Thursday, September 27, 2012

Slow times at Victoria High

It's a sales-free zone out there folks.  The only hotbed of activity is the comments section of this blog where we've managed to rack up 60 comments a day this week.

Just how slow is it out there?  Well last week I saw 12 SFH sales in the core areas under $550k and 17 from there to $900k.  So far this week I'm at 3 and 5 respectively.  Some more will come of course.
From the depths of page 2 in the comments come similar reports:
I've got one sale on my main PCS in the last four days - SFH <575 core areas + Brentwood. Are others seeing the same in their PCS accounts, or are there higher end sales happening? - Animal Spirit
We might have close to 125 house sales in the core districts this month, compared to 163 for the same month in 2008. There are about 835 active house listings now.  The Western Communities had 77 home sales in September 2008 and should have around 55 this month with an inventory of 635 listings.  The Gulf Island have some 410 listings and are on track to have 25 sales this month. - Just Jack 
Made a lowball offer on a place but after a bit of back and forth we were still miles apart.  We're offering 2013 prices and they're still in 2008.  Near as makes no difference to 5000 listings out there but there really isn't much that's interesting.  The stale listings are showing up as rentals instead on craigslist.  Wonder how that vacancy rate is going to look?

Monday, September 24, 2012

Sept 24 - Monday Market Update

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands. 
September 2012 month to date  (previous week in brackets)
Net Unconditional Sales: 321 (208, 97) 
New Listings: 939 (671, 359)
Active Listings:  4768 (4716, 4690)
Sales to new listings ratio: 34% (31%, 27%) 

September 2011
Net Unconditional Sales: 458
New Listings: 1303
Active Listings: 4940
Sales to new listings ratio: 35%
Sales to active listings ratio: 9% or 10.8 MOI

Current SFH average is $618k, with a median of $531k, while condo average is at $331k.  Marko says "The SFH MTD Median is subject to quite a bit of variability right now, it could easily swing to 520k with two sales under 515k or up to 538k with two sales above 550k."

It's remarkable how consistent the numbers are this year.  A few less sales and listings as the same month last year.  So the inventory isn't increasing anymore YOY, but the months of inventory are still significantly higher.  We're shortly before the time when many sellers give up and try their luck again in the spring, although at this point I doubt many still seriously believe a bounce is just around the corner.

Wednesday, September 19, 2012

The stubborn seller

After a near-decade of price inflation in the Victoria real estate market, you could probably forgive sellers for the hard times they must be feeling these days as the weeks go by without a sale and the days without showings outnumber the days with showings by a wider margin. Many Victoria sellers likely believe this period will pass in short order and 'the norm' will return before they start to feel the consequences of their stubborn-ness.

Those of us who have followed this market for some time know this phenomena as "catching a falling knife."

I overheard a conversation between a seller and an agent recently* that I've re-created** here for your entertainment:

Seller: It's been 45 days since we put the house up for sale and we haven't seen an offer. Why?

Agent: The market is slow all over town right now. There's lots of houses on the market and there aren't very many buyers actively looking to make a purchase. You might want to think about dropping your asking price if you want to invite an offer.

Seller: We did that 15 days ago. You told me August was slow and things would pick up in September again so we dropped our asking price by $10,000 to attract some interest. We've had two open houses and a handful of agents walk through. And yet not even a hint of an interested buyer. Our house is worth more than we're asking for it. We've invested almost $10,000 getting it ready to sell and making it the nicest house in the neighbourhood, why no buyer interest?

Agent: The market has changed. There are far more homes for sale than buyers actively looking to make offers. Believe me, I'm hearing the same thing from my other clients and I'm hearing other agents telling me their clients are all saying the same things. You have to understand, it's not just about having a nice house anymore that people can move in and enjoy right away. I know that when you bought 7 years ago, you would have faced bidding wars on houses that needed work. That's not normal. That market was too hot to be sustainable. This market is what we call balanced. Which means you have to not only have the nicest house in your area, you also have to have the best price. Right now, we're talking about you finding the best price.

Seller: So what does that mean? Are you suggesting we drop the price again? We started at $499,000 now we're at $489,000 and there are less showings than when we were at $499,000. That doesn't tell me the price is wrong.

Agent: Do you recall when we first talked about your listing price? We looked at some comparables in the neighbourhood to determine what price your house should be offered for sale at. We had a discussion then about the condition of your house in comparison to your immediate competition. We agreed the money you'd spent on getting your home ready for sale made it nicer than the rest. We agreed this was a good thing and would likely mean that you were more likely to get more for your house than Mr and Mrs Jones the next block over.

Seller: We did. We should. Our house is nicer. It's worth more.

Agent: Have any of those houses sold yet? They haven't have they? Have they dropped their prices too? They have. You see what I mean? Your house is in nicer condition and you're asking a premium price based on that when you look at the comparables. 

Seller: Of course we are. It's worth more.

Agent: I think we should price it the same as the Jone's house around the corner and see if we can invite more viewings that way and maybe entice an offer.

Seller: Are you suggesting we drop our price over $40,000 from the original? That's crazy, we may as well give it away.

Agent: If we price it the same, you'll have the best house at the same price. If you were shopping around for a new car, and saw a BMW for the same price as a Toyota, would you hesitate to look at the BMW and maybe even buy it?

Seller: We can buy a BMW with that $40,000 you're suggesting we just give away.

Agent: You're moving right? You've already made that commitment. What are your options? Can you afford to buy your new house if this one hasn't sold? Can you afford to wait to move until this house sells at the price you think it should sell for? I have to tell you, I don't see prices going up anytime soon. They haven't really been going up for a couple of years now. So if your price that you think your house should be at is already too high, when do you see the market bringing you that price? 

Seller: You tell me, you're supposed to be the expert.

Agent: I'm telling you now. The market doesn't agree that you have a $500,000 home. The market might bear $460,000, but we won't know until we try.

Seller: If we drop the price $40,000 in only 45 days we'll be inviting low ball offers. We don't want a low ball offer.

Agent: Right now you're not getting any offers. A low ball offer is better than no offer and gives us a chance to counter. Once a buyer has made a decision to make an offer, we'll have an opportunity to negotiate. That's a lot better position than you're in today. 

Seller: So we drop our price. What happens when the Jone's drop their's too, which they did already? What then? Drop our price all over again? That would be crazy. This is Victoria, people want to live here.***

Agent: That's competition and that's the way the market works. Hopefully you'll get a buyer soon. But you'll need to be prepared to adapt to the changing conditions in the market if you really want to sell your home . 
* no I didn't
** by re-created I mean made-up
*** see what I did there? 

Monday, September 17, 2012

Sept 17 - Monday Market Update

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands. 

September 2012 month to date  (previous week in brackets)
Net Unconditional Sales: 208 (97) 
New Listings: 671 (359)
Active Listings:  4716 (4690)
Sales to new listings ratio: 31% (27%) 

September 2011
Net Unconditional Sales: 458
New Listings: 1303
Active Listings: 4940
Sales to new listings ratio: 35%
Sales to active listings ratio: 9% or 10.8 MOI

The market continues to be comatose and we're on track for again missing last year's already mediocre marks.  Meanwhile the BC Real Estate Association has been quick to lay the blame on the new mortgage rules for Vancouver's sales collapse, completely ignoring that it started before they were instituted (thanks JustWatching).  Their big brother illustrates how yearlong forecasts are useless by revising them constantly (again, credit JustWatching).  Does anyone actually use these forecasts or is this just make work by an organization trying to justify its own cost to its members?

About this time last year is when some people here made some forecasts about the end of the year, with mixed results.   Anyone care to try again just for fun?

Monday, September 10, 2012

Monday market update

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands. 

September 2012 month to date
Net Unconditional Sales: 97 
New Listings: 359
Active Listings:  4690
Sales to new listings ratio: 27% 

September 2011
Net Unconditional Sales: 458
New Listings: 1303
Active Listings: 4940
Sales to new listings ratio: 35%
Sales to active listings ratio: 9% or 10.8 MOI

It's ugly out there. If you were trying to sell your house last month, your agent probably told you things would pick up after the Labour Day long weekend. With just under 10 unit sales per day thus far, it's safe to say the "picking up" is closer to dropping off. 

Over yonder in the YYZ, the Competition Bureau is hearing a case against the Toronto Real Estate Board. It remains to be seen whether or not the case will have implications for all Canadian real estate boards or not, but suffice to say, this is a huge case. 

In one corner are agents who want to innovate and essentially automate the home buying experience, giving users the ability to bypass agents to access information they currently can't without a physical action by an agent. 

In the other is a bureaucratic board dominated by a few bloated brokerages with over $2 billion in annual commissions at stake. These folks believe you should have to call an agent if you want to know what your neighbour's house sold for--using the ridiculous claim that somehow knowing what your neighbour paid for their bungalow is "sensitive personal information" and that only a licensed agent is capable of determining whether or not you should know what they can easily look up with three clicks of a mouse. In other words, are you buying or selling anytime soon, or as they prefer to say to one another when we're not listening in: am I going to make 3 and 6 from these jokers or not? 

While I agree that there is a responsibility to protect homeowners for the industry, the reasoning of the TREB is well and truly the most egregious attack on common intelligence I've read in some time. 

Case in point: in B.C. every year, you can look up on the BC Assessment website what your neighbour's house sold for, if it sold last year. Otherwise you can see what the state thinks it should have sold for last July. Why does a real estate board feel this information is a breach of personal privacy? Here's the truth: they don't.

What's really sad in this whole pathetic affair is the fact that the TREB and their member agents believe their services are so devoid of consumer value that they have to resort to fear mongering in a pathetic attempt to protect their inflated commissions.

In case you were wondering, I'm wearing the Competition Bureau jersey in this playoff game.   

Friday, September 7, 2012

August sales, a sleepy disappointment

Subtitle: an emergency 200 comment update from the road.

What to say about August sales?  By all counts it's a sales disaster.  Never mind that you can still get 2.99% on a 5 year fixed, people just aren't buying anymore, and August sales are the second lowest in a decade.  The VREB maintains this is a flat, stable market; which I assume is about as positive as a flat, stable reading on a heart monitor. 

Where have prices gone?  Nowhere fast, as DavidL points out with a chart of the last eight years of August prices.  There is certainly weakness in the past few years, but not a lot of movement yet.  These donkeys will need a prod before they move.

The new rules do seem to be having an effect.  Anecdotally we've seen more offers fall through due to financing, and our mortgage broker is seeing the same: "The market is turning out to be a quite soft as approving mortgages for clients has become tougher on all fronts… Clients who would have easily been approved under the old rules are now getting turned down under the tighter requirements."
And it's not over yet.   OSFI rules are coming into effect and cash back mortgages are becoming endangered.

It's going to be an interesting fall. Just don't expect it to be exciting.