Chances are, if you can afford this house on Cedar Hill Rd:
You can afford this car:
Chances are if you've been kicking around old HHV's blog for the past 12 or 18 months, you'd have saved enough to get your hands on this beautiful German girl without doing anything at all.
How's that go HHV? We thought you would have given up smoking the BC when you left for greener and sunnier pastures just 7 short months ago?
Simple I say! If you didn't buy a Victoria median house last January, you would have saved yourself a cool $51,000, about enough to get yourself a BMW 3 series with a whistle and still have a $1000 to impress the ladies with! Sheeeet.
Median SFH prices fell $51,000 between January 2011 and January 2012. Average prices dropped from $597K to $567K - though the average is far less indicative of the market than the median.
Speaking of indicative of the market, did anyone else notice VREB's fancy schmancy new way of reporting the numbers. Now it could be coincidence, seeing as that it is the first reporting month of a new year and all, but the cynic in me would rather explain it as confusing on purpose. Switch up how you report your sales data and no one will know that prices fell almost 9% over the past 12 months.
Presto Chango! Whackadoo!
112 comments:
Monthly medians are marginally better than monthly averages, but I'd still hesitate to use them to compare anything.
So let's look at the trend here...
It's definitely an extended downward trend. However note the end of last year to see how quickly things can change.
I like the new data presentation that VREB has. However what's missing is the 6 month average.
Because of the bank's willingness to extend people leverage on houses.. they can make and lose huge money quickly.
A couple who saved up over years 50,000$ and used that as a 10%downpayment a year ago.. has now seen it vanish in one year.
If they went really crazy and got a 1 million home with 5% down.. they not only lost the 50,000$, but are now 50,000$ more underwater.
Of course people were loving it on the ride up. 50,000$ down on a 1 million home, rises 10%.. you just made 100,000$ in a year on 50,000$.
Victorians are going to learn the danger of the game over the coming years.
What about loosing money on this place?
http://www.realtor.ca/propertyDetails.aspx?propertyId=11480225&PidKey=-1091333764
Can anyone give an example of what someone does that can afford a place like this? (Real examples)
What about loosing money on this place?
Anyone buying this place won't care whether its price drops by a few million in the coming years; he probably has $30 million in the bank.
Anyone buying this place won't care whether its price drops by a few million in the coming years; he probably has $30 million in the bank.
I would disagree. They likely care about the price dropping a few million just as much as any other homeowner cares about being out $50 grand. Your average millionaire probably cares a lot more about $$ than most (i.e. they didn't get rich by being stupid with money)
The people that own that home are good, hard-working people that moved here to enjoy their retirement and built what they thought was their dream home. But, health and mobility problems cut their dreams short. The house has dropped over 7 million from what I remember.
Oh, and the money was from Ritchie Bros Auctioneers.
My wife corrected me - dropped $9.5 million since first offering.
and great graph, Leo. Good to see you on VV as well.
That house on Cedar Hill has been for sale for a long time now with a couple of price drops along the way. Is there something wrong with it or is the price still too high for a place like that?
Here's a version of Leo S' chart in real dollars - i.e. inflation adjusted
Now, back to my regularly scheduled bliss. Bliss animal spirt? Sleeping dragon :)
Marko - must have missed you by around 5 minutes at the gym yesterday. Should have warned you it was so busy!
Thanks. Very interesting. Approaching 5 years of inflation adjusted flatness. On to the declines!
"The people that own that home are good, hard-working people that moved here to enjoy their retirement and built what they thought was their dream home."
Mr. Market metes out his punishment for paying a ridiculous price on good, hard-working people and lazy sleazeballs alike.
I don't feel sorry for anyone who's going to lose money after paying too much because they are personally responsible for the inflated prices in the first place.
yes, spending 20 million dollars on a house is ridiculous. But, it is their money to spend how they see fit. Tiny resale market for them - who has $15 million that wants a place far out of a smallish city that they did not design to their preferences?
As far as the BMW goes, I would be more inclined to buy a good, used Jetta, buy Marko a set of weights for $1K, and pocket the remaining $35K.
Both objects in those pictures are gifts that keep on taking. Which one will have higher maintenance costs and depreciate faster?
Have not seen an article from the Times Colonist yet informing its readers of the median $51K drop in local real estate. I am sure it is in the works as they peruse over pictures of balloons popping that best show up on newsprint.
4424 TORQUAY DR seems like good value. Gordon head for $500k, doesn't look like a teardown, listed for $100k under assessment.
Is this priced for a bidding war?
^1949 built is not as attractive as a 1970s home in Gordon Head.
Sold for $460,000 in July 2007.
4424 TORQUAY DR seems like good value. Gordon head for $500k, doesn't look like a teardown, listed for $100k under assessment.
Torquay is a fairly busy road. Best to avoid it.
@a simple man wrote: I am sure it is in the works as they peruse over pictures of balloons popping that best show up on newsprint.
Here's the perfect graphic for the TC to publish:
http://www.gogwatch.com/wp-content/uploads/2011/03/20050817-mr_housing_bubble.jpg
(I sure wish images could be linked into this HHV blog.)
^1949 built is not as attractive as a 1970s home in Gordon Head.
Torquay is a fairly busy road. Best to avoid it.
True true. Very nice large lot though over 9000sqft. Hope there's an open house on that one.
In case any one missed this TC article
The scale of the reductions estimated by the union are in line with the latest projections from the Canadian Centre for Policy Alternatives, which estimates job losses could hit between 98,000 and 108,000 with deeper cuts. Of those, 53,000 would disappear in the public service
It's a glorious day
when you find out
you will paying
in 53000 less ways!
and in case anyone has concerns over gov't job cuts, see how Vallejo's rich gov't pensions caused that city to go bankrupt.
(by the way HHV, if you really want to impress girls follow the instructions in the Old Spice commercials – nary a BMW in sight :) )
Great image, DavidL - make me have a good laugh - and that is always a welcome event in life.
@Paula, romantic puppy surprise?
Yes that's a good one! :)
The BMW (unlike the house) is absolutely guaranteed to lose value. Fast (18-28% per year).
Did anyone see this one. Flaherty concerned by mortgage lending
"CMHC has recently received an unexpected level of requests for large amounts of CMHC portfolio insurance," CMHC spokesman Charles Sauriol told CBC News this week. That's giving lenders "the ability to purchase insurance on pools of previously uninsured low ratio mortgages," he said.
They're doing that so that they can turn debt — in the form of mortgages — into assets on their own balance sheet through a process known as securitization. These new securitized mortgages can then be sold to other investors.
The sale of such mortgage-backed securities was prevalent in the lead-up to America's housing crisis in 2007, but it's a practice that has been rare in Canada to this point.
If anyone wants to learn more about mortgage-backed securities and how they (and other investments) reeked havoc on the US financial system, I highly recommend the documentary: "Inside Job".
Trailer: http://www.youtube.com/watch? v=FzrBurlJUNk
The movie is available on Netflix and elsewhere.
Okay... Try this link (without the extra space in it) :
"Inside Job" trailer: http://www.youtube.com/watch?v=FzrBurlJUNk
Might be a lot of construction going on downtown in the near future....looks like the Era building on Yates might be a go again - got the email this evening. Prices from $198,900 (studio), $219,900 for one bedroom.....
So this year we'll have a crane at the Sovereign, Promontory, Mondrian, and excavation at the Era hopefully...
Oversupply of condos?
I think I'm in the minority but I would expect the demand for condos to be higher than for SFHs from incoming retiring boomers. Probably 80-90% (NPFB) of boomers won't be able to afford to buy a SFH in Victoria after retiring, but many more could sell their house elsewhere and get a condo here. The trend is towards downsizing and less maintenance anyway as people age.
If think the majority of any inbound retirees will choose to rent for financial reasons. Too now that the declining trend is in place it will last as long as the uptrend and put off people. People dont like to buy things that are falling, especially old people. If I was 65 I would rent on the island for the summer, and buy a nice 50k condo with a pool stateside for the winter.
As vw said, just because you can afford to buy something doesn't mean it's worth buying. I don't think someone owning a SFH elsewhere in Canada is going to be keen on selling it and buying a condo in Victoria for the same or slightly smaller price.
I think people in Victoria and BC in general have a vastly inflated idea of the attractiveness of the province to retirees from elsewhere. They're just not coming - the statistics show it.
Someone in Toronto can sell their house, buy a house (not condo) in a nice small town a couple of hours away for $200K or so, buy a condo in Florida, and have a heap of change to boot. And see their kids and grandkids whenever they want.
They're just not coming - the statistics show it.
Can you link to those statistics? I haven't been able to find anything definitive. Aside from the fact that the percent of Victoria's population above 65 has been at 17% for 2 decades. So it certainly doesn't seem like we are seeing more retirees coming here than before... But I think the bulk of the baby boomer retirement wave is still ahead of us.
Nasdaq 11-year high, Dow Jones also looking good this morning.
Apple is doing particularly well. Should have put that $500,000 into apple stock.
Interesting how the US is gaining strength while Canada is looking increasingly weak. I wouldn't be surprised if US interest rates start rising sooner than 2014. I think they're on the mend while we have yet to deal with the housing pain that they're getting close to bottoming on.
Leo - exactly what I was thinking. NASDAQ gains are great, but they came on the back of sane housing prices.
Yes, Apple is doing well - all time high. I had a chemistry proof at Thompson Rivers University in 2004 that was the president of the Kamloops Apple club. I remember at that time all he talked about was how he was buying more Apple shares - I remember him saying his average share price was under 10 bucks. Saw him last year in Victoria - picked up a nice house on Beach Drive. Must be doing well now.
I picked up some GE for 16.20 in December...unloaded it this morning a bit too early...oh well.
I've managed to rack up 166 trades in my Questrader account in the last 12 months. Fun hobby when things are going well.
I have no idea what is going on in Langford but condo sales have been absolutely blistering in the last 3 weeks....another sale this morning at 623 Treanor.
4 condo sales in Langford yesterday, already one today. Abnormally high activity.
condo sales - BMO effect. A 2.99% mortgage is a powerful incentive for first-timers.
As far as the trading goes - good for you, Marko. That is the sort of thing that you need to do early in life before kids and other responsibilities make it difficult to take even calculated risks.
I also have to say that I really respect what you are doing, Marko, and appreciate the viewpoints you bring here.
This might be relevant to Victoria's 13% employed in real estate related work. The new jobless:
Meet the new jobless – your broker, your real estate agent, your insurer.
Jobs in financial, real estate and insurance services took another hit in January, declining for the fifth consecutive month. They fell 23,000 in January and are down 50,000, or 4.6 per cent, from a year ago.
Trading has certainly been better since I black listed RIM. Last go around, picked it up for $44 and was lucky enough to get out at $28. $1,600 down the toilet :)
Wow 166 trades! I'm "long" guy I guess. Did a bunch of buys in 2009 when all the blue chips were half off but that's it. Long sure has worked well for me with apple ;-)
To bring it back to the bubble topic, IMO Real Estate is something that should only be considered if you are going long. Play it short and you can be burned by far more than $1,600. I personally know of a recent sale that took a hit of $70,000 even though it looked like they sold it for $10,000 more than they bought it for. A bunch of Reno money down the tube.
I've managed to rack up 166 trades in my Questrader account in the last 12 months. Fun hobby when things are going well.
It is a fun hobby, although I'm nowhere near as active as that. Just started last January and certainly made some mistakes along the way... Ended up just slightly up from where I started, but I learned a lot from stupid mistakes so I think it will be worth it in the long run. Apple has certainly been one of my best performers for the year.
166 trades is between $800 and $1600 in trading fees alone... Seems like a lot.
What's your plan, dasmo? Buying soon or waiting?
It's too late for me. Saw an opportunity and took it. Bought for 10% under assessed value so I don't think I overpaid. 2.99% 4 year fixed with a 25% down payment. Just signed the mortgage docs today. Certainly I did not buy because I sense an increase in value is going to happen but rather there was an opportunity in a neighbourhood that I wanted to live in. I negotiated a price that I thought reflected it's 2012 value ;-). To me this spring will be the canary in the coal mines. If you are waiting and can afford to buy in (not as an investment) I would watch carefully. Better to buy an the lower end of the downward slope than the start of upward slope IMO. Much more negotiation power and way less pressure...
Thanks to this Blog for giving me insight into the true state of the market. It helped me a lot! I guess we will know soon enough if it should have scared me off altogether....
IMO Real Estate is something that should only be considered if you are going long. Play it short and you can be burned by far more than $1,600.
I totally agree. I am comfortable betting on Victoria real estate (specifically, on a SFH in the core) in the medium to long term, and I'm not putting all my chips in one place (just lots of them).
Check out the cover of Canadian Business forecasting housing crash.
http://www.canadianbusiness.com/issue/66623--issue-january-24-2012-february-20-2012
No equivocation there.....
dasmo - congratulations on your new home. I wish you many years of health and happiness there.
A terrific day for you and yours.
So how is real estate doing in the core?
Back in September 2008 a home on Edgecliff in South Oak Bay sold for $2,999,000.
This home was subsequently put up for sale in July 2010 for $3,595,000. (short term holding)
And now after 550 days on the market has sold for...
$2,675,000
As it is now, holding real estate for the short term, in this case under 4 years, is not such a good idea.
That leaves holding real estate for the medium or long term. But what is meant by long term and medium term investing?
Long term holding of real estate is simply leaving the property to your heirs. A lot of people say that they will never sell their homes. However, every home that has ever been bought will also be sold.
That leaves medium term investing. The problem with medium term is that period of time is getting longer and longer. Back in 2005, short term was under 3 years, now it seems to be increasing to over 4,5 and 6 years.
Eventually medium term will become long term.
While the buyers a half dozen years ago still have an option of selling at a profit today, the investor of today is unlikely to make a profit as interest rates rise over the long term.
So, anyone buying real estate today, unfortunately are in it for the long term.
The problem with Real estate as an investment in general is it's not only an asset but also a liability. Buying equities is a much better plan. Although they can erode in value (even to nothing) they don't cost you anything after you have bought them and you can buy in small chunks and diversify. Real estate as an investment is best left to those with deep pockets. Buying your home is another matter IMO.
Dasmo, why did you leave 5% on the table?
When interest rates are this low, why not finance at 80% or even higher and why not for at least 5 years?
As long as you keep cash in reserve or investments that can be gotten to easily to pay down the mortgage, why not take advantage of the low interest rate and lock the mortgage in for as long as you can.
You might think that increasing your down payment from 20 to 25% makes it safer. It doesn't. The banks don't care that you have 20 or 25% down when you start missing payments.
The money is so cheap right now Why didn't you take 2 buckets of cash when they offered it to you at the same price as 1 bucket.
When interest rates are this low, why not finance at 80% or even higher and why not for at least 5 years?
Depends on your confidence in your investment returns. To beat paying down your mortgage at 3% you'll be wanting to guarantee at least 4% return on your investments. That's not much, but for a 100% guaranteed investment it's good.
Also, since many mortgages will have limits on lump sum payments, you minimize your risk if interest rates were to jump up.
Maybe I'm too timid, but once we have a mortgage I'm dumping everything in until it's gone.
oops sorry Jack, good question, I did do the min 20% not 25%. Banker gave me the same argument and I couldn't come up with a reason against.
ALERT, ALERT, ALERT
(This is only my opinion)
Again at this low interest rates it is not a good idea to pay down the mortgage until the term is up.
Instead, invest what you would use as extra payments in some other kind of investment.
You don't want to put all your eggs in one basket (the mortgage) because you are going to need a lot of money to pay down the mortgage if interest rates are higher at the end of your term. If interest rates are 1 to 2 percent higher at renewal time you will need a hundred thousand dollars to reduce the monthly mortgage payment by about $400 (leverage is a bitch on the way down). That's why I think you are going to need to invest any extra money in a TFSA so that it can grow.
Then at renewal time you can use that TFSA money to pay down your mortgage or supplement your higher monthly payments. Its all about reducing your risk for the next 15 years or until you've taken a big chunk out of the mortgage through normal mortgage paydown.
The ideal world would have been to borrow 80% on a mortgage but have that same amount in solid investments earning money. An investment that you could use to pay down that mortgage if an interest rate spike hits you at renewal time. Very few people are that fortunate, especially when more than 25% of their income is going to a mortgage.
But if you can build up an investment reserve of half the amount of your mortgage, then the risk of a large mortgage over the next 15 years should be diminished substantially.
So, you've already started by investing that 5% in a TFSA - right?
Buying a home is the easy part - owning a home is the tough part.
In the process of making some new promotional videos....made a market update one as well -> http://youtu.be/nYOE7hi-BV8
“Can you link to those statistics?”
It's a nice easy sound bite to say Victoria is a retirement capital (and good PR for tourism and real estate), but it's definitely overblown.
BMO’s report found that the majority of Canadians retire in their home provinces, and of those moving to somewhere in BC, the majority are from the prairies.
85% plan to stay in Canada, and of those:
*49% choose a variety (guesses: Okanagan, Ladysmith Whistler, Calgary, PEI, NS, NB, NL)
*36% ON & PQ: small-town ON (14%), Toronto (11%), Montreal/PQ towns (11%)
*15% Victoria: incl. those that already live here and in BC
From BMO report, page 2: Who retires to somewhere in BC?
BC: 92%
AB: 35%
SK/MB: 25%
ON: 7%
PQ: 5%
Atlantic: 0%
Sure, Victoria’s retirees are more noticeable because there’s not much industry here (the oldest city was Trois-Rivieres).
But many Canadians spend summers in Canada and winters in a warmer place.
@dasmo
Congrats on the new home. It sounds like you have been careful with your purchase and are making the best choice for you and your family. Good luck!
@Leo S wrote: Maybe I'm too timid, but once we have a mortgage I'm dumping everything in until it's gone.
Over the past 10 years, I have been busy paying off my mortgage as fast as I can. However, I have still left room in my budget for TFSAs, RRSPs, RESPs, contingency fund, etc. Throw in expenses like daycare (previously), private school for 2 kids (currently), and an occasional modest vacation - there is not so much left over to make additional mortgage payments.
@Just Jack
Over the past year, my "safe" investment portfolio grew by 6.8% while I pay just 2.4% on my mortgage. Currently, I am further ahead by putting extra cash in investments.
Over the past year, my "safe" investment portfolio grew by 6.8%
Ok it's clear, I need an advisor or to become smarter :)
As for this month's median being a statical anomaly, that clearly isn't true. It's right in line with the 12 month trend. Of course it could reverse, but January's data is not at all unusual given the trend.
So how are you paying the mortgage off faster?
Most people pay bi-weekly, but some mortgages have the option of paying down an additional 10 percent of the mortgage once a year.
I like the bi-weekly payments, but I am a little hesitant to make use of the once a year payment option with the interest rate so low. In my opinion, the key is diversity. Its good to pay down the mortgage but not at the cost of having no other investments.
Of course at your 3 or 5 year renewal you can make a substantial mortgage payment or not. When you have investments outside of your mortgage, you have options.
If you have been putting everything into paying down the mortgage, your betting the interest rate will not change significantly.
In my opinion, I can see interest rates reaching 6 percent or more sometime in the next 15 years. So, most people will have to go through several (3, 5 or more) term renewals in that time. That's risky, unless you have a bundle of money in outside investments working for you.
Just an opinion
In my opinion, the key is diversity.
Garth makes the same argument, but I don't understand the logic behind that.
As soon as you take on that mortgage, you're stuck with the risk. Your equity position doesn't change that.
Say you have $100,000 and buy a $500,000 house.
Option 1: Put down $25,000 and invest $75,000
Option 2: Put down the whole $100,000.
Now the housing market corrects by 20%. You house is worth $400,000.
Option 1: You're $75,000 underwater and have $75,000 in investments (ignoring what you've paid into the mortgage and made on investments in that time)
Option 2: You've lost all your equity.
Your loss is exactly the same in both cases. Unless your investments are negatively correlated with the housing market, your diversification is doing you no good whatsoever.
If you have been putting everything into paying down the mortgage, your betting the interest rate will not change significantly.
Again, I don't see the difference. If you pay the mortgage down your risk decreases, because at renewal time your principal is way lower so any interest rate jump will have far less impact on your payments. Leaving the money out in case you need it to pay down the principal at renewal does not reduce your risk.
I suppose I would then ask the question why would you pay off a debt that is costing you 2.99% with and investment that is earning you 6 percent in a TFSA?
The other problem is if your payments go up by $400 a month at renewal, how much would you have to pay down the mortgage to get your payments back to being affordable?
And if you can't pay down that mortgage by that amount, how do you come up with the $400 difference if you don't have any investments to draw on?
Of course this may not be your experience, but if you are maxed out at a debt ratio of 40 percent or more, the chances are you are not going to be able to find another $400 a month in your budget in order to pay the increased mortgage payment.
Again, I don't see the difference. If you pay the mortgage down your risk decreases, because at renewal time your principal is way lower so any interest rate jump will have far less impact on your payments. Leaving the money out in case you need it to pay down the principal at renewal does not reduce your risk.
I strongly agree with Leo S's philosophy here. One thing that is crucial to keep in mind is that, even though interest rates are extremely low right now, when the principal owing is large (at the beginning of the mortgage) the majority of each payment goes towards interest, not principal (by a 3:1 or 4:1 ratio, or thereabouts, depending on your exact interest rate). In other words, one's regular mortgage payments, in the beginning, hardly make a dent in the principal.
Because of this fact, it seems eminently prudent to make plenty of extra payments to principal, even though interest rates are low and it may not seem urgent.
All banks and lenders operate differently, but my credit union allows me to make an extra payment to principal at each payment, and to pay off up to 20% of my principal owing once a year on the anniversary date.
I suppose I would then ask the question why would you pay off a debt that is costing you 2.99% with and investment that is earning you 6 percent in a TFSA?
2.99% is after tax dollars. Your TFSA is only $5000/year, so it's not a big impact on tax savings there. Depending on your tax rate, paying off a 3% mortgage is like getting a 4-4.5% GIC. Yes you could do better, but not without extra risk. Maybe it's renewal time and it's a bad time to sell those investments.. You're taking more risk there, not less.
The other problem is if your payments go up by $400 a month at renewal, how much would you have to pay down the mortgage to get your payments back to being affordable?
Affordability is about income. If you can't afford the rise in rates you can't afford to buy. Shifting money around isn't going to help you.
And if you can't pay down that mortgage by that amount, how do you come up with the $400 difference if you don't have any investments to draw on?
If you're drawing on investments to pay the mortgage you're doing it wrong :)
if you are maxed out at a debt ratio of 40 percent or more, the chances are you are not going to be able to find another $400 a month in your budget in order to pay the increased mortgage payment.
We're not talking about those people. Those people also don't have any money to invest.
Can't argue with you, all good points. Everyone has a different financial profile.
Paying down the mortgage as rapidly as you can has worked well for those that have bought in the past. I know people that bought in 1998 and paid off their home in 10 years.
"If you have been putting everything into paying down the mortgage, your betting the interest rate will not change significantly."
Seems to me to be the other way. If you're NOT paying down a low rate mortgage, you're betting that interest rates are going to stay low.
The more you pay down a mortgage the less risk to you from rising rates.
At 2.99% about 1/2 goes to principle at a 25 year term. Look it up yourself on a Mortgage calculator. Also, the US fed has guaranteed the rates low untouched until late 2014. They are doing this to stimulate thier economy. There is almost no chance that the rates will take a big jump after that; the economies are too fragile. I have said it way too many times now, but the most centered predictions on rates I have heard is to expect within 1% in the next 5 years.
Do the actual calculations on that median house for a 5 year term for rent vs buy. Te low rates , and crazy rent prices, make the payments pretty much the same. After 5 years you have paid off $50k on a 30 yr term. You are about even with a market 10% down in 5 years.
I have rented and owned before so don't bother with the high maintenance costs. Compare apples to apples, a rental is marginally maintained and doesn't have a renoed kitchen. You could do the same with a house you owned.
I figured the %20 was a good down because it kept the CMHC insurance cost down and kept more cash out to deal with closing costs and renos. More principle can be paid down at the end of the term and during the term without affecting things that much. I also did rent to own calculations with numerous calculators.At minimum Housing just needs to maintain a flat line to make sense to buy but you need to have a decent down payment and you need to negotiate the right price. Do not overpay, just walk away. Personally I don't think you will "see" the market go down as much in listing prices. It's in the selling price and as is brought up here many times, the selling prices is less these days. post 2003 on the way up places sold in days for 10% more than asking. Now places stay on the market for months and sell for 10-15% less than asking and in some of the high end homes 30%.
If I select SFH homes from 450k to 850k (to avoid teardowns and high end) there have been 139 sales since January 1st, 2012.
Average List: $593,447
Average Sell: $580,359
If you look at ALL homes since January 1st, 2012.
Average List: $594,891
Average Sell: $576,611
Yes the selling price is less these days compared to list; however, we are talk less than a percent compared to times when the market has been better.
Half your payment may go to principle OMC, but when your house devalues $51,000/12 each month that principle and a whole lot more vanishes into a black hole. And I'm not sure you understand who has the most control over mortgage rates. As an example, do you think this country chose to have their rates rise so much over the last year? It's primarily the housing bubbles in these countries like Ireland, Spain that caused their borrowing rates to climb. That's why our gov is sweating about our bubble & CMHC's risk. They're now trying to defuse the bubble as well as slash spending in thousands of gov jobs before bond investors catch on how risky an investment Canada is.
Yes, I think I'll keep my six figures earning me enough income to pay my rent, grocs, car, DRIPs.. rather than join the black hole.
Marko said:
"Nasdaq 11-year high, Dow Jones also looking good this morning."
*LAUGH* Nasdaq is still 40% below it's all time high in 2000". It's at 2905 today, and 40% below isn't even adjusted for inflation.
Dow Jones? If you invested 100K in the year 2000, you'd have... well about $100K today. How's that for a 10 year return?
On the other hand....
Nuff said.
139 sales since January 1st, 2012.
Average List: $593,447
Average Sell: $580,359
Is that original list or last listed price?
Last listing price to sold price is pretty constant. People are more likely to drop their price than accept a lowball. But original list to sold price has definitely gone down.
we are talk less than a percent compared to times when the market has been better.
Where's that data? Let's say for 2006 or something, what was the Sale/list price?
2851 Scott successfully flipped for $375,000...
To whoever above said “There is almost no chance that the rates will take a big jump”
Yesterdays news- 10-year yields rise most since November
10-year note yields up the most in almost three months…casting doubt on the Federal Reserve’s pledge to keep interest rates low through 2014
Leo_S,
You can add about 7k to the last list price for homes sold between 450k to 850k to come up with the original list price.
Original: 600k
Last: 593k
Sale: 580k
For all homes combined you can add about 10k.
I look at these numbers frequently - it is the number one sales pitch for my buyers cash back program. When I give people $7,000 back on a $600,000 home effectively my clients are getting 50% more off list price than with other realtors assuming equal negotiation abilities. My average negotiated of list price (before the cash back) is almost identical to the VREB. For SFHs....
Original List: $580,433
Last List: $571,713
Sale Price: $559,446
You can add about 7k to the last list price for homes sold between 450k to 850k to come up with the original list price.
I find this somewhat hard to believe given the big price drops I see on most houses that are sold... But ok, if that's what the data says.
But you said that it's only one percent down from when the market was better. So sale/original list was the same+1% in 2006/2005?
"I find this somewhat hard to believe given the big price drops I see on most houses that are sold... But ok, if that's what the data says."
1. When you see a home sell in your private client service system significantly below assessment or significantly below original list price you take notice (I do too). When you see a home sell in 2 weeks close to original asking price people typically quickly skim over it. Homes selling close to original asking outnumber homes selling significantly off by a large amount.
2. A lot of overpriced homes, despite large price drops never sell so they don't affect these stats.
I can email you these stats is more detail if you are interested.
2851 Scott successfully flipped for $375,000...
Sold for $353,00 back in October.. 22k gain - legal/inspection fees - taxes - realtor fees.. Perhaps a marginal gain.
Assuming it was sold as a teardown it does lend credence to your theory that lot prices are still increasing though. Although perhaps it was sold as a "package deal with custom renovation" as the listing suggests.
January 2006 - ALL HOMES
Original - $502,288
Last - $493,608
Sold - $482,862
This surprises even me...
Thanks, I believe the numbers, I was just surprised by them. Good points about what one notices, and that the big price drops often don't result in a sale.
Same the other way, when the market was hot the multiple offers get noticed, but I guess overall it only makes 1% difference eh?
Interesting. Marko, do you have those average ask vs sell stats for 2011?
A stunning character conversion suite in Fairfield (An old home converted to 4 condominiums) that was originally purchased in July 2008 for $500,000. The half million bucks is for just ONE of the suites. The suite is only 1,000 square feet and is in what would have been the basement of the old home.
The condominium conversion has been put on the market several times and sold this week for $440,000.
This is what happens when you want to be the first person to fry bacon in the nude in a new home. - You get burned.
So how could this happen. Surely the bank must have had the suite appraised? Surely a professional appraisal would have shown the real value of the suite to be much lower than $500,000? Sans bacon.
Well, most banks don't have to get the property appraised anymore. That practice was eliminated almost a decade ago. And now more than 70 percent of home sales are not appraised.
The sale price is accepted as stated without verification. A practice accepted in the USA, but only recently allowed in Canada.
Or a risk management tool is used by the lender based primarily on the assumption that homes are worth more than their assessed value. Because for the last decade they have been.
Or if the home is to be insured by CMHC, data about the home and the applicant is inputted by the broker or banker to get instant approval. The program designed by CMHC and used by brokers. A case of the fox guarding the hen house.
Or, you find an appraiser who either lacks the knowledge and experience to do a competent valuation or one that is very pliable to the wishes of the broker or banker and intentionally over values the property to get further work from the banker or broker.
Only now are these failures in the mortgage system appearing. All of them were hidden in a market of rising prices.
Hmmmm, didn't this happen south of the border a couple of years ago?
How about age restrictions in condominiums.
Do they affect value?
It seems they do.
Of the last 643 condominiums to have sold in the core districts of Victoria 174 (28%)of those condominiums had age restriction of 16 years or more (no toddlers please).
Those condominium complexes with age restrictions selling for about $18,000 or 7 percent less than those complexes that allow children.
Dogs didn't do very well either. Complexes that allowed dogs sold for 36,000 more than those that said no to a pouch.
Cats were about the same as children with complexes that allowed kittys selling for 15,000 more.
So there you have it condominium builders. Forget the granite counter tops, stainless steel appliances or "green" building we want our condominium complexes dog friendly and you can add another $36,000 in profits.
That's pooch - a pouch is where you put a pooch if you don't want it to poo on a couch. Said Sam I am.
Just Jack said, “The sale price is accepted as stated without verification”
That’s exactly what my hubby and I were talking about this morning. When you have biased appraisals, then buyers think that any sort of discount is a deal.
For example, why does anyone think a war shack in Saanich is worth $500k when an average home in Halifax sells for $250k, and a nicer one close to downtown Seattle would be $350k. Average San Diego $450k.
The problem is that buyers depend on local word-of-mouth about how “it must be worth $500k if someone else paid that much”
At least in the stock markets it’s easy to instantly access bid/ask prices, P/E ratios, and then prices fall within days when demand drops.
As Case-Shiller described, when demand drops in real estate, it can take years for prices to drop because it’s not a sophisticated market - sellers can hold out for eons expecting an unreasonable price.
So there you have it condominium builders. Forget the granite counter tops, stainless steel appliances or "green" building we want our condominium complexes dog friendly and you can add another $36,000 in profits.
Same goes for strata councils who decide on those kinds of rules. If a council decided to loosen up on a dog restriction they would all be up in value!
Any idea what kind of effect rental restrictions have on condo prices? In some ways you'd think they increase the value by creating an owner-occupied environment and probably lower turnaround. On the other hand it can be a burden for owners who may have no choice but to rent their unit out.
So what's your conclusion omc? You've been on for a long time, then disappeared for a while and came back a halibut.
So is the next step to jump in?
In complexes that do not allow rentals the median is $271,000
Buildings that allow rentals the median in $285,000
Intuitively it stands to reason that any time you limit purchasers you negatively affect market value.
But it appears that the affect of tenants and cats are about the same.
Why doesn't someone design a condominium complex that is pet friendly? As I think about this more - its starting to sound like a good idea. You could have a doggy daycare, baths, grooming, etc, etc. 24 hour vet service. Use your imagination. Any builder using this idea owes me 50 bucks royalty from now on.
This is what happens when you want to be the first person to fry bacon in the nude in a new home. - You get burned.
Hey, Ethan Hawke, this is the second time in five days that you've used your "frying bacon" bit. You need some new material.
Your right Introvert,
So I'll return your Blogg membership fee!
Interesting statistics about the asking versus sale price gap staying constant over time.
I think what Marko said is true. The appearance is that there is a big gap in asking and sell because the MLS is crowded with homes that never actually sell.
While the well priced homes get a lot of interest and sell quickly. At a price not far off the asking.
It would still be nice to know those ask vs sell stats for 2011!
"At least in the stock markets it’s easy to instantly access bid/ask prices, P/E ratios, and then prices fall within days when demand drops."
It's far easier to assess P/E (aka price/rent) for RE than for stocks. No number fudging and no surprises down the road - rents are very stable.
There are two very good reasons why RE prices continue defy fundamentals. One, the government is holding the bag on the financing, and two, there's no short selling.
However even the above cannot keep prices from levitating forever.
Er, should be "keep prices levitating forever".
"It would still be nice to know those ask vs sell stats for 2011!"
This type of stat I can only do when search results are less than 2500...if you are interested in a specific month in 2011 let me know.
From May 2011 to January 2012, the average of the original asking price (excluding original price for relists) to final sales price was 95%. So, on the average 500K original asking price, the final sales price was 475K, or 25K lower. Sample size for the data I trolled was 1223.
dasmo - cedar hill X?
Don't forget stocks go through their own bubbles just like real estate. In the 1990's stocks were an incredible investment, returning 30% many years.
Everyone in the 1990's knew that you would get rich buying and holding stocks.
A decade of losses and people are now weary to invest in the stock market. That fear of the equity markets, has been a factor in pushing people towards investing in real estate.
To get the whole picture on the average sell vs ask data, it would be nice if we could include:
- the re-lists (original asking)
- the ones that don’t sell at all (yes those would be 0),
- the average drops in asking prices.
Otherwise we’re only tracking the “in demand” properties. It’s like a car salesman telling his boss that all the company’s cars sold for 95% of asking, while glossing over the Blue Light Specials and hiding the un-sold ones in the View St parkade.
Paula - sorry but I don't have the data to do analyses for the first two bullets. I can do the third though - will take a bit of number crunching to pull it out. First comes making dinner though...
Animal Spirit - agreed, we just don't have good access to the first 2 bits of data. Dinner sounds like the better option right now :)
I would be careful trusting 'ask' data. There was an article in the G&M a few years back entitled "Your realtor’s little secret" that detailed agents habit of reducing the asking price, after the sale, to bump up their sale/ask stats. If you happen to be a GlobePlus member this is the link to read it:
http://www.theglobeandmail.com/subscribe.jsp?art=191485
Does anyone happen to know the sale price for 2649 Heron St, which was listed at $729 K?
Heron went for $725K. Ouch!
"that detailed agents habit of reducing the asking price, after the sale, to bump up their sale/ask stats."
Locally, I find this hard to believe (and have never caught someone doing it) as with the VREB you have to get a contractual change with signatures from the seller to change the list price.
Monday, February 6, 2012 8:00am
MTD
February 2012 2011
Net Unconditional Sales:
80 488
New Listings:
245 1,276
Active Listings:
3,539 3,714
Please Note
•Left Column: stats so far this month
•Right Column: stats for the entire month from last year
Marko,
Thanks for the sale price on the Heron St. property.
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