Tuesday, April 10, 2012

Monday market update: look familiar yet?


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.

April 2012 month to date
Net Unconditional Sales: 145 
New Listings: 377
Active Listings: 4116
Sales to new listings ratio: 38% 

April 2011
Net Unconditional Sales: 574
New Listings: 1577
Active Listings: 4561
Sales to new listings ratio: 36%
Sales to active listings ratio: 12.5% or 7.9 MOI

16 unit sales per day. Long weekend in there too. Of the top of my head, I'd say that's down, slightly, from what it would have been this time last year. Certainly no signs of an uptick.

The more we analyze this market, the more convinced I am that interest rates are the major driver of prices today and have been now for several years. 

78 comments:

Just Jack said...

Sooke

2011 population 11,435
Number of homes 4,986


Number of listings 315
# of homes sold in March was 23

One out every 16 dwellings in Sooke is for sale. Inventory is now at 13.7 months.

The median price, in Sooke, over the last year has been $355,000 which will buy you a 1,650 square foot home built in the last decade and on an 8,000 square foot lot.

Compare that to Victoria City.

2011 population 80,017
#of dwellings 47,691


#of listings 676
#of sales in March were 124

One out of every 71 dwellings is for sale. And the months of inventory is 5.5

The median price for all types of homes in Victoria City is $385,750 which will buy you a 1,150 square foot condominium built around 1990. With some select neighborhoods possibly even increasing by a percent or two.

The spring market in the urban core districts may be sprouting daffodils, but the outer areas are still experiencing a cold winter.

Leo S said...

So with MOI that high, have prices in Sooke declined at all?

Just Jack said...

For homes on city sized lots in Sooke, prices have only come down marginally from last year. Probably less than 5 percent.

But Sooke is not a separate market. Sooke is part of the whole residential marketplace and its prices are supported by what happens in Langford and Colwood. And Langford and Colwood prices are supported by what happens in Victoria, Saanich and Oak Bay.

Market values in each of these areas is relative to each other. That's why homes in the James Bay neighborhood always carry a premium of around 10 percent over the typical home in the core district's neigborhoods. That premium only changes marginally up and down, remaining pretty constant over bull and bear markets.

Consequently, the high months of inventory and declining prices in Sooke have an affect of dampening prices in Victoria. Because a prospective purchaser always has the ability to move another mile farther out to get a lower house price.

There are sub markets that buck that trend, but these would be "fad" markets like new micro condominiums or foreign buyers. Markets that are heavily supported and propped up by speculation for a time. These sub markets come and go, but will always revert back to the local buyer looking for a home to live in.

Kinda like "shag" carpeting.

dasmo said...

It's not about moving just a mile further out and paying less. If someone desires to live in James Bay or Fairfield they are going to pay a premium for the lifestyle. These neighbourhoods are extremely small geographically with nowhere to expand. We also have the Collwood crawl in between the core and the other communities. This is why they are more expensive. There would be drag on those values if Sooke tanks but but it will take a big differential to have a noted effect in my opinion...Or an LRT...

Alexandrahere said...

Good Article: Key in: " Poll find Canadians more ready to cut discretionary spending to reduce debt."

Leo S said...

If someone desires to live in James Bay or Fairfield they are going to pay a premium for the lifestyle.

Obviously. But that premium can only go so high. Maybe right now the premium is 100k (the amount doesn't matter), and some people make the decision to pay it to be close4r in town, and others make the decision to live farther out more cheaply.

If prices in Langford drop and the premium for in town increases to 200k, more people will buy in Langford, and in town prices will drop until the premium is once again balanced to demand.

That's why prices in Langford matter. Given that it is a bedroom community to Victoria, the prices do not move independently.

I'm less convinced about Sooke. I think that is far enough away to be a separate market.

dasmo said...

True, I would agree a big differential will have an effect. I think the differential is already big...When I bought in VicWest almost ten years ago that differential was about 100k or 1/3rd by crossing the bridge (it seems less now). It's probably that ratio going out to Langford? I don't know I haven't done the math here...

chris said...

Many commute from Sooke to work in Vic. Also bear in mind everywhere affects Vic. If Qualicum plummets, many retirees will substitute and pocket the change. If Kelowna business tax falls, an entrepreneur who was looking at Vic will substitute. If Tallahassee dives, some who planned on Vic will sunstitute and pocket the difference.

Just Jack said...

I have two neighbors that have recently retired. There children have left Victoria and now both neighbors are "thinking" about selling and moving to Penticton and Vernon. Their reasoning is to bank the difference in housing prices and have a better lifestyle in their retirement.

Personally, I don't think either one will move, both will find some reason to stay. But if prices were to start dropping here, I think that may push them into moving.

It's a good idea to listen to what the baby boomers are planning and what they may actually do.

Marko said...

High-end sales have continued into this month. SFH average sitting at around 645k.

chris said...

I foresee the ave house price at 1 million by Oct! One of the 10 million dollar waterfront in OB will finally sell that month for 4 million. The other four Oct houses will sell for 250K each.
Sorry, I had a couple minutes to kill before my favorite HGTV program :-)~

dasmo said...

I think you are putting too much emphasis on the boomers. They make up about 33% of the population. their children make up 27.5% . They are the more important generation to pay attention to since they are now between 16 and 36 years old and will have have the bank of mom and dad behind them.

VP said...

“They are the more important generation to pay attention to since they are now between 16 and 36 years old”

The boomers were also between 16 and 36 in the year 1981. The next 3 years saw prices shrivel.

dasmo said...

Boomers had parents that benefited from the deprivation of the Great Depression... key difference.

patriotz said...

Kevin Falcon turns bearish (thanks to southseacompany at VCI):

B.C. House Prices to Drift ‘Downward,’ Falcon Says

Have to compliment the guy on his condor, I'd expect him to stay silent on the topic and keep the option of blaming a bust on the NDP if they take office.

Introvert said...

Have to compliment the guy on his condor

You mean his pet vulture? Falcon owning a pet condor would be very fitting.

Marko said...

High-end continues a hot streak, another 2+ million sale today.

SFH average so far 663k
Median = 575k

Introvert said...

SFH average so far 663k
Median = 575k


And the status quo continues...

Of course, next month could be the month that prices take a tumble, but folks here have been saying that very thing for the past 60 months.

reasonfirst said...

Introvert - I hope you realize that the pleasure you get out of comments like that are ephemeral.

Anton said...

I think it is good to have a range of opinions here. As long as people are civil it makes for a better blog. The minority opinions here might represent the majority out there.

a simple man said...

Interesting post from "Dan in Victoria" on the greaterfool site - seems the trades are starting to feel the pinch:

"Half the tradesmen I know here in Victoria are under employed at this time.
Further up island you go the worse it gets.
I have friends (trades) phoning me looking for leads.
Painters , plumbers, carpenters, electricians, drywallers….
I have one friend who is an absoulute master at woodwork, beautiful work, he’s in his early sixties. Nada. No work. He’s always busy…..
I have one small job lined up, thats it, no calls, no nothing.
This is as slow as I have seen it in a long time."

Dave said...

I know lots of construction workers having to leave the island, and BC for that matter. If you think it's bad now, wait for the NDP to take over in a year.

On the media front, the Times Colonist wins yet another headlining-the-obvious ribbons.
Canada one of the worst places to invest in 2012

Marko said...

"Dan in Victoria" wrote the same thing on Garth's blog two years ago....

Garth's blog has a ridicolously close minded cult following in my opinion...

patriotz said...

"If you think it's bad now, wait for the NDP to take over in a year."

Seems we've moved from "the Golden Decade" to "If you think it's bad now".

I guess it must be Greece's fault.

Leo S said...

"Dan in Victoria" wrote the same thing on Garth's blog two years ago....

And he was right back then too. Construction has been slow compared to the boom years. That doesn't mean the sky is falling, but it's true.

Al said...

Actually "Dan in Victoria" was voted by the "blog dogs" (the name Garth gave his blog followers)as MVP of the year back in 2010 (or was it 2011?). A nice, sensible, and sharp guy, I don't mind to let him helping with our shed work, only if he is reading this blog, too :-)

wrt construction business, my neighbor's son-in-law is a young carpenter, and he is looking to become a firefighter now.

Marko said...

The problem is everyone calls themselves a "carpenter." I would like to give some of them a dome to frame on a home and see how long it takes :)

The ones I know that are truly capabale (at reasonable rates) are almost never unemployeed even when construction is slower.

Leo S said...

The ones I know that are truly capabale (at reasonable rates) are almost never unemployeed even when construction is slower.

Well there's the proof then. If even the best carpenters are sometimes unemployed while charging reasonable rates, you know the market is slow :) They would have had people beating down their door before.

Al said...

That is the point Marko, it is not about the young carpenter's skill level, it is about the slowing down (or someone calls it: balanced) housing construction market for past few years.

Good for people who want/need to build/reno ...

a simple man said...

Garth's blog has a ridicolously close minded cult following in my opinion...

Let us not get into name-calling, as many people might say the same about this blog. I think there are good and not-so-good comments posted there.

I typically just look at the previous day's post and search the comments for "Victoria" and see what people are saying without reading the hundreds of comments. Some different local folks on there than come here, and perhaps some that come here to read but do not post (right, Coastal?).

DavidL said...

Non-mortgage debt keeps piling up
Credit survey finds consumer debt loads increased 3.4 per cent in 1st quarter

Rhino said...

This should make introverts head explode...hehe

http://www.theglobeandmail.com/report-on-business/economy/canadians-find-happiness-on-the-prairies/article2399039/

Alexandrahere said...

Al: re your neighbours son now a carpenter and looking to be a fireman. Is it easier to become a fireman right now vs getting work as a qualified carpenter? What qualifications does one need to become a fireman? Just wondering.

Just Jack said...

Why are there so many pre-construction condominiums selling?

I think its the way the deposit is made, that makes these condominiums so enticing. 5 percent down, then another 5 percent a few months later, followed by another 5%.

So, by the time that you have to secure bank financing you already have 15% down. Right?

Maybe not. The price you bought the condominium for is a contract price, it certainly will have nothing to do with the market value a year or two later when the building is complete.

So, will the bank honor your contract price and lend according to that value? Well, they have in the past, because it was insured through CMHC.

Will they in the future? If you were loaning your own money - would you? Maybe if prices were going up. But not today. I think any bank following that route would have to answer to its shareholders.

happy renter said...

Resources fuelling B.C. economy and housing demand:
http://www.timescolonist.com/business/Resources+fuelling+economy+housing+demand+economist/6447887/story.html

Of course, this information was presented at the Vancouver Real Estate Forum.

Introvert said...

This should make introverts head explode...hehe

http://www.theglobeandmail.com/report-on-business/economy/canadians-find-happiness-on-the-prairies/article2399039/


It doesn't come as a shock that the superior economies of the Prairie provinces breeds greater optimism in its people. By the way, I didn't move to Victoria for economic reasons; on the contrary, I moved here for reasons of weather, natural beauty, lifestyle and for the slower pace that comes from not being hyper-business-oriented.

Come to think of it, why didn't B.C. fare better on this survey? After all, Christy keeps saying we have such an amazing pro-free-market government at the helm.

Marko said...

"Why are there so many pre-construction condominiums selling?"

I guess you saw all those places going pending at the Promontory today (not sure why they decided to upload a few? typically developments don't do that). I've represented seven buyers at that building so far and it doesn't surprise me that they are selling well.

Prices on a lot of pre-sales are attractive....for example, at the Promontory starting at around 192k (including incentives), with underground parking, heat pump, miele appliances, super attractive kitchens with built-in TVs (included), high-end concrete building with both penthouses sold over $2,000,000.

Pre-sales right now are making a lot of sense for first time buyers and investors too in my opinion.

If the market is flat most pre-sales will do well. I think people who buy very early into presales (most attractive prices) will on average start losing money if the market corrects more than 15%. I took the gamble that it will be flat :)

a simple man said...

more trades tales from the greatefool site (from "Coastal"):

"Dan in Victoria,

As per your previous blog thread posts about the glut of tradesmen in Victoria. A month back I had my “free” plumber from one of the major plumbing companies in town in to repair a few worn out taps and shut offs, at zero cost of course in my rental with the million dollar view. As usual I ask the tradesmen what it’s like out there for plumbers and he stated there is a whole slew of starving plumbers out there. I found that very surprising in a city filled with rotting old piping systems. He said the last construction boom created way too many tradesmen to add to the existing stock and it’s dog eat dog out there in Victoria. It backs up your factual stories that old V-town is not a good place to swing a hammer or pipe wrench regardless of what the agent types spew."

Al + TOH said...

Alexandrahere, I think he likes the job stability of a firefighter and the pension comes with it. Which job is easier to get? Depend on the person's age, physical condition, skill set and other qualifications and how many people want to do which one, I guess. I don't know the requirements, but can ask. He is taking some courses/seminars most nights now.

Russ said...

Firefighter's definitely have stability and a good pension. Its also very competitive among young guys to land a job. It isn't the kind of thing a tradesman can just decide to pursue and walk right into. Would take minimum 1-2 years to get enough courses, training, and experience to even be considered. Can take several years of applying after that to get a position especially if you aren't willing to leave the island.

dasmo said...

Judging by the skill level of the people that worked on my bathroom a few years ago a cull is in order...
It's kind of like when tourism from the states slumped a few years back, Now we only have one Christmas store downtown instead of three!

About said...

Re: Trades

My own thoughts:

1) It's way more common to hear "oh things are tough, work is down etc.. than "Yah! I'm rocking it!, rolling in the money!". The first statement is one that will get a smile and camaraderie from whoever is listening, the second will come across as pompous and high-falutin. I'm guilty of of complaining about finances when really not got a darn thing to complain about. And Simpleman perhaps I'm one of those 'neighbors' you keep hearing in Oak Bay - except I'm lying.

2) My husband runs a plumbing business. It's a growing business but it's grown year over year for 5 years now (little to no advertising - mostly word of mouth) Last year we hired an apprentice. Never has my husband had to go do work for free nor does he complain to customers all the plumbers out there are starving. Perhaps I am sensing something wrong with that business model??!

3) I bet there are a lot of trades out of work - some will be because the boom is over and lots of that will be because they weren't running a sustainable business combined with the appropriate skills to begin with.
I see ads on used victoria offering a skill for $40 an hour. The problem there - if that person has a legitimate corp, proper accounting, insurance, tickets, wcb etc.. etc.. - they will definitely be starving and for what it's worth - do you want the $40 and hour person doing work on your home? No doubt a 'boom' instantly creates business for anyone - but don't be fooled - concentrate on yourself and building something that will last. The boom won't always take care of you.

Phil said...

The daily numbers out of Vancouver have been extremely bearish and are perhaps the first indicators of the CMHC slowdown on approvals.

Just a matter of time before the monthly stats are affected and prices drop...

a simple man said...
This comment has been removed by the author.
Marko said...

"Dan in Victoria,

As per your previous blog thread posts about the glut of tradesmen in Victoria. A month back I had my “free” plumber from one of the major plumbing companies in town in to repair a few worn out taps and shut offs, at zero cost of course in my rental with the million dollar view. As usual I ask the tradesmen what it’s like out there for plumbers and he stated there is a whole slew of starving plumbers out there. I found that very surprising in a city filled with rotting old piping systems. He said the last construction boom created way too many tradesmen to add to the existing stock and it’s dog eat dog out there in Victoria. It backs up your factual stories that old V-town is not a good place to swing a hammer or pipe wrench regardless of what the agent types spew."

"free plumber," "million dollar view," "starving plumbers," typical Garth follower...

Marko said...

"2) My husband runs a plumbing business. It's a growing business but it's grown year over year for 5 years now (little to no advertising - mostly word of mouth) Last year we hired an apprentice. Never has my husband had to go do work for free nor does he complain to customers all the plumbers out there are starving. Perhaps I am sensing something wrong with that business model??!"

My exact thoughts. My father uses a finishing carptener that has about 40+ years experience (he is literally 73) and we are always waiting on him because he is so busy. Quality work and only charges $35/hour, doesn't waste material, etc. = never ending work.

a simple man said...

Good tradespeople will always have work - but what about the 49% that are below average tradespeople?

DavidL said...

I know the owner of a rather large Victoria-based electrical contracting company. They do both new installations (house, apartments and commercial) and well as retrofits. They told me that 2010 was a very slow year, but things picked up for most of 2011. However, 2012 is so far proving to be their slowest year ever.

Just Jack said...

Top reasons it is a good time to buy (for 46% "yes" group):

-- 28% say interest rates are low
-- 17% say it is a buyer's market/many properties for sale
-- 13% say prices will continue to rise


A recent Real Estate Survey for Vancouver revealed a close split between prospective buyers and sellers.

Top reasons it is a good time to sell are (for 56% "yes" group):

-- 18% say prices are high
-- 17% say that prices will go down/market correction/housing bubble
-- 14% say it is a good time of year to sell

I just thought this was interesting statistics, especially if you associate fear and greed to each of the responses. And that more prospective home sellers feel that there will be a market correction, than prospective purchasers. That's unusual.

If I were to weigh fear between the two groups. I would say that sellers are a little more fearful of prices falling than prospective buyers are of prices rising.

I think that's an important shift between buyers and sellers. Especially when it comes at the start of the busiest market - the spring market.

DavidL said...

Thanks, Just Jack. As you say .. very interesting stats.

Just Jack said...

You think that is interesting. Well here is another statistic that I have trouble understanding. These are home owners who DON'T think it is a good time to sell.

-- Top reasons it is not a good time to sell are (for 56% "yes" group):


-- 29% say prices will go down/market correction/housing bubble
-- 19% say they are concerned about the economy
-- 13% say it's a buyer's market/too many properties for sale


It's not a good time to sell, because prices will go down????
WTF, on that one. Obviously, these are home owners that are not using their home as an investment. They are using it as a place to live.

I left this group out of my original post, because this group has nadda, zippo, zero affect on prices. (Helllooo Introvert) Just as I left out those who are not intending to buy for the same reason.

I should also add, that the questions were based on what the buyer or seller is thinking of doing in the next 3 months.

MD80 said...

Trades:
I know a ticketed electrician who recently made the jump from a large electrical company in Victoria to a government-type organization (still as an electrician). His rationale is he makes less but receives guaranteed hours. Of course, everyone's circumstances are different but in this case, knowing his personal situation, this is about slowing trades.

patriotz said...

"Top reasons it is a good time to buy (for 46% "yes" group):

-- 28% say interest rates are low "

I never fail to get a laugh out of that one. Of course the best time to buy is when interest rates are high.

a simple man said...

Of course the best time to buy is when interest rates are high.

If you have the capital and don't have to borrow too much.

MD80 said...

It's right now, when interest rates are at all time lows and prices are at all time highs that people are having to borrow "too much". When interest rates rise prices will have to come down so that your average homebuyer can afford (affordability is already at record lows!!). It all comes down to monthly payments. The underlying principle and interest rates don't matter until renewal, when today's buyers will come back to that harsh reality, having to pay a normal %interest on "too much" principle.

Just Jack said...

High or low rates, the monthly payment has only moderately increased while prices have skyrocketed.


What has skyrocketed along with higher prices is the time it takes to pay off a mortgage. Not your amortization time, but the ability to pay off the mortgage. Someone buying in 2000, would have paid off their mortgage by now (assumptions do apply here).

But, today's buyer will have to go the full 30 years.

Because of the many shocks that happen over 30 years where people have to borrow against the equity in their homes, most people will never pay off their mortgage.

And that causes a big drag on our economy.

Dave said...

Realtor Larry Yatkowsky today at YatterMatters.com:
On a boat called ‘Titanic’ such a load of listings might not by themselves, sink such a sturdy craft. However, when the rain soaked weight of dismal sales which in Vancouver is currently recorded as -29.2% is loaded in addition, the stability of the vessel becomes increasingly questionable.
It is suspect that the combined weight of both an extraordinarily high number of listings and depressed sales may not need the services of an iceberg to cause upending calamity.

patriotz said...

"If you have the capital and don't have to borrow too much."

No, it's a better time to buy, period.

Because if rates go up prices have to go down. Someone who bought at a higher price and lower rate will soon be paying the higher rate, which means you are better off buying at the lower price and higher rate.

Just Jack said...

More so than at any other time in the last decade are interest rates so important. The diversity of prospective buyers has been eroded, so that just a single event such as an interest rate hike, could shut down this market.


The difference between the 1980's and now has been lost. Both markets can collapse for the same reason. Back in 80's it was interest rates going to 20 percent. This time its interest rates going to 5%.

CFA Joe said...

Spoke to a realtor friend of mine, 20 yrs in the business. Says its never been this slow and is saying lots of realtors are leaving the business. He does well but he says if people aren't prepared to lose money on their property, after he gets paid, he's not interested in taking the property. He says many people don't have equity anymore. Just saying...

Just Jack said...

In my opinion, those studying economics in the near future will deem the last decade in Real estate as the biggest destroyer of personal wealth in history. Not because of the high prices, but because of the ease of getting a home equity line of credit.

It was a decade of living beyond your personal income. When someone earning minimum wage could buy a new BMW, Porche or Lexus just by using the equity in their home. A decade where it wasn't necessary to make choices between a vacation to Disney Land or a new car - you could have both. When people bought dog walking, high tech and coffee shop businesses, using their home equity, for hundreds of thousand of dollars, just to have them close down 5 years later, after every drop of their home equity had been drained. A decade that lacked accountability and responsibility among home owners and where lender's due diligence was discarded for speed and market share.

A decade where people bought debt to get themselves out of debt.

How could it end any other way.

CFA Joe said...

Just Jack,

Totally agree. And I predict 10 years from now people will be asking themselves how "those" people are so well off. Well "those" people will be those that lived within their means and were able to save/invest throughout this past decade. Then "those" people will get taxed more. Human nature will never change. And people wonder how the rich get rich!

Leo S said...

On another non-real estate forum:

"I can only speak for myself, but the only reason my house is 40% paid is cuz it rose in value 100% a few years ago.

And I borrowed against the house.......a lot....(car, 3 motorcycles, home theatre, vacations, etc, etc)

Life's too short...."

Happens a lot I think..

Marko said...

"Spoke to a realtor friend of mine, 20 yrs in the business. Says its never been this slow and is saying lots of realtors are leaving the business. He does well but he says if people aren't prepared to lose money on their property, after he gets paid, he's not interested in taking the property. He says many people don't have equity anymore. Just saying..."

The mid/late 90s were also very slow with much lower prices (much lower commissions).

Let's put it this way.

2000 = $1,172,973,251 Total Sales $
2011 = $2,981,977,290 Total Sales $

2011 was a horrible year yet Total Sales $ (what commissions are based off) is almost triple.

Last year I did 28 transactions, this year on pace for 45-50...if you offer reasonable commissions, provide decent service, and work hard things aren't that bad.

If you are a brand new realtor charging 6%+3%...good luck.

Phil said...

Oh don't worry, when things get ugly those same people will just claim bankruptcy and walk away leaving the taxpayers with the bill. Our courts are so bogged down they'll probably even get to live in their house for free for a few years just like down south.

Don't forget Florida and Nevada are recourse too. It didn't change anything.

Mindset said...

Just Jack Said: In my opinion, those studying economics in the near future will deem the last decade in Real estate as the biggest destroyer of personal wealth in history.

You nailed that one Jack. With a bit of hindsight, I believe we will see the last decade for what it was, a period of debt expansion, not a period of prosperity. A period where we put our own golden handcuffs on, because wearing them made us feel smart and wealthy, and hey, everyone else was wearing a pair.

It's a bit sad how easily we are manipulated. For a side example, I was having a chat a couple of days ago about a new visa that gives you cash back. 'You get 2% back on all purchases in cash' I was told. My response was, you do realize that they add 4% to all sales so that you can get that cash back right? So in the end, by signing up for these cards, we are all agreeing to pay 2% more for everything. Without the cards, you would get 4% immediate cash back on purchases, not a delayed 2%. The response 'Yes, but if everyone else has one, then I am still paying the 4% and getting nothing back'.

When did we become these Sheeple that are so easily fleeced?

I also hope that people do realize that borrowing long term money at current interest rates is handing the banks the shears for a future fleecing. Rates will go up, and RE prices will come down. They are heavily correlated.

Mindset said...

Marko said: if you offer reasonable commissions, provide decent service, and work hard things aren't that bad.

There are are always businesses that survive the downturns, and by doing so, are primed for the next recovery.

Just curious, but what kind of resistance do you get to your model in traditional agent circles? Are they discounting as well to try and win listings that you are after?

dasmo said...

Or the new norm is low interest rates in general. You just don't know. They have been under 6% for a decade now. I doubt we will see 20% again ever. That just does no one any good...

Marko said...

"Just curious, but what kind of resistance do you get to your model in traditional agent circles? Are they discounting as well to try and win listings that you are after?"

On listings, I discount my listing portion and offer the buyer's agent the bigger cut so no resistance from that perspective. For example, on a $500,000 home 6%+3% breaks down to

$9,000 + HST to listing agent
$9,000 + HST to buyer's agent

What I do is

$4,000 + HST to me (listing agent)
$8,500 + HST to buyer's agent

If the seller is worried about the $500 dollar cut to the buyer's agent they can always add the extra $500.

For some reason I am always in competition for listings against the top 10% of realtors and most typically don't discount let alone match.

As for the buyer's cash back business model which accounts for 75% of my business it is a non-issue with other agents as it is simply a contract between me and my buyer. This year I have been incredibly busy with this business model. There is growing demand via word of mouth and very little competition which is very surprising.

Leo S said...

Or the new norm is low interest rates in general. You just don't know. They have been under 6% for a decade now.

I can't see them going up higher than that either. Maybe it'll go up a couple percent, but anything past that would require a far more robust economy. I don't think that's happening for another 10-20 years.

Leo S said...

This year I have been incredibly busy with this business model. There is growing demand via word of mouth and very little competition which is very surprising.

Well there are quite a few realtors that do cash back for buyers, but the most I've seen is 50%.

Naturally giving more back will give you more clients, but less profit per client. In the end all that matters is profit. So the trick is finding the right point on the pricing curve to maximize profit. Perhaps there is no competition at 70% because other realtors feel there is more profit at lower percentages. Or they're just slow on the uptake :)

Phil said...

Never say never on interest rates. 1982 wasn't exactly the stone age.

If the government really has to start paying out on it's CMHC liabilities the bond market might get cold feet.

And to echo Just Jack, it doesn't have to go to 20%, 5% will do more damage now than 20% did in 1982. Irish, Italian and Spanish bonds are already over that.

dasmo said...

I doubt that. Most peoples mortgages were that or are that unless they got their mortgages a month ago.

backinVictoria said...

"I can't see them going up higher than that either. Maybe it'll go up a couple percent, but anything past that would require a far more robust economy. I don't think that's happening for another 10-20 years."

I'm not disagreeing with you, but can you elaborate on your robust economy requirements?

I'm young(er), and don't really understand why interest rates got so silly in 80/81...but one of the few life lessons I've remembered from my dad is when he's talked about people back then having to walk into the bank and hand over their keys because they can't make their payments.

That's scary.

He fortunatly locked into a decent interest rate (not sure what) not long before the bust, and it turned out to be one of the more significant moments in my families financial history.

Why can't something like that(significant interest rate hikes) happen again?

patriotz said...

"I'm young(er), and don't really understand why interest rates got so silly in 80/81..."

Inflation.

"Most peoples mortgages were that (5%) or are that unless they got their mortgages a month ago."

A rise in rates to just 5% would put first time buyers right out of the market, which means that prices must fall, notwithstanding that people who already bought might be OK.

Also, you're not allowing for the fact that many people who bought years ago have increased the original mortgage amount greatly by refinancing (as has been pointed out many times here). A rise to just 5% would put many of them in trouble.

Marko said...

Monday, April 16, 2012 8:00am

MTD April

2012 2011

Net Unconditional Sales:

265 574

New Listings:

698 1,577

Active Listings:

4,230 4,561

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

sell my house said...

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