Monday, August 13, 2012

Market Update and a Lazyweb Request

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.

August 2012 month to date  (previous weeks in brackets)
Net Unconditional Sales: 153 (75)
New Listings: 397 (207)
Active Listings:  4834 (4836)
Sales to new listings ratio: 39% (36%)

August 2011
Net Unconditional Sales: 542
New Listings: 1200
Active Listings: 4944
Sales to new listings ratio: 45%
Sales to active listings ratio: 10.9% or 9.1 MOI

Looks like August is off to a very slow sales start.  So far we're at just under 13 sales a day.  At this rate we'll be lucky to hit 400 sales in the month.  Even factoring out the stat holiday, it seems we are on a much slower pace than last year.  An anomaly or are the new rules now being really felt?


I also have a lazyweb request for everyone that I'm hoping could result in a nice resource for Victoria house hunters.  We're looking at various places, and I'd like to know more about what to ask about the condition of the house before committing to an offer.  Of course we would always insist on a home inspection, but is there a solid checklist of things that could be assessed by the average buyer?  For example, whether walls are 2x4 or 2x6 construction, whether there is aluminum wiring in 70s boxes, whether there is vermiculite insulation, etc.   

Could we come up with a list of general non-obvious construction and maintenance related items that could be inspected or asked about by a buyer?  Perhaps a general list that applies to all houses, and then some that are of special note for 50s houses versus 60s, versus 70s, etc.  I've seen lots of good advice here over the years, it would be great if it was all collected into one place.  I'm happy to do the collecting but have little knowledge of what to put in such a document.  If there are good resources out there that would be helpful, but I think it would be useful to have a Victoria-specific resource as well.  Anyone else interested and want to throw out some suggestions?



177 comments:

Chuan Si said...

Im willing to pit them up in spreadsheet

koozdra said...

If you are considering purchasing property, I would strongly recommend against it. You will be purchasing an inflated asset at the peak of a speculative market. Even if you are thinking of low balling, you will be catching someone's falling knife. The real estate market here will follow Vancouver and return to mid 2000 levels in the next few years.

dasmo said...

Now that's not much help is it koozdra...

I would check with land titles and see what's on title first. This will give you the legal description, show you who owns the property, if there are easements, mortgages etc etc. The city planning department can provide construction documentation if it exists. also useful...
I would find out why the seller is selling.
I would go to the house at different times to see what goes on on their street.
Ask to see the disclosure statement.
Look to see if the foundation looks solid and without repair.
Is the house looking straight and solid.
Is the exterior in good shape?
is there any additions?
Smell everything especially the basement and or crawl space. A musty smell is bad news... A look there can also give you an idea of how the place is put together.
when was the roof done and what kind is it (how much longer until you need a new one)?
A big one is evaluating how much you are going to want or need to change and do you want to do that. That will be dependent on your taste and each individual place.

A lot of the details should get covered in a house inspection so really it's about getting a feel for if you think it's worth going there.

I do think vermiculite is a key thing to look for not because it's truly a health risk but because it might cost more later to deal with it. WCB is coming down hard so even doing any renos with it might be problematic...

Anyway this is by no means the list but it's a start to the conversation.

a simple man said...

Age and condition of roof, age and condition of weeping tiles/storm drains, insulation type (vermiculite?), wiring (knob and tube, aluminium, copper), electrical panel size, ever any leaks in foundation, walls insulated?, asbestos floor tiles or ceiling tiles or plaster?, furnace age, type and service history, hot water heater type and age, who did renos and with permits?, window type and age, rats or ant history?, plumbing pipe type, size of main service to road, etc.

Watching and waiting said...

How old are the perimeter drains and what condition are they in; do they drain?

Lift up the insulation in the attic and check for silverfish while you are at it. They love to feast on 1950's paper coated insulation.

Leo S said...

Good suggestions, thanks.

Vermiculite is most common in 40s/50s places?
And aluminum wiring in 70s?

A lot of the details should get covered in a house inspection so really it's about getting a feel for if you think it's worth going there.

Yeah it's more about being in a stronger position to negotiate or decide whether to bother making an offer at all before having to pay for the home inspector. Also have heard some stories about big problems that home inspectors missed.

Mindset said...

The real estate market here will follow Vancouver and return to mid 2000 levels in the next few years

I think 2000 levels are a bit extreme (a 50-60% correction). I do think a correction somewhere in the range of 20-35% is likely. I'd say that it's probably off 10% from the peak already, so another 15% over the next year or two wouldn't surprise me.

On the topic of things to look for old homes in Victoria:
- Buried Oil Tanks (especially leaky ones that have not been rendered inert)
- Asbestos
- Aging Brick Chimneys

Leo S said...

- Buried Oil Tanks (especially leaky ones that have not been rendered inert)

Any chance of finding these if they aren't disclosed?

Just Jack said...

A lot of this would be covered under the property disclosure statement made by the owner.

I would ask when the home was built?
How long they have owned the house?
And what changes or upgrades they have made since they owned the home?

Then questions on the age of the roof, hot water tank and furnace.

Then its off to take a look at the home. Remove your shoes and as your walking around the home see if you can feel any uneven floors. This could alert you to a foundation problem - like a post and beam foundation, etc.

Depending on when the home was built, there are certain things that are now inadequate. Single glaze windows, aluminum wiring , 60 amp service, knob and tube wiring, urea formaldehyde insulation, etc.

Stand back and look at the home from the yard. Is the roof mossy, is it sagging in areas, is the electrical mast a wood post. Have there been any additions with or without permits. Can you clearly see a perimeter concrete foundation. Is there wood siding in contact with the earth?

Is there white chalk like marks on the concrete in the basement or a moldy smell that would indicate water problems.

If the basement is unfinished. Why is it unfinished? Has the home just been repainted to cover water or fire damage? Are there drain tiles? When was the oil tank last replaced. Asbestos? Are the loose rugs covering problems with the floors? Do the floors need to be refinished?

Then make up a list of what repairs are immediate and a list of potential repairs five years from now. Then you might be able to estimate some cost to repairs.

Immediate repairs should be deducted from what you believe the home would be worth when the repairs are done. These repair costs should have a 50% cost over run contingency.

Repairs that are 5 or more years out should be budgeted for and brought to the vendor's attention and used as in your negotiations.

Mindset said...

(Leo about buried oil tanks), Any chance of finding these if they aren't disclosed?

I believe that the municipalities have lists based on historical oil deliveries. Sometimes, if you look closely, you may be able to see where the line used to come into a home through the foundation (patching or a capped pipe).

There are also companies that can scan for Oil tanks like GeoScan.

Sinkholes in yards are also a common giveaway, as the tanks tend to collapse over time.

If you are tearing down an old home to build, it is well worth the expense of having a tank sweep, and if one is located, an environmental survey to see if it has leaked oil into the soil. It can be a very expensive cleanup. I have heard some extreme stories of the costs getting into the 30-50K range due to contaminated soil.

koozdra said...

@dasmo
"Now that's not much help is it koozdra..."

It's the best advice you will receive.

Don't end up like these guys:
http://www.vancouversun.com/business/First+time+homebuyers+wish+they+second+chance+report/7067627/story.html#ixzz23HRb1zpd

I'm confused, I thought this was a bear blog. All the posts here are talking about declining prices. Now you are talking about what to ask when you buy? Aren't you paying attention to what is happening to home values around here?

What possible reason could you have to buy in a declining market?

kabloona said...

Interesting piece in the Times-Colonist Business section today:



Comfortable retirement? It's time to sell your house


By Kevin Greenard, The Greenard IndexAugust 14, 2012 8:42 AM


Many Canadians entering retirement find themselves with a significant portion of their net worth tied into their principal residence. Home ownership in many ways is the national symbol of success. Most clearly remember the first home they purchased, and it's hard forget the years of forced savings to pay down the mortgage.

So it might seem a bit ridiculous now that the house is fully paid off, and you finally have time to enjoy it, for someone to suggest that you sell it.

But for some, this is the only way they can ensure a comfortable retirement. In first getting to know our clients we ask for a net worth statement that lists all assets and liabilities. The challenge we are seeing is that homes represent 50 to 80 per cent or more of their net worth.


Read more: http://www.timescolonist.com/business/Comfortable+retirement+time+sell+your+house/7086781/story.html#ixzz23XkoRllQ

dasmo said...

What possible reason could you have to buy in a declining market?

Because it's better than buying in an inclining market...
You have choice, time, negotiating power, low rates. Just don't over pay and you will be fine.

We won't be going back to mid 2000 levels here. I bought back in 2003 because I realized then that we were globally highly undervalued at that time. It was actually more expensive to rent than buy at 6.5% and rates were falling so I bought fast. My feeling (in the core areas) we are only slightly overvalued right now. A drop of 10% is already here, just some sellers deny it. A drop of 30%-40% in asking prices would trigger a buying frenzy because you could have positive cash flow buying and renting. Hell, if it goes there, I'll borrow from the mob to buy all I can and in ten years I'll be rich renting to you!

koozdra said...

@dasmo
If you bought in 2003 and you see your purchase as an investment than it is time to sell and reap the rewards of price appreciation.

Your decision to buy in 2003 was a good one. However, this is not 2003. We are experiencing a declining market because of extreme over valuations.

"Just don't over pay and you will be fine."
Again I reiterate, even if you are low balling you will over pay. Prices have increased significantly since 2003 based on the idea that real estate is a sound investment and the availability of easily accessible mortgage credit backed by the CMHC. As the government starts to cut back on the rampant deregulation that has caused this housing market to spiral out of control, we will revert to mid 2000 prices.

dasmo said...

"Prices have increased significantly since 2003 based on the idea that real estate is a sound investment and the availability of easily accessible mortgage credit backed by the CMHC. As the government starts to cut back on the rampant deregulation that has caused this housing market to spiral out of control, we will revert to mid 2000 prices."
A gross over simplification. Like I said, mid 2000 we were undervalued. so there is no driving force for property to become undervalued again. Reaching a value equilibrium yes, but suddenly undervalued, I doubt it. That happened due to a long process that started in the 80's. So inflation plaid a role. Sooo if you have 20 years to wait and roll the dice, go for it. Then again you might just be to old and tired to do much at all by then...

Just Jack said...

Overvalued? Undervalued?

Definitely long term trends, but since these are market forces of supply and demand, there can be no certainty of how far prices could drop.

In a major correction, most investors are going to be illiquid. There should be lots of choice and very few prospective home buyers.

Why do we class real estate as vastly different from any other asset?

Because it appreciates.

But it took the largest group of buyers in the entire history of the Earth to cause this. And they only managed to keep house appreciation slightly ahead of inflation.

And now they are about to become net sellers.

At the same time the cost of ownership has been skyrocketing. fixed and variable costs like taxes, heat, garbage eat deep into the budget of home ownership. This is why I think the "premium" of home ownership is going to reverse to the "burden" of home ownership. That the monthly mortgage payment will be less than the monthly rent for the same home as there is a steady loss of potential buyers.

The bloom is going to come off the Rose of real estate.

Or maybe not.

koozdra said...

I think we are having a problem of terminology. When I say mid 2000, I am referring to the 2000 decade. I would say that this would be 2003 to 2007.

"there is no driving force for property to become undervalued again"
I would argue that there are driving forces currently that would drive house prices down significantly and quickly. The government has shortened amortization periods and has made it more difficult for first time home buyers to enter the market (new regulations put on the CMHC by OSFI). Without first time home buyers, sellers will not be able to off load their properties. Supply will grow as demand wanes forcing prices down.

Lets not forget about the global economic situation.

SilverSurfer said...

"Lets not forget about the global economic situation."

Oh, how people underestimate this, including many on this blog that work within the real estate industry.

The reason we constantly hear the words "surprise" in conjunction with major economics reports in the daily news, whether it be reports on unemployment, real estate sales / prices, tax revenues, GDP, bond sales, etc is often because of tangent external factors that were never part of the internal model being used for said projection. Even after 2008, most economic statistic forcasting calculations remain intra-sector myopically focused.

It seems many so called experts still don't get the interconnectedness of the economy as a whole.

As such, don't be surprised if the use of the word "surprise" in association with headlines of failed sector specific projections will continue to re-appear in the news.

dasmo said...

Kevin Greenard was my "financial adviser" for a while. His picks only ever lost me money...

dasmo said...

...He tried to get me to sell apple twice...Glad I didn't listen to him...

Just Jack said...

Some of us are calling this current market over valued. But over valued in relation to what?

To equities
to bonds
to G.I. Joe action figures

No, most are saying real estate is over valued in relation to what real estate was in the past or what it might be in the future.

In that case are you better looking now than you were 10 years ago? Will you be better looking 10 years from now?

The comparison should be with something that is current in time. So, you should be comparing your self to Hugh Jakman in a Speedo.

See how much easier it gets!

So, is real estate over valued in relation to the stock market. Or is the stock market under valued in relation to real estate market?

Obviously, real estate is not as simple as comparing yourself, or worse your spouse comparing you to, Hugh Jakman in the shower. Real estate is more ambiguous like comparing yourself to Charlie Sheen with a Brazilian wax.

Not so easy now.

koozdra said...

The housing market is not overvalued compared to other markets. It is overvalued compared to affordability.

What leads me to conclude that the current housing market is over valued is the rate at which price appreciation has occurred and the cause of said appreciation. The price appreciation has departed from market fundamentals and is unsustainable.

It is a basic fact that over the past ten years we have seen a doubling of housing prices. Real estate affordability is governed by market fundamentals. These fundamentals are primarily unemployment, salaries, foreclosure rates and mortgage rates. The first three factors have remained stable while the fourth has been greatly affected by government intervention. Lengthening amortization periods and decreasing the interest rates to record lows has granted buyers access to more mortgage credit. In turn these buyers engaged in bidding wars to purchase property there by driving up prices on real estate to astronomical levels.

Now the government is changing these same market fundamentals to cool the housing market. Without the rampant availability of credit the housing market will inevitably decline to a state of equilibrium with the new fundamentals.

Also examine the rent to buy monthly affordability. Rent has been increasing steadily with inflation while real estate prices have been driven by debt fuelled speculation and expectations of future growth. This is a good indicator of over valuations of housing prices.

This is why I conclude it is not a good time to buy.

DavidL said...

Some other things to consider before buying:

How much is the annual heating bill?
A 50-year old house with minimal attic insulation and no insulation in the basement walls could cost you $3000+ per year in furnace heating oil. A well insulated house with a heat pump or baseboards could cost < $500/year. Just think - over 10 years that equates to a $25,000 difference.

Were permits obtained when renovations were done?
Few things could be more risky that poorly done "major" renovations. Saanich provides an excellent tool for looking up permits and inspections with their Property Profile Report. (I don't know of any other Victoria municipalities who offer a similar online tool.)

Just Jack said...

The vast majority of time, real estate is affordable. When it becomes unaffordable then market value will quickly adjust until the market is affordable again.

The fundamentals of real estate are social, economic, political and geographical. A price to rent ratio is not a fundamental its just a unit of comparison.

Very true that our government enabled and encouraged speculation to keep people spending and our economy out of a recession or more likely a depression. Because when the USA sneezes, Canada gets one hell of a cold. If the government hadn't screwed around with our castles, then we would have most likely experienced a deeper recession than the USA.

The government gambled that the USA would be pulling out of its recession before now, so that we could piggy back on them to avoid a recession.

It didn't happen, so now we are in deep poo. Because an increase in consumer spending is how most recessions end. And that ain't gonna happen with most people up to their man breasts in debt.

Another way is to pick a country to invade in the name of Canadian democracy and Gooseberry Pie. Where are the bikini wearing Swedish beach volleyball terrorists when you need them. Of course that may be the only war where none of our soldiers want to come home.

Instead of "Pork Chop hill" we would have Hot Tub Haven. Instead of My Lai, we would have Me Laid.

War is heck.

DavidL said...

@Just Jack
When it becomes unaffordable then market value will quickly adjust until the market is affordable again.

The market adjustment would have been much quicker if it were not for government tinkering. As far as I'm concerned, we left the "affordable" realm in 2005 ... which is why I predict an eventual return to 2005 prices (after adjusting for inflation).

Just Jack said...

Different definition of affordable.

For the last decade, the economic reports have been saying our prices are affordable because people are making their mortgage payments.

If you can make your mortgage payment - then your house is affordable. Price is of no importance.

That's how most people got hooked. From the listing agent, government, to mom and dad were telling the wannabee home owners how affordable homes were.

None of them talked about risk or that when Mom and Dad bought the could pay off the mortgage with extra payments and take advantage of falling interest rates and be mortgage free in under 15 years. No one talked about that - it ain't sexy as a see through shower door.

Now, with higher interest rate for the next 30 years and the inability to make extra payments because the wannabees were maxed out in debt, some of these new home owners may never, ever pay off their homes.

And that's the difference between 2012 and 2000.

Leo S said...

I'm confused, I thought this was a bear blog.

I think primarily it is. However most people here are also interested in buying at some point in their lives. So the more knowledge you have the better.

Aren't you paying attention to what is happening to home values around here?

Believe me, I'm paying attention. And so far the decline has been very gentle. If you look at the 12 month rolling average it is flattening out at the moment. The market is weak, but not declining at a strong rate. Maybe that will change going forward, and maybe it won't. It's never so cut and dried that you can be certain about what is going to happen.

What possible reason could you have to buy in a declining market?

For us, we need more space within the next 6 months. So the question has been forced. Do we move to renting a house, or do we buy? Based on my affordability projections I am as certain as I can be that we are in for another 5-15% drop from current levels. However that has to be weighed against many other factors including hassle to move, increased rent, etc.

Leo S said...

I bought back in 2003 because I realized then that we were globally highly undervalued at that time.

I would like to see your metric for that. Globally undervalued? Real estate is local. I don't see any basis for comparing to a market halfway around the world.

Looking at affordability, 2003 was very close to the historical average (40% of average family income to afford the average SFH). Doesn't look highly undervalued to me. In 2005 we were above the trend.

My feeling (in the core areas) we are only slightly overvalued right now.

I agree we are approaching the trend line again because of low rates.

there is no driving force for property to become undervalued again.

This is where we differ. I have not seen any correction that stopped at the trend line. Corrections always overshoot. So even if rates remain low, we still have a ways to fall as we overshoot the trend.

Leo S said...

The housing market is not overvalued compared to other markets. It is overvalued compared to affordability.

Not really at these rates. Have a look

Leo S said...

By the way, great suggestions. I'll start collecting them in a google doc.

koozdra said...

@Leo S
I disagree that being able to afford mortgage payments at historically low rates equates with affordability. I too am a renter and am watching the market. Good luck.

Leo S said...

I disagree that being able to afford mortgage payments at historically low rates equates with affordability.

That is actually the definition of affordability.

Look I totally agree that risk is elevated. If rates go up this whole house of cards will collapse so fast it will make people's heads spin. But I don't think rates are going anywhere for a long time to come. As the real estate market starts to slowly unwind across the country, economic growth will slow and any last remaining "green shoots" will be stamped out. Without the housing boost, it will take years before the economy will recover to a point where they can start raising rates.

Hence my projections based on current affordability, which would indicate another 10% correction in nominal prices over the next 2 years or so.

koozdra said...

I agree that a rise in interest rates would be catastrophic. I don't think this is an option at this time.

What concerns me are all the building starts and what a cooling in the housing market would mean to all of those jobs. Economic growth in this country has been reliant on the housing sector fuelled by debt.

People have been buying homes with future appreciation in mind. They all thought this was a "good investment". This is what drove prices up so quickly. A public sentiment change will mean more and more inventory as buyers lose confidence in the real estate market. This will likely result in a rapid downward spiral in prices.

Leo S said...

@koozdra Can't argue with that. Could certainly happen. Many solid markets in the US have deteriorated far past what historical affordability would have predicted.

There are a few things different this time around. Instead of loosening credit we have it tightening. Instead of a boomers driving house prices they are peaking and will move into their net selling years.

No_Problem said...

Even if there is this big RE crash that you all seem to hope for, most will be fine.
If your in a condo or on a small lot, yeah you'll probably eat crow.
Most people bought pre y2k with decent land component and even if they have to reduce 50-70k will still be laughing all the way to the bank...and that's if they just want to cash out.
If they want to buy back in it's relative.
You may think your low balling, but really they're thinking your the greater fool.

patriotz said...

I disagree that being able to afford mortgage payments at historically low rates equates with affordability.

"That is actually the definition of affordability."

No, affordability means the ability to afford all expenses over the lifetime of the property.

As we've been reading a lot about lately, people ignore expenses other then the mortgage, and possible increases in interest rates, until they can't.

A lot of people in the US bought properties with teaser mortgages which they thought they could afford. Today's low rates are just another kind of teaser.

Leo S said...

No, affordability means the ability to afford all expenses over the lifetime of the property.

That would make it impossible to ever calculate. Since we don't have 30 year mortgage terms here, we can never predict what lifetime affordability will be.

The accepted use is current affordability. So sure, you can add maintenance and taxes to the monthly costs, but in the end when looking at averages, the actual value is less important than having a basis for comparison to historical values.

Robert Reynolds - HMR Insurance said...

Canadian home prices drop 2% in July, sales steady: CREA

http://www.thestar.com/business/article/1242064--canadian-home-prices-drop-2-in-july-sales-steady-crea

happy renter said...

"As far as I'm concerned, we left the "affordable" realm in 2005 ... which is why I predict an eventual return to 2005 prices (after adjusting for inflation)."

What was the average SFH price in a neighbourhood like Fairfield in 2005?

DavidL said...

@happy renter
What was the average SFH price in a neighbourhood like Fairfield in 2005?

Housing prices in Victoria peaked during the late spring of 2010. House prices in 2005 were about 30% lower - so for my west Saanich home (peaked at $510K), this would be a return to ~$350K. However, when factoring in the CPI: $350K in 2005 is worth $400K in 2012. By 2014 I believe $400K is very likely, with $350K being quite possible. Time will tell ...

As for Fairfield, I gather that some houses have been bucking the trend and continued to increase in resale price after 2010. Still, I would suggest about 30% off the peak.

VP said...

I find it strange that people think land prices are safe. Land is merely a commodity, like the other components that make up a house: wood, asphalt(shingles), concrete, glass, copper (wiring, plumbing). As Maclean's showed us last year, commodities are cyclical.

http://www2.macleans.ca/wp-content/uploads/2011/03/commodity-chart11.jpg

Us westerners are doubly at risk, as much of our income comes from commodity industries. Often it's the land component that falls the most like the early eighties. I think a return to 2004 price, or further is a given. Under 400k for the average house, then languish for many years.

koozdra said...

Not going well for this developer. These were sitting for the longest time at $399,000. Now they aren't selling at $374,900.

BC Assessment: $473,000
http://www.realtor.ca/propertyDetails.aspx?propertyId=12145749&PidKey=-969808700

BC Assessment: $592,000 (assessed with an unfinished building)
http://www.realtor.ca/propertyDetails.aspx?propertyId=12259483&PidKey=1827067145

BC Assessment: $605,000 (assessed with an unfinished building)
http://www.realtor.ca/propertyDetails.aspx?propertyId=12145745&PidKey=-1367440512

Just Jack said...

The median price in Fairfield over the entire 2005 year was $530,000. And for the last 12 months it has been $651,000.

19% is an easy reversal of fortunes back to 2005 price levels even for Fairfield. Just, the recent change in the amortization period from 30 to 25 years would do half that reversal.

Just Jack said...

Land only has value when there is a use that it could be utilized for. Vacant residential land has a limited use - and that would be for constructing a home.

If new home construction grinds to a near halt, then vacant residential land would fall precipitously. Unlike land improved with a house, you will find it near impossible to rent a vacant lot. And there are substantial costs for holding vacant land.

Just Jack said...

Depending on the builder and a lot of other things too, between 15 to 20% of the construction of a home is profit to the builder. Not bricks, not glass, not concrete - just profit.

And in a recession, that profit margin goes almost to zero as builders are constructing just for wages alone. Working just to earn enough to put gluten free bread on the family table.

Even today, there is still a lot of "fat" in our home prices that can be trimmed.

When you see contractors' trucks up for sale on Used Victoria then you know things are getting tough. The truck they bought for $60,000 with their home equity line of credit and are now selling for $20,000 cash. The same line of credit that is most likely insured by CMHC.

Home Equity Lines of Credit - are evil.

koozdra said...

"5PM TODAY IS THE DEADLINE FOR YOUR OFFER!! SUBDIVISION POTENTIAL OF 2 or more LOTS!!OR REZONE & CREATE A DEVELOPMENT SITE."

Take advantage while you still can!!

http://www.realtor.ca/propertyDetails.aspx?propertyId=12238255&PidKey=-202595333

Just Jack said...

Sorry, that deadline conflicts with my Martini hour, so you'll have to give me your best price and I'll get back to you later this week if your price is acceptable.

koozdra said...

I forgot to mention:

http://www.realtor.ca/propertyDetails.aspx?propertyId=12238255&PidKey=-202595333

asking: $999,500
assessed: $750,000

VP said...

"If new home construction grinds to a near halt, then vacant residential land would fall precipitously."

Well said. With June's permits down 47%, maybe builders are finally clueing in that maybe they shouldn't be building so many vacant units.

http://www.timescolonist.com/business/Residential+building+permits+slip+June/7057153/story.html

MC said...

"is the electrical mast a wood post?" The place we rent has this, what does it mean?

MC said...

Another thing one might look at when considering a house is what the zoning and development plans are for the neighbourhood, especially in the new development areas. For example, when I was in Edmonton, they started building huge powerlines in a right-of-way - people that had bought their houses next to this once empty right-of-way were outraged... but they bought a house next to a righ-of-way and should have considered this BEFORE their purchase!

DavidL said...

@koozdra

Another thing about the property at 1245 Burnside Rd West - it has five large Garry Oaks, which cannot be cut down by someone hoping to subdivide. Also, between 2011 and 2012 (assessments) the land value remained stable at $577,000 while the house value dropped by $39,000 (18%) from $212,000 to $173,000.

All this information is available using Saanich's Property Profile Report.

koozdra said...

@DavidL
Thanks for the Saanich Profile Report resource.

Ouch, this listing is sounding worse and worse.

koozdra said...

Another favourite of mine:

"SHOWINGS ONLY ON WEEKENDS!!"

I guess this guy was so inundated with calls for showings that he had to stipulate the show times in the listing.

http://www.realtor.ca/propertyDetails.aspx?propertyId=12145768&PidKey=-1612421923

Just Jack said...

The potential problem with the electrical mast being a wood post is dry rot. A metal "hanger" is screwed into the wood post and the electrical wires are secured to the post by the hanger. The hanger taking all of the weight of the triplex electrical wire. Sometimes that hanger pulls out of the post or the wood post just rots away. Better to have the wood post replaced with metal mast and at the same time you should upgrade the electrical panel, because you probably would have an older panel of 100 or less amps.

Budget $4,000 for the electrician. Check out the electricians with the Better Business Bureau and get 3 quotes.


NOTE: if the hanger pulls out of the wood post, BC Hydro is responsible for installing a new hanger. However, you are responsible for the wood post.

omc said...

My understanding of saanich's tree law, is that you can cut down any tree that would be in the new buildings footprint. If the property is already zoned to allow the extra lots, there isn't much to stop it going forward. Those trees only limit landscaping and such.

DavidL said...

@omc

Under section 13 (page 10) of the Tree Preservation Bylaw, there are some permissible reasons for protected tree removal (after obtaining a permit) - but surprisingly, it does not include a new building.
http://www.saanich.ca/living/pdf/treepreserve7632.pdf

Maybe I'm missing something?

DavidL said...

From Ben Rabidoux ... complete with compelling graphs of sales/new listings ratios:

"Balanced Market" Nonsense
The precise definition of a "balanced market" is certainly up for debate, but I'll suggest it's not when the sales-to-new listings ratio is near or at decade lows in 4 of the largest Canadian cities, whose metro areas account for just under 40% of the total Canadian population.

patriotz said...

Land is merely a commodity, like the other components that make up a house: wood, asphalt(shingles), concrete, glass, copper (wiring, plumbing)

Actually it's quite different, because demand for it is entirely internal (engodenous) to the local housing market. Which means land prices can tank, hard, when there's a RE bust. Las Vegas RE prices are down around 90% for example. Developers simply will not pay more because that's the most they can pay and still sell houses for a profit.

CS said...

"The government gambled that the USA would be pulling out of its recession before now, so that we could piggy back on them to avoid a recession.

It didn't happen"

Yet.

But US vehicle assembly numbers are up, US industrial production is up, US home builder confidence is up, and US oil and gas production is up.

The transition from oil and coal to dirt cheap natural gas give US industry a new competitive edge that will tend to curb the trade deficit. Increased domestic oil production, which now accounts for more than 60% of net consumption for the fist time in more than 20 years, will also curb the trade deficit and strengthen the dollar.

In the next several years we may, therefore, see real growth in the US, while the CPI remains flat as lower energy costs stabilize food and transportation costs.

At the same time, continuation of low interest rates will tend to stimulate investment which could drive asset price inflation including a recovery in real estate values.

In which case, Canada may achieve the hoped-for real-estate soft landing.

Just Jack said...

The sales to new listing ratio being the only measure of a balanced market may be misleading.

In my opinion, the sales to new listings ratio, the months of inventory along with the month over month and year over year price changes should all be considered when accessing if a market or a sub market is in balance.

And when I say balanced, I mean that market conditions neither favor the buyer nor the seller with prices remaining stable.

If you have a price to listings ratio of 0.25 (for every one sale there are 4 more houses listed) along with 9 months of inventory with the current median down from last month and the year before, then I'd say the market is NOT in balance.

And it would take a lot of external stimulus to reduce listings and increase sales for both month over month and year over year prices to reverse their decline.

I also think that a balanced market could be different for new houses and condominiums because of the time it takes to build. It might also be different for high end properties where there are only a handful of prospective buyers that may take a year to be properly exposed to the market - like James Island.

Then there is government interference. Say the government announced that interest rates will definitely go up by 2 percent on September 1. Then I would expect prospective buyers to panic and act irrationally. But that's just the government $%^@ing with the market -AGAIN.

omc said...

@davidL

Section 3 b specifically states that the building envelope doesn't apply. There are a whole bunch of other ways you can cut those trees when developing also, which aren't specifically stated.

Guess the developer has decided to sell off rather than hold on a few years or the market to return.

Craig said...

The one (and very big) bright spot out of the US is surging energy production from fracking and new technology. This has the potential to make the US energy a net exporter within ten years.

But this surge in production has taken place on private lands, while the government has throttled production on public land, which leads us to the new arms race of this century: private sector productivity and wealth creation versus government spending, regulation and insolvency.

dasmo said...

@Leo my metric was observation through travel of other special places... It wasn't based on graphs and averages and stats. It was simple. Here is one of the best places to live in the world and you could buy a house with a yard for under 200 K. About 100/ month less than renting. That was my metric. I had freinds I was preaching to about buying who thought prices were too high then.. I saw it as a once in a lifetime window. I think I was right. We will see...

@patriotz. Las Vagas is a desert... Land has no intrinsic value there at all. Not the best metric...

Leo S said...

Here is one of the best places to live in the world and you could buy a house with a yard for under 200 K

So a house with a yard selling for 40% less than the average home at the time. Nice place I bet.

DavidL said...

@omc

Thanks for the clarification.

SilverSurfer said...

Yes, it's true, I suffer from this Gen X syndrome, so I really can't help it but to write something, cuz watching CS ride around the blogosphere on a unicorn, wearing rose tinted glasses whilst proclaiming it's all double rainbows and free koolaid from here on out, is more than I can handle.

CS said: "The transition from oil and coal to dirt cheap natural gas give US industry a new competitive edge that will tend to curb the trade deficit.

Two errors here:
1) The "100 year" natural gas number that Owebummer parroted in the mainstream media and which was repeated ad nauseum thereafter, is based on estimation principles that only Bre-X could topple. Get ready for a massive price shock in natural gas prices in a few years when it finally becomes mainstream news that estimations were exagerated by some 80%. Come the next macro downturn, I'm loading up on LNG like it was gold in 2001.

2) "Tending" to curb the trade deficit, is not the same as actually doing it. For a clue on what is really going on, google "output gap trap".

"Increased domestic oil production, which now accounts for more than 60% of net consumption for the fist time in more than 20 years, will also curb the trade deficit and strengthen the dollar. "

That's one way of putting it. The other way of putting it is that with the greatest recession since the great depression, a real unemployment rate of 15%, and major manufactoring outsourced to emerging markets over the past decade has actually reduced US oil consumption by 15%. As you can see here that extra 1 Million barrels of oil being produced since 2010, is but a blip in the radar managed through new contravertial fracking technologies and deep sea drilling a la BP oil spill.

And as for the trade deficit, it's worse than you think. The GDP numbers coming out of the USA are purely derived from government induced spending of declining tax revenues coupled with debt monitization from Fed printing and ever increasing UST debt sales to foreign nations.

"In the next several years we may, therefore, see real growth in the US..."

Oh yeah, and which American industry/sector(s) will we see real growth from ? Even 10 Facebooks couldn't create the sustained 4% (real) GDP required for several years in a row to close the trade deficit.

"while the CPI remains flat as lower energy costs stabilize food and transportation costs."

If significantly lower energy costs ever emerge (don't hold your breath), it would indeed translate into buying a few years of growth and prosperity, which incidentally would give the Fed the green flag to raise interest rates, so ain't no way inflation would remain low.

Also, the actual main counter-point to your statement here is that CPI actually excludes energy and food costs, so that is an exceptionally invalid conclusion to arrive at.

SilverSurfer said...

CS said: "At the same time, continuation of low interest rates will tend to stimulate investment which could drive asset price inflation including a recovery in real estate values."

Dude, we've had low interest rates for 3 years now. Has real estate in Canada gone up significantly? Nope, it's been flat and now declining. This is due to the affordability ceiling being reached. If 3 years isn't enough to convince you, look at Japan with 20 years of extremely low interest rates paralleled with declining real estate values.

"In which case, Canada may achieve the hoped-for real-estate soft landing."

Keep smokin' that Hopium, cuz reality will hurt too much.

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JustWatching said...

Financial Post article

Canadian home prices falling steadily

A senior economist at Royal Bank of Canada said the city’s lack of affordable homes is pulling down the market.

The Canadian Real Estate Association said tighter mortgage and lending regulations seemed to have cooled Canada’s national housing market, even in the bigger markets.

“Recent changes to mortgage regulations were widely expected to temper sales and prices in Greater Toronto and Greater Vancouver, and the data released today confirms that,” said Wayne Moen, president of the association, in a statement.



CS said...

"Keep smoking the hopium"

LOL

Could have predicted your reaction SS. And, talking of hopium, if things turn out as I suggested they might, your precious metals stash could turn out to be worth less than you expect.

But I won't take up space debating, the trajectory of the US economy, which is only peripheral to this blog. Those who might want a brief positive assessment of the outlook for US energy production, energy use efficiency and industrial production, employment,etc. could take a look at (U Michigan) Professor Mark Perry's blog. I go there from time to time for an antidote to the end-of-the-world propaganda of the hoarders of surplus metals.

CS said...

Re: "Canadian home prices falling steadily"

That's a truly misleading headline.

The evidence to support it?

"the average price of a home sold last month was $353,147, a decline of 2% from a year earlier. The year-over-year decline in June was 0.8%."

Wow.

But if you look at their graph of home prices since 2008 you see a close to linear upward trend from around 285K to 365K. Currently, there is a dip but it still does not qualify as anything more than random variation.

happy renter said...

Thanks for your replies, DavidL and Just Jack!

koozdra said...

If I had a million dollars...

http://www.realtor.ca/propertyDetails.aspx?propertyId=12282441&PidKey=-1193023559

neo said...

CS @ August 16, 2012 8:48 AM

This guy ?

"Bottom Line: To the extent that there has been a real estate bubble in the U.S., and a subsequent crash in home prices, it's been pretty isolated to a small group of states like CA, FL, NV and AZ, and most of the country has seen home prices continue to rise, or flatten out."


http://mjperry.blogspot.ca/2008/08/real-estate-bubble-only-4-states-ca-fl.html

So, the other markets that fell precipitously after 2008 were not in a bubble ?

Using the Case-Shiller index data for Seattle from this posting date to today :

http://ycharts.com/indicators/case_shiller_home_price_index_seattle/chart#series=type:indicator,id:case_shiller_home_price_index_seattle,calc:&zoom=&startDate=8/31/2008&endDate=8/16/2012&format=real&recessions=false

Or New York, etc.

I have seen other economists that are more bearish and have better prediction records : http://finance.yahoo.com/blogs/daily-ticker/global-recession-only-time-heal-economy-says-gary-123445059.html?l=1

Anyhow, we'll see, it sometime seems like confirmation bias is unavoidable with all the data out there. I'm sure I have it as well :-)

patriotz said...

Las Vagas is a desert... Land has no intrinsic value there at all.

Would it have more "intrinsic value" if it rained more?

What "intrinsic value" does undeveloped land on Vancouver Island (excluding commercial forest and farm land) have exactly? What income does it return to its owner?

CS said...

@ Neo

"Confirmation bias"? I don't think so. I'd be delighted if prices dropped 90%. Then I'd buy a decent spread on the Oak Bay waterfront, like this, which sold for $800 K in the 80's.

I even predicted a 30 to 60% fall in prices here. But that was based on the assumption of an upturn in interest rates such as the 17 increases in 2005-2006 by Greenspan's Fed, which destroyed the US housing market and much of the banking industry.

And I don't think such a development is as likely in the next four years, either here or in the US, as a US recovery.

It's true that Prof. Mark Perry tends to look on the bright side. But a US recovery after four years of recession seems more probable than four more years of stagnation or worse.

Some people say debt is too high and that it will take more than four more years of deleverage before the US begins to recover. But with real interest rates at around or below zero, why does debt matter? Only when an expansion begins to cause labor shortages that drive inflationary wage increases. But with tens of millions of unemployed workers and the decline of labor unions, labor will have no pricing power for years.

In summary, I agree with Marko, anything may happen.

DavidL said...

The number of houses for sale in my PCS (Victoria core) have dropped from a high of 430 to 395 in the past ten days.

Are potential sellers pulling out of the market: [1] so that they can enjoy the last few weeks of summer unfettered, [2] because their neighbour told them prices will go up again in the spring, or [3] they are busy putting in a rental suite as a mortgage helper?

omc said...

I felt there was a bit of a scramble lately by sellers to sell before prices dropped. Maybe the perception is that the market has passed. Vancouver has shown a 5% drop in listings YOY.

Happy hunting LeoS

SilverSurfer said...

CS said:

"But a US recovery after four years of recession seems more probable than four more years of stagnation or worse."

Again, OUTPUT GAP TRAP! Please take a few mins and read it (use arrows at top to go back and forth between slides) so you can stop this silly unfounded optimism.

"But with real interest rates at around or below zero, why does debt matter?"

Debt matters when it is owed to foreign nations. So when you don't have the credit (read: income earned from a productive economy with a reasonable debt to GDP ratio ) the only option is to print more of your currency, to pay off the interest on the bonds you sold. Problem is, when you increase the money supply, you devalue your currency and when you do that 100% of your citizens lose buying power. Do it too much, and Zimbabwe is what you'll turn your nation into. Further, the more you monitize your debt via this method, the less your future bonds will be worth thus requiring you to pay higher yields on your debt. Cross the 7% line, and your country is TOAST.

Debts matter. Understanding basic economics before spouting out unfounded optimism also matters.

CS said...

"So when you don't have the credit (read: income earned from a productive economy with a reasonable debt to GDP ratio ) the only option is to print more of your currency"

This is outrageously irrelevant to the blog thread! So with apologies to all:

If you borrow at a real rate of zero and still cannot turn a profit, then sure, you might as well give up.

But we may not have reached that point yet. BP, for example, is borrowing at 1.65% yet has a forward PE of around 6, implying a total return of 10 to 15%.

The US is not Zimbabwe. Although the Fed has printed a ton of money, credit has contracted. So effective money supply has increased little if at all.

The problem for the US and the West generally is how to turn a profit using money borrowed at zero real interest rate when you're industrial labor force is paid ten to thirty times as much as that of the Third World competition.

Judging from the trends I cited above, the problem for the US is not entirely insuperable.

The US dollar fundamentals may seem flawed, but the currencies its priced against look even more flawed. Or are you buying up Euros and Renminbi's with your silver and gold?

totoro victoria said...

I'm excited to be moving into our new place at the end of the month. Reducing our monthly costs (excluding utilities) to $400 goes a long way towards helping us reach our early retirement goals.

Sometimes low mortgage rates and having rental units as part of your primary residence works out pretty good... even when prices are high. Leo's (I think it was yours?) affordability chart demonstrates that.

I do feel that my interest in speculating on what is going to happen to prices has waned somewhat now though. Once you are in you're in. It's going to be interesting to see how the numbers line up ten years from now :)

Just Jack said...

Hey! totoro is back from vacation. Welcome back.

S2 (Just Jack's wife)

Leo S said...

Leo's (I think it was yours?) affordability chart demonstrates that.

It does? Well, I suppose it shows that the (un)affordability bubble has corrected something like half way from the peak in 2008. With prices steady, it is a far better time to buy now than in 2008.

I wouldn't say it's a good time to buy though. Affordability is OK only because of low rates. Prices will decline some more as affordability continues its symmetrical correction.

The problem will come as the economy recovers and interest rates start rising again (could be a while out, but it will happen eventually). That could drag out the recovery for years and years and years.

I think people looking at the last 50 years of Victoria SFH prices and projecting that to the future will be in for a surprise in 10 years.

koozdra said...

"MUST BE SOLD, PRICED OVER $100,000 BELOW ASSESSED VALUE, TRY YOUR OFFER!!! Fantastic Value !!"

This is getting more and more common in listing descriptions.

http://www.realtor.ca/propertyDetails.aspx?propertyId=12146888&PidKey=68580475

Ryan said...

Inflation numbers are out today. CPI has been falling quickly for over a year now - not quite as steep as 2008, but close.

That means real interest rates have been climbing - similar to the early 80s.

totoro victoria said...

Yes, I agree that affordability will be impacted when interest rates, but prices will likely drop to compensate. And yes, an overcorrection is likely because that just seems to be the way people roll - confidence inspires confidence and vice versa. And the cycle continues.

As for that real rate of inflation vs. interest rates, have no idea how to apply that to a decision to buy or not. What do those numbers really mean for the average person? I have a 10-year low rate and does that not impact this variable - inflation will rise and fall over that time.

Buying is not an esoteric accounting exercise, I approach it more as a feasibility study and, if feasible, a ten-year business plan with all the variables and risks accounted for.

There is no crystal ball and there is only the deal of the day and whether you can live with it. You can sit in the sidelines forever and be more invested in the analysis than getting into the game.

Finally, I gather that many folks are not making more than 4% on investments these days. Maybe you can shelter some of this in a TFSA or your RRSP (is anybody getting 4% there?) but most of it will be taxable if you are sitting on a big pile of money. Some who are really good at investing may be doing better, but I'm not part of that crowd.

Real estate at low rates and high prices with the addition of rental income and adding sweat equity is something I feel better with long-term as the basis of a retirement plan.

totoro victoria said...

Thx S2 :)

Renter said...

@ Koozdra

That listing has also been around for 60 days at the same price. I think they'll have to move the price further than $100,000 under assessment to get a real bite.

Goes to show that not everyone wants an acreage, and that those who do don't necessarily want a 3,000 sq ft house.

Trex said...

This forum has been a resource in the past for me and so I am going to respond to the request for advice on a home purchase.

I was born in Victoria and have owned multiple residences in several different Provinces.
I now own a home on Vancouver Island.

First pay attention to the basics-the expensive basics-plumbing,HVAC, wiring and panels, sewer, foundations and structural.
Beware all moisture.
Newer houses usually require less work and expensive upgrades than older ones.
Older properties may have multiple, successive "upgrades" to things like wiring and plumbing that can be a nightmare to rectify.

Next is location, location, location.
What is the neighborhood zoning like and is it going to change?
Who are the neighbors? A fraternity? Hells Angles?
Do you have a view of any kind? Can it be blocked or impinged upon in the future?
Traffic flow and noise in the area both now and in the future?
Schools? Shopping? Transit? Parking? Hospitals and clinics?
A righteous neighborly grow-op that accepts credit?

I once owned a house in a nice inner city neighborhood. A five story, long-term residence for battered woman and children on social assistance went up a block away from my house. Obviously homeowners in the neighborhood opposed the construction but, ultimately, it went ahead. No parking was provided for the several hundred units. The kids flooded into a small highly regarded local school.
The cause was admirable.
We reckon our property value dropped about $175,000 after we sold.

This is a real estate bear site and I happen to believe buying into a falling or flooded market is even more difficult than in boom times.
In cities like Toronto, Vancouver and Victoria some people have become house poor, some may even fall into a negative equity situation. These people may become pressured into being slightly less than honest when trying to sell.
Lets face it,if you know the market is flooded and you need to sell you say whatever you need to in order to get the sale.
The same goes for listing realtors.
And if that is less than completely honest or forthcoming, well, so be it.

I leased several properties while I shopped for a home.
One house had water running inside the walls in high rainfall-high wind situations.

Another home had a raw sewage back-up situation occurring sporadically in the lower level of the home.
Fixing the sewage problem would have involved ripping out part of the concrete floor and foundation footings on the lower level as well as trenching out the old lines in the backyard.

Yes these houses are for sale on Vancouver Island and no to the best of my knowledge the homeowners have no intention of admitting or declaring these issues.
And as to that property condition declaration that sellers have to sign- that's just for honest folks.

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

Lets turn to my own experience here on the Island.
I spent over a year shopping for homes.
Had a highly recommended buying agent.
Hired a top notch home inspector.
At the end of the day I had minor internal structural damage, some moisture issues, a rotted out deck and an insect issue.
The homeowner had made blatant cover-ups.
And lied on the property declaration.

So, our friends asked, didn’t you talk to the realtors, the original homeowners and a lawyer?
Yes, Yes and Yes.
Our realtor the buying agent seemed horrified and did indeed work hard to try and get some resolution.
The selling realtor, a highly respected fifty something realtor who works for a large real estate company ( first word starts with an R, second word starts with an L) did not even bother denying he knew about some of the issues when contacted.
He merely stated "We feel the house was appropriately priced for its condition and if you feel you need the advice of a lawyer you should get one"
A complaint to the real estate office went " on file".
Contacting the original owner, a local small business owner, our realtor, the buying agent was told " see ya in court".
When we discovered some of the internal damage that had been previously hidden on possession day our real estate lawyer refused to stop the cash transfer and refused to consider a hold-back."Thats not done here" he said.
Our family lawyer then explained that going to court would only be advantageous for the lawyers (as always).
The chances for satisfaction were slim we were told.
The only worthwhile maneuver would be to try and scuttle the whole property purchase and get out of the whole deal with our money back.
Very difficult to do with no guarantee of success.
Small claims court?
Waste of time and effort for chump change.
In court it would have been his word against ours.
For example:" Hid or concealed damages, not me your honor, it must have been my buddies who stayed over for a couple of months".
"Bugs your honor, I drink a fifth every morning for breakfast and drop two hits of blotter every evening- your honor is crawling with bugs as we speak".

So much for the property declaration.
Like I said its for honest people.

In my view the sellers in general on Vancouver Island are less honest than has been my experience in other regions.
Why this is so I have no idea and I was born here.
Perhaps its because the properties are so overvalued and the good jobs so hard to find.
Maybe its because of all the older homes,perhaps the attitude becomes " well hell there is something wrong with all of them anyway" .
Or maybe because "everybody else does it".

Get the best buying agent you can find.
Hire the best home inspector you can find.
Trust nothing, verify everything.
Prepare and budget for a couple of small issues and one big issue.
Pray hard.

The jewels are out there but when looking at the stream bed which do you think are more common, jewels or fools-gold?

And remember: It could always be worse- it could be a boat.

Leo S said...

As for that real rate of inflation vs. interest rates, have no idea how to apply that to a decision to buy or not.

Yes I'm still struggling with this as well. Real prices are critical to figure out how assets have appreciated, but if I don't see a huge impact on a rent vs buy decision. When using a tool like Rogers' rent/buy calculator, I assume one would always use nominal values (the inflation is captured in the increase/decrease for rent or house price.

I suppose if nominal prices are stable, then it's best to calculate net worth when renting/buying for some point in the future. If rent is less than the sunk costs of buying (interest + taxes + maintenance), then you're better off renting.

totoro victoria said...

I agree Leo.

As for horror stories about buying... I don't have any... knock on wood.

I've bought seven properties over the years and sold three. Got one more to go and I'm done :)

I would say that a buyer's agent is less useful than a good inspection and being present for it. We have been present for the last five and it helps raise awareness.

Maybe more important are some generalizations about Victoria I have learned:

1. fairfield tends to have water in basement issues, especially near the waterfront
2. perimeter drains are big ticket items and it is better to get them scoped before buying - a home inspection is not adequate
3. foundations are really important
4. big trees near your foundation can mean big trouble
5. roofs are big ticket but easily inspected and bargained over
6. aluminum windows suck and are big ticket to replace - I don't want that hassle again - or the condensation or mould that go with them
7. location is absolutely key - if you want to rent it out later or when it comes to resale
8. check with local police department and the city to see what complaints have been registered near you re. the neighbours
9. knock on the neighbour's doors and introduce yourself and check as to their view of the home and the neighbourhood
10. 200 amp electrical is very good - upgrading is somewhat expensive.
11. overall square footage including unfinished is very nb. if you want to suite
12. I check with the city to view the permits and plans on file once we have an accepted offer (this is permitted)

And then the regular heating, plumbing and electrical. I wouldn't sweat appliances or other fixtures - those are easy fixes with craigslist if need be.

VP said...

"If rent is less than the sunk costs of buying (interest + taxes + maintenance), then you're better off renting."

Speaking of which, The Economist now claims we are 77% overvalued relative to rents Canadian price-to-rent. I believe it's closer to 100% overvalued here and in Vancouver. Does anyone know where to find their city specific data?

totoro victoria said...

Of course, that is just one measure. The economist offers five measures:

• House-price index – rebased to 100 at a selected date and in nominal terms only.
• Prices in real terms – again rebased to 100 for the selected date, but the index is deflated by consumer prices to take account of the effects of inflation on purchasing power.
• Percentage change (in real terms) – shows the increase or decrease in real prices between two selected dates.
• Prices against rents – compares the relationship between the costs of buying and renting, rebased to 100 at the selected date.
• Prices against average income – compares house prices against average incomes in each country, again rebased to 100 at the selected date.

http://www.economist.com/blogs/dailychart/2011/11/global-house-prices

Look at Singapore if you want to see some crazy numbers...

VP said...

It's still 'gold medal' impressive that we are the MOST overvalued of ANY country %wise against rents. Singapore for instance, is only 58% overvalued in the linked table, compared to our 77%. Singapore being a city state at 58% would compare to Vic & Van’s 100+%. If Canada is 77%, it's a given we're over 100%.

totoro victoria said...

Rent levels reflect the market ability to pay. Real estate purchasing power may increase as mortgage rates decrease, but income does not increase and thus neither does rent.

I would say the price to rent ratio is more reflective of low interest rates (leading to higher prices) and that high prices are being financed at a lower monthly cost than rent in some cases.

The price to rent ratio seeems less valuable to me than other measures.

dasmo said...

@Leo it is a nice place... Remember VicWest was considered a bad neighbourhood at the time. Just before the rail yards, the dockside green and the bayview / roundhouse. Take a 100 k off the price of a house crossing the bridge... Anyway I love my rock solid house built in 1933 for $3300, bought in 2003 for 192500...

koozdra said...

"A unique development opportunity at the end of a quiet cul de sec close to Statacona Park and the junction. The Rochford designed house is heritage listed and must be preserved, it is a beautiful design and in amazingly original condition but will require total restoration."

Asking Price: $1,650,000
BC Assessment: $719,000

So after I pay DOUBLE the assessed value, I have to completely restore a heritage home? This is definitely a "unique development opportunity".


http://www.realtor.ca/propertyDetails.aspx?propertyId=12310396&PidKey=-649515744

Leo S said...

@totoro
8. check with local police department and the city to see what complaints have been registered near you re. the neighbours

You just walk into the police station and ask? Or is this info online somewhere?

Leo S said...

Here's a first stab at collecting the excellent responses in this thread plus some of my own.

Victoria house condition checklist.

Renter said...

That's one skookum checklist already, Leo! Kudos to you and to all the commenters!

totoro victoria said...

Leo - I called the police department and asked. This was my last property in Oak Bay which bordered a school ground and I had specific concerns not about my neighbours, but about the school grounds and after hours use and noise this could cause. They were helpful in responding.

As far as police complaints go, my understanding is that incidents reported and investigated are public knowledge. The OB police department is really small not too busy so I'm not sure what the process would be for a larger jurisdiction such as Victoria. In many cities in the states reports of crime and investigations are actually tracked geographically and publicized on websites.

JustWatching said...

This article sums it up....

Canada’s Real Estate Market – Boom Or Bust?

The graph that shows prices tracking mortgage debt tells the story.

koozdra said...

"$2000 decorating bonus"

I've been musing as to what exactly a "decorating bonus" is. I'm assuming that it has to be different than a cash back bonus that is becoming more popular in listings.

How to enforce that the $2000 is used for decorating and not something useful like buying appliances?

I came up with a system. After your purchase you are required to submit receipts up to and including the maximum amount of the decorating bonus. At which time the seller has the right to reject certain purchases if they are deemed "too practical" or "did not fit into the strict category of decorating".

For example, you purchase the house and buy a painting and a mirror to decorate your living room walls. The vendor has the option of refusing to reimburse you for the mirror purchase because it has a non-decorative function.

Does anyone else interpret this differently?

http://www.realtor.ca/propertyDetails.aspx?propertyId=12302781&PidKey=-274704105

Dave said...

Here are a few more, sorry for any duplicate:

* negative surface drainage $
* galvanized plumbing $$$ (may not even know until you’re swimming uninsured)
* failing envelope (window caulking,etc) $$
* soffit squirrels, birds, rats (good to know your neighboirs)
* leaning chimneys/mortar decay $$($)
* sagging sewer mains, sewage backups $$$
* polybutylene supply lines $$ (in a flood, insurance may be void)
* old roofing (attic/ceiling water stains) $$
* leaky shower/tub drains, sinks/dishwasher, hidden wall drain and supply pipes $
* can do air spore counts in certain areas to confirm leakage and how unsafe for breathing
* know some of the signs of grow-op or other past drug manufacture
* and if it’s really old, don’t lick any flaking paint chips!

info said...

xxxxxx

koozdra said...

This will be interesting...

http://www.timescolonist.com/business/Colwood+developer+offers+kind+mortgage/7111142/story.html

info said...

Thinking of buying? Now is not the time.

The Victoria housing market has already lost 10% and none of the new mortgage rules have had time to work yet.

Soon to be gone will be cash back (zero down) mortgages, liar loans, etc.

In 08-09 Victoria's market lost about 15% in approx. 9 months. That revealed to us how susceptible to price drops this market can be. Only government intervention stopped the crash in 09. There will be no similar intervention this time once prices start dropping dramatically.

Most people would be unable to comprehend the degree of intervention/stimulus thrown at the housing market since 09. To sum it up, in 09 CMHC had about $300 B on its books. That number today is close to $600 B, only 3 years later.

Mid 2000 price levels might easily be reached. Since Victoria is no different than Miami, Las Vegas, part of California and Phoenix in terms of real estate, one has to consider that a drop of over 50% could be possible as well.

Leo S said...

Last two places we were somewhat interested in had offers on them. A few days later both offers had fallen through due to financing and the properties were back on the market. A common story these days so I hear from the realtor.

Leo S said...

Only government intervention stopped the crash in 09. There will be no similar intervention this time once prices start dropping dramatically.

True, but we are also starting from a different point. Affordability was very poor in 08. However it's hard to take into account all the CMHC changes that have happened since then. How many people were buying only because of stated income or cash back? Those people are in the process of being removed from the market.

To sum it up, in 09 CMHC had about $300 B on its books. That number today is close to $600 B, only 3 years later.

I don't think we've seen much effect yet from CMHC stopping their bulk portfolio insurance. Rates are still extremely low out there. However there are some stories about lenders tightening up their criteria.

totoro victoria said...

"Mid 2000 price levels might easily be reached. Since Victoria is no different than Miami, Las Vegas, part of California and Phoenix in terms of real estate, one has to consider that a drop of over 50% could be possible as well."

Victoria is very different from these parts of the US. Our lending system is a very important part of the underlying relative stability in our part of the world. Our economy is influenced by the US but is currently much more stable.

I myself would not be banking on a drop to 2005 pricing - I suppose unless interest rates rose a lot. My best guess is that prices will drop a bit more, but that a rise in interest rates would trigger bigger drops - but if interest rates rise so do your monthly payments.

The real question for me who does not plan to put more than 20% down is where affordability will be. How much will your monthly payment be today at low interest rates or in two year if rates rise and prices fall further.

patriotz said...

"This will be interesting..."

Toxic mortgages, Canadian style.

What better evidence do you have that this market is headed for the dumpster.

koozdra said...

@totoro victoria
"Victoria is very different from these parts of the US"

Here are some similarities I see:

Everyone will move here when they retire.

The weather is best in the country.

Debt fuelled speculation has driven real estate prices much higher than underlying fundamentals.


Lets not forget that the US still has the lowest rates in it's history. Yet they managed to have a huge housing correction without a single interest rate rise.

Are we smarter than those "dumb" Americans? Is our economy so much stronger? Why is Victoria different than Miami and Phoenix?

koozdra said...

@LeoS
"Last two places we were somewhat interested in had offers on them. A few days later both offers had fallen through due to financing and the properties were back on the market. A common story these days so I hear from the realtor."

Does that mean that offers on the houses were made before the buyers were pre-approved for the price?

info said...

Prices in Victoria could easily drop back to early 2000 levels. Consider what pushed prices into bubble territory in the last 10 or 12 years. It was easy and cheap credit. There are no fundamentals backing these price gains.

Compared to the lending standards of approx. 10 years ago, we have gone through a time of unprecedented credit expansion with lax lending criteria. This is evident when one considers that in 2006 CMHC had about $100 B on its books and now has almost $600B. Incomes and other fundamentals do not justify housing price gains in the last decade.

Victoria's market has already lost 10% and we still have in place the price inflating advantage of historically low interest rates, liar loans, 0 down (cash back), etc. Even without rates increasing, this market will correct significantly and for an extended period of time. Once the 25 year amortization kicks in (it takes approx. 5 months) and the OSFI changes have been enforced and have had time to work, we will see an acceleration of price declines.

Real estate bubbles always burst and revert back to their long term mean. Victoria is a prime example of a city in a real estate bubble. There is no contrary evidence.

Bubbles where the value of the asset has doubled or tripled in a short period of time never correct slowly by 15% and then stop and wait a number of years for the fundamentals to catch up. On the way back down to their long term mean, bubbles always wipe out those that paid too much for the asset. Think of it as survival of the fittest. Victoria's experience will be no different.

totoro victoria said...

I find it interesting how speculation is presented as absolute fact with no room for alternate views. It is very Garth Turner-esque.

If you go back on this board you will find numerous posts which predict imminent and drastic declines spanning a long period of time with the same absolutism you are presenting these yet to happen "truisms".

You may be correct, but you may also be wrong. You don't have a crystal ball and I don't either.

Now if only someone was in charge of handing out prizes for being right I guess I could understand the motivation better.

patriotz said...

I find it interesting how speculation is presented as absolute fact

Well it's not. Speculation is predicting what will happen, fact is what has already happened.

However plenty of absolute facts are being presented to back up the speculation. Facts which bear a strong resemblance to the US in 2006.

Now if only someone was in charge of handing out prizes for being right

Mr. Market is.

Leo S said...

Does that mean that offers on the houses were made before the buyers were pre-approved for the price?

Yes. No idea why anyone would do that. They paid for the home inspection, the appraisal passed, and then no financing.

Just Jack said...

For those that believed the myth that Oak Bay prices will never come down, this week saw a home on Oliver sell for $757,000.

The property had previously been purchased six years ago, in May 2006 for $710,000 after just 7 days on the market.

But that's what happens when there is over nine months of inventory of homes for sale now in Oak Bay. With two new listings being added in relation to every home that sells.

Cooler heads lead to cooler prices.

I also recall several posts on this blog, saying that this could never happen in Oak Bay.

This is the myth about location, location, location. Which misleads people into believing that buying at anytime in Oak Bay will guarantee a secure investment.

Buying the right product, house or commodity at the right time is what makes a good investment.

And that's the prize.

Leo S said...

Once the 25 year amortization kicks in (it takes approx. 5 months)

Why does the 25 year amort change take 5 months to take effect?

Real estate bubbles always burst and revert back to their long term mean.

Well, here is the inflation adjusted price history (red line) for the last 37 years in Victoria. Looking back 50 years the picture is the same. What is the mean?

Asset bubbles of any kind always correct. But real estate is bought on credit. House price appreciating by 100% is not enough to indicate a bubble if credit has gotten easier/cheaper to acquire in that time. So buying in times of low rates exposes you to interest rate risk, but interest rates will almost certainly stay low for a long time. Especially if the real estate market starts to decline it will put a drag on growth and rates.

info said...

Leo S

Victoria real estate is currently in a bubble and has been for at least 5 years. Easy and cheap credit is the cause of it. This will correct back to its long term mean. No need to deny it.

Prices don't fully adjust to new mortgage rules in a day or a week. When lending standards were lowered, prices moved higher for months and maybe years as a result.

How will reducing the amortization period from 30 to 25 years affect house prices in Victoria? How will the OSFI changes affect house prices?

Overall, the government is tightening credit availability. We are headed for a long period of credit contraction that will cause house prices to move downward substantially for years.

One must look at the big picture here. The exact time line of events cannot be predicted, but nothing is immediate. Victoria house prices have entered bubble territory like so many US cities and for the same basic reason - ease of credit. All of those bubble cities in the US have corrected, to varying degrees. Many of the retirement cities in the US were the hardest hit by price crashes, including Phoenix, which lost up to 80% or more in some areas.

Low interest rates will not prevent a crash in Victoria. Vancouver is basically crashing right now despite historically low interest rates.

totoro victoria said...

"Buying the right product, house or commodity at the right time is what makes a good investment.

And that's the prize."

Yes, but I would prefer it if we had a bet app on this website. Buying the right house at the right price is so... hard to time. And some folks here might never buy. And, heck, we are all time limited.

Also, I agree that OB is coming down a bit. Prices are still high but places are not moving like they used to. Folks who have to sell are subject to more low ball offers than they used to be.

Leo S said...

This will correct back to its long term mean. No need to deny it.

You didn't answer my question. Show me on this graph of 52 years of inflation adjusted Victoria home prices where the long term mean is.

How will reducing the amortization period from 30 to 25 years affect house prices in Victoria? How will the OSFI changes affect house prices?

Really only possible to determine in retrospect. Both sets of rules affect mostly marginal borrowers. So how many marginal borrowers do we have here? The data is somewhat lacking.

By the way.

Teleport back to 1995. Real Victoria SFH prices have doubled in 10 years and just last year they started dropping a little bit. The picture looks like this. Clearly prices will continue to crater, right? After all we are above even the lofty highs of the 1981 bubble.





No_Problem said...

It's the looming retirement crisis that will keep rates low.
Rates will slowly start to rise once the boomers are all dead.
Victoria housing is of little concern.

Ryan said...

Show me on this graph of 52 years of inflation adjusted Victoria home prices where the long term mean is.

By looking at your graph, it’s likely between $200 to $300 thousand in 2010 dollars, although we require more historical data to be sure. As you can see from these longer examples, it’s much easier to determine their inflation adjusted long-term means. For Amsterdam, it’s 200 (right scale). For the US, it’s near 100 (left scale). Home prices over the long-term can’t outpace inflation, however they can spend periods of up to 70 years far above or below their mean before reverting as seen from the Amsterdam example.

Leo S said...

Home prices over the long-term can’t outpace inflation, however they can spend periods of up to 70 years far above or below their mean before reverting as seen from the Amsterdam example.

Yes, but the very big difference is that both the Herengracht Canal data and Paris were established cities for that whole period. They were essentially as dense back then as they are now.

Victoria 50 years ago was quite different than it is now. It is not yet a really mature, dense city, and certainly was not 50 years ago.

Another example is Seattle. They have a clearer "long term mean" visible as the period 1950-1975. You can also clearly see their bubble and correction.
However, they are never going back to that pre-1975 mean, and in fact seem to have somewhat overcorrected at the moment. Just like Victoria, it's a different city now and there's a new normal.

Ryan said...

Are you trying to claim the US was as densely populated in 1900 as it is now? It doesn't look like they have reverted to their 100-year mean yet. From there they likely undershoot. For Seattle (like Victoria), 50 years is not enough data to determine a long-term mean.
As their country as a whole likely undershoots to the downside for many years (possibly decades) as the inflation adjusted graphs show usually happens, I don't see why Seattle wouldn't as well.

Leo S said...

Are you trying to claim the US was as densely populated in 1900 as it is now?

There is no land constraint in the US as a whole today. If more people need single family homes, then more will be built. Just like 100 years ago.

I don't see any evidence that individual cities have to mirror a national average.

For Seattle (like Victoria), 50 years is not enough data to determine a long-term mean.

There is no such thing if a city is changing. Clearly the long term mean for a dense city is nothing like that of a small town. Therefore, as a city grows from small town to a bigger one, the value of a single family home is not constant.

I don't see why Seattle wouldn't as well.

I see this very clearly. It's all about how much a home costs to buy. Any index that ignores financing costs is not very useful. Especially in the US where the interest rate can be guaranteed for 30 years.
The monthly is the determining factor (and by extension, the total cost of the house).

Clearly we can't expect a house to cost the same when rates are at 8% compared to 3%.

info said...

The situation we are in today is unique compared to any other time in Victoria's RE history. Both the price to rent ratio and the price to income ratio clearly point to a bubble. These are reliable metrics.

Record home ownership levels, record personal debt, a stagnating economy, tightening of mortgage regulations and historically low interest rates set to move higher soon all point to a bleak future for RE in Victoria.

Unprecedented gains in house prices over an extended period of time guarantees that the correction/crash will also be unprecedented.

patriotz said...

However, they are never going back to that pre-1975 mean

As I've said before, the one income family was the norm back then, the two income family is the norm now and in all likelihood it will stay that way.

That's the one thing that really is different about then and now.

totoro victoria said...

Hmmm... so data from 1650 is a reliable predictor of what will happen in 2012 and beyond? If it takes 70 years to return to figure a mean I would suggest we are not looking at a reliable set of data for housing prices.

British Columbia did not exist until 1871. BC in 1871 had thirty-six thousand people. It only hit 2 million people in 1971 but this has now doubled.

I would not be looking at data older than about 50 years because our economy, population and availability of land in urban areas has changed radically.

In addition to this data, I think you have to factor in the impact of interest rates as they have changed over time and for this reason I like Leo's affordability graph.

Leo S said...

Hmmm... so data from 1650 is a reliable predictor of what will happen in 2012 and beyond?

I think it is reliable to predict house prices long term on the Herengracht Canal. But it doesn't necessarily generalize well. It might generalize to other dense, established cities, where the dwellings don't really change they are just renovated or rebuilt in place. I very much doubt it generalizes to a city like Victoria which is actively densifying. Remember everyone, all of these measures are for single family homes, which always get more expensive as a city grows and more people move to higher density dwellings.

Leo S said...

As I've said before, the one income family was the norm back then, the two income family is the norm now and in all likelihood it will stay that way.

Anyone know where to find long term historical family income for BC? So far I've only found back to 1976.

patriotz said...

Remember everyone, all of these measures are for single family homes, which always get more expensive as a city grows and more people move to higher density dwellings.

It is simply not true historically that SFH have always become more expensive in real terms as cities have grown. Nor is it true that as cities have grown the % of SFH has always decreased.

The latter has been the case in recent decades, but remember household size has been decreasing (e.g. the number of single person households and single parent famlies has increased) and it really can't get much smaller.

totoro victoria said...

In my lifetime in Victoria SFH have become more expensive. Victoria's population has also been growing steadily since WW2.

I have noticed that many areas of Victoria have densified and that many larger homes have secondary suites now. I don't have a study to back up the claim that SFH in Victoria have become more expensive and that this is related to densification (among other factors like the local economy) but it seems like a pretty reasonable proposition.

Leo S said...

It is simply not true historically that SFH have always become more expensive in real terms as cities have grown. Nor is it true that as cities have grown the % of SFH has always decreased.

Sources? I'm just going on what I see. Bigger cities have higher house prices than smaller cities in the same area. Any counterexamples?

Just Jack said...

The act of densification creates jobs, wealth and a positive sense of the future whereby people are more willing to take on excessive debt and property values rise.

Densification is also the argument, made by the construction industry, as a way of developing "affordable" housing. And that may be true, but only when the city has been overbuilt and the construction companies have closed down operations. Then rising vacancy rates, increasing unemployment and a less than positive feeling for the future cause prospective purchasers to be reluctant in buying long term debt. And property values fall.

There is no direct relationship to the size of the city and the price of homes. Bigger cities do not equal bigger prices.

Just Jack said...

Oak Bay has higher prices than Victoria City.

SuperBob said...

As I've said before, the one income family was the norm back then, the two income family is the norm now and in all likelihood it will stay that way.

Nope, the three income family is the new norm! So many need two jobs plus rental income to qualify for financing.

DavidL said...

@totoro victoria
Finally, I gather that many folks are not making more than 4% on investments these days. Maybe you can shelter some of this in a TFSA or your RRSP (is anybody getting 4% there?)

In 2011, my combined self-directed RRSP's and RESP's gained 6.8%. Just a nice balanced mix of bonds, dividends and EFT's with low MERs. At the same time, the assessed value of my house dropped from $510K to $480K - a 5.9% "loss". I predict the 2012 assessment will be $460.

koozdra said...

Can someone explain this to me:

Price: $3,375,000
Assessed: $1,011,754

TRIPLE the assessed value. This has to be some kind of record. Is the assessment really old?


koozdra said...

oops.. forgot the link

http://www.realtor.ca/propertyDetails.aspx?propertyId=12145545&PidKey=-2013284214

Renter said...

@koozdra

Maybe because they are also selling the business along with the house and property? But that is a charitable as I can get, because a horse boarding business isn't worth an extra $2 million, not by a long shot.

DavidL said...

Anyone have the weekly stats? (Is Marco still on vacation?)

Alexandrahere said...

re house prices in big cities compared to smaller ones. Google "Living in Canada"

"Prices are higher in Canada's big cities than they are in the surrounding towns"

Vancouver proper is the 8th largest city in Canada but Metro Vancouver is the 3rd.

a simple man said...

RBC raising their mortgage rates tomorrow.

Just Jack said...

The land is being assessed as a farm. That property has 59 acres and the land assessment is only $144,000. That $144,000 is not a market value, but one that is determined by legislation. And if you read your assessment notice carefully you will find that the notice refers to "Actual Value" not "Market value"

The last sale of vacant farm land on that street happened a little over a dozen years back and was half the size of this one. And that dated sale of an older lot sold for $870,000. The land value alone for this 59 acre parcel could now be more than $2,000,000. Also, the current owners have improved the property with expensive indoor riding rings and a swimming pool. I'm sure they initially will try to recover 100 percent of these costs.

But, because of the extremely limited demand for this type of property it is possible that almost all of the costs of these expensive improvements will not be recovered on the sale. However since the Vendors will have gained on the land appreciation they may have a net profit.

A lot of this land is surplus to most hobby farmers needs. And that surplus land, say over 25 acres, adds only marginally to the value of the whole property.

Which means that you would only pay slightly more for this property over a similar equestrian center with half the acreage.

koozdra said...

@just jack

Thanks for the info. This one might be on the market for years to come.

totoro victoria said...

DavidL - wish I was as good at investing as you... maybe one day. Do you have some sites that you use for reference? I have been thinking of following the Canadian Couch Potato recommendations...

totoro victoria said...

"the assessed value of my house dropped from $510K to $480K"

I look at housing as a long-term investment and don't pay too much attention to assessed drops unless I am in the market to buy.

DavidL - Do you approach your RRSP and RESP investments the same way?

I've been thinking that real estate as part of an investment portfolio (as opposed to "home") should be treated in a similar manner to other retirement investments... ie. don't sweat the short-term ups and downs until you are ready to cash out.

That is not to saying that buying low in real estate with a big down payment not the ideal :)

Just Jack said...

If your are going to hold real estate as an investment for the long term then you should have deep pockets and a long life span.

Long term real estate investors are insurance companies and real estate investment trusts. Because in the long term we are all going to be dead.

I don't agree with the thought of an individual buying real estate just to hold and sell long term.
Real Estate is expensive to buy, maintain and to sell. And that is going to be more evident in the future as it is today.

It is far better to purchase real estate when prices are firmly going up, than to buy and hold for a decade before prices begin to rise again. It isn't like there is a shortage of real estate and we are going to run out of it in the next 10, 20 or 30 years. The only thing we have more of, is cars and most of our cars are not appreciating. And the housing industry is changing from net buyers to net sellers.

Of course you can buy a rental property and have the legal rents cover all your costs. But that requires you to put down a big down payment which is just robbing yourself of time and money.

As an investment, most residential real estate in the core areas today is a loosing investment. However, if your a teacher's union, fat with union dues, and looking to develop cash flow, then buying a shopping mall may be a good investment for the next fifty years. You might bleed red ink for the next decade, but you have a steady flow of dues to offset the losses. It isn't like its your money.

But for most of us, that is not an option. We have to time our investment purchases.

Buying a home to live in - well that's a different story. You buy when it makes financial sense to you - and you alone. You don't buy because all your friends are buying. You never buy because of the collective wisdom of your parents or what someone on HGTV says, no matter how sexy they are - with or without overalls.

If every year you wait to make your purchase you cut off two years of mortgage payments, why wouldn't you wait until it made economic sense to you. That may be next year, or it may be five years from now. But then your buying based on your needs - not what someone is telling you what your needs should be.




Just Jack said...

As I have alluded to before, affordable housing is coming to Victoria City. And that is the micro-condos.

The Mosaic on Fort street was built around 1962. About eight years ago it underwent a facelift and was transformed from office space into small residential condominiums of less than 500 square feet with the suites having an industrial theme. Which really meant the developer could cheap out on finishing.

In June 2004 a never before lived in second floor suite sold for $120,000.

The same suite sold for $197,000 in April 2007. When the "crazy" people were buying.

And this week has resold for $170,000. After 5 months of marketing the property and a 21 percent drop from the original asking price.

Yet some developers are still trying to flog their micro condos for a hundred grand more - because they're new. New versus 8 years $270,000 versus $170,000. You be the judge.

And despite the fact that you can rent these suites, they are losing value at a faster rate than the more traditional 950 square foot condo.

Maybe the City should be buying up these, rather than derelict motels.

DavidL said...

I look at housing as a long-term investment and don't pay too much attention to assessed drops unless I am in the market to buy.

I've never considered my house an investment ... it more of a rent-avoidance strategy. When paid of in a few years (~13 years after purchase), it will cost just $450/month to cover property insurance, taxes and basic maintenance (paint, flooring, appliances). Realistically, $700 or $800 a month (not including labour) is needed to fully maintain the 2400 sp. ft. home. If my house were an investment, I would have sold in 2010 and be renting right now.

Do you have some sites that you use for reference? Do you approach your RRSP and RESP investments the same way?

After 10+ years of leaving my investments to the "professionals" and only seeing modest returns, I decided to read books and online resources to learn about how to invest. All my (and my wife's) investments are self-diercted. I don't follow a particular investment strategy or sales pitch. Instead, I follow a simple approach:
[1] Don't buy and hold. Selling when an investment drops turns your paper loss into an actual loss. Instead, buy more of the investment is you feel that a rebound will soon follow. If the chance of rebound is many years away, you are better off to sell at a loss and reinvest the remaining proceeds. Make sure you sell when the investment peaks ... don't hold out too long. Don't be greedy, otherwise you will lose.
[2] Diversify. Buy a mix of bonds, stocks and other investments. Never put all your eggs in a single assest class.
[3] Mutual funds: always factor in the MER. If the investment is growing fast, a high MER is okay. If the investment has lacklustre performance - the MER is going to "kill" you. Learn about risk measures (beta, standard deviation, alpha, Sharpe ratio, r-squared, etc.) and how to use these values to decide on a particular investment.
[4] Re-balance your portfolio quarterly. Every three months (after getting dividends paid out as DRIP), examine how your portfolio has performed and sell those investments that are either not performing to your expectations or do not have a likelihood of future growth.
[5] Pay attention to politics and business stories. Adjust your investments accordingly. Don't be an optimist or pessimist - be a pragmatic contrarian. Don't be a sheep and follow the herd - be a shepard.

My 2 cents ...

Leo S said...

@DavidL How much time do you estimate you spend on managing and researching your investments?

DavidL said...

How much time do you estimate you spend on managing and researching your investments?

Not much - about 1 to 2 hours per week. I am a bit of a news junky, though ...

JustWatching said...

Real estate market slowing down...

Victoria BC Real Estate Month-to-Date Statistics August 20
Net Unconditional Sales: 254
New Listings: 620
Total Active Listing Count: 4,834

Only 101 sales last week and 78 the week before. Should hit 450 for the month - way below the 542 last August.

DavidL said...

@JustWatching

Thanks. If sales follow a linear pattern, a total of 400 may be more likely! If sales continue to slump, I would expect significant reductions to start in the late fall and through the winter.

Marko said...

Monday, August 20, 2012 8:00am

MTD August
2012 2011
Net Unconditional Sales: 254 542
New Listings: 620 1,200
Active Listings: 4,834 4,944

Please Note

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

Marko said...

SFH MTD Average = $591,274
SFH MTD Median = $539,000

Condo Average = $342,538

Marko said...

I have checked out some Real Estate while in Croatia on vacation.

Average monthly salary is about $800 per month and a decent condo in a bigger city like Zagreb runs around $1,500 to $2,000 Euros per sq.meter. Dubrovnik is absolutely ridicolous.

We are renting a condo for my grandfather in a smaller town in the middle of no where for $133 CND per month and the place is worth about $40,000 CND. Makes a lot more sense to rent.

Vacation properties crazy expensive. On the island of Brac where I am from lots of Russians buying up waterfront villas.

CS said...

The US real estate recovery is now reported to be underway. Which is consistent with Just Jack's account of the Government of Canada's housing market strategy.

Marko, why is RE so expensive in Croatia. Building costs cannot be higher there than here, surely. So does regulation restrict development or what?

totoro victoria said...

"After 10+ years of leaving my investments to the "professionals" and only seeing modest returns, I decided to read books and online resources to learn about how to invest."

This is where I am at. Thanks for the feedback DavidL.

DavidL said...

LEAGUE Equity Mortgage
LEAGUE Financial Partners is developing the Capital City Centre in Colwood.

Thoughts?!

dasmo said...

I think it helps to invest in what you know. Say you are an IT person and know about servers etc, You know what companies are respected, what are purchased, what will be purchased, you are probably already reading news about them etc...This is what will help you be a "Shepard" in equity investing. Oh and never buy off a stock tip, even if it's from Jim Cramer, maybe especially if it's from Jim Cramer.

koozdra said...

@DavidL

This is exactly like a cash back bonus for buying. Of course you don't have pay interest on it because it isn't a loan. From the vendor's point of view it's a discount.

If you consider this equity then here's an easy way to make $10,000.

"$10,000 Cash Back bonus to buyer who brings unconditional offer before August 31"
http://www.realtor.ca/propertyDetails.aspx?propertyId=12144160&PidKey=-625280638

dasmo said...

" - the only mortgage with no interest to pay and no monthly payments. Plus there's no personal liability," Huh????

dasmo said...

Hey Marco, sounds like you had a good vacation, now back to work! Did this place finally sell? I'm curious for how much? I noticed they dropped the price under a million after the rules were announced...

Just Jack said...

I don't know the details of the Equity Mortgage but it sounds like the developer is giving a discount.

Since I do not know the details, the following is hypothetical only and is not meant to single out this developer.

This could be a discount.

Hypothetically what can happen is the condo's price is inflated to account for the discount.

The premise is that the bank will finance at the full price not the price less the discount. However, the discount has to be disclosed to the bank and CMHC otherwise this would be fraud. Some developers in the past have tried creative ways to get around the down payment. In one case a builder had you finish the landscaping and that accounted for your 5% down payment. The builder called it building sweat equity. CMHC calls it fraud - unless its disclosed.

Why fraud? Unless your disclosing the discount or rebate to the bank you are intentionally misleading the bank and CMHC into lending on a higher amount than market value.

Now will this creative financing work. Most likely it will. Because the banks rarely order appraisals on new sales. Go back a dozen years ago and this creative financing would never have a chance of succeeding - because an unbiased appraiser was checking the values.

As I write this, I can hear someone screaming into their smart phone in Croatia that I am misinforming people. But I have learned from the past that anytime a form of "creative financing" is involved - someone is always getting screwed and its not the developer.

koozdra said...

@just jack

Good news, we allow this type of fraud. We'll even insure it with our tax dollars.

"Normally, the minimum down payment comes from your own resources. However, a gift of a down payment from an immediate relative is acceptable for dwellings of 1 to 4 units. For eligible borrowers, additional sources of down payment, such as lender incentives and borrowed funds, are also permitted. Check with your lender for qualifying criteria and availability."

http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_003.cfm

DavidL said...

According to this TC article:

Homebuyers will need 10 per cent of the purchasing price, but League Financial will then loan them an additional 10 to 25 percent in order to qualify for a 65 to 80 per cent conventional mortgage.

The mortgage program is designed to allow buyers to avoid mortgage insurance premiums from the Canadian Mortgage and Housing Corporation and qualifies them for a 30-year amortization period.


Note the "10 to 25 percent" is loaned. To me, this "new kind of mortgage" just seems to be another way of prolonging the purchasers indebtedness.

koozdra said...

How does this avoid risk if you have to pay the money back?

If equity is defined in this manner then when I borrow my friends car, my equity goes up?

Just Jack said...

Its a loan without money. They are loaning you equity?

You want to buy a condominium that is worth a hundred thousand dollars, so the developer inflates the price of the condo to $110,000 and calls the difference loaned equity.


dasmo said...

But how can they say "no interest to pay and no monthly payments." uhhhm so I get a $350,000 condo with no monthly payments? I'll take them all please. LOL...

DavidL said...

@dasmo
Say you are an IT person and know about servers etc, You know what companies are respected, what are purchased, what will be purchased, you are probably already reading news about them etc...

Unless you enjoy short-term stock speculation, I wouldn't recommend this strategy. I work in IT and rarely invest in IT companies ... there's just too much volatility.

dasmo said...

@David, Actually you just corroborated my strategy!