Sunday, February 12, 2012

Feb 13: 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.

February 2012 month to date (previous weeks in brackets)
Net Unconditional Sales: 179 (80)
New Listings: 557 (245)
Active Listings: 3629 (3539)
Sales to new listings ratio: 32% (33%)

February 2011
Net Unconditional Sales: 488
New Listings: 1276
Active Listings: 3714
Sales to new listings ratio: 38%
Sales to active listings ratio: 13% or 7.6 MOI

The first week was a 5 day week and we saw sales of 16/day. Last week it was 14.1/day. It's most likely just noise, but aren't sales supposed to be accelerating this time of the year?

105 comments:

caveat emptor said...

Two steady housing years ahead: CMHC

http://www.theglobeandmail.com/report-on-business/economy/housing/two-steady-housing-years-ahead-cmhc/article2336199/

Perfect. A taxpayer backed insurance scheme wearing rosed coloured glasses.

patriotz said...

And here's what CMHC was predicting for 2008

VICTORIA, November 15, 2007 — Demand for homeownership will keep housing starts and existing home sales at above-average levels in BC and Victoria, and push new and existing home prices higher in 2008.

rentorown said...

Go Canada! We have the highest price to rent ratio in the world. That likely makes Victoria the highest price to rent ratio of any city in the world. Needless to say, you would have to be a little challenged to choose to be an owner right now.

Marko said...

^challenged is a strong word.

Just Jack said...

Only 3 percent of our population is actively buying and selling real estate.

Meanwhile, in the real world, more people are maxing out their home equity lines of credit as they find it very difficult to live on their wages. Blend and extend is the phrase most often heard today when refinancing.

caveat emptor said...

Well there are 48000 private residences in Victoria. Someone has to choose to be (or remain) an owner. At an individual level you can sell out to avoid the "crash" but obviously everyone can't do that.

dasmo said...

Funny I get a 28 for a price to rent ratio based on our last SFH average of 564K and assuming that would rent at $1700/month. That makes us neutral right now in terms of more expensive to buy or rent. check it out yourself:

http://trulia.movity.com/rentvsbuy/

Leo S said...

you would have to be a little challenged to choose to be an owner right now

Yeah let's not get into insults. Marko showed that in his own situation owning still makes financial sense. Everyone has their own circumstances that changes the outcome.

Leo S said...

That makes us neutral right now in terms of more expensive to buy or rent. check it out yourself:

27 puts us in the second highest category on that page. That's not neutral.

The highest category (much more affordable to rent) is 31+, but neutral would be about 20.

dasmo said...

True my bad. I thought it was funny myself.

rentorown said...

Apologies, what I was meaning was 'financially' challenged, it kind of came out wrong.

rentorown said...

And yes there are always specific situations that would differ.

Just Jack said...

Just looking at the number of people per household in Victoria.


Population 80,017
# of dwellings 47,691

Household size 1.68 persons per dwelling.

Compare that to Langford or Sooke at 2.3 persons per dwelling. Even Oak Bay and Saanich were better at 2.2


The one thing we don't have a shortage of in Victoria is dwellings. I wonder which we have more of in Victoria? Dwellings or cars?

Just Jack said...

According to the Fraser Institute, the average parent's income for the Oaklands' school neighborhood is $47,900.

Well today a remodelled "starter home" sold in this hood for $575,000

That is a price to income ratio of 12

In comparison. Margaret Jenkins Elementary has an average parents' income of $77,600. A similar home to the Fernwood house sells for about $625,000 in this area. That is a ratio of 8.

What can I say....

Fernwood go BOOM!

Fiduciary said...

JJ, do you consider Margaret Jenkins in Fernwood? I grew up there, went to that school myself, and I always considered it in either Rockland or Fairfield. Now I know not that many people consider Rockland a neighbourhood, but I'd still put it closer to Fairfield or Oak Bay than Fernwood.

Just Jack said...

No, the comparison being made was between Fernwood and Fairfield.

The question is why will someone pay 12 times the neighborhood income for a home in Fernwood, when a similar home can be got for 8 times the neighborhood income in Fairfield?

Is there a fundamental flaw with using the income to home ratio or is Fernwood in a bubble?

What do you think?

Fiduciary said...

I don't think it says as much about a neighbourhood to neighbourhood comparison of income to price as it does about the price compression going on and the value of Fernwood relative to Fairfield. Personally I'd expect the same home in Fairfield to be a bit over $50,000 more than one in Fernwood, but I don't track those types of things that well, I'm just going based on my sheer ageism of Fairfield = old, Fernwood = young, which is flawed, I'll admit.

The lesson I take out of it is this: if you're going to buy a starter home, and you're going to buy it now, save up a bit longer and get something nicer, or in a nicer area. Then again, it's late and I'm reaching for an answer.

PS: I'm surprised, but I looked up ageism and it's a word. Huh.

caveat emptor said...

JJ i assume those incomes are household incomes (taking account of both parents).

I would agree that by this measure Fernwood seems overvalued relative to Fairfield.

However probably neither income figure is representative of current buyers in those areas.

So then the question becomes, what is the relative desirability of those two areas? And what Fairfield price premium does that difference in desirability support?

For myself when I was loooking 3 years ago I liked Fernwood but even then thought prices there were a lot of money for what you got (old house, small lot, less nice location than Fairfield)

Just Jack said...

The Fraser Institute calls the income... Parents' Income.

But I could not find the definition of "Parents' Income".

The inner city neighborhoods, like Fernwood, typically have the lower parent's income. These are the neighborhoods with the most rentals and most likely a larger portion of single parents.

So what does that say about a neighborhood. If we ranked neighborhoods by income then
the lowest neighborhoods would be
around

George Jay, James Bay, Quadra, Oaklands, and Cloverdale schools.

While the highest parent's income neighborhoods would be:

Cordova Bay, Crystal View, Keating, Lakewood, Lochside, St. Michaels, St. Patrick's, Strawberry Vale, Margaret Jenkins and Willows.

Areas that I don't think have a high count of rental properties such as basement suites or apartments and rental condominiums.

I think this illustrates the difficulty in using price to income ratios as a measure of how far out of whack market prices have become. Obviously you can't compare an urban area to a semi-rural neighborhood.

Just Jack said...

School ratings seem to work better in relation to home prices.

The under performing schools are Cloverdale, Colwood, George Jay, Macaulay, McKenzie, Quadra, Ruth King, and Tillicum.

The over achievers (excluding private schools) being Campus View, Cordova Bay, Frank Hobbs, Keating, Lochside, Torquay and Willows.

So if you live outside of the urban areas you will earn more money and have smarter children. You'll probably be better looking too. Of course this affect drops off substantially as you approach Langford.

DavidL said...

@Just Jack wrote: School ratings seem to work better in relation to home prices.

I agree that school ratings often indicate the average value of surrounding homes. I live very close to one of the "under performing" schools, yet send my children to a different school located outside of my catchment area (champagne dreams on a beer budget?). How does this affect the value of my home, or the perfomance at the local school?

However, within the catchment area on my local school, SFH prices vary greatly - by at least $200K.

Check out catchment areas for SD 61 at: http://www.sd61.bc.ca/schoolCatchment.aspx

patriotz said...

"I think this illustrates the difficulty in using price to income ratios as a measure of how far out of whack market prices have become"

Essentially price to income is useful only at the metro level. Once you start looking at smaller areas the demographics start skewing things as you pointed out.

Price to rent for individual properties, however, never gets it wrong. Well except if you're looking at lot value properties where the price and rent should be the values after redevelopment.

Price to income at the metro level does track price to rent quite closely, which is an indication of its reliability.

Paula said...

Interesting article today at CBC.

Home foreclosures skyrocket in Kelowna

"Neumann thinks many working class families are losing their homes, but not all real estate agents agree. Ash says many Canadians are now buying vacation homes in the States, where prices are currently low"

DavidL said...

Canadian housing market cools in January

"This month's decline is reflective of what will shape up to be a softer year in sales," said Jacques Marcil, senior economist at TD Bank, adding that "the actual correction is foreseen to start in 2013, with both resales and prices turning negative."

patriotz said...

"Neumann thinks many working class families are losing their homes"

Why? Interest rates are at their lowest ever, so why should anyone who bought a few years ago be unable to afford the payments now?

Unless they lost their job in construction... uh oh.

DavidL said...

>>> Kelowna housing starts have dropped precipitously in the past two years:
http://www.cmhc-schl.gc.ca/odpub/esub/64183/64183_2012_M01.pdf?fr=1329338506930

>>> As for Victoria:
Construction started on 72
new homes in December, bringing the
annual total to 1,642. This represents a decline from the 2,118 starts recorded in 2010, and is 15 per cent below the annual average recorded over the previous ten years (2001-2010 average: 1,941 starts).

http://www.cmhc-schl.gc.ca/odpub/esub/64179/64179_2012_M01.pdf

rentorown said...

^From that Kelowna article;
“What do you tell your sellers that are not in foreclosure that are now up against something they didn't see coming."
Those poor sellers. Who could have ever seen this coming? *sarcasm off
Canadians credulity is embarrassing. How about tell them the truth, "YOU and your neighbours caused the bubble. YOU equally contributed to the bubble even if YOU greedily chose NOT to sell after hitting an undeserved jackpot." The last part is only directed at any forthcoming whiner sellers. *rant off

rentorown said...

Listings will begin boiling over this year. All the 5y term speculators who bought at the top in 2007 2008 will be wondering lately "things aren't returning to normal yet like I thought they would. Gosh maybe realestate doesn't always go up. Should I renew on that losing investmnet or get out while I still can with a smaller loss?"

Marko said...

Not everyone buys a home as an investment. A lot of people just want a comfortable place to live.

Leo S said...

Not everyone sells their home either. The market is made by the few that do.

patriotz said...

"A lot of people just want a comfortable place to live."

I've got a really comfortable place to live without owning.

And if someone cares about how much they can sell their house for, it's an investment, by definition.

I've yet to hear any new home buyer say, "Yeah I'm pretty sure I'm going to lose money on this, but it's comfy."

Marko said...

"I've got a really comfortable place to live without owning."

Fair enough.

Rhino said...

"I've yet to hear any new home buyer say, "Yeah I'm pretty sure I'm going to lose money on this, but it's comfy.""

I have actually heard a few of my friends who bought say that lately to be honest

Fiduciary said...

It's sort of funny, I'm about to enter a similar situation, but with a rental. It's more money than I want to pay, it's not a good deal, but dammit it's exactly what I want in terms of a comfy place to live. I can certainly afford it, it just sucks to not be able to get a "deal".

dasmo said...

You buy because you can afford to make it your own. You hope it will appreciate so down the road you have equity. That equity can help you get into a different place, borrow more, etc. Flippers are out there and it's irritating. I'm Ok with them getting a haircut. In the short term anyone who has bought and can afford their payments will be fine. They can't just walk anyway. In the US you can default and walk away, here you are still on the hook. So unless you are truly destitute you will ride it out.

Russ said...

I need a RE intervention!

Although we weren't seriously looking at properties (I'm a long time HHV reader and bear believer,) the wife and I have fallen in love with mls 302794. I need a dose of reality and advice, am I crazy to be thinking this way? Am I about to become one of the people I deride, horny for stainless and not enough savings??

The vital stats are: approximately 45% down payment, a house we see ourselves raising our new family in, able to pay it off before retirement. DB pension.

My heart says this is how I dreamed I'd live and raise my family. My head says in 12-24 months I could find something equally to our liking, with a larger downpayment and possibly for 10-20% less.

Would appreciate any thoughts on buying vs waiting, and anything about this specific property. Anyone go to the open house on the weekend?

Marko said...

Just out of curiosity - are you planning on renovating MLS:302794?

Russ said...

Marko,

Ya that would be the plan. As you can see it's incredibly dated.

Russ said...

Marko, did you go through it?

I noticed you have a listing nearby. If we get more serious about the place we may give ya a ring for a meeting.

Leo S said...

In the US you can default and walk away

Only certain states (about half) have non-recourse mortgages.
This study showed that recourse loans (what we have in BC) reduce foreclosure rates by about 20% compared to states with non-recourse loans.

DavidL said...

@dasmo wrote: You buy because you can afford to make it your own. You hope it will appreciate so down the road you have equity. That equity can help you get into a different place, borrow more, etc.

When I bought my house ten years ago, I purchased it for a different reason: rent avoidance. At that time, I had been renting for more than 15 years, and knew that it was a good time to buy. The plan was to pay off the house ASAP so that I would have more wealth (i.e. no mortgage payments) as I get into my 50's.

Interestingly, when setting up my mortgage in 2002, I told the bank that I wanted to amortize the loan over 17 years. They looked at me as if I were crazy, and then asked why I didn't want the "full" 25 years to pay it off. They even tried to talk me out of it. When I switched the mortgage to another lender 3 years later (at a better rate!), I told the new lender that I wanted to amortize the loan over 11 years. The same conversation ensued. In 2015, I'll be mortgage-free.

Ongoing maintenance, insurance and taxes are about $600/month - much less than rent. The resale value has never been a consideration to me.

Leo S said...

@Russ. How long have you been looking until you found this place that you love? It's not exactly a run of the mill place, so places that you would love equally as much might be few and far between.

If you're comfortable with the amount and don't mind if it decreases by 20%, then why not?

Anton said...

Russ,
I do not know that property but have driven by it several times. If you have 45% to put down I say you can afford the house whether the correction is 10%, 20% or whatever. It is a bit risky to “fall in love” with anything, particularly a house you don't own. This market has cooled substantially so buyers can put in lower offers and don't feel the same pressure. I would say try and fall out of love with the place and put in a fair offer subject to inspection if it is really the house you want. As far as a place to raise kids, the downside is as a view property the back yard is pretty steep and not really suited for kicking a ball around etc. but the beach is nearby which is pretty nice. The place will be expensive to heat (2X4) construction, sun room in winter, but furnace could be converted to a heat pump. The local schools are quite good (Keating etc.) and I believe a school bus goes by there. The local reserve is trying to develop a huge shopping center (Costco, Target? plus shops) by the Macdonald's so I suppose that might add to value down the road.

I think people will make big purchases they know they will not make money on. Car purchases come to mind. I am a confirmed bear but am prepared to buy now if the right property comes along. It depends on your comfort level on losing some money in the short or medium term. Having a defined benefit pension would give some peace of mind re taking more risks with money. If this one gets away there will be lots of other nice ones and no, you won't be “priced out forever”.

dasmo said...

True David, I bought almost ten years ago in 2003 when it was actually cheaper than renting. Times have changed so I revised my why as to one would buy now ;-) If you don't WANT it and cant AFFORD it then don't buy it. It's cheaper to rent right now without question. I just think it's debatable whether it's worth it to buy now VS waiting for a possible POP....

Paula said...

“In the US you can default and walk away, here you are still on the hook.”

Agreed, procedures are different in the US, but in Canada people can still walk away by declaring personal bankruptcy. That’s what happened a lot here in the 80s.

Industry Canada has a site that talks about bankruptcy trends:
“… consumer bankruptcies increased during the recessions of the early 1980s and early 1990s … According to ex-bankrupts, two of the main reasons having led them to bankruptcy were a change in their financial situation (such as a separation or a divorce, the loss of employment, health problems or a decrease in income) and an insufficient salary.”

dasmo said...

@Russ, Try not to fall in love until after you own it, helps with negotiating. Most likely they expect to get 10% less than the asking price so offer arround 20% less to start out (by default). Also, an agent can help you get helpful information like how much is left on their mortgage, why they are selling, comparable sales in the hood. Contrary to popular belief you can also negotiate after the house inspection if major things come up, especially in this market and if you have confirmed financing. The key is not being in love so you are comfortable with the deal not happening...Good Luck!

patriotz said...

". In the US you can default and walk away, here you are still on the hook. So unless you are truly destitute you will ride it out."

3/4 of US states (including Florida) are recourse, just like Canada.

As for here, my bet is that 90%+ plus of the people who are going to end up with underwater mortgages have no other assets except for RRSP's and pension plans, which are protected in bankruptcy.

So what do you think that portends?

dasmo said...

Not much. You would have to really start to look at what % of people bought say 2006 and after that will not be able to pay their mortgage to the point they want to declare Bankruptcy. Not an minor impact on life and usually a hand that is forced not a mechanism to walk away from your mortgage because your equity just went into the negative.
I assume a much bigger percent of owners out there (except langford) bout before 2005 and will be fine even with a 30% drop in the average price....

dasmo said...

bout? what the Freudian slip...

Paula said...

Yes bankruptcies happen because people’s financials change, eg., job losses/changes, family changes - which isn’t a stretch in today’s economy and extended debt loads.
In the 80s my dad had a very “secure” job and great pension, but the whole company had to shut down, and we only stayed here because he started his own business.

Russ, sounds like an exciting time for you. Have you written down a comparison of that property with other ones you’ve considered? Maybe getting it on paper would crystallize what to do.

dasmo said...

I also have family that declared Bankruptcy. I also have a friend Down south that lost everything in the crash. Was a builder with an ARM mortgage on his place. The banks were ruthless though. They just wanted everything of the books. He would have been fine if he could have finished a few properties he was building but they pulled the rug out from under him and cut his line of credit to nothing. Funny thing is the bank also lost out in the long run...

patriotz said...

"You would have to really start to look at what % of people bought say 2006..."

Something that someone has already said on this board and I'll repeat: market prices are determined by the people who are buying and selling, not the people who aren't.

rentorown said...

New American Dream is renting to get rich

"The founder and CEO of Cornerstone Wealth Manageme...an adjunct professor in personal finance at the University of California at Berkeley, found that, "100 percent of the time it was better to rent, rather than own."
That's right: 100 percent.
In the States, no less. His findings are surprising to me but I'm not about to argue with a CEO slash finance professor.

Marko said...

"Marko, did you go through it?

I noticed you have a listing nearby. If we get more serious about the place we may give ya a ring for a meeting."

I haven't been through it but I may take a look out of curiosity given it looks vacant.

I wonder if 1965 would have engineered trusses? That would make a reno a lot easier if you could move the interior walls.

PS. Forget about the reno and just buy my listing...just joking.

SilverSurfer said...

rentorown, that was hilarious. Let me know when all the masses start following that new American Dream, that may very well be the signal to finally buy.

Meanwhile, let's all propagate a new slogan at parties... instead of the old "Buy now, and stop wasting your money on rent", we should start proclaiming "Sell now, and stop wasting your money on bank mortgage interest payments".

dasmo said...

"As for here, my bet is that 90%+ plus of the people who are going to end up with underwater mortgages have no other assets except for RRSP's and pension plans, which are protected in bankruptcy.

So what do you think that portends?"

I was only responding to your question at the end...eluding that there will be a wave of foreclosures coming as peoples home equity goes under water...

Just Jack said...

Court ordered sales are a very small fraction of the Victoria home market.

Of the 3,132 houses (excluding condos, townhomes, half duplex) that sold in the core, Westshore and Peninsula areas only 31 were advertised as court ordered sales. The sale prices ranged from a low of $270,000 to a high of 1.5 million. The typical price being $515,000 after being on the market an average 100 days.

That probably tells us, that our market was functioning well during 2011, as most homes under duress will have sold before the lender had conduct of sale.

Currently their are 10 homes advertised as court ordered sales in those same areas.

And an almost equal amount of townhomes, condos and half duplexes are under conduct of sale by the lender. That would be less than 1% of the current listings.

Of course this was where Kelowna was just a year or two ago too. If our court ordered sales shot up like Kelowna has we would be looking at around 550 homes, condos, etc. for sale in Victoria under court order. Because of our low sales volume, that would most likely be a disaster for our marketplace.

Just Jack said...

Mathematically challenged. That's what happens when you are trying to finish the write up and having to pee at the same time.

Now that I have both a clear mind and bladder.

If Victoria's court ordered sales were to jump like Kelowna then we would have about 200 homes (not 550) under conduct of sale or about 8% of the listings. That would not necessarily mean a disaster but we would have serious erosion in home prices.

Just Jack or just one flush away from pervection - damn have to go again.

Just Jack said...

If the value of your house is less than your mortgage does not mean you'll stop making payments.

Canadians are nice people. We like to pay our bills. And while there is a chance that the market will rebound in the next decade or so, we will pay our mortgage.

That is unless, something happens that really pisses (I don't know - I have this urine thing going on today) us off. Like a rise in the interest rate at renewal time or we owe more than 20 to 30 percent than the value of the home.

As long as there is the faint hope of a reprieve in house prices we will continue to make payments. And after making inflated payments for the next decade we will look back and ask ourselves why we didn't declare bankruptcy then.

Leo S said...

The banks were ruthless though. They just wanted everything of the books. He would have been fine if he could have finished a few properties he was building but they pulled the rug out from under him and cut his line of credit to nothing.

Yep, that's banks for you. Don't expect them to be rational and continue lending to those qualified individuals.
Tightening credit catches everyone, and can change the market in an instant. Will be interesting to see what happens with the CMHC limit.

Paula said...

"If the value of your house is less than your mortgage does not mean you'll stop making payments."

Completely agree but as you know the problem in a down economy is that people don't have a choice - they lose or change jobs, and vacation home owners don't have as much play money. So both groups don't have the bucks to make payments.

Kelowna is a good example - the realtors said it's a combo of working class who can't afford the payments anymore, and vacation home owners who'd rather buy in the US.

Just Jack said...

Which is different in Victoria.

The court ordered sales appear equally dispersed amongst income groups.

patriotz said...

the realtors said it's a combo of working class who can't afford the payments anymore, and vacation home owners who'd rather buy in the US.

Actually this is the guy who really got it right:

"Elton Ash, the vice-president of Remax Realty in Western Canada, says most of the foreclosed properties are from people who were trying to flip homes during the hot market a few years back.

"People weren't able to achieve their goals in doing this and so they quit making payments," he said.


It's speculators who are primarily responsible for both bubbles and the resulting bust because they can move between the buy and sell side at any time. This is the fact that the "homeowners will just keep paying" argument ignores.

And at the risk of being boring - market prices are set by the people who are buying and selling, not the people who aren't.

dasmo said...

Of course they are but an all out bubble burst like down south was not cause by simply the flippers hands being forced. Armageddon requires some scenario that also causes regular folks into the position to have to sell in such a market that has set the prices lower than they owe. that is the fuse that need to be lit

Anyone trying to flip in this market right now is crazy unless they like losing 100 K....But this hasn't visibly affected the market. One property comes to mind. it's last sale was $675K it's on record as selling a few months ago for $685K. A wash right? This record doesn't include the $75K they did in renos...

pod_x said...

A wash right? This record doesn't include the $75K they did in renos...

Also doesn't include lots of other things, such as realtor commission, property transfer tax, property taxes and financing. Sitting on a house is not cheap, especially if you don't live in it and have to pay housing costs elsewhere.

Just Jack said...

I suppose that it depends on your definition of a flip.

Of the 11 homes that are currently advertised as court ordered sales only 2 were bought in the last five years. 9 of the 11 were previously bought between 2005 and 2007.

My humble opinion, is that it is not flippers but home equity lines of credit that are getting people in trouble. Easy access to credit has resulted in too many trips to home depot and the new car dealerships. And its not in one class or income group. Doctors and firefighters are equally as likely to fall into the trap of spending more than they earn.

The scary thing is that the home equity lines of credit were available universally to every home owner. I think most of us know of friends or friends of friends who are trapped into the spiral of increasing home equity debt loads. People, that are facing refinancing and have to extend their amortization period to the max.

The one thing that is common to all of these court ordered sales is that the homes are amortized to the max.

Taigaa said...

Is there a way to tell in the realtors data if the houses are paid off or if not, how much is left owing or how to you know if they are amortized to the max?

Animal Spirit said...

interesting that there are very few mid-range sales in the core areas this week - a fair number of lower end sales, but almost nothing 500-575K. Back down to around 94% sales price to assessed for Feb. for SFH <575K

Marko or LeoS, how are the higher end sales in Victoria recently?

Marko said...

Higher end sales not bad. 10 for the month so far over 1 million.

In the system I can see titles to see whether or not there is a mortgage but realtors don't have access to amount owing.

Leo S said...

Little activity in the low end. I am seeing similar things as you Animal Spirit. A few more sales this week in the < 550k SFHs, but the stuff that is selling is far under assessment. After a brief surge at the end of January, my 30 sale price/assessment is down to 92.5%

The higher end is doing a bit better. Price/Assessed at about 100%, or about 2% higher than the lows in December.

chris said...

Another professor joins the ranks.

http://business.financialpost.com/2012/02/17/housing-market-poised-for-severe-correction-finance-professor-says/

Is it just me or has there been a monumental shift in the media? I wonder if it might get buyers thinking twice.

dasmo said...

Major shift. They are on that bandwagon now without question. It will be interesting to see what it does to the market. I've said it before...the spring shall be the canary...

Introvert said...

the spring shall be the canary...

I'm pretty sure people here said "this spring will be telling" last year, too. I wonder, What did last spring tell us?

Leo S said...

What did last spring tell us?

That consistently high MOI makes prices drop. Given that inventory is as high or higher right now, and sales are tracking about the same, I would expect similar results this year.

SilverSurfer said...

The part that makes me chuckle about the mainstream media seemingly turning tides towards the doomer shore is that each new doomer ferry passenger is coming up with their own technically justifications - some more valid than others. Thething is that the ultimate outcome is a result of mass psychology (not technical logical arugments - most of the time), which is influenced of course by mainstream media experts.

In other words, if this trend continues in the mainstream media, it will become a self fulfilling prophecy wherein the arguments of the experts become valid, regardless of their true validity (or lack thereof) in the first place.

Whatever... I don't care anymore, just hurry up and get on with it, I've been waiting long enough! :P

patriotz said...

"I wonder if it might get buyers thinking twice."

90% of them, no. People who aren't willing to pay attention to the bust in the US (or Kelowna, or SSI) aren't going to pay attention to some talking head.

However it is the 10% who do think twice (both buyers backing out and investors getting out) who make prices fall.

Bitterbear said...

Hello all...anyone know anything about Mount Washington? I'm thinking of picking up a cabin and land package from lefevre development. I've never bought recreation property before, but I love it up there and plan to move up there once my kids are done high school. I've been told prices are about 30% off a high (?around 2007). Any thoughts are welcome.
-BB

Just Jack said...

The 3 or 4 percent of the population that are actively bidding on and/or selling real estate are real estate enthusiasts. It takes a lot of main stream media news to change their opinions.

Meanwhile, most of the 97 or 96 percent of the population have already come to the understanding that prices will be going down.

There is only one table left playing at the casino. When that game is finished, the casino will close down for awhile to clean up the mess.

After a couple of years, the real estate casino will open again, but at much lower stakes.

Alexandrahere said...

The tax assessment people couldn't make up their minds on the value of 4001 Lacarno. MLS 303195

2007 673K
2008 679K
2010 630K
2011 676K
2012 653K

Just sold at $617K

chris said...

Bitter bear
This is the only thing I could find on recreation/vacation homes.
I don't know what to make of it. All I can say is it seems like many of the Boomers (between46-66)I know have hung up their skis for other recreational activities. Then again there is lots of x-country skiing and summer hiking trails up there so, maybe it’s a good investment at 30% off if your going to live there. Maybe I'll move up there and be your neighbor.

DavidL said...

@BitterBear wrote: Hello all...anyone know anything about Mount Washington?

I was up on the slopes between Christmas and New Year's. I chatted with quite a few owners.

Those who purchased before 2005 have broken even, but many who bought more recently have lost 25% or more off their investment. One guy I chatted with said that he had already lost 70K in the resale value just in the past couple years. I asked him where he thought the market was headed - and he said it was only going to go down. I asked if he considered selling, and he said he couldn't afford to turn the "paper" loss into an actual one. There is a lot for sale on Mount Washington, and I believe a whole lot more will be put on the market in the next few years.

A tip that another owner told me: you need to live nearby to deal with rental issues, maintenance, etc. The water pipes on his chalet burst (froze) after BC Hydro cut the power for a few days. The damage was significant, requiring closure for most of the season to replace upstairs and downstairs flooring, sub-flooring, and wall damage, etc. He said that his insurance company tried to deny his claim, but as he visited the property the day before (lives in Courtney), they eventually paid for the damage. Other owners from Victoria who also had water damage were NOT paid out, as they could not prove that they had been negligent in maintaining the property.

DavidL said...

@SilverSurfer wrote: ... if this trend continues in the mainstream media, it will become a self fulfilling prophecy wherein the arguments of the experts become valid, regardless of their true validity (or lack thereof) in the first place.

I entirely agree. In some parts of the US, housing can be purchased for less than two times the annual average family income - but people "want none of it" because of the concern and fear that continues to be perpetuated in the media.

This is why I consider the current Victoria market like a roller coaster cresting and the top of the track. Those who are looking down (including some media) and afraid of the pending drop, while those looking up are enjoying the sunny skies. Some of the riders are begininng to nudge each other and saying: "Hey look down there!". When everyone is looking down ... there will be no more sunshine.

DavidL said...

@Alexandrahere

I see that between 2011 and 2012, the assessed value of the land at 4001 Locarno dropped by $2000, while the value of the "improvement" (house) dropped by $21,000. The $2K drop in land value seems typical for the neighbourhood.

Ranulf said...

I remember back in 2007 and 2008 when I was visiting the US bear housing blogs. And I remember when the US media went from full on bulls on housing to full on bears.

One commenter back in 2008 said 'there is no middle ground for these guys'. And it stuck in my head. The media is all one way or the other.. and they try to out sensationalize stories than the competing press.

Marko said...

"roller coaster cresting"

Roller coasters run flat for almost 5 years?

Leo S said...

Well there were some bumps since then. But yeah, most people are here more for the mini donuts than the roller coaster.

DavidL said...

@Marco

Agreed... adjusting for inflation, prices over the past five years have been relatively flat. However, those roller coaster riders who have been eating the cotton candy handed out by main stream media (MSM) have been thinking that the market is still inflating.


It's all about perceptions...

Paula said...

“run flat for almost 5 years?”

Yes housing cycles last several decades (buyers/sellers can't react as fast as in the stock market), and peaks can include flat periods >5 years.

Examples:
This shows San Diego stayed >$600k for 4 years (start 2004 - end 2007), San Francisco >$1M for 4 years (2004-2008), similar with Seattle >$400k (2005-2009).
Click on MSA-level price indexes
Or more history
Case Shiller data 1890-2011 (2nd tab has data, eg., 1930s, 1950s, 1980s-1990s)
Or Summary

Bitterbear said...

Thanks Chris and DavidL...that's my understanding as well.

the insurance thing is a pain. I think there are rules that you have to be on the property every few days. Fortunately, I will be there Sun through Wed every week.
-BB

patriotz said...

"adjusting for inflation, prices over the past five years have been relatively flat. "

But total returns have been negative. That's what eventually gets Wile E. Coyote off the plateau.

Leo S said...

What is still a mystery to me is whether a trigger is necessary to start a bigger decline, and what that trigger could be.

A big part of the US market started declining in 2006 due to subprime and the resulting increased foreclosures. Quite a few places however, like Seattle, San Diego, San Francisco, kept increasing for another 2-3 years, until the global financial crisis triggered the decline. They dropped and are still dropping.

We dropped and bounced. Not sure what the difference is, and whether another shock is necessary to start a decline, and what that could be (rising rates, tightening mortgage regs?).

dasmo said...

i'm curious what a nice house in a nice neighbourhood still goes for in Seattle. Just to take the short sale foreclosures out of the equation.

Leo S said...

Seattle does not have significant numbers of foreclosures. 0.1% foreclosure rate.

Leo S said...

Of course there are areas where prices are stable. Redmond for example, where the vast majority have excellent salaries from Microsoft declined hardly at all.

Anton said...

I suspect this is stating the obvious for most folks reading this blog, but the only place Mount Washington values are going is downhill. It is a playground. Think Las Vegas. I'm sure there is a value to the housing up there based on the income it can generate but it is a lot lower than current values. Most of the housing is in wood frame condos built in the leaky condo era. The strata fees are high and the rental season is short. Demographics and global warming aren't working in the resort's favor either. Granted, it is a beautiful place but so are many "real" communities up the island.

Paula said...

"whether another shock is necessary to start a decline, and what that could be (rising rates, tightening mortgage regs?)."

Canada's recoveries seem to lag the US (our 1990s recession lasted 3 years longer). Rising commodity prices have saved us so far (similar to Australia). However our currency is also high, which eventually prices us out of certain markets, and our biggest trading partner hasn't recovered. To top it off, the gov't fueled excessive debt to keep the real estate industry going during the recession, so while US consumers have deleveraged, Canadians haven't even started yet.

patriotz said...

"What is still a mystery to me is whether a trigger is necessary to start a bigger decline, and what that trigger could be."

No external trigger is needed. RE markets start declining simply because they run out of buyers.

The first major Canadian markets to start declining were Calgary and Edmonton in mid-2007. What was the trigger for that?

"A big part of the US market started declining in 2006 due to subprime and the resulting increased foreclosures. Quite a few places however, like Seattle, San Diego, San Francisco, kept increasing for another 2-3 years,"

No, foreclosures were low in 2006. Foreclosures lag falling prices and are a result of them, not the cause.

US foreclosure charts

Also, San Diego was the first major US market to start declining in late 2005. The last was Seattle in mid-2007.

a simple man said...

Hi Marko;

Any stats for the past week?

Marko said...

Monday, February 20, 2012 8:00am

MTD

February 2012 2011

Net Unconditional Sales:

311 488

New Listings:

818 1,276

Active Listings:

3,676 3,714

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

Marko said...

SFH Average MTD = 615k
Condo Average MTD = 300k

a simple man said...

thanks Marko - looks like last year repeated.

a simple man said...

By the way - what is the median running at?

caveat emptor said...

Re Mount washington
Our extended family owns a place there (condo, not chalet). Costs about $7000 a year just for taxes condo fees, power, phone, etc. That is with someone being up there every weekend in winter and on and off all summer.

A very few people live in the building but there are some disadvantages to that (not much of a community, almost no shops).

I would say that a purchase up there is totally a consumption item NOT an investment IMO

Just Jack said...

The Langford condominium complex known as Reflections was one of the first complexes where the pre-construction prices for the suites were set not at current prices, but at what the developer estimated the price would be when the complex was completed a year or two later.

That's why you have such a large difference in the original pre-construction price and what the property re-sales for today.

Like a fourth floor suite that was bought pre-construction for $324,900 in 2006. And has just re-sold today for $225,000.

The market for condominiums has not dropped 30 percent below 2006 levels in Langford. It's just that the pre-construction buyer bought into the hype.

This is a very good reason for anyone looking to buy a pre-construction condominium to research the current marketplace or pay someone to investigate the market for you.

Rhino said...

"Like a fourth floor suite that was bought pre-construction for $324,900 in 2006. And has just re-sold today for $225,000."

Wow. That is bad. The kind of person buying this type of property is just a working stiff, making under 50K a year. To actually go out and have to save over 100K in the real world to make up this hole will probably take a decade at least.