Sunday, January 22, 2012

Jan 23: Monday Market Update

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

January 2012 (last week's numbers)
Net Unconditional Sales: 240 [154] (52)
New Listings: 717 [497] (228)
Active Listings: 3456 [3428] (3,358)
Sales to new listings ratio: 33%

January 2011
Net Unconditional Sales: 339
New Listings: 1,187
Active Listings: 3,283
Sales to new listings ratio: 29%
Sales to active listings ratio: 10.3% or 9.7 MOI

Not much to say about this one. Looks like we're on pace to more or less match last January's numbers, except with 5% higher inventory.

102 comments:

caveat emptor said...

The comment on the last post about 4% return after inflation inspired me to ask a relative about a house he recently sold in Vancouver.

Bought in 1977
Sold in 2008 for net (after real estate fees) of 13.8 times purchase price.

Nominal returns = 8.8% annualized
Real (adjusting for inflation) returns = 4.8% annualized.

Crazy!

Is it any wonder that the average Vancouverite (and by extension Victorian) thinks that real estate can only go up in value?

Maybe houses need to come with a warning label (like mutual funds) - past performance does not guarantee future returns.

Marko said...

I think sales numbers will exceed last year which was a slow year.

Leo S said...

I would tend to agree. I'd be very surprised if sales were even lower this year.

Animal Spirit said...

Caveat emptor - same could be said for dating :)

As for the sales numbers, was anything actually moving last week with the snow? Since it usually takes at least a week to close an offer, I'd expect the weather to slow down month end sales. Of course, this is simply pushing demand to the future, so February would have a slight blip up.

DavidL said...

Marco, by sales numbers - do you mean: the quantity of transactions, or the total dollar amount of RE sales?

Marko said...

Both.....

ArtVandelay said...

As if we didn't know already...

"An international housing survey has ranked Vancouver the second-least affordable market in the world, replacing Sydney in that spot. Hong Kong remains the least affordable place to own a home."

"Four of the six most unaffordable Canadian cities are in British Columbia. In addition to Vancouver, Abbotsford, Kelowna and Victoria also made the list. "

Full Article

Leo S said...

We dropped from a multiple of 7.1 last year to 6.8 this year. Median household income increased by $1000 to $61900, and median price dropped $13k to $417,000

happy renter said...

Globe and Mail: "Connect the Housing Bubble Dots"

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/connect-the-housing-bubble-dots-there-could-be-trouble-on-cmhcs-horizon/article2310132/

Introvert said...

Excerpt from Globe & Mail article, "Connect the Housing Bubble Dots":

When we connect the dots and look at the real risk, the time has come for the federal government to do the prudent thing and raise the minimum equity payment from 5 per cent to 10 per cent, and at least minimize the hit from the riskiest segment of mortgages insured by CMHC.

I agree: it should be minimum 10% down, maybe even 15%. This does make sense to me.

Leo S said...

10% down would be nice, but I doubt we'll see that again. Just clamping down on the sleazy bank practices of giving you 5% cash back and letting you skip a payment would make me happy.

dave said...

Attention-grabbing Feb cover to Canadian Business magazine. No matter which side of the fence your on, Vancouver should be fascinating this year - at least as interesting as Australian and Chinese cities have been last 6 months.

Alexandrahere said...

Marko: What did 119 Howe St go for? Just wondering as it has been on the market for quite some time. Thanks.

Marko said...

$455,000

Paula said...

Dave, interesting article, esp. this: “Rising prices draw people to the market in part because they’re afraid they will eventually be shut out … in good times, rising prices create a sense of urgency among home buyers who don’t want to miss out”

It reminds me of how much of it is psychology - it helps make prices sticky for years at the end of a boom cycle. Rushed buyers react to over-powering bank ads. Mortgages at 2.99% are just a way to create more urgency in the minds of buyers. Greater urgency means higher prices.

Buyers need to know that it’s OK to slow down and walk away from overpriced property. Wait a year and rent if needed. Getting a higher-rate mortgage on a lower price is better than a 2.99% mortgage on a higher price.

I saw the downturns in the 80s and 90s – the trigger in the 80s was interest rates, and in the 90s the recession (interest rates were flat/falling but real estate still went down). Who knows what’s in store now.
But in the 80s, unlike now, high downpayments were common and endless personal debt wasn’t in vogue. People had the means to ride out the storm.

Leo S said...

Yes. With an average down payment of 7% for new buyers, there is not much of a buffer. Especially since some of those buyers are just borrowing the 5%. Getting people into houses sooner sounds good on paper, but in the end it just ends up with higher prices for everyone.

By the way I thought this was funny. Not a word lost that house prices might not always appreciate.

Paula said...

Funny about the CMHC downpayment calculation. It's no surprise that 5 of the 9 CMHC board members are from real estate related businesses.
Even their "Click here for historical data" is a bit different because it doesn't show the flat-to-falling prices in 1993-1999 and it has average "MLS price" instead of final "sale price", ie., it doesn't really match VREB data. At least it has general conditions at the time in BC.

Marko said...

Lack of high end sales are driving the average down this month = $569k so far for SFH.

a simple man said...

or maybe the market is just falling?

Leo S said...

Median prices will reveal that. I'm seeing comparatively lots of sales in the low end SFH. Twice as many as this time last year.

Fiduciary said...

A simple man, if that's true, then next time a glut of high-end sales raises the average you should ask if the market is rising.

Leo S said...

Teranet index updated for November.

"Prices were down in eight of the 11 metropolitan markets surveyed"

"Calgary and Victoria stood out with declines of 1.6% and 0.9% respectively."

Paula said...

Marko, thanks for the updates.
What's considered high-end in those numbers,
eg., over $700k or $800k?

patriotz said...

"or maybe the market is just falling?"

"Median prices will reveal that."

Median is more reliable than average but can still move in the opposite direction to prices.

City has two types of properties, A and B.

Month 1: 10 x A sold for $500K each, 9 x B sold for $600K each. Median $500K.

Month 2: 9 x A sold for $450K each, 10 x B sold for $550K each. Median $550K.

Much simpler than real life of course but the point is that median is affected by sales mix.

a simple man said...

Live buy the sword, die by the sword.

Paula said...

patriotz, yes - that's the way median should be calculated.

But strangely VREB's web site says their "Median Price is the mid-point price between the least expensive sale and the most expensive sale in the month."

If their description is true, then they're not considering # of sales, and VREB's take on your data would show a median of $550k for Month 1 and $500k for Month 2.

Just Jack said...

A different mix of sales is unlikely to happen. The more likely culprit is that the volume of sales has dropped to a point that the market has become shallow and dysfunctional.

This happens most often during the winter months. A good reason why any stats during January and February can be misleading.

The method used by Teranet. Using re-sales of the same home has its problems too. While the quality of the data is great, each sale has to be investigated to make sure that property has not been renovated or impaired since the previous sale. There is also a much smaller number of the sales that can be used. Also, sales of the same property that are more than 10 years apart are questionable as you are comparing a new apple to a 10 year old or more apple.

Best to use a combination of all methods and try to reconcile them with long term trends. As long as there has not been a significant change in factors that affect value such as interest rates, financing guidelines, etc.

A clear understanding of the market will not likely occur until we reach into spring.

happy renter said...

Globe & Mail: "Canadian Home Prices Dip":

http://www.theglobeandmail.com/report-on-business/top-business-stories/canadian-home-prices-dip-for-first-time-since-fall-2010/article2314582/

Leo S said...

Index schmindex! It's the year of the dragon, prepare for prices to jump!

Introvert said...

A clear understanding of the market will not likely occur until we reach into spring.

And when we don't have a clear understanding in the spring, we will point to the summer. Then in summer, the fall. In fall, the winter. And around and around we go.

Just Jack said...

Intorvert, That would be optimistic on your part. If the spring market is weak, the rest of the year is likely to be a fiasco.

Just Jack said...

A recent re-sale suggests that their is something up this year in condominiums, rather than just a simple slide in prices.

It my opinion, the condominium market in Victoria is overbuilt. Victoria has too many condominiums for its population. This is causing the condominium market to fracture into separate markets. There is the new and near new condo market that appears to be functioning. Then there is the market for older condominiums that seem to be taking a nose dive in prices.

Such as the recent sale on Paul Kane drive for $500,000.

This same condo sold back in April 2006 for $609,000 and in May 2003 for $419,000. There is more than simple price slippage going on here - this looks more like a glut of condominiums similar to what happened in the USA.

This happened here in the mid 1990's, when the depressed prices of condominiums dragged down detached house prices too.

MD80 said...

From the G&M article:
"On an annual basis, though, prices were up across the board, though varied depending on the city. Toronto, at 10.8 per cent, and Vancouver, at 9.1 per cent, led the pack, followed by Winnipeg (7.5 per cent), Montreal (7.2 per cent), Quebec City (6 per cent), Hamilton (4.4 per cent), Ottawa (4.2 per cent), Halifax (2.8 per cent), Hamilton (1 per cent) and Calgary (0.5 per cent)."

They conveniently missed Victoria's y/y% decline of 0.35%. I guess it really is different here!!

Leo S said...

I think the falling assessments are having an effect on market sentiment. Just about every house in the low end has gone down by a couple percent.

When was the last time assessments went down? Probably nearly 15 years ago. Many people would never have experienced it.

DavidL said...

@Leo S wrote: When was the last time assessments went down? Probably nearly 15 years ago. Many people would never have experienced it.

Since my house was built in 1979, the assessment has only gone down twice: in 1982 (4%) and in 2011 (6.8%). Even during the stagnant 1990's, my assessment either stayed the same or increased by just a few $K per year. I expect a few more years of my assessment going down ...

Leo S said...

Thanks DavidL. Very interesting.

happy renter said...

"Such as the recent sale on Paul Kane drive for $500,000."

JJ, when was that condo built? How many bedrooms/baths?

Ranulf said...

Yes whatever has rocketed up in value over the past one or two decades people naturally assume it will keep rocketing up.

Remember how good the buy and hold strategy for stocks looked in 1999. It worked wonders from the early 80's.

Since 1999 the record has not been so good. Most are down even with dividends. Meanwhile money invested in the market was money not being used to ride the real estate market.

Of course guessing what will be the super bull market of the 2010's is a hard game.

omc said...

Surprised no one here is talking about the big news that will have real influence on prices; the fed announcing that rates will be at record lows until at least late 2015. Some times the news is not what you wart to hear, but you should pay attention to it.

a simple man said...

thought it was end of 2014? Anyway, important news as it will have an overarching impact on our economy. I also see it as a sign that their economy is not recovering. The ultimate impact of the news here?

I don't know.

Leo S said...

Can you explain how you think that will have an effect on prices? All I see is more of the same.

That seems fine with me. A continued slow decline and in a year or so we'll probably still be able to get 5 years for 3%.

Craig said...

"Surprised no one here is talking about the big news that will have real influence on prices; the fed announcing that rates will be at record lows until at least late 2015. "

US rates have been at 1% or lower since 2008 and US house prices have continued to fall. The median new house price just returned to its 2010 low, and the fed rate is at .25%.

So what is your argument here? That low US interest rates mean higher house prices, but only for snow-bound countries that start with a C?

dave said...

omc, the Fed's announcement is very negative for real estate. If that's what you were getting at, disregard this comment. Whoever posted this here a while ago, gets it. Check the latest Teranet to see just how predictive falling rates are to falling home prices. It's peculiar the confusion people have towards rates right now.

I would also add, the most precarious part about low rate periods is the overbuilding. Not only do inexperienced builders go full retard, but they will also hold onto vacant unsellable product longer than normal adding to the glut.

happy renter said...

The Globe & Mail headlines are really starting to get gloomy (or promising, depending on how you look at them):

"Boomers 'Punch Drunk' on Household Debt":
http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/boomers-punch-drunk-on-household-debt/article2315580/

"Scotiabank Removes the Rose-Coloured Glasses":
http://www.theglobeandmail.com/report-on-business/small-business/sb-marketing/scotiabank-removes-the-rose-coloured-glasses/article2315080/

Marko said...

Sales have really slowed this week secondary to the weather from last week.

a simple man said...

or maybe sales are just dropping because Victoria is overpriced and the taps have run out of well-financed fools? ;)

Marko said...

You could look at it that way as well.

a simple man said...

Obviously slightly tongue-in-cheek.

For some people right now may be a perfectly logical time to buy.

Introvert said...

Surprised no one here is talking about the big news that will have real influence on prices; the fed announcing that rates will be at record lows until at least late 2015. Some times the news is not what you wart to hear, but you should pay attention to it.

For me, personally, low interest rates for the next few years is a good thing. As a young-ish person no where near retirement, I don't have a giant nest egg that would benefit from high deposit interest rates. Instead I have a sizable mortgage, which I'm paying off as speedily as possible (via extra payments to principal); lower debt-servicing costs can only help me toward this end.

What's more, when inflation goes up it's a good thing for me: I'm a debtor. The bank, and people who have paid off their house and have substantial savings--those are the groups that need to worry about inflation. Keeping in mind, of course, that one day I'll be in their position, railing against the dangers and wealth-destroying power of inflation.

a simple man said...

As my nest egg gently weeps (hummed Eric Clapton style).

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

"when inflation goes up it's a good thing for me"

It doesn't look like inflation is coming any time soon. Too, if you click on the inflation by province bar chart at the top , BCs is the lowest in the country.

Paula said...

Speaking of 1980s assessments: luckily my parents kept all theirs (they keep everything). They had a house built in the 1950s.
Between 1981 and 1985, their assessment went from $116k to $86k ... a 25% decrease.
(interesting: it's in line with the VREB graph, which shows average change was $125k to $95k)

Ranulf said...

Probably the best argument I have heard for buying into this market now.. is if you believe there will be strong inflation in the years to come. (and that that future inflation will translate into increased wages for the average person).

There is talk that you can lock in for 10 years for just 3.99%.

Personally I believe Canada is going to enter deflation.

Paula said...

“if you believe … that future inflation will translate into increased wages”

Yes that’s a big “if.” In the 1970s unions had bargaining power to fight for higher wages. Now, most manufacturing jobs (where bargaining power is strongest) have moved to Asia, eg., Foxconn increased salaries by 20%+. India’s engineers are getting 25%+ age increases. North America has turned service-based.

Also, recent increases in money supply have already increased home prices. So if interest rates go up with higher inflation, that’ll be one of the factors pushing home prices down.

Leo S said...

What's more, when inflation goes up it's a good thing for me: I'm a debtor.

Increased inflation means increased interest rates. If you can weather the rates it can be good as your debt is inflated away. CMHC surveys have shown that many people would not be able to weather the increase and be forced to sell or compromise other areas heavily.

Of course as a saver that means your returns rise, so inflation isn't necessarily bad for savers (assuming you are investing to take advantage of the rise in rates).

DavidL said...

What Happens When Canada Housing Bubble Pops?

patriotz said...

"Increased inflation means increased interest rates. "

Not only that, it likely means higher real interest rates due to uncertainty about future inflation.

Inflation is only a debtor's friend if your debt is locked in long term. GoC can borrow for 30 years, you can't.

Marko said...

A couple of surprises this morning....

127 Eberts St - 0 days on market goes over asking price.

Brand new 796 sq.ft. Ground floor condo in Langford goes for $369,900 - full asking.

MD80 said...

I think an intervention is in order for the condo buyer. What are they thinking?

Paula said...

It seems to make sense about 127 Eberts. Both the assessment and asking price were much lower than current market conditions.

(A house down the street with 1/2 the sq ft, built in same era, had exactly the same assessment. The house 2 doors down from 127 was assessed 178k more for similar sq ft for house and land.)

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

I read today (very quickly) that Abstract Developments is planning on building a ton of condos downtown. Who is going to buy them?

We don't have HAM here. People have stopped coming. This should be interesting.

Good Luck!

caveat emptor said...

Shed no tears!

http://www.theglobeandmail.com/sports/hockey/globe-on-hockey/len-barrie-gets-the-boot/article2317265/

Nancy said...

I would love to sell our money pit of a house. The problem with us is that we have two dogs 3 cats and 4 kids.

We can't find anything to rent that would be suitable. One place we found was lovely but it was $1000 more month than we pay with mortgage and taxes all together. I am looking at Bear Mountain. I know it would be a nightmare with 4 kids in 4 different schools but I am willing to suck it up. It were just my husband and I with 1 kid or even two I would happily rent a condo or a townhouse. We have pets and the kids can be really noisy.

Marko said...

Nancy,

rezoning approval is needed — construction could start in early 2014, but any start date would also be subject to market demands.

Read more: http://www.timescolonist.com/business/Project+pitched+Fort+Cook/6058742/story.html#ixzz1kgZNNvAx

If construction starts in 2014 it could be until 2016 until these units come to market - all 86 condos. A ton?

happy renter said...

I'm guessing that Nancy was referring to this part of the article?:

"Several condominium projects are underway or planned in Victoria, including the 177-unit Promontory in Vic West, the 36-unit Sovereign on Broughton Street and the $1-billion mixed-use Capital City Centre in Colwood, where homes for thousands of residents are to be built over 20 years."

vw said...

It's like RBC says in yesterdays FP article.

"Historically, after a long period of low interest rates, what lies ahead is some kind of speculative excess,"

http://business.financialpost.com/2012/01/26/pending-housing-bubble-spells-trouble-for-canada/

MC said...

I was just checking out, for fun, some of the rentals currently out there. There are some pretty good deals to be had right now. Seems like you can get much more quality in the $1000-$1500 range than you used to be able to get

MC said...

And by good deals, I mean relatively speaking for Victoria and what you could get 2 years ago

Renter said...

@MC: Do you have any examples?

Thanks!

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

Yeah, I'd like to see examples too.
I'm looking for a new rental in that price range right now, although specifically a newish 2br condo.

Leo S said...

I am looking at Bear Mountain. I know it would be a nightmare with 4 kids in 4 different schools but I am willing to suck it up.

I don't understand. The house is a money pit, but a rental would cost you $1000/month more and be more inconvenient to boot? You must be really sure of a crash to want to take that deal..

MC said...

Not sure how many people you are looking for, but these ones caught my eye. They do not look like slums:

OK this one is a bit pricey but it sounds nice
http://www.usedvictoria.com/classified-ad/URBAN-GARDEN-COTTAGE_16574319

http://www.usedvictoria.com/classified-ad/2-br-suite-in-heritage-house_16616125


THIS ONE caught my eye
http://www.usedvictoria.com/classified-ad/RENT-REDUCED-Large-3-bedroom-main-floor-of-house-nr-Mt-Doug--Broadmead_16614380

http://www.usedvictoria.com/classified-ad/2-BR-Upper-Flr-Modern-Well-Maintained-Condo--Flexible-Move-In-Day-Avail-_16614357

This one is expensive too, but it looks nice

http://www.usedvictoria.com/classified-ad/2-Bedroom-modern-suite-in-James-Bay-character-home_16614659

MC said...

http://www.usedvictoria.com/classified-ad/2-br-1-ba-Newly-renovated-house_16612665

^And that one.

So, after looking at them again, and seeing their locations, I am still sad about the cost of living in this city. But I think the rental market is slightly better than before. What do you think?

dasmo said...

http://www.realtor.ca/propertyDetails.aspx?propertyId=11429381&PidKey=917249698

^doing a rent vs own on this place, assuming you have a some cash, and that present 5 year GICs are 2%, assuming you can get it for $450,000 and have 25% down, and a 3.2% 5 year fixed mortgage... the calculator says the home needs to increase by 1.17% a year, 6% in 5 years. Monthly payments are more ($1750 not including the etcs) but if you are saving money for a down payment you must have surplus cash. If the market is going down, wait, if the market is going to be flat or going up at a normal rate and you have the down payment, I say it's an OK time to buy because you don't have a lot of competition but certainly no rush...certainly renting right now is not a bad option.

Leo S said...

present 5 year GICs are 2%

You can get a savings account for 2%. No need to lock your money in if that's all the return you're expecting.

Nice to see some new posters around here. Welcome!

Unknown said...

Does anyone know what 2184 Meadow Vale Drive went for?

Unknown said...

Does anyone know what 2184 Meadow Vale Drive went for?

Marko said...

$640,000

Dan said...

Marko, do you know what 1554 Montgomery sold for? Thanks.

Marko said...

$845,000....no surprised there if you've seen the homes going up on that street.

Dan said...

It went for more than I expected but as you said they'll probably put up a mansion.

Marko said...

Amazing what kind of premium people are willing to pay to be surrounded with mansions....

1678 Warren Gdns which is only a few blocks away went for $565,000; however, the street is lined with 1950s bungalows and only one new mansion so far.

Could put up similar mansion on both lots.

Dan said...

I'm getting the same impression. There are big lots on other streets that are more in line with market. But the wealthy crowd is moving to Despard and Montgomery streets.

Leo S said...

Isn't that always the advice though? Worst house on the best street?

Dan said...

Normally yes but 850k for an old house means they are going to tear it down and rebuild (the best view lots are on Montgomery and Despard)

Introvert said...

Marko, could you please provide the last few sale prices, along with the highest ever sale price, for properties on Warren Gardens? I'm curious. Thanks.

Leo S said...

More mortgage restrictions coming? Looks like there are some rumours.

Here's hoping for 10% down.

Paula said...

Introvert, bcassessment.ca has the latest sales from last year, eg., $665 and $710.

Viewer said...

Great blog.
Financial Post also had a story about the mortgage rules.
Mortgages

A new round of mortgage rules from Ottawa could include tough new measures for calculating how the self-employed qualify for loans and tighten regulations for condominium buyers, according to two separate sources.

Ottawa remains concerned about the possibility of an inflated housing market and wants to crack down on the practice where consumers self-disclose what they make when applying for a loan.

dasmo said...

This doesn't sound that new to me. I bought in 2003 when I was newly self employed. 20% was the minimum down required, 5% with default insurance. I had a difficult time due to the fact I was recently self employed (about 9 months) and was able to work through it because I was still doing the same profession. My family and I had been with the bank for many years which also helped...

Personally I think it only adds security to the market if people can't borrow the money if they can't afford to pay it back. This is how you create the mass distressed sale scenario that happened down south...

Leo S said...

It's embarrassing how crappy the data is that all the analysis is based on. In the Desjardins report there are pages and pages of analysis on the period after 1990, which is barely one cycle. Why is it that they have so much better data in the US?

Nancy said...

LEO S

I just want to get our money out but my husband's argument is - it costs $80,000 to sell and move (taxes etc.). We can't move up and we can't move down it would be a lateral move.

I just think we have too much money invested in one asset and we are not getting any younger.

dasmo said...

Leo, It is sad the Data doesn't go back that far... I found a classifieds section from a 1960s newspaper a while back. A house in Esquimalt went for $11000. My house was built in 1933 for $3000...

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

Monday, January 30, 2012 8:00am

MTD January

2012 2011

Net Unconditional Sales:

328 339

New Listings:

978 1,187

Active Listings:

3,551 3,283

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

Marko said...

SFH Average = 566k
Condo Average = 306k

a simple man said...

Thanks Marko - that average is a substantial drop. As we all know, the mean price of RE here it is highly variable due to the small sample size and the overwhelming impact of outliers, particularly on the upper end. However, most people do not understand this nuance. I wonder how this will play out in the TC? A 30K drop in one month is nothing to sneeze at.

And sales numbers look about on par with last year, a devastating year for agents.

Toronto Condo said...

At Toronto Condo Investment Management we not only help you find the right Toronto condo property, we maximize the income potential of your condo investment and efficiently manage every aspect of your condo property.

Toronto Condo Investment