Monday, July 9, 2012

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.

July 2012 month to date 
Net Unconditional Sales: 120
New Listings: 306 
Active Listings: 4827 
Sales to new listings ratio: 39%

July 2011
Net Unconditional Sales: 523
New Listings: 1374
Active Listings: 5094
Sales to new listings ratio: 38%
Sales to active listings ratio: 10.2% or 9.7 MOI

Unit sales dropped significantly in the first week of July from June's average: 15 units per day versus 21--that's almost 30% in case you were wondering. Now there was a long weekend in there and July is typically slower than June and the first week is typically slower than the rest, but still 30% is significant.

Will the trend continue? If so, we're on pace for 465 sales. 

165 comments:

DavidL said...

@HHV

About a year ago, you commented on July 2011 sales: Active listings are at all-time highs while sales volumes are at decade lows. It's a game of supply and demand, and clearly the supply side is lopsided.

Even if sales this month repeat last year - then the trend of decade lows sales will be continuing ...

DavidL said...

Lots of prices changes in my PCS today ... In fact, the rate of price reductions has been picking up during the past few weeks.

Ryan said...

Someone was comparing to the 1990s. The 1980s are by far the best model for predicting what’s next. Most reject any connection to the 80s for it’s high interest rates. Yet they overlook the most important detail - that rates fell in half while prices toppled. People have difficulty wrapping their heads around how prices could fall while interest rates are dropping. Simply put, they wrongly believe lower interest rates will always cure lack of demand.

Frankly, the early 80s witnessed a whole list of things that more or less fell in half, precisely as they are now doing in the 10s:
* resource prices
* the number of new adults available to establish their own places; boomers then, boomer kids now
* interest rates
* and home prices

One fianl similarity was the widespread overbuilding of the early 80s as builders are usually the last to change course.

DavidL said...

I posted about how price stagnation in the mid 1990's is effectively a prolonged deflation.

I think that the best-case scenario hoped by real estate bulls is that prices don't decline ... while the bears are expecting something more drastic.

Born and raised in Victoria - I remember the early 1980's market well. I remember how quickly prices fell - even after rates declined. Much like what has recently happened in the US, once people shied away from purchasing real estate - it took them a number of years to change their minds.

In early 1986, it was possible to buy a decent starter home for $80K - down 40% from the high in 1981. At the time, I remember wishing I had the money for a down payment! Alas, I was only early $6/hour (minimum wage was $3.65/hour).

HouseHuntVictoria said...

@Ryan, you're right, but it's important to note that a spike in interest rates toppled the dominos first (priced people out). For me, I think it was more about the market sentiment once the supply demand ratios got so out of whack and prices started dropping. Once the default opinion on the market becomes "whoa" then I think we could see some pretty sharp declines.

Leo S said...

At this point I can't see any reasonable argument for flat nominal prices. Before the mortgage and OSFI changes I might have been convinced that prices could flatline, but with the new rules I'm about as certain as is possible that we're in for a further decline. Could be mild (~10%) but I think it's coming.

Marko said...

While 10% might be mild for some markets that would be massive in Victoria. Since 1988 the biggest drop in prices year over year has been 5.47% and the second biggest drop was 2010 to 2011 with a drop of 2.55%.

Just Jack said...

And that makes what is going on with price decreases startling today. Year over year declines in house prices for June show a 7 to 8 percent drop in the median price. While condominiums exhibit an 8 to 12 percent decline in the median.

And the correction has just started.

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

Marko Said: Since 1988 the biggest drop in prices year over year has been 5.47%

Sorry Marko, but you are cherry picking statistics here.

Based on the average annual prices available from the VREB site, the drop in prices from 1982-1985 was 26%. 1981 to 1982 alone dropped 17.1% in a single year. The 1981 house prices were not seen again for 7 years. The run up in the 80's was similar to the 2000's with prices doubling over 5 years.

Core US stats (the strongest economy in the world) show the current depression being more serious than the 80's, with very similar unemployment levels and twice the reduction in GDP.

US Recession Statistics

Consensus is also that Canada is just getting into the real slowdown with China showing signs of trouble and commodities dropping. A RE downturn and a commodities drop would hit us in two of our largest sectors of employment.

I cannot find a single reason that the current downturn will not be at least as severe as the 80's, making a 20-35% reduction in housing prices a very real possibility. I also do not expect our current prices to be seen again for many years.

a simple man said...

Now the populous is waking up to what is coming.

The National last night had 2-3 stories detailing the changes in real estate in Canada and a story on Cleveland where they are tearing down tens of thousands of abandoned houses to rid the neighbourhoods of them before they brought down property values too much more. Most of the houses they were ripping down looked like South Oak bay houses. They highlighted a few houses that were for sale - one started at $70,000 and now down to $28,000 with no viewings.

Leo S said...

While 10% might be mild for some markets that would be massive in Victoria. Since 1988 the biggest drop in prices year over year has been 5.47%

I mean total drop. That would be another 2-3 years based on how many years prices went up. It does mean prices will have to start dropping faster than they have been, but ~5% a year is not much. Best case scenario.

PS: I'll make a note and in 2 years we can laugh at how off that prediction was.

Marko said...

"I cannot find a single reason that the current downturn will not be at least as severe as the 80's, making a 20-35% reduction in housing prices a very real possibility. I also do not expect our current prices to be seen again for many years."

Other than interest rates are about 15% less and a 50 other reasons :)

Marko said...

"I mean total drop. That would be another 2-3 years based on how many years prices went up. It does mean prices will have to start dropping faster than they have been, but ~5% a year is not much. Best case scenario."

Yea 10% in 2-3 years, maybe. That would bring down a $600,000 home to $540,000. This would improve affordability especially given most homes have suites as well.

I think we'll mostly see a whole lot of flat prices with very slow sales for the next few years. Money is too cheap for prices to plunge.

Also the economy in Victoria helps, 4 of the last 6 sales I've had in my own building have been to military, uvic, and bc government employees. I don't think those employeers are going anywhere anytime soon.

a simple man said...

Military, uvic, and bc government employees?

Aren't all three contracting their work forces?

Leo S said...

I cannot find a single reason that the current downturn will not be at least as severe as the 80's

What do you think about the affordability argument?

Here's what a 25% correction would look like for affordability

Single family homes would be as affordable on a monthly basis as before and after the 80s bubble.
I have a hard time picturing that, because Victoria has densified significantly since then, so demand for detached houses has risen. This is assuming flat interest rates, which if China slows I think we can be pretty sure of.

However I could see one scenario that could get us there, which is if a sharper decline triggers significant foreclosures and we overshoot. For example, have a look at what happened in Seattle. Their market overshot and affordability improved much more than what one might expect based on monthly payments.

Mindset said...

Other than interest rates are about 15% less and a 50 other reasons :)

Interest rates have gone down in the states (an a lot of other countries), and prices still dropped more than 5.5%. ;)

We live in a system, and there are lots of moving parts, not just interest rates... which are probably going to move up as soon as they can be moved to healthier average rate of around 7%, which is double today's rates.

50 reasons is a lot, but I'm game if you are. You name 10 reasons that this time we won't see a price decrease bigger than the 5.5% you quoted, and I will pull together 10 reasons that 20-35% I quoted is more likely.

Everyone else can chime in as well to keep it all above board, and we will have the benefit of real-time statistics to back our positions.

SARV said...

Hello all - First time poster

Assuming you were to buy now, what sort of offer would you make? How much below assessed for example?

Marko said...

"Military, uvic, and bc government employees?

Aren't all three contracting their work forces?"

That is what everyone keeps saying but I've had a few friends land some very nice jobs (70k+) recently with two of those employers.

All my VIHA friends are working a ton of overtime, they never have enough staffing.....basically if you graduate as a Respiratory Therapist (my first profession) you are automatically guaranteed a job, same goes for nursing, etc.

BC Ferries begging my girlfriend's father to come out of retirement for the summer.

I don't see a crisis in day to day living.

patriotz said...

Interest rates have gone down in the states (an a lot of other countries)

No need to go that far, RE prices are already tanking all over southern BC except for Victoria and Vancouver.

The fact is that RE prices can and do drop when interest rates are already low and are falling.

Marko said...

What was unemployement in Victoria in the early 1980s?

Marko said...

"No need to go that far, RE prices are already tanking all over southern BC except for Victoria and Vancouver."

http://kelownarealtor.files.wordpress.com/2012/06/average-price.jpg

^Interesting.

Leo S said...

What was unemployement in Victoria in the early 1980s?

Higher I assume. However this should be reflected in the income figures, so an affordability comparison would still be valid.

a simple man said...

OK - we are one day after the changes...wait a couple months and until the OFSI regulations take hold.

I have watched the market slowly erode from two years ago when above asking offers seemed the norm, and now they are the exception. Price reductions were almost unheard of and now they are commonplace. The market has been in a long, drawn out battle and now we are in the eleventh round and the govt has hit it with a hard left hook to the jaw. It will stagger for certain, but will it finally fall?

July 9th. The day the first punch of the one-two combination landed.

This sucker is going down. It fought above its weight for too long.

a simple man said...

Sure, individual stories may differ, but don't the stats show the workforce for military, uvic, and bc government employees shrinking? If not, what are the unions screaming for?

Just Jack said...

Hi SARV, I wouldn't use the assessments to help you determine what you should or should not offer. They are dated estimates and may not be consistent across neighborhoods or among assessors. Furthermore some of the assessed values are based on legislation and not market value. That is one of the reasons why assessments are called "actual values" not market values.

Far better for you to look at a lot of houses to get an understanding of value in a neighborhood and have access to a public data system like the one Marko offers here for free.

Most of us take a jab or two at Marko, but he keeps coming back and I figure anyone that has a commitment like that is worth a commission.

Perhaps, if you gave us an idea of what kind of home and where you are looking, some of us can give you an idea of what is or is not a typical price for that size of home or location along with some examples/economic indicators of similar transactions.

EagerBuyer(Not) said...

Guys - give Marko a break. Now that he is an agent whose livelihood depends on making commissions from real estate sales he has to believe that Victoria prices won't decline significantly and the market will be "stable and balanced". It's like asking a car dealer if now is a good time to buy a car.

a simple man said...

"10 reasons that 20-35% I quoted is more likely"

Start with the fish in a barrel:

1.) Price to income ratio is over twice what is considered affordable
2.) Price to rent ratio makes renting the far cheaper alternative.
3.) The cheap money tap is being turned off
4.) People are emotional and now they are waking up. The herd will turn from stunning financial irresponsibility to fiscal prudence out of necessity.
5.) Canadian personal debt levels are at all time highs
6.) Interest levels are at emergency all time lows and have nowhere to go but up.
7.) How can a crumbling shack in Oak Bay be worth three-quarters of a million dollars? Really? How long would it take the average family in Victoria to save that kind of money?

JustWatching said...

Some of us have been saying that prices have already been falling in Victoria. Several readers have posted graphs showing median sales prices are down. The Teranet HPI (National Bank) for Victoria also shows price erosion.

But many folks don't believe it until it comes from a professional REALTOR®. So today we get this from the always optimistic Royal Lepage HQ.

Press release - Victoria house prices post slight decreases in second quarter of 2012

The Royal LePage House Price Survey and Market Survey Forecast released today showed year-over-year price decreases among all housing types surveyed in Victoria.

Prices for detached bungalows fell an average of 3.2 per cent year-over-year to $460,000, while standard two-storey homes posted a similar decline, falling 3.4 per cent year-over-year to $461,000. Standard condominiums posted the largest price decrease, falling 4.8 per cent year-over-year to $280,000.


Royal Lepage also released their national report today and the "reporters" over at the TC are busy preparing a copy and paste article for tomorrows paper.

Canada's Housing Market at a Tipping Point

“We have had three years of solid house price appreciation in almost all regions of the country,” said Phil Soper, president and CEO of Royal LePage Real Estate Services. “Confidence in Canada’s real estate market is sound, but home prices cannot grow faster than salaries and the underlying economy indefinitely. Some regions have reached or perhaps even exceeded the current upper level of price resistance as buyers have embraced an era of historically low mortgage rates.”

Sounds good so far but then the spin...

Soper noted that when national average home values do soften, they historically have declined for only a brief period of time. Following a period of significant price appreciation, Canadian real property prices tend to flatten versus decline, until the economy catches-up to the new price norms. The last notable national price decline took place in 2008 and lasted only eleven months, previous to that there was a period of over sixteen years without a significant decline. The longest period of national average price decline since 1980 took place in 1995 and lasted for fourteen months.

But Phil didn't you tell us a couple of months ago that real estate was local and market analysis needs to be done that way?

SARV said...

Thanks for your reply Just Jack,

I do get the real-time MLS listings Marko quotes. And I do have a fairly good idea of present value but I'm more questioning future value (as in 2+ months) and where the mindset of the seller is at. Are they just wanting to get out? Are buyers low balling to see if it sticks?

I'm curious given all the discussion of a big burst, what would you offer on a house if you were to buy now? Lets say in Oak Bay or Cordova Bay?

And, while I agree with you about BC Assessments being inaccurate, the same goes with Asking price so its hard to ask the question without using some sort of barometer.

Thanks for your comments. Its appreciated!

patriotz said...

And, while I agree with you about BC Assessments being inaccurate, the same goes with Asking price

Asking price isn't a measurement of anything, just a wish, so it doesn't make sense to talk about it being accurate or inaccurate.

fatjay said...

@Marko: "No need to go that far, RE prices are already tanking all over southern BC except for Victoria and Vancouver."

http://kelownarealtor.files.wordpress.com/2012/06/average-price.jpg

^Interesting.


Interesting indeed. But not indicative of what homes are really selling for in Kelowna. I live here and follow the market closely.

It seems like there has actually been an uptick in sales lately, and I've even seen some high end sales where I wasn't seeing much of anything selling over 1 million for quite a while, but the average and median don't tell the story.

Prices have finally started to move down and sellers are apparently realizing that. Most of the sales I see are properties that come onto the market appropriately priced and sell quickly within 1-3 weeks.

A lot of condos are 30-50% off of their highs and residential homes are around 10-30% down depending on the area.

We rent one of 4 new, identical homes on a high end street in Kelowna, about a block from the lake. 7 of the 10 homes plus 2 lots on our block are for sale. The only one that isn't was sold for 842k plus taxes 1.5 years ago. The 3 similar homes by the same builder are still for sale. They were originally all priced within about 30k of the first.

Since the first sale the other three homes had the basements finished and the owner wouldn't rent to us because they were "sure" that they would sell with their new pricing. They came back on with new basements and new pricing at 800, 815 and 835.

Since then they've rented us the 800k home for $2200 a month and reduced the other two in increments of 40k, 30k and 30k down to 715 and 735.

I actually thought they might sell at that price, but still no buyer.

Our former rental, originally priced at 1,050,000 reduced all the ways down to 700,000 before the owners finally sold their second house and moved back in. Similar houses on the same street sold at a rate of 1-2 per year (always 4-5 listed at a time) with values decreasing around 100k per year.

I am watching mainly homes in the 600-700k range in our area and they have come down about 50-100k over the past 2 years.

I wouldn't use Kelowna as an example if you're trying to refute the point that RE prices in the BC interior aren't tanking.

DavidL said...

Here are the historical unemployement rates for Canada and BC

Unemployment Rate (percent of labour force)

           CAN     BC
1980    7.5    6.7
1981    7.6    6.8
1982   11.0   12.1
1983   12.0   13.9
1984   11.3   15.0
1985   10.5   14.3
1986    9.6   12.7
1987    8.8   12.1
1988    7.8   10.3
1989    7.5    9.1
1990    8.1    8.4
1991   10.3    9.9
1992   11.2   10.1
1993   11.4    9.7
1994   10.4    9.1
1995    9.5    8.5
1996    9.6    8.7
1997    9.1    8.5
1998    8.3    8.8
1999    7.6    8.3
2000    6.8    7.2
2001    7.2    7.7
2002    7.7    8.5
2003    7.6    8.0
2004    7.2    7.2
2005    6.8    5.8
2006    6.3    4.8
2007    6.0    4.3
2008    6.1    4.6
2009    8.3    7.7
2010    8.0    7.6
2011    7.5    7.5

From: http://www4.hrsdc.gc.ca/cv2@-eng.jsp?fromind=1&iid=16&sid=8&chrtid=1

CS said...

"what would you offer on a house if you were to buy now?"

The price of a house is like the location of an electron, indeterminate, until a vendor accepts an offer, which then establishes the price -- just as pinging it with a photon establishes the location of an electron.

In other words, it all depends on what's going on in a buyer's head and a vendor's head. If the two agree at a particular instant, you have a price. Otherwise, the value of the property is indeterminate.

But with some people expecting a 1980's type bust, some vendors will be nervous and inclined to look at offers. So if you're not in a great hurry, you could try some low bids and see what happens. 2705 heron st went for 16% under assessment, and 2840 Lincoln rd went for 20% under assessment, although both were in poor shape, either outside (Lincoln rd) or inside and out.

Houses in the same area being offered at something like assessed value aren't moving, and several have lowered the asking price, presumably because they suspect that prices will only go lower and they'd like to pass the loss to someone else. Under those circumstances, the RE industry will tell you this is a buyers' market!

DavidL said...

Looking at the above historical unemployment rates - it looks like interest rates peaked, housing dropped (like a stone) and then unemployment rose significantly. In our current market, is it fair to assume that if housing drops that the unemployment rate will rise? How might this affect interest rates? Hmmm ...

JustWatching said...

Sarv,

Why make any offer right now if you know the future is uncertain? No one, including VREB or any brokerage firm (like Royal LePage) is predicting short term price increases for Victoria.

The feds have said that they want to cool the market. The new mortgage rules just took effect and OSFI rule changes are being implemented now so why not wait? Prices will fall it is just a debate as to how big the drop will be.

But if you are determined to buy now, due to family pressure, lowball and see what happens. You can always use Marko's services and save on the commission if the lowball works.

DavidL said...

Home-building pace 'unsustainable', TD says

'Home prices cannot grow faster than salaries and the underlying economy indefinitely.'—Phil Soper, CEO, Royal LePage

Just Jack said...

The only way that you are going to get a low ball offer accepted is not to have any other bidders on the property. That's not going to happen if your looking in prime neighborhoods. All the vendor has to do is lower his price marginally to get action on the property. You'll have to wait for the months of inventory to go over 9 months and that be sustained for at least a year, before low balling will have an affect.

Now, if your buying in Sooke, Up Island, the Gulf Islands, farms or water front properties, then there is an opportunity to low ball. But probably a year or two from now prices will be below any low ball offer you make today.

SARV said...

Thanks for your comments. We need to move as our rental is no longer working out. And we'd prefer to buy as renting just creates so much uncertainty for the kids. We've been unlucky with rentals. We have bought and sold in the past and made good money on it so we have something in our pockets. But we don't expect to do that this time.

We realize the timing could be better and will try to wait another month or two. But given our circumstances we might have to buy on the way down vs at the bottom...which makes it hard to know what to offer.

It's helpful to know the mindset of the seller out there right now. If they are in a panic or not. And what other buyers are doing. Thanks for the feedback.

Leo S said...

I don't think sellers are in a panic, but they are certainly feeling the pressure. Inventory is at record highs. Toss a few lowballs around and see what the reaction is. It all depends on the property. For example, the owner of 4107 Borden took a lowball of $50,000 under asking today. Asking price $529,000, after 78 days on the market they took $479k.

If you want a "deal", I think the best ones out there are the houses that need some work. They seem to the weakest right now.

Good luck!

DavidL said...

@SARV

If you are willing to wait a few months, I suspect the prices will already be lower. Even without the current uncertainty, housing prices typically drop in the fall and rise again in the early spring.

Alexandrahere said...

House prices in 1981/82 dropped 27%. This is true. However house prices say in Gordon Head went from new in 1974 at $36K to sold in late 1980 for $132K.

Leo S said...

Lots of sales with a sale date of July 9th popping up right now :)

patriotz said...

However house prices say in Gordon Head went from new in 1974 at $36K to sold in late 1980 for $132K.

Both that bubble and subsequent bust took place during a time of high general inflation. Which means real prices in the mid-1980's were about the same as in the mid-1970's.

Remember that the high inflation was not a free lunch - it was reflected in historically high interest rates, which were already into double digits in 1974.

LeonMaynard said...

I might agree with you Marko IF we had American style mortgages where you can negotiate a 30 year mortgage at a fixed rate of 4or5% for the entire 30 year term.

But we Canadians must renegotiate with the banks for a new interest rate every few years.

Today we are unfortunately moving in the same direction we went in 1982+ where interest rates increased and people had to renew their mortgage at the current prevailing interest rate on a house that had decreased in value by 25%.

For example, say you bought a house last year with $50,000 down and a $450,000 mortgage and a 5 year term. In four years when your mortgage is up for renewal and house prices have decreased 25% that means your house is now only worth $375,000. The bank will only lend you 80% of their assessed value, or $300,000 in this example. The owners have reduced their mortgage to $415,000 after 5 years of payments. Therefore, the banks not renew the mortgage until the owners pay the bank the difference between what they owe and what the bank will lend, or $415K minus $300K or $115,000. How many people will be able to pay the bank $115,000 and how many will be forced to sell instead? This is what happened and we seem to be going the same direction again with a boom followed by rising interest rates followed by thousands of mortgages resetting at higher rates on deflated houses.

This is the scenario that happened to hundreds of people in Victoria in the 1980's - I knew several of these people and yes, they sold their house because they did not have the money the bank wanted, so they had to sell and slowly pay-off the difference.
------------
Marko said:
I think we'll mostly see a whole lot of flat prices with very slow sales for the next few years. Money is too cheap for prices to plunge.

Reid said...

Fatjay, we are also in the Kelowna area after having moved from Victoria. Having looked at the Kelowna market over the past year what I have found is that sales volumes are down on average 30-33% since 2008 when compared against the 2002-2007 period. But it appears the real variance has been the higher end homes (<$700k) which simply do not sell today compared to 2005-2007. The lower end ($325k-$550k) is fairly active and as you suggest if priced right, they sell quickly. This lower price point seems to align with the average Kelowna income levels. But I have seen a lot of houses in the $750k to $1.5 million range that are well priced, but they simply sit there – many for years. I assume most locals do not buy in this price range and why would someone buy a second home at this price point given other options and the fact you are buying an asset which you will have a hard time selling yourself. It is for this reason, I am cautious about buying anything over $700k even when I see value in it.

The biggest variance I see between Kelowna and Victoria is patience. In Victoria if someone has not sold their place within 60 days, there is an issue and often price reductions follow. In Kelowna properties often sit for years with no activity and many sellers sit tight on price. I suspect this maybe something we will see in Victoria that sellers will take time to lower their expectations. They make take a initial 10-15% hit, but beyond that it maybe slow to see prices below at least until there is some catalyst (higher interest rates, foreclosure spike).

Taigaa said...

We recently offered 685 on a place listed for 730. The listing realtor told us only serious offers are being accepted. After some back and forth we ended up offering 690 and them at 720. We left it at that. A few weeks later the sellers came back to us offering us 710, we said no. They then offered us 690. By then we had moved on an were no longer interested in the house. They reduced their asking price to 700 a few days later and it has not sold yet. So sometimes a lowball could definitely work, but the realtors, both listing and your realtor, will try to talk you our of an offer that low. If you are ok with not getting the place I would try it.

yogurt said...

4107 Borden's original asking was $549,900, so $479,000 is about 13 percent under asking after 78 DOM. It had a bit of a cottage-like feel to it.

Other more traditional houses within a two minute walk have been selling more quickly for asking or slightly over, around the $550K to $600K level.

We're hoping to buy in this neighbourhood within a few years, but I worry it will be one of the last to tumble.

Just Jack said...

If at renewal time your mortgage is more than the market value of the home, in most cases the bank is not going to ask you to come up with the difference. Although they don't have to renew your mortgage at renewal time either. The mortgage is just rolled over at the new interest rate. I doubt you are going to have very much negotiating room on the interest rate or terms. The bank knows you can't go move your mortgage.

However, if you want to increase your mortgage or move your mortgage to a new bank, then you would have to re-qualify and that would mean a professional appraisal would have to be performed and you would be under new mortgage rules.

Say you had opted for the 40 year mortgage a few years back. At renewal time the bank is not going to change your amortization to 25 years. The amortization period will be allowed to tick down every year from 40 to 25. However, your not going to be able to use any equity in your home that would increase the size of your mortgage. Nor is it likely that you will be able to change lenders unless you could manage the payments on a 25 year amortization. So forget putting a new car on your home equity line of credit, or paying for your daughters education or marriage using your home equity, or paying off high interest debts, etc., etc.

The 40 year mortgage really sucks.

dasmo said...

Offering 10% under asking is not lowballing. It's pretty standard in negotiations to ask for 15-20% off asking so you land at 10% off. Old and ancient price bargaining. In fact If you are buying trinkets from a 3rd world street vendor it's standard to start at 50% off the asking price.

@Taigaa That estate agent not taking your offer to their client was against their code I believe. serves them right that they didn't get their price! 685 on 730 is a fair start to a negotiation.

IMO you can expect they have priced a property with 10% off in mind unless they have priced it to try to get a bidding war (good luck with that these days).

Just Jack said...

Okay, my misunderstanding.

I thought a low ball offer would be more than 6% on a home listed at $730,000.

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

But I have seen a lot of houses in the $750k to $1.5 million range that are well priced, but they simply sit there – many for years

My definition of "well priced" is at a price that someone is willing to pay. What's yours?

It is for this reason, I am cautious about buying anything over $700k even when I see value in it.

Again, what's your definition of "value"?

Just Jack said...

If you're looking for something to low ball in the city, then you should look at homes on busy streets.

No matter what you buy in the next month or two, the prices will be lower than your offer in a few years. So what you want to do is try to buy something that will lose you (really the bank) the least amount of money.

Such as the recent sale of a property on Dunsmuir in Esquimalt for $480,000. That's up only $60,000 from when the vendors bought the home in September 2005 for $420,000. At least these prices are farther along in the market contraction, so you won't lose as much as a home say in Oak Bay or Fernwood that still has to start contracting.

You're (really the bank) still going to lose money - just not great big gobs of it. Just put down the minimum downpayment, because there is no sense in losing your money when you can lose someone elses.

Reid said...

Patriotz, my definition of value in these higher end houses I mention is that they can be acquired at a substantial discount (30-50%) to what it would cost today to buy and build (most are fairly new). Also what you get for say an additional $250k over what is actually selling is almost a joke. In Victoria or Vancouver the additional $250k would provide a fraction of what you get here.

Still no plans to buy any time soon.

Alexandrahere said...

On a lighter note....anyone noticed that the old "Edith Cavell" is under green wrap once again. That project has had nothing but problems since day one. The name has changed at least three times.

Also, both towers of Ocean Park Towers, just down the road on Kimta is also once again under wraps. The "rainscreen" technology was applied to that complex around 15 yrs ago and now it looks like round two is in progress.

So much for not buying those horrible old condos in Fairfield

Just Jack said...

Reid, If your making your decision based on a deduction from the replacement cost new of a property, you are very likely to run into major problems.

First, you have to know the lot value. Not an easy thing to do when only half a dozen vacant lots ever sell in all of Victoria City in a year. Then construction costs vary considerably from one builder to another, especially on custom builds. Then you have to know how much the building has depreciated since it was built. And most importantly, what something costs to build may have nothing to do with market value. Especially when prices are falling. Undoubtedly you will see more and more houses advertised as selling below replacement costs in the months to come. Most lenders have done away with any reliance on a cost based value and I think that is a wise decision.

I think you might save yourself a lot of grieve and have the property appraised before you buy. Especially when you are looking at the high end properties. Then at least you can sit down with an unbiased appraiser and discuss the upside and downside of the property.

DavidL said...

From the Times-Colonist ...
Lowest and highest priced homes for sale in Metro Vancouver

Look at this great investment property in Vancouver selling for $500K: [Link to photo] $499,000 1839 TRIUMPH ST Vancouver: 2 bedrooms, 1 bathroom, floor space 1095 sq ft. Built in 1930. Now rented for $1,500 until January 2013.

fatjay said...

@Reid: I agree. The market in the 400-500 range in Kelowna is still active, although you do get a little more for your money now.

The market for high-end homes was completely stalled. Seems that sellers and buyers were in a stalemate; however, I am starting to see a lot more reductions, and subsequently, more sales lately.

Looks like a house on our street just sold this week. Originally priced at 1.6 million, and I think it went for about 1.15

Noticed that another million+ house has sold a couple blocks away. Didn't see anything sell for almost all of March-May, but I have seen a lot of significant price drops lately and those homes are now moving.

I also agree about the "value" in the high end right now, but only in comparison to cheaper properties. I think that eventually, tightening credit will push the lower end prices down as well, but for now the vacation properties and the high end properties are seeing the brunt of the declines.

LeonMaynard said...

Sorry 'JustJack' but that's not how banks works! The banks want 100% coverage as their collateral, so you won't find any banker renewing a mortgage for more than the house is worth and certainly not for 138% of their usual limit; just ain't going to happen, not now, not ever. Call your favourite banker or broker if you don't believe me. This scenario was rampant in the 1980's and it looks like it will be again in the years post 2014 when many mortgages are up for renewal at higher interest rates on homes that have depreciated by over 15%.


Another thing Jack, Canadian banks never lose money on mortgages. It just does not happen, not even if you declare bankruptcy, not even if you die with any assets like life insurance, bank account, etc. You would have to die a homeless hobo for the banks to lose money on your mortgage.
----------
Just Jack said...: If at renewal time your mortgage is more than the market value of the home, in most cases the bank is not going to ask you to come up with the difference.
-------------
JustJack said...: No matter what you buy in the next month or two, the prices will be lower than your offer in a few years. So what you want to do is try to buy something that will lose you (really the bank) the least amount of money.

Just Jack said...

What happened in the 1980's was that lenders like Columbia Trust went bankrupt and their portfolio of mortgages were bought out by companies like Household Finance. But even then, at renewal time, the mortgages were rolled over by Household Finance even though the mortgage was higher than the property value. A performing mortgage is still a money maker for the bank.

The banks make the least amount of money on mortgages. The competition among them is fierce and there is only a small profit margin. What the banks want, is all of your banking services, RRSP, Investments, etc because that's were the big profits are for them. So banks can lose money on mortgages.

Would you evict your tenant if he lost his job but was still making the rent payments? No, you would not. So, if someone is making their mortgage payment why would the bank not renew.

Your just fear mongering.

Ryan said...

Credit tightening is a nail in the coffin, but it’s the overbuilding that will truly swamp this market by next Spring.
Many builders are carrying more unsolds than they have fingers and yet they continue swinging their hammers to keep busy. All at a time when vacancy rates are soaring.
Here is today’s CMHC Housing Starts grahpic.
http://media3.marketwire.com/docs/HScmhc0709.jpg

Ryan said...

House Starts graphic

Leo S said...

IMO you can expect they have priced a property with 10% off in mind

I don't think so. Marko posted some stats a while back about what places sell for relative to original asking price. I think it was something north of 95%.

Maybe the initial offer can be lower, but something selling for 10% under asking price is very rare.

LeonMaynard said...

JustJack - I see you didn't bother to call a banker or mortgage broker before posting your comments; and, Household Finance Corp of the 1970's and 1980's were considered 'loan sharks',(check with Google for more on Household Finance). Before I posted my comments I checked my recollection with a former CMHC executive, now retired.

Taigaa said...

I agree, it would be rare to go 10% or more under asking right now. Maybe 10-20k is what most would expect but not 10%

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

Lots of houses in OB going for far, far under initial offering price - $50K - $100K not unusual.

Introvert said...

Dear Just Jack,

Worse than your understanding of the minutiae of mortgages and banking is your understanding of English grammar.

For the benefit of us all, please study and internalize the following:

your = possessive
you're = "you are"

its = possessive
it's = "it is"

grief = noun
to grieve = verb

... when you can lose someone elses

It should be "else's" (possessive).

Warm regards,
Introvert

Just Jack said...

Allow me to iterate what you have said.

That when you go to renew at the end of your term, the lender will not renew your mortgage if the mortgage is more than the value of the home.

If this is what you mean. Then you and your retired CMHC executive are wrong. Actually, you just probably misunderstood
what he said. OSFI was considering implementing this rule. (hint - if they were considering implementing this rule - it means it doesn't exist right now) but that change was dropped. That is where you may have been confused.

The mortgage is a debt pledge that you make with the bank. Your ability to pay the debt is what is important. If you don't pay the mortgage the bank sues you for the debt not for the home. The home is just collateral. That is why you get a cheaper interest rate than an unsecured loan.

And most importantly, that 21 year old kid across the desk from you that is renewing your mortgage. He doesn't know what your house is worth! And he isn't going risk losing you as a long term customer with all of your savings, RRSP's TFSA, etc. because the mortgage is $20,000 more than the BC Assessment. Because the one thing that is always true about the BC Assessed value is that it is almost entirely always wrong. Very few homes sell at exactly their assessed value.

So, you have to ask yourself. Do you have the balls to pull the plug on a 30 year customer with a million dollars in investments in the bank, because the BC Assessed value is below the amount of the outstanding mortgage. And risk that customer taking his accounts to the bank across the street? Or do you just roll the mortgage over?

And if you do lose this customer, you'll find others with similar size Gonads in the unemployment line with you.

Taigaa said...

I was comparing to last asking price, not initial asking price

Just Jack said...
This comment has been removed by the author.
Just Jack said...

That reminds me of a story about Don Cherry.

Once he asked "where are the bathrooms at."

The person corrected him, by saying that you should never end a sentence with a preposition.

His reply

"Where are the bathrooms at, arsehole."

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

Here are the GV June stats for sale price to listing price.

For typical houses and condos the ratio was 97% or 3% off list. Fairly typical given the 5.5 MOI in June.

For SFH waterfront and acreage the ratio was much lower at 91-93%. Not surprising when MOI is over 10.

Greater Victoria sales stats - click here

Leo S said...

Just Jack is correct. The bank will not force you to come up with the difference just because the value of your home has dropped. They're not going to throw a good customer on the street for no reason.

dasmo said...

An asking price for a house is arbitrary. Don't feel bad offering less. It's a negotiation. Sure in the glory days of the late 2000s you would be better off offering 10% over asking. Now we have returned to the time to offer less. I have purchased two houses. Both of which I offered 20% less and ended up 10% less than asking. The first with a buying agent who was aghast at the thought. the second, I didn't have an agent (nothing against them though Marko) With the second place, I studied the e-value BC numbers and found that at least 50% were selling for less than the assessed value, some for a chunk more, some for about the same. I looked at 10% less than assessed as my target. This blog also helped me feel comfortable offering 20% less than asking with that target in mind. It also made be feel comfortable of doing the dreaded asking for more money off after the inspection. (if you look that up on the internet, you absolutely shouldn't do that!) hogwash. This a lot of money folks. a first offer is just that the first offer it's a process of trying to find their best price. Be patient and be willing to walk. Do not get emotional or attached until the keys are yours...

Animal Spirit said...

Sales price to original list price has averaged 95% over the last year (for houses <575 excluding Westshore and anything east/north of Brentwood Bay).

For a reasonably priced house you'd be hard pressed to get better than 95% of final list price, so on a 500K list price, 475K would be a good final ngeotiated deal. Of course you'd need to start lower (e.g. 455K) and put up with the b.s. the listing realtor would give you. Make them think it over and come back, don't be suckered by pressure tactics like fake bidders, or get emotionally attached to the outcome. Make the sellor want to make the sale, make the realtor desparate for the sale and then you are in business.

Spend a good $1000 on counselling to deal with emotional attachment to outcomes ahead of the bidding process and you'll probably net a $20,000 savings, or a 19 times return in a few months.

Should do the same for my aversion to reasonably calculated risk (which, to me, doesn't include Victoria home prices).

Animal Spirit said...

and, apparently, spelling.

SARV said...

Thanks for all the tips, advice and stats. Much appreciated.

a simple man said...

good philosophy, dasmo. Few have the guts to do it.

I hate hearing "the seller was offended". Why make it so emotional? Just say yes or no - don't be a drama queen about it.

backinVictoria said...

LOL @ introvert.

If you can't debate the content, might as well be a grammar nazi.

Keep up the good work Jack.

Just Jack said...

A walk on beachfront property with a small older home along Lochside Drive originally was purchased November 2006 for $900,000.

The home has almost been continuously listed since December 2010 for about 507 days starting at $899,000.

After a couple of price drops, the waterfront property has just re-sold for $760,000.

Properties that have the majority of their value in the land component, such as waterfront, acreage fall first in a declining market.

That also includes small older homes in expensive hoods like Oak Bay. That price drop hasn't happen, yet - but it will.

Just Jack said...

Oops an error in the above. The property was re-listed starting at $1,200,000 not $899,000

Just Jack said...

Once, the other side counters - its a new round in the negotiations. That means everything can be re-negotiated.

In your initial offer you should list the extras that you want included - even ones that you don't want. Washers, dryers, fridge, stove, vacuum canister, blinds, cat.

The game is to make the vendor feel that they've gotten their best deal. So, you may counter at the same price but not include the appliances and cat.

Trevor_tni said...
This comment has been removed by the author.
CS said...

One reason selling prices are generally within 5% of the asking is that most people think no one will accept a lower offer.

But that attitude may be about to change. If so, vendors will have to review their position.

There's nothing "real", "actual" or "legitimate" about a realtor's price appraisal. It's just that, an appraisal. The actual price is what a buyer and a seller finally agree on. Before they agree, the price is indeterminate.

And remember it's all on stolen Indian land, apparently, so we may have to give it back sometime.

yogurt said...

It took me all this time to realize that Trevor_tni is Introvert spelled backwards. :)

a simple man said...

Trevor_tni;

Nobody wants a grammar nazi - we all know what the idea is and small grammatical or spelling errors do not detract from it. We all make them when posting blog comments - it is not an english essay.

And what is a permabear? I don't know if any of us here would fit into that description if I am understanding it correctly.

I appreciate Introvert being around, as I do you. Let's all play nice.

a simple man said...

good catch, yogurt. Why is it that the bulls around here tend to take on multiple personalities?

Introvert?

dasmo said...

I disagree Jack, don't mess around with an offer make it serious. If it's a fair starting offer it will get the ball rolling. Unless you actually want the stove and dishwasher. More than likely you will wan't to include that those things will be removed upon possession.
The game isn't to make the vendor feel anything. The game is to get the house you want for the lowest price you possibly can. Part of the strategy is to first engage the negotiation and the end game is to close it so you must consider feelings in your strategy but they are not the endgame. This is partly why you start low. In both my deals I always accepted the vendors counter for example....

Personally I wish buyers agents were trained negotiators that actually helped in this manner. I remember my buyers agent for the first house actually fighting me on the offer I wanted to present. I had to just tell her to make it. Good thing my father was a developer and new what really went on. Although he was a little extreme at wanting me to offer almost 40% less LOL. Now that's a lowball!

JustWatching said...

dasmo,

Interesting strategy. Did you make these deals recently or during the credit crunch a few years ago?

Just curious as to what the state of the market was when you lowballed.

Just Jack said...

The price is important but so are the terms.

A vendor may be willing to accept your offer over one that is higher, because the terms better suit their needs. Closing dates are one example.

Maybe, the vendors want to rent back the home for a few months.

Maybe they are willing to accept a lower offer if you assume their mortgage.

Maybe, they are willing to pay you, for assuming a mortgage that is more than the property's (possessive) value.

There are going to be a lot of interesting scenarios popping up as property values decline.

Just Jack said...

A buyer's agent is trained to work for the buyer. If the agent worked for a flat fee, instead of a commission then it would be professional.

But are you willing to pay someone a couple thousand dollars to negotiate on your behalf and in the end not get the house?

I doubt that most prospective purchasers would pay up front for a professional negotiator. I think there is a market for this professional, but as the real estate act is written, people that do this to make a living, have to be licensed real estate agents. In Ontario I believe lawyers can act as your negotiator - but I don't know if BC allows this.

Yes, you can have a friend or your father negotiate on your behalf. But once they start doing this as a career - they have to be licensed.

JustWatching said...

Just Jack said "A buyer's agent is trained to work for the buyer."

Surely you jest. Agents take a short course, pass an exam and are licensed. I think Marko said he did all the course material in about 2 weeks. Most of these agents couldn't negotiate a good deal with a street vendor in Mexico.

Marko - care to comment?

Just Jack said...

The game is to keep the negotiations going. If you reach an impasse on price, you can still counter with chattels and terms.

Once negotiations break off, so is any chance of a deal. You then have to wait for the vendor's (possessive) agent to, maybe, call you back in a couple of weeks.

So how serious should your bid be? If you have narrowed done your choice of a home to one, then you have serious problems.

There will be a lot of homes that meet your needs coming up for sale in the future and it would be a good idea to keep your choices open to 2 or 3 homes when negotiating. And make that known to the agent. Tell the agent, if the vendors (plural) don't accept your fair offer, you're going to bid on this other home. This assumes that you don't have a buyer's agreement with the agent.

Faced with losing a commission, the agent will work harder for you.

Just Jack said...
This comment has been removed by the author.
Just Jack said...

You may not like real estate agents, but that doesn't mean that they're not trained to work for a buyer.

Or do you know some other professional that has qualifications, experience and formal training to work as a property negotiator?

yogurt said...

@a simple man, I didn't mean to suggest that Trevor_tni was secretly Introvert. I would be surprised if that were true, because Introvert seems happy to defend his own ideas.

The name does suggest that somebody is playing games, but I'm happy to just focus on the real estate chat and advice.

a simple man said...

true, yogurt. Just history here of some posters using multiple aliases.

Intorvert can clear it up. Or Trevor_tni.

dasmo said...

@JustWatching
I really didn't consider my offers lowballing and still don't.
First house was 2003 just before the run. It was for a house that no one wanted because Vicwest at the time was a terrible neighbourhood. (I liked to call it the nicest shitty neighbourhood in the world.) it was on the market for over thirty days, the pic on the MLS looked horrible and the asking price was too much. I passed over it initially a few times myself until seeing it in person. It needed a paint job... But that old growth, clear cedar siding is as good as new, it just looked shabby.

The other place was bought last winter in Fairfield. Again, a place that sat on the market for a while because it was on a small lot and had a few other "things" about it that wouldn't appeal to somone looking in that area. We ended up buying it for lot value and then we bought a section of the neighbours yard (that was huge) so now we have a large lot with a big back yard!

Opportunity lies in things others don't want. You just have got to dig for hidden gold.

Terms are also key. In both cases my only subject to's were financing and inspection. This makes it more appealing for the seller since the deal is less likely to fall through than if it's tied to your house sale.
This is why I am pulling equity out of house one to make house two happen and then rent house one out instead. This will pay for the equity extracted. I might sell house one in ten years when Vicwest is finished being built out and the market is strong again, until then renting it will be better.

Anyway enough about me, back to the doom and gloom.

a simple man said...

doom and gloom?

No - that is where we have been as a housing market for the past 8 years. We are now talking about a correction to prices that makes sense in relation to incomes. One that people don't have to sacrifice their quality of life to afford to buy a home.

Sounds great to me. Sunny days ahead.

JustWatching said...

Just Jack,

I don't want the agent to act as my negotiator. In fact I prefer to act in my own self interest and deal directly with the listing agent. But if I use an agent to represent me this is what I expect:

- Arrange for viewings, get the keys and get me inside the property for viewing.
- Let me know if they see any defects during the viewing
- Provide the MLS listing history including previous sales and any re-listing activity
- Provide the BC assesment for the property over several years
- Provide comparables for the area (although I can get these for $11 from Landcor)
- Pass on any details about the owner that the listing agent has divulged (leaving town, divorce etc.)
- Give feedback on the area (schools, crime stats, bylaw changes etc.)

If I decide to put in an offer I expect the following:

- Fill in the purchase and sale agreement with the price, terms and conditions that I want
- Present the offer directly to the seller
- Give any feedback that they received from the seller or their agent.
- Keep me updated on the status of my offer

I fully expect that they will probably pass on anything I tell them to the listing agent. So I don't tell my agent anything I don't want the other side to know (i.e. my bottom line, financial status, emotions about the property).

What I don't want from an agent representing me in a purchase.
- Comments that the house is just perfect for me
- Cost of renovations unless they are/were in the construction trade
- Negotiating on my behalf. I can do this myself and they are just muddying the waters.
- Telling me I will lose the deal unless I do this or that.

If the deal is accepted I expect the following:
- land title documents including restrictive covenants and building schemes (if any) within a day
- for strata purchases I want all the required forms and strata minutes for both of us to review
- check for building permits if there were major renovations
- arranging for a time that my building inspector (no recommendation wanted) can go over the property
- forwarding of all documents to lawyers in a timely fashion
- bringing me the keys on closing day.

From the above you can see that most of this can be done directly with the listing agent and my lawyer. If I deal directly with the listing agent I expect to get a better deal because they should be reducing the commission to the seller. In most cases if the listing agent wants the deal they will do what is necessary to make it happen.

BTW - I am not recommending this approach to first-time buyers. If you don't know what you are doing use an agent. But never sign one of these buyers agency agreements.

patriotz said...

There's nothing "real", "actual" or "legitimate" about a realtor's price appraisal. It's just that, an appraisal.

Well no it's an estimate, not an appraisal. An appraisal is done by an appraiser and few realtors are going to pay out of their own pocket for one.

DavidL said...

@ a simple man
true, yogurt. Just history here of some posters using multiple aliases.

A little over a year ago, HouseinVictoria changed her profile name to Carmy so that "both" of them could attack Just Jack. When confronted, Carmy then deleted her posts and hid her profile.

Just Jack said...

A real estate agent gives a market evaluation. While most are very competent in estimating a value for a property they do not carry the errors and omissions insurance to do an "Appraisal"

To become an appraiser, you have to have a University degree, then complete the appraisal course from the Sauder Institute at UBC, then article under a designated appraiser who acts as your mentor, while completing case studies on a variety of properties which are submitted to the governing appraisal body for examination, then pass an oral examination, then re-certify every five years with 60 course credits.

Why so much?

Because the Appraisal Reports forms the basis for millions of dollars to be lent, settle estates, taxation, litigation, etc.

The public deserves no less in qualifications from an appraiser.

Although being qualified just means you have met the minimum requirements, it doesn't mean your anymore competent or accurate than the agent doing a market evaluation. Which is the same in all professions from Accountants to Zoologists.

I think everyone on this blog can give a reasonable estimate of what a Victoria home is worth. But then no one is going to sue you for damages if your wrong.

Introvert said...

true, yogurt. Just history here of some posters using multiple aliases.
Intorvert can clear it up. Or Trevor_tni.


Not this again! Here we go...

I'm not Trevor_tni in disguise. I wish that Blogger allowed administrators access to IP information, so that we could set the record straight.

I've only ever posted under the handle Introvert. I don't have the time nor inclination to create phony personas in order to push my views. I'm quite happy being called a "troll" under only one name, thank you very much.

I do want to say to Trevor_tni: thanks for coming to my defense from time to time. It's very good of you.

On the subject of grammar, I realize this is a blog and not a term paper, but it pains me to repeatedly encounter basic writing errors that should have been licked in grade seven.

CS said...

"I think everyone on this blog can give a reasonable estimate of what a Victoria home is worth"

Whether an appraisal or an estimate, it ain't the market value, unless both a buyer and a seller agree. And sometimes what they'll agree to is surprising.

And the probability of the market value being at a particular point continually varies, with economic trends, the weather and the emotional state of market participants.

In my own experience, the best time to make a low ball offer on a new automobile is on a wet Monday morning in late November.

The stock market is the same. Prices are more likely to be up on a fine day, and down on a wet day.

The same is surely true of RE, which is why more properties are marketed in the spring than in the winter.

So if you really, really want a particular property and money is no object, your best bet is to offer the asking price. But if you want a deal, it may be worth bidding way below what a RE agent or appraiser suggests. And if you're worried about giving offense with a low-ball offer, you can always feign indignation at the vendor's rapacity in asking so much.

patriotz said...

The same is surely true of RE, which is why more properties are marketed in the spring than in the winter.

The reason is that most people with kids would like to move during the school break. Price variations really don't factor into it, since most of them are selling one property and buying another.

dasmo said...

if you're worried about giving offense with a low-ball offer pay for an appraisal yourself. $100 will show you what a pro thinks it's worth. In the last property I talked about it turned out the bank appraisal was exactly what I paid (whew). They look at the property from a technical perspective. If I do it again I will get an appraisal before making an offer and bring it out if need be.

properties are marketed in spring because they have a better chance of selling hands down! the garden is in full swing, everything is green, spirits are up. it's a much better "Stage" in the spring than winter...

Just Jack said...

I don't know if you can get an appraisal for a hundred bucks, but if you can that's great. But you're probably throwing a hundred bucks away for nothing and only getting a couple of pages of pretty pictures.

The reason why the bank mortgage appraisal was exactly what you paid for the property, is because you only paid a hundred bucks for someone to fill out a blank form in under 15 minutes, and I don't think that is professional at all.

Like all professions there are good and bad people. But a well researched and documented appraisal for a home would lay between $300 to $500.

I guess you've changed your mind about getting an appraisal performed before making an offer now. At those prices, most people will just take a stab at it themselves. But the good thing about the appraisal, is if you rely on the report to make an offer and then take a loss because the appraisal was erroneous - you can sue the appraiser for your loss.

DavidL said...

When I bought my house 10 years ago, the home inspection cost $350 ... so it makes sense to me that an appraisal should cost the same.

When you are thinking of buying a home, investing ~ 0.1% of the purchase price to get a proper assessment seems like a good idea to me.

CS said...

"Price variations really don't factor into it"

Seasonal price variations may not factor into people's thinking, but it factors into the prices they pay, according to this technical research paper: from plus 1.5% to minus 6.3%, according to month of purchase.

Leo S said...

I do want to say to Trevor_tni: thanks for coming to my defense from time to time. It's very good of you.

I don't think he's doing you any favours. I have yet to hear an actual logical argument out of the guy.

If someone joined under the name Seo_l and started cheerleading my comments I would be creeped the hell out.

Leo S said...

Edit: backwards spelling is clearly not my strong suit. :)

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

Trevor - stick around. No-one is running you off.

Lifestyle reasons figure prominently in most of the decisions of posters here.

Name: LP Misa

Just Jack said...

I, Just Jack, advocate buying now if your personal circumstances warrant it.

dasmo said...

My house inspection cost $400. I didn't pay for the appraisal so maybe it was more but I doubt it was that much. The appraiser didn't climb up on the roof, nose around the attic, and crawl on his hands and knees in the crawl space and write up a report with pictures etc. The bank version is probably cheaper than one you would get as an individual I could imagine. giving one to an individual exposes them to more risk so I could see them charging more to an individual vs the bank.

introvert trevor_tni is pretty crazy!!! Well spotted Leo! They don't seem like the same person to me but then again maybe introvert doesn't actually know he is also trevor_tni...

Leo S said...

Looks like you guys want to run me off the blog.

Yes it's a veritable lynch mob *rolls eyes*

This board doesn't like anyone that advocates buying now for lifestyle reasons.

Clearly you haven't been paying attention. Moving on now...



In other news, “Not sustainable, my friends,” writes Rosenberg.

Leo S said...

Well spotted Leo!

It was yogurt that noticed it.

Or maybe yogurt is my alter ego? Hmm.. I do like yogurt... It's all very confusing :)

patriotz said...

Seasonal price variations may not factor into people's thinking, but it factors into the prices they pay

Holy tautology Batman. You don't have to read a research paper to see that.

CS said...

"You don't have to read a research paper to see that."

Right. Sure everyone knows there's a 7% arbitrage opportunity between January and May.

Actually, I didn't know that. Seemed quite interesting, although, as with the weather effect on stock prices, the commissions preclude the possibility of much if any gain.

Leo S said...

@CS. Sounds interesting, but your link doesn't work.

Introvert said...

If someone joined under the name Seo_l and started cheerleading my comments I would be creeped the hell out.

Naw, we're all anonymous here (except Marko), so the creep factor isn't there for me. I'll graciously accept any cheerleading that comes my way.

patriotz said...

Actually, I didn't know that.

You didn't know that price variations for RE factor into the price you pay for RE?

Do price variations for gas factor into the price you pay for gas? Do price variations for food factor into the price you pay for food?

I was making a joke because you made a tautology.

Just Jack said...

Remember the good old days of real estate in Victoria. Where the last sale on a street, formed the base price with a little more added for the next home to come up for sale.

A home on Roseberry in Fernwood sold this week for $550,000.

The last sale on the street was their neighbors at $675,000 in 2011. Both homes are similar style, similar floor area, similar lots and their assessed values differed by some $15,000.

But the Fernwood/Oaklands neighborhood has been a pimple on a bubble in prices for the last couple of years now. Could this be a sign that the zit is being squeezed.

JustWatching said...

Today's news headline...

New house prices rise 0.3% in May with Victoria recording the largest decrease at 3.2 per cent.

a simple man said...

3.2% drop in a month. Wow. Some would have me believe that is close to the profit margin for contractors.

Not sustainable, but worth taking note.

JustWatching said...

Simple man,

Carla will C&P the article for tomorrows TC. I expect they will get a comment from VREB - "market is stable and balanced".

a simple man said...

Soon VREB will lose its credibility - it needs to tread carefully ion this market as once they have lost it, it will be difficult to get it back.

CS said...

@Leo_S

"your link doesn't work."

Sorry, and now I cannot find it. But I found this, which states:

"Seasonality in house prices poses a challenge to standard models for durable goods. To account for seasonality, this paper develops a matching model that emphasizes the role of match-speci…c quality between the buyer and the house and the presence of thick-market effects in housing markets. It shows that a small, deterministic driver of seasonality can be ampli…ed and revealed as deterministic seasonality in transactions and prices, quantitatively mimicking the seasonal fluctuations in transactions and prices observed in the United Kingdom and the United States.

Patriotz, will of course, already have known that.

CS said...

But here's a graph that shows the season effect nicely.

CS said...

Oh, yeah, here's that original link on house price seasonality.

It shows, among other things that seasonality is greater in tourist destinations, e.g., Honolulu with a 14% annual range, versus Greeley, Colorado, where prices are dead flat year-round.

JustWatching said...

simple man said Soon VREB will lose its credibility

Are you saying that you consider them credible now? You agree with their press releases and interviews?

Just asking...

a simple man said...

I was really trying to be diplomatic. Hoping that they pull the nose up now and start reporting the stats unbiased.

DavidL said...

I am guessing a simple man is referring to VREB's credibility by media outlets, etc. who currently parrot VREB releases without analysis. A few slip-ups, and the media might treat VREB with more suspicion ...

Leo S said...

Actually VREB is excellent as far as their stats go. Of course their press releases point them in a rosy light. That's their job.

Compare to other boards though. Their stats are released very timely, they have an excellent archive, and they don't try to hide behind some bullshit home price index. Overall I think VREB is the best real estate board in the country that I've seen. They have also been very friendly and responsive when I have asked for additional data.
Their press releases make for a nice monthly humourous interlude.

not yet said...

how will we know the changes to sales above 1M in the coming weeks and months? I expect there will be a big change with the feds not backing them anymore.
will this force expensive houses to lower their prices?
has there already been a slowdown in this price range?

DavidL said...

Credit unions escape new mortage rules
– OSFI has lowered the maximum size of popular home equity lines of credit (HELOCs) to 65% loan to value. But for Credit unions in provinces such as British Columbia and Ontario, the previous limit of 80% loan to value is still in force
– OSFI has been on a mission to compel lenders to be more careful about lending to the self-employed and under the new rules, so-called stated income mortgages will no longer be allowed. But as far as credit unions are concerned, the bar for income proof remains low.

Just Jack said...

These JUMBO mortgages pose a big risk to CMHC. A million dollar cap is very liberal. I think the Yanks cap their insured mortgages at $650,000.

Over time, I think CMHC will bring that million dollar cap down. In Victoria, about 11% of the listings are for properties over a million.

Oak Bay has 149 listings and 60 of the are for more than a million.

It isn't that people buying a million dollar plus home need CMHC insurance, it's the lender that wants insurance. If the lender can not get insurance, then they may want a much larger down payment than 20 percent.

And most of what makes up a home's value today is not brick and mortar but the ability to obtain financing.

Leo S said...

The even bigger story will be in Vancouver. This will finally show how much is H*M and how much is just over-leveraged locals. Most of their SFH market is over a million, so if this doesn't cut the market's head off, I'm not sure what will.

ArtVandelay said...

Free House Cleaning with Every Mortgage and if you need help with the down payment call these guys!

a simple man said...

That sign is almost criminal.

If I was a bank official and saw that sign, I would pull over and mark down their names - they are too high risk and they will happily pass this risk off to me so best I avoid doing business with them at all.

Just Jack said...

Would that be like a bank manager who had their office in a Safeway?

"Come down for the half price sales and get yourself a mortgage at the same time"

Loans processed while your in the check out line or the BBQ chicken is on us.

Just Jack said...

And the prices keep rolling back in the outlying areas.

The Sooke market is dominated by listing of newer homes. That means the older 1970's boxes have become the cousin that no one talks about.

And these basement entry homes are withering on the market. Like the recent sale on Sooke Road that has just been updated with new floors and sold for $302,000. But was previously purchased for $298,000 in April, 2005.

That's over 7 years ago.

That's equivalent to a 30% drop in home prices in today's urban core homes. That these sales now exist, raises the probability that it can also happen to the core market.

And really, a 30 percent drop in Victoria home prices at today's interest rates would just bring our housing costs into the reasonable range being slight higher than the national average. And for the 15th largest city in Canada that seems reasonable to me.

EagerBuyer(Not) said...

Some of you are sitting on the fence but still looking to buy.

Well this agent says this is your last chance to buy or it will be rented!

ROTFL

Just Jack said...

That'll put the fear into you.

DavidL said...

I guess when it is rented, that means it won't be put back on the market for at least another 10 or 15 years!

SilverSurfer said...

JJ said: "Oak Bay has 149 listings and 60 of the are for more than a million."

Watch the ones in 1.1 and 1.2 range to promote "New Price" at 999K to escape the 1Million rule. Instant 10-20% mark down.

Doug N said...

Just did a street view. That house, 4008 Bow Rd (last chance before rental) is right next to a rezoning request (4012) to split a single lot into 3.

Maybe it will be a rental for next 15 years!

Street View Link

EagerBuyer(Not) said...

Doug N,

The Google Streetview is 3 years old. Since then the council has approved the subdivision and development is proceeding.

not yet said...

does anyone have data on recent levels of HELOCS?
I wonder if they are begining to fall.

SilverSurfer said...

Canada launches lending-rate review after Libor scandal

That should really read "CRIME", not scandal, given it affected 100 of TTTTTRILLIONS of derivatives globally.

At any rate: Get ready for the queue of massive lawsuits and likely a few nation wide class-action ones, but I'm not yet sure what/if/how or when this may impact Canadian mortgages. Any ideas?

a simple man said...

love how the slant in the news has gone from "No bubble - there is no bubble" to "We are finally experiencing the soft landing we wanted".

Where is the truth?

a simple man said...

http://www.cbc.ca/news/business/story/2012/07/16/crea-housing-sales-june.html

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

Monday, July 16, 2012 8:00am

MTD July
2012 2011
Net Unconditional Sales: 258 523
New Listings: 606 1,374
Active Listings: 4,863 5,094

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

Marko said...

SFH Average MTD = 570k
SFH Median MTD = 527k

Condo Average MTD = 342k

On the street things are slow but steady. Went to book three showings last night, three accepted offers. Also had a few offers on my listings come in over the weekend.

If we get another 138 sales per week next two weeks plus another 40 or so July 30th and 31st should exceed last years totals easily.

Roger said...

Marko said "If we get another 138 sales per week next two weeks plus another 40 or so July 30th and 31st should exceed last years totals easily."

I suspect this won't happen for two reasons.

- The pending sales reported last week were for offers made before the July 9th mortgage rule change deadline. This week will have more of the same. It typically takes 1-2 weeks from the time a conditional offer is made until the subjects are removed (financing, house inspection) and the pending sale is reported to VREB. Once the pre-deadline pipeline of sales is emptied things will slow down.

- Sales wil taper off quickly as we get further into the summer. This is the normal seasonal pattern and there is no "driver" this year like a reduction in interest rates to propel sales.

Folks this will be a long, slow movie so grab some popcorn and watch the show.

Just Jack said...

The re-sale market for condominiums in Langford seems to be pretty bad. With 109 listings and only 9 sales in the last 30 days and an average 88 day exposure on the market. That's 12 months of inventory of used condos for sale and lots of pressure on agents to get an offer before the listing expires.


Compare that to Victoria City proper with 388 used condos listed and 57 sales over the last 30 days or 6.8 months of inventory with an average 66 day market exposure.

How you perceive the market is defendant on where you're buying and selling.

There are still euphoric buyers for real estate in Victoria City, while Langford seems to mostly razor blades and Leonard Cohen followers.

Just Jack said...

Faltering demand would likely only result in prices sliding at a rate of half or 1 percent a month. In my opinion, you won't see a substantial drop without a substantial increase in listings, maybe a double or triple increase in listings from what they are now.

There just isn't the necessary panic in sellers to see a crash in prices. That won't come until later, when people lose the faint hope that prices will rebound.

And I don't see the possibility of a dead cat bounce either because so much of our demand was brought forward.

This market may just be a death by a thousand cuts.

Of course if Vancouver hits an iceberg, then the little tugboat called Victoria will be dragged down with it.

Alexandrahere said...

Last week there were 29 SFH sales on my pcs in Vic,Esq,OB,SE&SW with the criteria being min 2beds and 2baths priced between $375K & $775K. There have only been two weeks since mid July 2010 that sales have been higher than that within the identical criteria. Those weeks were 26 July - 01 Aug 2010 with 31 sales and 28 Feb - 6 March 2011 with 35 sales.

Last week the avg sales price was $577K and the med. sales price was $550K.

Roger said...

Alexandrahere,

Looks like a rush of pre-deadline buyers that wanted 30 year amortization mortgages and lower payments.

Marko reported that for July-to-date the SFH median is 520K and the average is 570K. The median is down 10K and the average 21K compared to June. This indicates more low end sales which usually means more first time buyers.

Looking forward to your last week of July stats when the pending sales are for post July 9 deals.

patriotz said...

Looks like a rush of pre-deadline buyers that wanted 30 year amortization mortgages and lower payments.

They'll get the 30 years all right, but not the lower payments. Lower than buying later, I mean.