Monday, May 14, 2012

May 14: 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.

May 2012 month to date (previous week in brackets)
Net Unconditional Sales: 286 (140)
New Listings: 761 (382)
Active Listings: 4444 (4451)
Sales to new listings ratio: 37.5% (36%)

May 2011
Net Unconditional Sales: 572
New Listings: 1524
Active Listings: 4857
Sales to new listings ratio: 37.5%
Sales to active listings ratio: 11.7% or 8.49 MOI

I think at this point we can just start posting last year's numbers instead of updates and call it close enough!  However the averages are stubbornly high, with high end properties reportedly selling well (after some price cuts perhaps?).  Marko reports the SFH average at $652K, while condo average is $331K.  

102 comments:

Leo S said...

4010 Carey sells for $340,000. $35K under asking and $75K under assessment. 1500sqft on full size lot.

Dave said...

Is anyone else feeling some deja vu with 2008? There seems to be a lot of wealth evaporating in the great market machine.

Mindset said...

I hope all the regular folks on the blog know that these monthly 'averages' are a very unreliable indicator of housing prices.

The average is an indication of how much people are spending, not what they are getting for their money.

I have been seeing some pretty impressive discounts on the homes in the couple million+ range. So, a bunch of people get swanky homes at 15-25% off, while the low end stagnates, and the average holds steady. But did prices?

Buyers go out and get more for their money by spending the same amount as they planned originally but now get more home, and the average holds steady. But did prices?

No, in both cases prices went down, but the averages held.

Ask yourself, if you have x$ to spend, to you buy less home, or get the better place than you thought and spend it all?

And the answer is.... We spend it all.

I've said it before, but need a Case Shiller index here with some adequate history. It cuts through this 'averages' BS like a laser.

a simple man said...

Mindset - this is exactly my perspective. In terms of the Case-Shiller, we do not have the Teranet Index, which is pretty much the same thing. The small sample sizes make it a little subject to uncertainty, but it is a good start.

http://www.housepriceindex.ca/

Mindset said...

Oh, and one more quick note, I have family member looking at RE here who was told by a Realtor that prices are up 7% over last year, and climbing (to add time pressure and market appeal).

Where is the accountability in this industry? I guess that, if found out, a realtor like this loses a buyer?

I think it would be useful to spin up a web site where everyone could post agent quotes with their names and let people comment on them and crowdsource feedback. That might clear up some of the shenanigans and create more room for the honest realtors.

Might also be interesting to know which realtors are running the 'show you the overpriced and undesirable home first' then 'show you average homes that look like a deal in comparison' routine, or the developers that are buying into their own developments or making special initial deals to give an impression of launch sales momentum.

Like a Wikileaks for RE?

Leo S said...

@Mindset. While I agree that average prices aren't a great indicator and can be influenced by shifts in the distribution of purchases, that can only be a temporary influence. Eventually the distribution will return to normal (as in historical, not a normal distribution) and average prices will come down.

For example, here is the teranet index plotted against the 6 month rolling average of the monthly medians. The trends are pretty correlated.

Good idea on the rating of realtors. Why not a site like ratemyprofessor.com? The problem is with the low volume of responses it would be prone to abuse and targeting.

Mindset said...

Simple man - Any idea about the validity of housepriceindex and the RE mix it represents?

Other than being a lag indicator by a few months and not pricing in home improvements, it seems to have a good statistical representation of the sales here.

My only concern is that it was created in partnership with a bank (not a rating agency like Case Shiller) and they don't let you get to the actual home sales data under the hood to validate the methodology.

I wonder if it's legit?

Mindset said...

Does Case Shiller correlate with averages?

Marko said...

"Might also be interesting to know which realtors are running the 'show you the overpriced and undesirable home first' then 'show you average homes that look like a deal in comparison' routine, or the developers that are buying into their own developments or making special initial deals to give an impression of launch sales momentum."

- I've been involved a lot of buyer transactions this year and only one was a home I suggested we view. Typical sequence of events: buyer is set up on a PCS account; does a lot of research on their own; finds properties they would like to view; emails me MLS numbers and we set up a time, I give them my honest opinion of what we are viewing. I've never had someone call me and say "Hey, I am looking for 3+ bed, 2+ bad in Gordon Head, show me around." Even the out of country buyers I had last year would email me what they wanted to see and then I would give them the low down on the area, etc.

- Regarding special initials deals...obviously developers offer better deals initially to get pre-sales going. I don't think there is anything wrong with that. For example, when I bought my unit at the 834 there was a pre-sale unit for $203,900 and it didn't sell right away. Developer ended up selling it as the building approached completion for $240,000. Most developers increase prices during the pre-sale period especially as the building gets closer to completion (seems like people are willing to pay more once they see a concrete structure erect), Concert (Era on Yates) tends to keep them relatively flat.

a simple man said...

Mindset - looks like it may be pretty robust.

"The estimation of the indices is based on the “repeat sales methodology”. This methodology was originally developed by Bailey, Muth and Nourse as a method of avoiding the heterogeneity issues in housing markets. This methodology was extended by K. E. Case and R.J. Shiller, the foundation of which is that each property contributing to an estimation of aggregate home value change must have been sold at least twice in a particular time frame. The two sale prices are assumed to define a linear change of the value of the property between the two sales dates."

More detailed:

http://www.housepriceindex.ca/documents/MethodologyEN.pdf

a simple man said...

Look at the graph in this posting and check out the change in prices in Vancouver - linear drop.

http://www.cbc.ca/news/business/story/2012/05/15/crea-home-sales-april.html

Look out below.

CS said...

Is anyone able to say at what price 2705 Heron St sold for? The info. would be appreciated.

Marko said...

Heron sold for $750,000.

CS said...

Marko, Thanks very much.

Shanye said...

Is anyone else feeling some deja vu with 2008? There seems to be a lot of wealth evaporating in the great market machine.

Improve Canada

Jason Lowe said...

People can manipulate the stats in their favour, however they like. Banks do it, Media corporations do it..
that property on Carey Rd. sounded like a good deal, but what if?

Just Jack said...

Re-sale of a pre-construction condominium on Nursery Hill Drive in View Royal today.

The investor bought from the developer in 2008 for $337,000 plus GST.

The investor then re-sold the suite this week for $311,000 (HST not applicable) for 945 square feet or $329 a square foot for what appears to be a good quality condominium complex.
For that price you get underground parking and no street people in front of your building. Of course you will have to bike to work.

Or you could buy downtown Victoria condo in Humboldt Valley in a high rise tower built by Concert Properties for $345,000 or $467 a square foot. Which is the same as the previous owner paid in 2008.

Although the initial investor(s) bought the property for $239,900 (plus GST) and appears to have flipped the property at $325,000 (not including GST) to another investors. Incestuous bunch aren't they? The difficulty with these pre-construction sales is that you don't know when the sale actually occurred, as the title can only be registered when the property is given a legal description at the Land Office. So in this case, the first two purchases where registered within a couple of days of each other in April, 2006.

Concert was one of the first developers to not allow a pre-construction buyer to flip the paper option before the property was registered at the Land Office. You don't want your pre-sales competing with your unsold units now do you!


Meanwhile a triplex in the Burnside area of Victoria with a projected income of $42,000 a month sells at 13.8 times annual earnings. Which doesn't sound too bad, depending on who is paying the utilities - you or the tenant, because that will eat into your zero profit margin after paying the mortgage.

Townhomes in Central Saanich are losing ground with a recent purchase on West Saanich going for $273,000. 6 1/2 years ago in 2005 the townhome had sold for $235,000. That's a 16% increase or roughly what both agents likely made on the combined sales of the home.

And those are my "cherry picks" for today.

a simple man said...

Thanks for your time in the orchard, JJ.

Alexandrahere said...

Wow, the last time the TSX closed as low as today's was on 7 July, 2010.

a simple man said...

And now the house on Meadow that languished on the market forever and then finally sold for more than a prior listing price is back on the market for $9K more than it sold for last yr.

Begin bath.

chris said...

I'm surprised the media is broadcasting how out of whack the price to rent ratio is. From the numbers on their map, they have Victoria as 2.6 times cheaper to rent (39/15). Correct me if I'm wrong, but that means either prices have to fall 61.5% or rents rise 160%, to reach equilibrium again.

Just Jack said...

The last time Victoria was in a price nadir, the price to rent ratio for single family homes was between 10 to 15. Today at our zenith in prices a house rented to single occupant is in the 20 to 25 range.

That would be for a home on a standard lot size without views. Using this approach the Victoria market might be between 25% to 60% over valued.

That's a pretty big range and its probably as accurate as any method including a Ouija board.

Leo S said...

Price to rent is valuable but you do have to take the interest rate into account. The statement from the article that "If the number is higher than 15, it’s generally not a good time to buy." is nonsense at today's low mortgage rates.

Case in point, Seattle is still at 27 after their 35% decline. Obviously they are not going to decline another 40%.

DavidL said...

I just notices a new listing for 4251 Springridge Crescent (MLS 309123). Twenty years ago, I used to know the owner who bought it in 1968 for $14,500. It's now listed at $450,000. According to the BOC Inflation Calculator, $14,500 in 1968 is now worth $94,875.

So are houses overpriced or is inflation calculated incorrectly - take you pick!

Just Jack said...

I have never heard any person buying a home consider a price to rent ratio. That doesn't mean its a bad indicator or valid method of comparing one time to another, nor does it mean its a good indicator. Its just one of many indicators.

Although, I have heard people speak about rent compared to monthly mortgage payments.

Simplistically, if renting is more than the payment for a home then they buy.

If a mortgage payment is higher than renting then they rent.

But that was in the days when it required someone to save a significant down payment. 5 and zero down payments - blew that apart and people could act irrationally indefinitely. Especially when someone putting so little skin in the game was given the same interest rate as someone with a larger downpayment.

People were simply gambling with other peoples money and WINNING. It was a rigged craps game.

Because when the government got into the game in order to make a profit, real estate was no longer a free market system.

What has baffled me (and many things do) is why rents increased when the ease of entering the market is so so low. I would have thought rents would have tanked all over the place. Maybe we have a large transitory population involved in construction and are not interested in a long term commitment?

Only the future will tell.

Introvert said...

Case in point, Seattle is still at 27 after their 35% decline. Obviously they are not going to decline another 40%.

Or will they...

Introvert said...

According to the BOC Inflation Calculator, $14,500 in 1968 is now worth $94,875.

So are houses overpriced or is inflation calculated incorrectly - take you pick!


Isn't this assuming that real estate market "fundamentals" were nearly flawless in 1968; that houses were neither overvalued nor undervalued in 1968?

How likely does that seem?

Moreover, times change. The economic system of the 60s is unrecognizable compared with today's. So why would today's housing prices revert to 1968's prices + inflation? How overly simplistic and naive is that view?

It's high time many of you face reality: the average house in Victoria will never again cost two times the average income.

University tuition will never again cost $300.

A normal house on a normal-size lot in Saanich will never again cost $250,000 let alone $95,000.

Are houses in Victoria, today, overvalued? Probably. But will our prices drop off a cliff back to 1968 + inflation? Hell no. Capitalism itself will sooner fail than our prices drop by that much.

(By the way, I am rooting for a successor to Capitalism. I'm not a fan.)

Introvert said...

What has baffled me (and many things do) is why rents increased when the ease of entering the market is so so low. I would have thought rents would have tanked all over the place.

Yes, why aren't rents in the tank?

You know, rents in 1968 were $50, so they should really be at $330 today.

Just Jack said...

You know, however unlikely it may seem, the one thing about this market is no one could tell you when or at what price our homes would top out in value. And no one can tell you where and when they will bottom out either.

But when tough times comes to real estate, depending on your personal circumstance, the drop in prices can be staggering.

Back in 1994, if you told me that condominiums in Chelsea Green would sell between $25,000 to $50,000 I would have said your crazy as these condominiums had been selling for $150,000 and more a year before.

But that's what happens when more people HAVE to sell, than there are that WANT to buy.

Back in 1968 a house cost you $15,000 and new car $3,000. Now a new car cost you $30,000 and a house? Anytime that you try to compare one commodity to another, you'll find that house prices are at the extreme end of credibility.

So, could a starter house in Fernwood be $150,000 again - why not, that number is as likely as $250,000 or $350,000 at this point in time. You just have to adjust your concept of what value home ownership has, like people that live in Windsor Ontario had to.

MC said...

I would have thought rents would have tanked all over the place.

Yes, why aren't rents in the tank?

You know, rents in 1968 were $50, so they should really be at $330 today.


Maybe it is because we all need to buy massive amounts of toys and pay for our cell phones, cable, internet, netflix, yoga, lattes, xboxs etc. that everyone just needs to make more money to be at par with this lifestyle -- and our needs, it all trickles down into the cost of everything.

Leo S said...

The economic system of the 60s is unrecognizable compared with today's.

This is not an argument. Men were also not on the moon in 1969. How is that relevant to house prices in Victoria.

There are plenty of legitimate reasons why a SFH will never again cost 2x income, but "the economic system is different" is not one of them. Densification, interest rates, CMHC lending support, all those things are behind the increase.

University tuition will never again cost $300.

University tuition is set by public policy and has zero relevance to the price of an asset.

You know, rents in 1968 were $50, so they should really be at $330 today.

This is actually an interesting point, although I suspect you don't have the actual numbers for rents. By how much did rents increase in the last 40 years? Probably more realistic to look at that than the general CPI.

ArtVandelay said...

I'm sure you've all seen this but Vancouver is Reporting a 10% drop in prices since last April. When will we see dips in Vic?

Vancouver’s real estate swoon deepens

Some reports of buyers walking away from their deposits:

Mayur Arora is seeing something few would have expected in Vancouver’s real estate market – people walking away from deposits on houses, convinced prices will fall further.

“It happened twice in the last month. One [deposit] was $75,000 and one was a $20,000 deposit, the guys just walked away from it,” said Mr. Arora, who runs Oneflatfee.ca in Surrey, B.C. “They are going to wait it out. So they lost $75,000 and $20,000, but if the market comes down $150,000 on a $1.5-million house, that’s not uncommon.”

Just Jack said...

Simply because Victoria is not nearly the same as Vancouver. We are more like the Fraser Valley than Vancouver in prices and population.

I think our entire population for Southern Vancouver Island is close to that of just the City of Surrey.

Of course Victoria is much, much nicer than Surrey but being on an island does affect prices.

dasmo said...

If we are playing make believe I prefer the starter home in Fernwood for $94,870....

chris said...

So are houses overpriced or is inflation calculated incorrectly - take you pick!

I say overpriced due to a generational housing bubble. Too many boomers with non-starter homes and second homes, and too few buyers in the pipeline. They may stick to their guns a while longer and ignore reality, but in the end they haven't saved nearly enough for retirement and will get desperate to sell. They have very different attitudes toward saving and debt than surrounding generations ( greatest gen & genX).

Marko said...

In Regina, year-to-date prices are 9.4 per cent higher than the same period a year ago. Sales and average prices set a record last month, driven by strong population growth, including migration, and the lowest jobless rate in the country. The average home price in Regina is now $312,873, according to CREA.

Maybe after the correction in Victoria we will be on par with Regina?

Just Jack said...

Of course none of us want to live in Sooke and that seems to becoming more universal among buyers too.

A home on Deerbend nestled on a quarter acre in the Billings Spit neighborhood of Sooke recently sold for $200,000. Back in June 2004 (eight years ago) the home sold for $160,000.

Could our prices roll back to 2004 - of course they can. And that would be a 40% drop from todays house prices in the core.

The rich and famous are not immune to a price correction either. Such as the recent sale on Sea View Road in Ten Mile Point for $2,540,000. Previously bought in 2008 for $2,847,000.

So in answer to your questions when will we see price drops in Victoria? Your just not looking in the right areas.

You should be looking at the neighborhood just a little further out from yours to see how prices are coming down. Because if you wait until it happens in your neighborhood - you'll be too late.

Just Jack said...

I suppose we could be at par with Regina after the correction.

Because we are near par with Fort MacMurray now?

Its a fools game to compare one city to another. The only purpose being to arose an emotional conflict between readers. We all have pride in our city, but do we have to disrespect others who live elsewhere.

Introvert said...

Because if you wait until it happens in your neighborhood - you'll be too late.

Too late for what? Selling before the drop? We're talking about people's homes here, not Enbridge stocks.

Oh no! I think I see a drop coming for my house because Cadboro Bay, which is right next to me, has seen a drop in its property! Quick, honey, call the real estate agent!

No one acts like this--and they shouldn't.

The vast majority of Victorian homeowners just go about their day-to-day business as their house historically appreciates at an average of 4% a year in inflation-adjusted dollars.

Just Jack said...

No, selling after the drop

chris said...

...their house historically appreciates at an average of 4% a year in inflation-adjusted dollars.

Typo, you need to move your decimal to the left, as it's 0.4% in inflation-adjusted dollars.

From Irrational Exuberance, 2d ed. Shiller shows that inflation adjusted U.S. home prices increased 0.4% per year from 1890–2004

Mindset said...

Marko said: I've been involved a lot of buyer transactions this year and only one was a home I suggested we view

From what I can tell from your posts and model Marko, this wasn't directed at you or buyers that do their own homework. But I have heard from a lot of people that within the first few houses they looked at, there was a 'shocker' thrown in where the price was ridiculous and it made them feel like the other houses they looked at were well priced.

Overpriced houses like the infamous St Anne from this blog go a long way in selling all of the houses around them. I'm sure that this fact is not lost on realtors, nor something that is ignored by opportunists. It's just good to be aware of this as a buyer.

I would also be interested in knowing how many initial pre-sales in developments are speculation. It is a general rule that where there is a lot of speculation or you have to show sales to drive market confidence, you have a lot of insiders.

This is similar to IPO's. You have to build sales momentum in order to attract investors, and a lot of that momentum is 'pre-sold' to insiders. The trouble is, if you think that this momentum is being created by other buyers like yourself, you feel ‘safe’ in your purchase, when in fact, there is a sales wave looming that will push inventory up and prices down. Another thing for buyers to watch for.

I'm guessing that with the market turn, this is pretty risky now.

Marko said...

"I would also be interested in knowing how many initial pre-sales in developments are speculation. It is a general rule that where there is a lot of speculation or you have to show sales to drive market confidence, you have a lot of insiders."

I follow sales numbers on a weekly basis, Promontory has about 100 of 177 sold, Era is at 42 out of 157, and Mondrian at about 25 out of 93.

I also followed the 834 sales numbers closely and they were accurate, on completion the developer had less than 10% of the units left for sale, now down to 3%.

Large developers depend on the reputation of their previous projects for sales on their next projects and in Vancouver there are blogs/forums where people discuss each project and their purchase, etc. Bosa & Concert have large followings.

If Bosa was to misrepresent sales it would spread like wildfire online and I don't think this would be in their best interest.

Finally, sales numbers at a presale development should only be a very small part of your analysis.

If development A is selling for $300/sq.ft. with 20 out of 100 sales and development B is selling for $350/sq.ft. with 50 out of 100 sales where do you buy? People fall in the trap of following the heard.

Marko said...

SFH average up to 664k for the month....lots of million plus sales.

Leo S said...

From Irrational Exuberance, 2d ed. Shiller shows that inflation adjusted U.S. home prices increased 0.4% per year from 1890–2004

Sure, but Victoria has been ~4% in the last 50 years.

chris said...

Sure, but Victoria has been ~4% in the last 50 years.

Boomer bubble. That tailwind is now turning headwind. Would you rather look at 114 years, or only the last 50 years where Boomers, well...boomed!

Just Jack said...

I would be interested in knowing where you got that graph of real estate prices in Victoria. I've never been able to find anything past 1970.

Bitterbear said...

Marko...thanks for all your data...I was wondering if you can calculate SFH averages (or medians would be better) for houses under 500,000, between 500,000 and 1,000,000 and over 1,000,000. The total average for SFH is hard to interpret because of all the rich people offloading their expensive homes at a discount.

Is it possible to break up the index like that?

-BB

Dave said...

Part of the adjusted ~ 4% a.p. per year over the last fifty years is the increasing size and quality of home. If you doubt this, take a drive around 60s 70s hoods (Uvic) where boomers began their rip. Then come in a little closer to their original parents 40s 50s boxes (Hillside mall). Noting many have had boomer add-ons and upgrades over the years. Then to really hit the point home, go through new or in-fill hoods and then try to tell me the average boomer abode is no different than what their parents shacked up in.

CS said...

This just relisted after a 4% price increase!

a simple man said...

all I can think is Tsunami zone.

Introvert said...

No, selling after the drop

No, Just Jack. Again, it's a home, not stock market shares.

There are a vanishingly small few who purposefully buy a house low and/or sell high.

Instead, most people buy and sell whenever they darn well feel like it.

Is this smart financially? Not always. But it's how almost everyone rolls.

Introvert said...

Boomer bubble. That tailwind is now turning headwind. Would you rather look at 114 years, or only the last 50 years where Boomers, well...boomed!

So are you implying that Victoria has been in a housing bubble since the beginning of the boomer generation? Wow! Who knew that when the average house cost $75,000 we were already in a bubble!

Fact is: for 50 years, housing prices in Victoria rose at an average of 4% in real terms.

You can try to explain that away all you want, but the numbers don't lie. And no one can accurately predict the future, so your guess is as good as mine.

Introvert said...

From Irrational Exuberance, 2d ed. Shiller shows that inflation adjusted U.S. home prices increased 0.4% per year from 1890–2004

chris,

Great, thanks for reminding me of that irrefutable rule that every city's housing market always behaves exactly as that of the U.S.'s national housing market.

Fiduciary said...

Introvert: is your theory then that house prices in Victoria will continue to rise by 4% in real terms indefinitely? I'm interested at what you think will happen when the average house price then costs 10, 20, or 30 times the average household income. In the last, say, 30 years, people have accommodated the increase in cost by spending a larger percentage of their income on housing. Please enlighten us all on how people will spend 75%, 85%, 95%, or 110% of their income on housing.

Also, I think you should avoid making statements like "this will never happen". Time is, you know, long.

Leo S said...

Would you rather look at 114 years, or only the last 50 years where Boomers, well...boomed!

114 years of course. But would I rather look at Victoria house price history or US national averages? I'm going to say Victoria, although of course there is value in looking at other numbers as well. You can't discount the effect of Victoria moving from a small town to a mid size city.

LWilliams said...

The total average for SFH is hard to interpret because of all the rich people offloading their expensive homes at a discount
- Bitter Bear


Really? How do you figure that they are selling at a discount? I think removing million dollar plus sales from this years averages to show a decrease in sale prices year over year is called "cooking the books".

Leo S said...

I emailed the VREB about it and they sent me the data. Here is the source data

Google docs will try to display it for a long time, then it will give up and offer you the download link. Do that to get the file. Let me know if it doesn't work.

Leo S said...

@JustJack that last comment was in reply to your question.

By the way I'm working on a comparison to Seattle's long term prices. Will post it along with next week's monday stats update.

a simple man said...

I don't follow the million plus market too closely, but from the reports here there have been substantial price drops in this bracket of housing - can anyone with the data confirm?

LWilliams? I see that name a lot in my walks through the uplands - a coincidence?

Introvert said...

Introvert: is your theory then that house prices in Victoria will continue to rise by 4% in real terms indefinitely? I'm interested at what you think will happen when the average house price then costs 10, 20, or 30 times the average household income.

No, that's not my theory. My theory lies somewhere between 4% forever and total market calamity à la Phoenix.

a simple man said...

well - if you are the LWilliams I see on the signs - welcome!

Just Jack said...

That's cool information. Especially when you tie the prices to world events and the age of the front end boomers born between 1945 to 1955.

Double income families starting in the 1970's, Oil embargo, etc.

chris said...

So are you implying that Victoria has been in a housing bubble since the beginning of the boomer generation? Wow!

Yes I am... as are these professors, planners, and demographers.

Results and conclusions: Sellers of existing homes provide 85% of the annual supply of homes sold, and home sales are driven by the aging of the population since seniors are net home sellers. The ratio of seniors to working-age residents will increase by 67% over the next two decades; thus we anticipate the end of a generational housing bubble. We also find that younger generations face an affordability barrier created by the recent housing price boom. With proper foresight, planners could mitigate what otherwise could be significant consequences of these projections.

Canada has a bigger problem than U.S., as our ratio increases by close to 80% over the next two decades.

pod_x said...

"No, Just Jack. Again, it's a home, not stock market shares."

Don't know why you're so fixated on this. Prices are determined by the propertied that sell. No one's interested in houses that are not for sale.

Bitterbear said...

LWilliams...

cooking the books?

....no. I'm asking for a better representation of the data because different things might be happening in different segments of the market.

For example, you might get more value for your money by buying a high end place rather than buying a midrange property and putting your spare change in a coffee can buried in the back yard.

I rather think hiding behind a SFH average that's only going up because of a few high end properties selling is a bit like adding sugar to salty soup.

dasmo said...

If The ratio of seniors to working-age residents will increase by 80% then there will also be a labour shortage driving wages up therefore improving affordability!

Leo S said...

@Bitterbear. Yes, at Seattlebubble they often separate out the price tiers and look at the individual sectors. For example.

As you can see the drop from peak is not uniform across the tiers, with the high end falling the least (26% in Seattle), while the low end fell the most (49%). This matches up with some of the observations here that the high end is less volatile overall.

chris said...

If The ratio of seniors to working-age residents will increase by 80% then there will also be a labour shortage driving wages up therefore improving affordability!

Wouldn't the economy and job openings shrink as seniors consume less. Specially if they're burdened with debt and their only source of income is to sell the house.

dasmo said...

No because the baby boomers kids and genX will be consuming away. Plus those aged Boomers will be consuming adult diapers and home care services because they don't want to leave home...

nan said...

"Yes, at Seattlebubble they often separate out the price tiers and look at the individual sectors. For example."

Those graphs are quite interesting. It looks like all price tiers have decreased by a similar dollar amount. (between 100 & 150 k) and the gaps between the tiers remained more or less the same. basically, every single house lost 100 - 150k - this to me is evidence that every single tier is affected equally by a credit expansion & contraction.

Greed doesn't discriminate!

Bitterbear said...

thanks Leo S...yes that was more or less what I had in mind. I wonder what that would look like in Victoria. What I'm hearing is the million plus bracket is dropping faster than the 500,000 - 1 mill bracket. Not sure what is happening in the under 500,000 for SFH (not condos). Thanks for the info.

Cheers

Leo S said...

So much for mortgage free by retirement. , 50% are expecting to retire with a mortgage.

Leo S said...

Not sure what is happening in the under 500,000 for SFH

The problem is that you do have to take tiers by percentage of the market, rather than price cutoffs.

I track SFHs $0-$550k and $550-900k but can't calculate a meaningful average for those, since as the market declines (assuming it is) houses that would have previously fallen outside a segment are now included and the average price wouldn't budge much.

I think only a realtor would be able to get the tiered data. Or Just Jack, he seems to have some sort of inside connection :)

Hence I track price/assessment. Doesn't give a long term average since the assessment is updated every year, but assuming that assessments are based mostly on sale prices, it will give an approximation of the current rate of change of the market.

Mindset said...

Marko said: Large developers depend on the reputation of their previous projects for sales on their next projects and in Vancouver there are blogs/forums where people discuss each project and their purchase, etc. Bosa & Concert have large followings

It's interesting that there is a lot of dialog by the people that have purchased. Any stats on the general levels of speculators vs buyers with the intent of living in the condos? And what that looks like over time?

Are there blogs like this in Victoria?

Some speculation level measures would be very interesting. Speculation tends to drive markets these days. Might be an interesting measure of sentiment as well.

I have friends with Condo's that they purchased for speculation and rent, but am not sure if there are statistics on how many units are rented vs how many are occupied by owners.

I am guessing here, but it is probably better for daily living and long-term resale value to be surrounded by owners. Perhaps something else for buyers to consider if they are looking to enter this market?

Marko said...

^I don't have specific stats.

At the 834 there are 38 rentals units out of 115 so definitely investors bought in. However, the most any investor owns is 2 units and rest are one owner per unit.

However, at the 834 they accepted 5% down....with developments now requiring 15 to 20% down, depreciation reports being legislated, credit tightening up, etc., a greater percentage of people buying pre-sales will be end users in my opinion.

Bitterbear said...

Thanks Leo S...yes I see the problem. What would happen if you took the sale price/assessment ratio and plotted it as a function of assessment with each data point representing a single sold property? If high end homes are showing a relatively greater decrease in sale price, presumably you would have a negative correlation ie as assessment price increases the ratio decreases. You would also be able to see the shape of the distribution which I think is probably not normal.

Wish I had numbers....

Just Jack said...

Are the developers requiring 15 to 20 percent down immediately or are they offering 5% down initially and then as construction progresses another 5%, then another 5%?

Just Jack said...

Are the developers requiring 15 to 20 percent down immediately or are they offering 5% down initially and then as construction progresses another 5%, then another 5%?

Marko said...

Most are 5% on signing, 5% after 60 days, 5% after 6 months, and 5% after one year (if they are doing 20% down).

The Era and Duet most likely will collect the entire 15% before construction even starts.

Just Jack said...

What happens to that deposit if after construction, the property is worth less than the contract price and the buyer can't get financing?

Just Jack said...

What happens to that deposit if after construction, the property is worth less than the contract price and the buyer can't get financing?

Marko said...

If you cannot complete you lose your deposit.

Marko said...

The developer can also sue you for specific performance.

If the contract price is 200k, deposit is 30k, you back out on completion, developer sells for 150k; theoretically they can come after you for the 20k difference.

Douggie said...

Our favourite topic got some special attention from the analysts at BMO this week.

http://www.bmonesbittburns.com/economics/focus/recent/120511doc.pdf

Vancouver seems about to hit the skids.

Douggie said...

Also there was some discussion about this earlier so I'll post the excerpt (maybe even stir the pot a little).

In regard to the "typical" $683,800 Vic/Van home...

"The median-income household buying a typical house, financed
using a 10% down payment at today’s low rates, will spend
an estimated 54% of before-tax income on mortgage
payments. This is well above the qualification guideline for
insured mortgages, which requires total housing costs
(including insurance and property taxes) not to exceed 32%
of gross income. Worse, a moderate 2-pt increase in rates
would raise mortgage-service costs to a nail-biting 65% of
income."

Just Jack said...

The average person is not buying the average home.

They're the above average person buying the below average home.

a simple man said...

JJ - you just defined 80% of Oak Bay.

Leo S said...

I heard something new about that today.

"Oak bay, where old people go to visit their parents"

Introvert said...

"Oak bay, where old people go to visit their parents"

That's a good one!

Just Jack said...

Not only are the homes in the outlying areas rolling back more in prices...

Like today's sale of home on Salt Spring Island for $353,000. That had sold previously in September 2005 for $365,000.

But also the rate of appreciation has fallen for inner city homes on busy streets.

Like a recent sale on Bay Street for $396,000 or some 44 percent over its previous purchase in February 2004 for $275,000. While the general market for homes has increased from $332,000 to $589,000 or 77 percent during the same period.

As the market continues to contract, those better located properties will descend in value. Perhaps in a year from now, A Fernwood bungalow will be a hundred thousand dollars less than today. Which really isn't much when you consider a hundred thousand only saves a buyer around $400 a month in a mortgage payment. But it will knock off several years of payments.

And it might be enough to allow you to sell your home and pocket some change, before the bank sells it for you and sucks every nickel and dime of equity out of the property and then CMHC comes after you for the difference and tracks you down like a dog through the Canada Revenue Agency that garnishes your wages for the years.

But - I digress.

Mrs. W. said...

Just Janice here -
As many of you know, we recently bought the house we were renting. I just got a call from BC assessment inquiring about the purchase.

It sounds as though they check through MLS to see if the property was "exposed to market" to determine whether or not the property should be included in comparable sales data.

I'm a little wary of this approach as it would seem to exclude many private sales, and I would think that any "arms length" transaction with a willing buyer and a willing seller should be included as "comparables".

I could understand if you bought a place from a relative and didn't have to negotiate a price that was seen as fair but if you've had a number of 'RE agents' come in and give 'market evaluations', then I'd say the sale should be considered 'fair game' in setting price.

At any rate, food for thought.

axeman said...

4010 Carey was a piece of crap. It sold for what it is worth. Lots of crap in Victoria, still needs to drop and then will sell.

MC said...

MLs 309152 http://www.realtor.ca/propertyDetails.aspx?propertyId=11926807&PidKey=-1864512023

They need more pictures of the house, not sailboats!!!

MC said...

and axeman, if the house really was a piece of crap, I don't think anything about $180000 is really 'what it is worth'...

CS said...

Interesting chart here and discussion on US housing affordability since 1980. Seemingly, affordability is not always a powerful driver of prices.

CS said...

Sorry, that link did not work.

Try this.

KhearP said...

Thanks for sharing this Monday Market Update. Keep sharing nice and great blog that we can discuss more often.



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JustWatching said...

Full price. I ain't paying no stinking full price.

Click here for price reductions

Marko said...

Tuesday, May 22, 2012 8:00am

MTD May
2012 2011
Net Unconditional Sales: 448 572
New Listings: 1,148 1,524
Active Listings: 4,649 4,857

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

torontoinvestrealestate said...

Does Case Shiller correlate with averages?

Commercial Real Estate Toronto

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