the break-even point keeps rising above the purchase price as time goes on because you have to make up that extra money you've been paying every month.

DavidL said...

@Marko wrote: Are you worse off having bought in 2004, 2007, 2011, etc? than having waited until 2018.

I am definitely better off having bought my house in 2002 than in 2004, 2007 or 2011. I expect that by 2018, prices will similar to 2004 (after adjustment for inflation). If I didn't already own, I would be renting and waiting.

Philly said...

Nice timing years DavidL. Canada's commodities and currency should begin strengthening again by about 2018 against the reserve currency. Good years you listed to buy CAD denominated assets.

Rhino said...

Teranet house price index out for October today. Shows a %1.5 drop from September. Thats 18% on an annualized basis..yikes!

That seems to jive with what I am seeing out there, thank goodness we don't have to rely on the VREB crappy averages anymore.

Roger said...

Leo S,

Try doing a 3 month running average on the median numbers in your data set for 2010-2011. It "smooths" out the monthly variation noise and allows you to see the trend much better. If you graph the calculated data it will be quite interesting for readers.

Animal Spirit said...

Welcome back Roger!

Leo S said...

Hey Roger, long time no see. Did you buy a place?

I don't think the smoothed data reveals anything new

This is just the public data off the VREB site. no new insights here.

Leo S said...

Shows a %1.5 drop from September. Thats 18% on an annualized basis..yikes!

Let's not get Turner'd away on month to month changes.... :)

DavidL said...

@JustWatching

The 2012 property assessments will be published on Tuesday, January 3rd 2012.
http://www.bcassessment.bc.ca/Pages/default.aspx

DavidL said...

@Leo S "Turner'd away ..."

Yeah, past performance is no guarantee of future results.

Animal Spirit said...

Leo - if you want to have real fun, inflation adjust the chart...

btw - how is the image server that you use?

Roger said...

Leo & Animal Spirit,

Thanks for the comments. I sometimes lurk on this board but don't post much anymore. I have moved away from Victoria and I am still renting. Living up island and travelling a fair bit. I won't buy in Victoria. It is still my belief that prices will drop once interest rates go up or the economy tanks due to European blowback.

Leo - the 3 month graph is interesting to me. You can clearly see the median has cycled around 550K +/- 20K since 2008 except for the period June-08 to July-08 (worldwide credit crisis). We all know, including VREB and the TC, that RE market prices fell during this period and then recovered after being goosed by low interest rates.

Now that we are at median low of 530K again readers should watch to see if we go down further. Given the recent stock market performance and the continuing Europe saga it wouldn't surprise me. This would signal another round of Victoria price drops.

Leo S said...

Leo - if you want to have real fun, inflation adjust the chart...

Right now I only have the yearly historical data inflation adjusted because I have to manually type all the values into the BoC site... That seems like too much work for the monthly numbers. However if anyone has the inflation numbers as a nice excel formula.....

Peripherally, the topic of inflation brings up a good point that Marko made a few months back. While adjusting for inflation is the more correct way to see how values change over time, does it actually make a difference to the buying decision? Ie, if the market stays flat but loses 20% of it's value to inflation over the next X years, is it better to buy now or buy later?

how is the image server that you use?

Seems fine. I use imgur because you can link directly to the image without ads. Not sure how long links stay active though.

JustWatching said...

Rhino,

Thanks for the Teranet Housing Price Index (HPI) update. I took a screenshot of the graph for the index over the last few years.

Click here

The index has been flat since early 2008. Note how prices dropped during the credit crunch of 2008-2009 and then recovered to the previous level and flatlined for the last two years. However , record low interest rates could only push it back to the 2008 peak.

If interest rates go up or we get another financial mess watch out below...

patriotz said...

"Ie, if the market stays flat but loses 20% of it's value to inflation over the next X years, is it better to buy now or buy later?"

If the nominal price of RE stays flat and buying is more expensive than renting (all expenses), it's obviously better to buy later than now.

What happens to CPI inflation during that period is irrelevant, as long as renting remains cheaper. We'd need a big surge in CPI inflation to move rental costs up significantly and that would move up interest rates too.

DavidL said...

The tricky part about adjusting for inflation is: do you use the CPI, average salary increases, or some other metric?

Leo S said...

I've used CPI so far to do the inflation adjustment, but it really is a poor measure for housing affordability.

If I come across some spare time I want to reproduce the local price/household income graphs that used to be on theeconomicanalyst.com

JustWatching said...

Today the IMF joined RBC, TD and Merril Lynch on the overvalued Canadian housing market bandwagon.

CTV - IMF warns about household debt, housing prices

The IMF says Canada not only faces headwinds from the global economy, but also challenges from record-high household debt and an overheated housing market.

The Washington-based monitor of the global economy says Canada's house prices are about 10 per cent above fundamentals, and more so in some areas.

A 15 per cent correction in prices could cut 1.5 per cent from private consumption, the IMF says, damaging the economy.



But what do these guys know? They aren't real estate professionals like Dennis Fimrite, president of VREB. He says we won't be affected by Canadian or global economic conditions (as reported by the Times Colonist).

Victoria safe from bubble

If you follow Victoria real estate on Twitter you will find lots of tweets by local realtors posting a link to this story and giddy with excitement.

Victoria homebuyers deserve better than this...

a simple man said...

Let's just make sure they we remind him of his predictions at the end of next year.

Introvert said...

Let's just make sure they we remind him of his predictions at the end of next year.

How about I remind many of you of your predictions: that the market is sure to nosedive in the near future due to x, y, and z. As I demonstrated in a previous comment, countless predictions of blog contributors here, since 2007, have been proved wrong.

Leo S said...

As I demonstrated in a previous comment, countless predictions of blog contributors here, since 2007, have been proved wrong.

Where did you do this? All I saw was a list of quotes mentioning downward pressure. That is not a prediction.

commuter12 said...

Yeah introvert, I agree no one here makes predictions™. They are merely projections.

DavidL said...

With the consumer confidence dropping (fast), this doesn't bode well for real estate:

Consumer Confidence sags to 30-month low
Conference Board index drops 6.5 points to 69.9 in December
http://www.cbc.ca/news/business/story/2011/12/22/consumer-confidence-conference-board.html

patriotz said...

"How about I remind many of you of your predictions"

Please do, we're waiting.

Rhino said...

"Yeah introvert, I agree no one here makes predictions™. They are merely projections."

Why would we, we are just members of joe public. You would expect the accurate predictions to come from professionals, who actually get paid to analysis this sheeeeeet. If you trust what those guys say, I have a used car to sell you.

Oh by the way the "professionals" now are getting on board for some reason:

http://www.news1130.com/news/local/article/313095--td-real-estate-correction-in-store-for-vancouver

Introvert said...

"How about I remind many of you of your predictions"

Please do, we're waiting.


------------------------

Patriotz, your wish is my command:

June 2nd, 2008, Patriotz said:

This is exactly why prices must come down. Landlords are only in it for the money, and prices cannot increase indefinitely. When they stop buying and start selling, the bottom falls right out of the market.

It’s December, 2011, and we’ve got 9.3 MOI (that’s a lot of sellers, right?). Why hasn’t the bottom fallen "right out of the market"?

June 8th, 2008, Patriotz said:

We're two years behind the US in this cycle. There were hardly any foreclosures in Phoenix in 2006 either.

Since we haven't had that many foreclosures, perhaps we're not two years behind the US in this cycle: maybe it's three, or maybe four. No, wait, it's five. It's gotta be five. We're five years behind the US cycle: I'm sure of it.

July 18th, 2008, Patriotz said:

I'm not the slightest bit bitter. I have no need or intention to buy until around 2012 and believe me I and other buyers like me are going to be calling the shots.

We’re only a few days away from 2012. Are prices radically lower today than in 2008? Nope. Are you “calling the shots” yet? Nope. Was your prediction wrong? Yup.

July 22nd, 2008, Patriotz said:

My choice is renting until the market bottom. See you in four years or so.

The same false prediction stated slightly differently.

Sept. 14th, 2008, Patriotz said:

We've been in a 35 year secular bull market for RE, with occasional corrections, and it's over, baby.

Patriotz in 2008: “it’s over, baby.”

Almost four years later, and, well...

patriotz said...

There actually was a bust in 2008. It was reversed by a huge drop in interest rates. Time will tell how long this remedy works. It's already not working in BC outside Vancouver and Victoria and the latter is looking pretty wobbly.

And renting is still a lot cheaper than buying at rock bottom interest rates.

So what has it cost me not to have bought yet?

Leo S said...

Patriotz, your wish is my command:

Not a good choice of predictions. Firstly, they weren't really predictions (more on that later), and secondly they were followed by a 15% decline in prices in 6 months.

It’s December, 2011, and we’ve got 9.3 MOI (that’s a lot of sellers, right?). Why hasn’t the bottom fallen "right out of the market"?

The decline seems to be well under way this year. The statement was "when they stop buying and start selling". When more of them start doing that the decline will continue/accelerate.

We're two years behind the US in this cycle. There were hardly any foreclosures in Phoenix in 2006 either.

Obviously this was wrong, but is this a prediction? Implied at best.

We’re only a few days away from 2012. Are prices radically lower today than in 2008?

That was not the prediction.

Are you “calling the shots” yet?

This one is tough, because what does "calling the shots" mean? I'd say yes buyers are calling the shots though. Just look at the lowballs that are being accepted, and huge DOM. Pretty sure early 2008 was nothing like this.

Was your prediction wrong? Yup.

Nope. Given that buyers have more power now the prediction is correct, and it's not even 2012 yet. This is why I'm saying these aren't really predictions because they're not precise enough. If the prediction was "in 2012 average prices will be under $500k" then you could make an argument they aren't met.

Patriotz in 2008: “it’s over, baby.”

Almost four years later, and, well...


And well, what? It is over. He was talking about a secular bull market in real estate. You can't deny that hasn't been the case since 2008.

I'm sure there are many predictions you could dig up that turned out to be not correct, but that was a sad bunch.

Real estate can't be predicted, which is why you'll see lots of people here are careful about specifically not making prediction, and instead looking at actual trends or indicators.
The RE professionals have no such qualms. Remember when they were forecasting higher sales this year? So much for that idea.

We should make some predictions though, so that you'll have an easier time nailing us to the wall next year.

Here's mine: "Prices will continue to creep down, and the 6 month average will end next year under $590k".

Marko said...

Why do people really care whether something is a trend or prediction or whether they are right or wrong?

"Remember when they were forecasting higher sales this year?"

I'll be honest - I thought sales were going to be higher this year, not because it was going to be a spectacular year but because I thought 2010 set a pretty low bar to beat (6500 sales). This year we will end up at around 6100 sales. I've been wrong before and I will be wrong again.

In other news, the VREB sent me an article on what to do if you want to get out of a MLS contract with your seller who is refusing to be realistic about price....I thought it was interesting - wouldn't see that in a hot market :)

Marko said...

^ meant to say trend analysis.

caveat emptor said...

Have been reading this blog since early 2008. There were lots of posters back then who seemed (by their comments) to be expecting to the Victoria market to fall hard and soon. My self I thought the market was going to fall further in 08/09 and certainly not bounce back so quickly.

Lately there has been much more humility on the board about our (in) ability to predict where prices are going. Probably because people's expectations or "predictions" were proved wrong.

Leo S said...

Why do people really care whether something is a trend or prediction or whether they are right or wrong?

I think people are sensitive to prediction fatigue to some extent. You yourself said Garth Turner has no credibility due to his wrong predictions. Lots of predictions on the bear side have been wrong for a long time, so the people that have been around for a while tend to avoid making them.

I'm somewhat concerned about being wrong, but not overly. Obviously if prices skyrocket next year I'll be kicking myself. So far so good though, waiting for 2.5 years now, and in retrospect it was well worth it even if prices don't decline further.

Every situation is different, but people like to look at things in absolutes. Introvert did well owning, while we did well renting during the same market. Good news all round!

a simple man said...

Sales this year and last year at decade lows. While it is very difficult to establish the decline in house prices in the last year, it is evident that you can buy a lot more house today than you could 18 months ago.

I believe that we are just getting started and I am stunned the market has been propped up this long.

We made some predictions a few months back, if I remember correctly. I remember taking a pretty strong stand on the drop percentage, so I may have to eat some crow eventually.

However, what we say on this blog is the opinions of Joe Q public, with exception of the valued contributing realtors.

When the president of a professional board comes out and claims a fact so obviously self-serving and frankly biased, it has to be noticed.

I would expect it of me in my profession, so why not him?

caveat emptor said...

A prediction from 2008:

The excerpt below is from our host, December 2008. I bring this up not to mock our host for being "wrong". Rather just to show how hard it is to predict the future even for intelligent people looking at the best available information. For the record if I had made a prediction at the time it would have been quite similar, so I was "wrong" too.

HHV
"I expect to see a total drop in average sales prices from the April 2008 peak nearing 30% by the end of 2009. That will mean a house that sold for $625K in April 2008 will be selling for around $440K next December. Something to look forward to bears: those crappy, neglected, homes with suites in neighbourhoods you'd rather not live in that are currently sitting on the market for around $425K, they'll be sitting on the market at the end of 2009 for somewhere around $300K.

Remember people, my predictions are worth exactly what you paid for them."

caveat emptor said...

Any guesses whether 2011 assessments will be up or down on average for the region? Based on MLS statistics for single homes in Greater Vic there wasn't a big change in prices between 10 and 11.

Average* and Median* for 2010: 617K, 557K
Average and Median for 2011: 621K, 551K

* Averages of Jun, Jul, Aug Data

a simple man said...

I am guessing that assessments will be up so taxes can rise.

patriotz said...

"I am guessing that assessments will be up so taxes can rise."

Taxes rise no matter which way assessments go, as anyone who has owned during RE downturns can tell you. I suggest you read the leaflet that your municipal government includes with the tax notice. Or just go to their web site.

a simple man said...

certainly the mill rate goes up, but it can be a double-whammy with both mill rate and assessment increases.

I don't pay property tax, though (directly).

Leo S said...

Right. So here are our previous predictions, just for fun.

EagerBuyer, Aug 2011 "I suspect there will be another real estate sales boom in Sept. when everyone gets back from vacation. "

Sorry EagerBuyer, no sales boom.

Mindset, "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)."

Correct.

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

Maybe almost right for Victoria (down 8.5% YOY if the average stays in December). Don't know about Vancouver and Toronto, but they're likely up YOY.

A simple man "I say a further 17% decline by New Years Day."

I assume 17% from August 2011? Sorry simple man, we're only down 10% since August on average prices.

Mindset "I'll put my estimate at $545,000 by Jan 1".

Unlikely.. I think Marko said it was at about $580k mid-month.

OMC, "Prices start to raise in the winter until things start to swing into the buyers favour in about April."

No price increases yet, but the winter is still long. Maintain hope!

Alexandrahere, "I say the average price will be $551K at the end of Jan 2012. "

Still possible.

Leo S, "I'll say the 6 month average at 600k at the start of the year, and 570k midway next."

Well, 6 month average is at $613k now, so it could get pretty close to $600k this month. I'll call that a win. I see that I was much bolder in the fall though. $570k in June 2012, versus today's prediction of "under $590k" at end of 2012. I'm such a waffler.

Animal Spirit said...

Leo S - since I had already graphed the inflation adjusted median numbers, here they are: inflation adjusted

Based on this, we are back to around April, 2007 prices - so someone who bought in April, would, inflation adjusted, get the same amount for their house as they paid for it (less taxes, realtor friction fees, etc.)

Somewhere 1/2 way down this thread, I had posted an equation challenge. Here is the graph of the linear price trend (x axis is month, y axis is the assessed price to list price ratio: 2011 listing price trend

Happy holiday and a great vacation to all!

patriotz said...

"get the same amount for their house as they paid for it (less taxes, realtor friction fees, etc.)"

Less PTT, CMHC insurance fee, maintenance, insurance, and above all rental deficit.

I'll bet you the person who just sold 50 Howe has spent about $100K more than if he had rented a similar dwelling over the same period.

Animal Spirit said...

o.k., let's say 10K PTT, 20K realtor fees, 8K CMHC insurance, $400*12*4=19K maintenance, 4years*3K property taxes = 12K. Include mortgage differential to rent (say with a variable rate, 300/month*12*4) of 14,400 and 750 /yr differential of house to rental insurance = 3K.

This sums to 10K+8K+12K+19K+14K+3K= $66,000 extra cost owning to renting, if one had bought in 2007. If one has to resell the house, this becomes $86,000.

This would mean that one would have had to bought back in June, 2005 to have broken even buying vs. renting now.

If resells the house, the Walmart price roll back is to around April, 2005 - or just when house prices were spiking tonnes.

This is the flat landing people are hoping for - normalizing our inflation and prices coming down slightly. If prices continue to drop, then we're into hard landing territory.

patriotz said...

". Include mortgage differential to rent (say with a variable rate, 300/month*12*4)"

Way more than that. Remember rates were a lot higher than today from 2006-2008. And it was 5 years, not 4.

> 100K total loss, easy.

Marko said...

"I think people are sensitive to prediction fatigue to some extent. You yourself said Garth Turner has no credibility due to his wrong predictions."

And yet people continue to quote whatever he says over and over again...that is my problem. Eventually he will luck out and be right!

a simple man said...

Did that Island Rd property for ~1.2 million sell or was is taken off the market? It is no longer on realtor.ca

Leo S said...

And yet people continue to quote whatever he says over and over again...that is my problem. Eventually he will luck out and be right!

And can you imagine the gloating when that happens?
Even though sometimes tedious, his blog is still pretty entertaining. Once I realized he's there to sell books and his own investment services it became a lot more clear to me why he writes what he does.

patriotz said...

"And yet people continue to quote whatever he says over and over again"

Which people and which whatever? On this forum I don't hear much except his views on Canadian RE, which are hardly original.

But he does put them forth in an entertaining way.

What annoys me is people who give as "evidence" that there's no bubble Garth's claim that there is one.

patriotz said...

"Eventually he will luck out and be right!"

As I've pointed out, RE bears only have to be right once, because it doesn't cost them anything to wait for prices to come down.

It's the bulls who always have to be right, because if prices ever go down it means buying was the wrong decision.

a simple man said...

Some powerful graphs in this post fro the economic analyst site:

http://theeconomicanalyst.com/content/house-price-rent-ratios-canadian-cities-alarming-levels

JustWatching said...

a simple man,

687 Island Rd expired after 61 DOM. Price started out at 1.189 M and was reduced by 50K but no takers. Assessment is 621.7K so something was strange...

Animal Spirit said...

patriotz - hell, I was being ultra-generous with the numbers, of course the differential to mortgage is higher, and likely there is an extra year or two of annual costs to calculate out (considering that one needs to have bought in 2005 to break even.

I'll see what I can do with a proper calculation on this - more than just a mental calculae, something in a spreadsheet model might do the trick. Then again, I can just use the on-line one :)

patriotz said...

I have a feeling that if you include all costs and adjust for present value to today the break even point for a purchase may well be some point in 2004.

Which would mean that those who have been bearish about Victoria RE since 2005 would now be proven right, since someone renting since 2005 and buying now would come out ahead of someone who bought in 2005.

That's an outcome of the flat prices since 2008 during which the rental decifit has continued to compound without price appreciation.

You may applaud now.

Just Jack said...

Hey, Roger's back. Welcome back Roger. Stick around. Things are finally getting interesting.

S2 (JJ's wife)

Leo S said...

since someone renting since 2005 and buying now would come out ahead of someone who bought in 2005.

That.. No.

patriotz said...

Maybe not every property, but certainly for this place in Sooke JJ pointed out a few threads back:

$177,750 bought in April 2003
$244,000 bought in August 2004
$291,000 bought in September 2006
$312,000 bought in September 2007

And now in November of 2011
bought for $256,500

That's a BIG roll back in prices probably to the first quarter of 2005.


If a property is selling for 2005 prices now, it means the person buying now is way ahead of one buying in 2005 due to the rental deficit.

a simple man said...

I want to extend the happiest Christmas to you all. I appreciate all of your discussion throughout the year.

May you be surrounded by those who you love and who love you.

Leo S said...

Thanks simple man. Merry Christmas/Festivus everyone.

Alexandrahere said...

Have a wonderful holiday season everyone. Look for the light and bask in the sparkle of your children's eyes and be patient and truly listen to some of your parents/grandparents thoughts, opinions & advice. They've been there.

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

Hope everyone had a nice Xmas and enjoyed the big feast!!

Here is a weekly stats update for the period Dec. 18-25. Previous weeks numbers in ()

Unconditional sales: 65 (79) (94)
New listings: 75 (144) (133)
Price changed: 64 (93) (109)
Cancelled: 27 (45) (59)
Expired: 87 (115) (75)
Back on market: 8 (9)(9)

As you can see things have been pretty slooow.... Should be more of the same this week with Monday & Tuesday being holidays. Sales so far this month around 295. By month end we won't be far off the 349 level of 2010...

Alexandrahere said...

Hi all, here are my stats for the week of 19 Dec to 15 Dec:

SFH: Min 2 beds & 2 baths in Victoria, Oak Bay, Esquimalt, Saanich East and Saanich West. Priced between $375K & $775K.

New:7
OM:14
P/C:4
Sold: 10

Avg Selling Price: $576K
Med. Selling Price: $560K

6 out of the 10 sales went for below BC Assm't and 7 out of the 10 had secondary suites.

Marko said...

"By month end we won't be far off the 349 level of 2010..."

With only three business days left looking at my matrix I don't think we will get to 349....

JustWatching said...

Several blog regulars are looking to buy in Oak Bay. Well here is a new listing in Estevan for only 569K!!

MLS 302545

Agent site - Photos & Floorplan

Better be quick before its gone...

P.S. Call Marko first and save even more.

a simple man said...

thanks Marko - saw that come up yesterday. Not a bad location at all - about as close as you can get to Willows School. And $569K - the market is headed in the right direction. Just a bit too small for my herd.

a simple man said...

I see there is already an accepted offer in place on Dalhousie. These ones are still snapped up very fast.

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

Wednesday, December 28, 2011 8:00am

MTD

December

2011 2010

Net Unconditional Sales:

301 349

New Listings:

441 522

Active Listings:

3,695 3,252

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