Friday, December 9, 2011

Quiet times: open thread

Clearly I've been MIA most of this week. Thanks to regular contributors for keeping the comments going, especially for those willing and able to supply readers with fresh and accurate data (Marko Juras and JustWaiting Cheers!)

Here's an open thread to hopefully make the comments section a little easier to navigate. I'll get back to the regular Monday market updates in a few days.

Based on JustWaiting's recent daily data, it looks like daily sales volume is down significantly (35% or so). I wouldn't be too quick to say this is anything but the Holidays are looming effect; interesting trend no less.


Anonymous said...

2011 is ending on a sour note for local builders/developers.

TC article - Region sees fewer houses built - new home prices fall

Greater Victoria contractors are building fewer homes and selling them for less, according to separate reports released Thursday.

Contractors have built 400 fewer new homes and condominium units this year as the overall economy and ebbing consumer confidence continues to chill the housing market.

According to data from the Canada Mortgage and Housing Corp., there have been 576 single-family homes built over the last 11 months - down from 784 at the end of November 2010.

In another report, Statistics Canada said Greater Victoria showed the country's largest price declines for new housing between September and October as contractors sawed sticker prices to move inventory.

The price of new homes in the region fell 0.6 per cent, according to the New Housing Price Index. Statistics Canada said builders in Victoria said the primary reason for cutting prices was to stimulate slow sales.

Marko said...

The price of new homes fell 0.6 percent yet new builds are down 27%.

The problem isn't the price new homes are selling for. The problem is cost of development which has resulted in a shortage of building lots.

Even in 2008 before the mini correction you could buy a nice FREEHOLD 6,000 sq/ft lot on Bear Mountain in Echo Valley for around $200,000 to $215,000. Now you are looking at $270,000-$280,000 for the same lot if you can even find one.

Just Jack said...

For the years 1996, 1997, 1998 and 1999, the average new homes bought each month in Victoria, Western Communities and Saanich Peninsula was



7 detached homes per month

For condominiums it was 4.4 new condominiums sold on average per month.

New home prices are the dominate force raising the home price ceiling in the marketplace on the way up. But have zero impact in a declining market.

The fact that Bear Mountain lots can't be bought for under $280,000 has no impact on the general market. There is enough competition with the number of homes that are less than 5 years old, that the builders have to follow the re-sale market prices down.

That land developers will not sell land cheaper, just means less new home construction and high unemployment.

Will the last builder to leave Bear Mountain, please turn off the lights.

Dave said...

Lot prices will fall hardest. In general, non productive assets always correct more than income generating ones. This CIBC headline was worth linking. Comical to see CIBC economists using biblical references.

Economist warns global slowdown will be of Biblical scale

Just Jack said...

The intrinsic value of real estate is its rental value. This rental value sets the price floor for real estate.

Investors will buy homes when the return on the equity is comparable to other investment risks.

But, their is a limited and negligible rental value for vacant land. Which means land value could theoretically fall to nothing. Which is unlikely in developed city centers the size of Victoria, but very possible in rural areas like Bella Bella or Prince Rupert or in economically depressed areas with high unemployment like Windsor, Ontario (about the same size as Greater Victoria) but with 12 to 15% unemployment.

That doesn't mean you'll find land developers selling their lots for a 6 pack of Lucky Lager. What would happen is that the underlying land value of improved properties would fall precipitously. The properties that would be hit the hardest in the urban core districts are ones that have the majority of their value in the land component, like waterfront, acreage and starter homes in Oak Bay. Of course anything outside of the 10 miles radius of downtown Victoria would have such a low volume of sales that their market would be shallow and dysfunctional.

Marko said...

"Lot prices will fall hardest."

If you can find one.

Leo S said...

"Lot prices will fall hardest."

If you can find one.

It's clearer if you say "Land prices will fall hardest."
It's not just empty lots, it's the land component of any property.

Anonymous said...

Thursday was another slow sales day in Victoria. A few desperate folks listing and price reducing 2 weeks before the holidays. Xmas shopping and partying is where its at now...

Thursday stats
Unconditional sales: 9
New listings: 23
Price change: 18
Cancelled: 7
Expired: 4

Wednesday stats
Unconditional sales: 10
New listings: 11
Price change: 17
Cancelled: 6
Expired: 12

Tuesday stats
Unconditional sales: 10
New listings: 35
Price change: 19
Cancelled: 12
Expired: 14

Just Jack said...

After 492 days on the market, it has finally SOLD. The Alder street property at $337,500. So did this 800 square feet home with an 800 square feet basement sell for lot value?

If you tore down the home, could you sell the site to a builder for the same price?

Obviously we have two types of land value going on here.

One is the value of the land as improved with a home.

The other is the value of the land as if vacant and available for new construction.

Why the heck should they be the same? There is simply stronger demand for home occupation than there is for new construction in the city.

That home occupier demand seems to be getting weaker and maybe at some time starter home prices will fall to the level a builder can buy starter homes, demolish, build and make a reasonable profit.

Anonymous said...

Just Jack,

That house on Alder in Mayfair started out over 400K. I guess the owner believed the assessment of 430K was market value.

Then they started chasing the market down with price reductions and the old relisting trick. The last asking was 369K and the buyer said nope - 337.5K. Every property will sell if the price is low enough. The owner would have got more by being realistic to begin with and would have sold long ago.

Animal Spirit said...

Marko, your comment "The problem isn't the price new homes are selling for. The problem is cost of development which has resulted in a shortage of building lots." doesn't hold weight using the Bear Mountain example.

We can agree that bare lot price = house price - teardown cost. Therefore development cost = house price - tear down cost + building cost. In the case of Bear Mountain, the equation is simplified to development price = bare lot price + building cost.

Given that there is a ready supply of land with services, or close to having services at Bear Mountain, the issue does not seem to be cost of development, but instead, implied land cost. In other words, owners of land that could be developed easily are likely holding lots back from sale to try to keep bare lot prices (and therefore their valuation) as high as possible. If they don't, the bank likely would give a call and collect the rest of the land.

One minute, didn't the banks already do that a bit at Bear Mountain? Asset valuation protection rather than cost of development is likely the issue.

omc said...

Hello all. I don't come round much here anymore, but thought I would pipe up to say hello and give my 2 cents.

My impression is that the market is slowing, but actually holding very firm for properties that are even slightly attractive. There still appears to be a fair amount of buyer interest, especially Oak Bay where the prices are still reaching ever higher.

As an example I will use 2056 Hampshire, that simpleman was lusting after. He states that it would have sold for $900k just a couple of years ago and compares its sale of near $750 today as evidence that the market is in free fall. I remember that house from the last time it went market in 2008. My impression was POS in a noisy and busy location. Small dank shack with low height basement and near unusable bedrooms in converted attic. I apparently wasn't the only one as the asking price was reduced to $575k before it finally sold. I don't recall the selling price, but the MLS was 251528. Maybe one of the realtors could confirm this for me. I still see POS in a poor location for that shack, just now it has an IKEA kitchen and some new paint. I have also noted the sale of a couple of other over priced flips such as the one on Avondale.

Don't mean to sound snarky, but want to remind everyone to not put the cart before the horse. As one of the longer term bears I have learned that calling the sky is falling builds false hope and lessens your credibility.

Best to everyone

Anonymous said...


Nice to see you posting again. Stick around - we need diverse viewpoints to keep this blog going.

Alexandrahere said...

omc: Very nice to see you back, we miss you.

I am seeing a change in the sales this week in my areas on PCS i.e. Vic,OB,Esq,SE&SW.

For one thing, my price range is $375K - $775K with a min of 2 beds and 2 baths, and this week out of 13 sales so far, there hasn't been one sale in the $500k bracket. Most sold in the $600K bracket. This is very unusual. Also only one had a secondary suite. All but two have gone for less than the BC Assessment.

A nice buy, if you can say anything is a good buy these days, I think was at 4019 McLellan. It sold for $490K and true the assessed vale was at only $497K. However, it is a solidly built 1961 home, on a very nice street in a fairly convenient area. The house is large and bright and has been nicely updated including a one bedroom suite with its own laundry. Also, for the guys there is a huge new separate garage/shop.

Anonymous said...


The McLellan listing was advertised as "priced for immediate sale". They started at 519K and quickly went to 499K and sold for 490K after 36 DOM.

Seller was smart and dropped the price when it hadn't sold in a few weeks. I bet in a year from now they will be happy they sold for this price.

Marko said...

"apparently wasn't the only one as the asking price was reduced to $575k before it finally sold. I don't recall the selling price, but the MLS was 251528. Maybe one of the realtors could confirm this for me."

It sold for $545,000 - August 22nd, 2008.

Marko said...

"My impression is that the market is slowing, but actually holding very firm for properties that are even slightly attractive."


Marko said...

"We can agree that bare lot price = house price - teardown cost. Therefore development cost = house price - tear down cost + building cost. In the case of Bear Mountain, the equation is simplified to development price = bare lot price + building cost."

Anyway you look at it land is extremely expensive. Even tear downs in the burnside area are going for 340k +/- 10k. Now add cost to demolish, plus excavation, new service hook up fees, plus new sidewalks the city will request, plus a few other things and you are looking at 380k-390k give or take for a truly serviced lot.

People forget that lots aren't really "serviced." When you tear down an old home the city of Victoria will require you put in a new sewer/storm/water line which is approximately $10,000 just to the property line....

Marko said...

Let's not forget asbestos abatement costs associated with demolishing as well.

Leo S said...

My impression is that the market is slowing, but actually holding very firm for properties that are even slightly attractive.

Everything has come down in the lower end, attractive or not. The stuff that used to sell in bidding wars is now selling after only one price drop. The rest is languishing and ending up off market or sold significantly below assessment.

a simple man said...

Welcome back, omc. I never had the chance to see inside the Hampshire house as the open house was cancelled due to the sale. But if you saw inside and say it was poor, then I accept your valuation. Had great pictures, but then so did the recent sale on Cranmore, but when I saw it - it was terrible.

pod_x said...

Everything has come down in the lower end, attractive or not. The stuff that used to sell in bidding wars is now selling after only one price drop.

It's a symptom of disappearing buyers, who can afford to be more picky and wait for that inevitable price cut. November/December is usually the time of >100% S/L days.

lurker said...

I've been a lurker for a while on this board; just curious what you guys may think of MLS # 302286 #20-4525 Wilkinson Road, just re-listed at 414900, end unit townhouse, been on the market for a few months; any thoughts/numbers (previously sold, for how much) would be appreciated. Thanks.

omc said...

The point I was trying to make is that Oak Bay is defying the rest of the market. It is still going up, and sections of it has seen the biggest increases percentage wise. I really don't understand what areas that were relatively cheap, Estavan and Landsdowne, are so attractive.

My understanding is that the house on Hampshire was bought by a family that just recently moved to Vic. There's was the only offer. They don't know anything but Oak Bay and don't know how much over valued less desirable areas such as this are really worth.

The house on Avalon is in a decent Saanich neighborhood. I know the address is Oak Bay, but it feels like saanich and is only a couple of houses from saanich. The closest neighborhood in feel to it would be Lexington just a couple of minutes down the road. Lexington was built as higher end neighborhood, has ocean views, the schools are much better and closer, the houses are bigger and newer. It's only 2 or 3 minutes down the road, way nicer than Oak Bay but way cheaper.

People are paying massive sums just to say they live inOak Bay.

a simple man said...

omc - agreed - there is a real premium for Oak Bay and many of the homes are grossly over-valued. Lots of people around us are leveraged very highly to be in this market. When the correction hits, it will be felt here.

Anonymous said...


In a word - Lowball....

#20-4525 Wilkinson Road is a 1997 townhouse that was originally listed Oct. 8 for 425K and then reduced to 409K. After 70 DOM they relisted at a higher price of 414.9 and then claimed it was a "new listing".

Assessed value is 403K and as a reader of this blog you have seen stats showing many deals under assessment. December and early January are low sales months and the seller will be lucky to see any offers in the coming weeks. If you are interested ask your agent to pull the sales records from the title office or from the VREB database. If you want to check them yourself pay a few bucks and get a Landcor report click here.

BTW - make sure your offer is conditional on a house inspection, acceptable title and covenant and review of strata minutes and reserve fund.

Anonymous said...


More info about the TH on Wilkinson.

Three of the neighbours properties sold in 2010. All were assessed at 424K which is about 20K higher than #20 which you are considering.

#24 sold 14 Jan 2010 for $419,777

#25 sold 22 May 2010 for $427,000

# 9 sold 7 May 2010 for $432,888

#3 tried to sell this spring for 419K (assessed at 419K) and was cancelled after 76 DOM. #10 tried to get 439K in the spring and gave up after 96 DOM (assessed at 424K)

Average prices have had a downward trend since these two sales. Click here for graph

Townhomes were not hot last month with 48 sold and 389 active listings as of Nov. 30. On average it was taking forever to sell - 81 DOM and the sale price/listing price was 97%.

If you take 97% of the last listing price (409K) they should jump at 397K. With the low sales last month and bleak prospects for a sale in December/January if they get 390K they would be lucky.

So.... lowball if you are really interested.

Anonymous said...

In my previous posts I gave some daily RE stats and the market sure was sloooww...

Here is a weekly update before tomorrow's "official" VREB numbers.

Unconditional sales: 94
New listings: 133
Price change: 109
Cancelled: 59
Expired: 75
Back on market: 9

About 29 of those 94 sales were reported last Monday and then sales became anemic. Expect even slower activity until after New Years.

Unknown said...


Thanks very much for the info. We've already seen some of those figures, but it's always great to have some additional input. Cheers.

Unknown said...

signed: Lurker (who's still mastering Web 2.0)

Marko said...

You can get a further discount if you use a cash back REALTOR®. Take a look at my website ->

Not meant to solicit if you are already working with another REALTOR®.

Anonymous said...


Do you ever present lowball offers on behalf of your clients? If so do you have a strategy or do you just let the offer do the talking?

Marko said...

It really depends on the scenario (type of property, my buyer, the seller's realtor). I look at a lot of things....

For example, if the seller bought a home in 2001 and paid $200,000 and the home according to the average/median price has increased 100% and now the seller is asking $430,000 I will send them the numbers to justify a lower offer. If he or she is asking $380,000 I won't send them those numbers.

I'll also look at comparables and see if it is worth justifying the offer with comparables.

Sometimes I just submit the offer. Often the seller has a number in their head that is not based on metrics and either they want to sell it or they don't.

I had a seller 4 months ago that was stuck on a particular number even thought what he was being offered for his condo was extremely attractive compared to the comparables in the building. Deal collapsed over a few thousand. Never ended up selling the place.

Sometimes it just takes time. I wrote an offer last year on a property for $350k and it was listed for $419,900. The listing agent told me that the sellers considered the offer a low ball. Six month later wrote an offer on the same property, same buyer, and ended up getting it for $340k (asking price had been reduced to $359,900).

Anonymous said...

Marko - Thanks for the reply. The seller must have been real sorry he didn't take your first offer. 10K less a year later!! Your buyer must have been a patient client.

Marko said...

The key to it all was that the property was worth around 350k. Sometimes people try lowballing properties that are worth close to list price and that typically does not work well.

Mindset said...

some notes on some research I did on 'lowballing':

Some people are motivated to sell, others are not, even in today's slow market. How do you find out if a seller is motivated? It's definately not going to be by offering them what they are asking..... unless a house is priced for a bidding war, offer them reasonably less. If they are not interested, walk away quietly and politely, and maybe come back later once reality has set in.

Do some homework and be able to explain why you are offering a lower price (i.e. what some other houses have gone for, what you would have to upgrade/update the home, what you can afford, etc) so that you can show that you are a decent person looking for a fair price. You may get a call back from the seller after a bit of reflection.

Don't leave the offer open for too long (a few hours should do it). Leaving a low offer on the table gives the seller a feeling of security in having at least one buyer out there, and allows the seller or sellers representatives to use your offer to 'farm' around for potentially better offers and to try and generate a 'competition' on the sale price (although a lot less likely these days). We all get caught up in competitions to own things, so keep yourself out of this dangerous game by putting a tight time deadline on your offer.

Of course, don't throw out a lowball in the first month on market. Best to let the slow market help the seller to get motivated.

And last but not least, be patient in this slow and downward-trending market. With current market trends, future RE prices will allow you to keep even more of your money in your bank account, and not the sellers.

Take from this what you will.

Renter said...

Back when we were still trying to buy a house (in the end, we never made a purchase), we tried low balling several times. Each time we were turned down. However, within a couple of weeks, someone else would come along and lowball them, and they'd sell for almost precisely what our offer had been.

Our theory was that we were priming the seller to accept reality when the only other offer to come in was also a lowball.

Frankly, looking back, we dodged bullets by NOT buying those houses - in three cases, we saw them come back on the market for substantially less than the lowballing buyer bought them for. Sure, it could be coincidence and they may have all gotten a divorce or got a job out of the city, but we now think it's more likely there was something wrong with those houses.

Marko said...

Monday, December 12, 2011 8:00am

MTD December
2011 2010
Net Unconditional Sales: 146 349
New Listings: 222 522
Active Listings: 3,879 3,252

Please Note

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

Marko said...

"Don't leave the offer open for too long (a few hours should do it)."

I find the few hour thing really irritating. When I sell homes for my father if the time is unreasonable we don't even reply.

If you are confident in your lowball offer I would leave it open at least overnight. The seller will always wait until the very last minute but by giving them time you show confidence in your lowball.

My experience this year has been that it is really difficult to get a huge discount off list price.

For example, when I select "The Core," sales SFH between 500-600k, since January 1st, 2011 to now, there have been 442 sales. List price average: $565,232, Sold price average: $552,743; however, the original list $575,622.

Seeing a home go significantly below original list is far more common than off current list; therefore, sometimes you just have to wait.

If you are offering 550k on a 629k home I think most sellers would probably be willing to try out 599k or lower before going down to 550k.