Tuesday, November 13, 2012

Nov 13 Weekly 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.

November 2012 month to date
Net Unconditional Sales: 140 (40)
New Listings: 323 (116)
Active Listings:  4648 (4397)
Sales to new listings ratio: 43% (34%)

November 2011
Net Unconditional Sales: 482
New Listings: 847
Active Listings: 4329
Sales to new listings ratio: 57%
Sales to active listings ratio: 11% or 9 MOI

Big jump in active listings from last week.  Not sure how that works exactly, since last week there were 207 new listings added to 4397 active listings which adds up to 4604.  And yet we have 4648?  Some BOMs would add to that number, but what about all the properties that went off market in the last week?

We're on track for 350-420 sales this month depending on how you project.  Another month of sky high MOI for sure.

119 comments:

Marko said...

Regarding the numbers, I've spoken to the VREB about it. The calculation of Interim Stats for each Monday is a scaled-down version of the suite of programs used to calculate the month-end statistics. The two count new listings and active listings slightly differently.

Bottom line is the Month-End New Listings and Active listing counts are correct.

Jack and Cate said...

You must be receiving a lot of negative feedback from your peers. The truth is hard to swallow I would guess.

Great time for watching not a great time for playing....

a simple man said...

Thanks for the background investigation and the numbers update, Marko.

koozdra said...

I wonder how the fall of Vancouver will impact Victoria. How many people decided to get a "vacation home on the island"?

a simple man said...

koozdra - I think it will impact the already-staggering gulf islands more.

info said...

Both Vancouver and Victoria saw unrealistic real estate price escalation over the past decade based on excess credit, as did the rest of Canada. Now that credit has been tightened, prices will fall significantly. Vancouver and Victoria are among the most overvalued cities in Canada (price to income and price to rent ratios).

This is how excess credit due to loosening of credit caused house prices across Canada to double over the past decade.

Vancouver's market has turned downward in dramatic fashion after months of level prices (some properties have sold for 30% below assessment). Make your own conclusions about what we can soon expect to see in terms of house prices in Victoria.


info said...

Canada house prices to drop, stay down for a decade, causing unemployment, Scotia says.

Quoting from that article:

Scotiabank’s report follows several other warnings on the housing market from other banks. Many outside observers argue Canada is caught in a classic housing bubble, with a painful correction on the way.


Even our own banks are predicting a decade-long correction/slump for Canadian real estate.




Introvert said...

Even our own banks are predicting a decade-long correction/slump for Canadian real estate.

And we all know that banks are never wrong.

Patient renter said...

Thanks for the numbers Marko, much appreciated.

Leo S said...

And we all know that banks are never wrong.

We all know that yale professors are never wrong.
We all know that journalists are never wrong.
We all know economists are never wrong.

The list of people that are apparently wrong seems to be growing every day.

dasmo said...

To be fair, that list includes everyone that got us here in the first place so why trust them now?

patriotz said...

And we all know that banks are never wrong.

They are almost always wrong - they are too optimistic.

Show me one time where a bank predicted a RE decline that didn't happen.

dasmo said...

The Banks aren't predicting anything. The "decline" has been happening for years. The banks are now just stating the obvious.
It's the Economists are predicting things. Where were they in 2007 and earlier? Well there were a few sounding the warning bells but they were silenced by the majority....

Leo S said...

The Banks aren't predicting anything.

From the article: "The bank’s latest housing outlook predicts a 10-per-cent price decline across Canada in the next two to three years, driven by larger declines in the Toronto and Vancouver markets, “where supply risks and affordability pressures have the potential to trigger larger price adjustments.”"

Sounds like a prediction to me.

koozdra said...

ReMax guy says everything will be just fine...

http://watch.bnn.ca/business-day/november-2012/business-day-november-14-2012/#clip806419

Introvert said...

Here's a letter to the editor in today's Globe & Mail; I'm sure the writer's point regarding oil forecasts is also applicable to economic/housing forecasts, don't you?

The alarm raised by your front-page headline Canada Sees Risk In U.S. Oil Boom (Nov. 13) needs to be put in perspective. Oil forecasting is political. Even International Energy Agency forecasts are political, vetted by member governments and selected oil companies before they go public.

I was a forecaster at the World Bank and Petro-Canada. An oil company once told me that it had forecasts for everyone – which one did we want?

Forecasters test scenarios – they assess economic and energy trends to produce numbers. Among the enormous range of possibilities, one forecast is chosen for public purposes.

Governments and oil companies have their own agendas. They want a forecaster to justify fracking, pipelines, Middle East embargoes. Earlier, the concern was about Peak Oil. Now the story is a dramatic drop in U.S. oil imports.

The question is: What agendas are behind this forecast?

DavidL said...

Ben Rabidoux (The Economic Analyst) says everything is not fine ...
http://theeconomicanalyst.com/content/comments-cibcs-no-us-style-crash-canadian-housing-report-part-3

Introvert said...

ReMax guy says everything will be just fine...

Anonymous blog contributor says everything won't be...

DavidL said...

@Introvert
I'm sure the writer's point regarding oil forecasts is also applicable to economic/housing forecasts, don't you?

I haven't seen the same wars and subsidies regarding housing as have happened with oil/energy.

Introvert said...

I haven't seen the same wars and subsidies regarding housing as have happened with oil/energy.

Wars, no. But subsidies? How about the first-time home buyer's tax credit? 40-amortizations?

Also, I hope you're not implying that banks and their forecasters are totally impartial, apolitical, disinterested entities.

koozdra said...

DavidL

Who are you going to trust for your forecasting? A highly paid employee of a large real estate company or an independent economist who is examining macroeconomic data.

I think we should trust the experts.

Here is an article from the states in 2006:

"Trade group sees existing-home prices falling for first time since '60s"

...

"Next year, though, the NAR expects the market to rebound, and existing home prices are forecast to rise 1.7 percent."

http://www.msnbc.msn.com/id/19069785/#.UKPVg-TWIgt

A boom followed by a bust. If only we had something to compare to.

Of course we all know what happened in the states won't happen here. We are smarter, our banks are more prudent and our debt to income ratios are much lower... oh wait.

btw: I'm cross posting these links from VCI

Leo S said...

Yeah we're not like those silly consumerist Americans at all.

Consumer debt loads grow at fastest pace in 2 years

dasmo said...

Well, IMO, we are already 10% down. It will just take a few more years to see it through the noise. So I don't see that as much of a prediction, but maybe that's because it's the same as mine.

a simple man said...

i see at least 20% more coming off. There is just too much debt and people are tapped out.

dasmo said...

Perhaps the consumer debt level is is a better indicator of inflation than the CPI, which seems to always adjust to what is convenient. I mean what is even on it? Anyone have a link to that info? "food" "shelter" is a little open ended...

Marko said...

1726 Green Oaks Terr just sold for $1,250,000 and it was purchased earlier in the year for $1,200,000.

Brand new and in the core still in demand.

Leo S said...

Well, IMO, we are already 10% down.

Perhaps, but they're talking about the future, not the past.
They're also saying the national average will decrease by 10% in the next 2 or 3 years with bigger declines in the more overvalued markets. We seem to be one of the more overvalued markets, but it may be mitigated somewhat by the fact that we've been flat for few years already.

1726 Green Oaks Terr just sold for $1,250,000 and it was purchased earlier in the year for $1,200,000.


Well I guess that little adventure only cost them a few tens of thousands then.

info said...

Signs point to a severe housing correction in Canada.

Quoting from the Globe and Mail article:


Home prices are simply way out of line, especially when viewed in relation to household income. The ratio of house prices to income has historically averaged about 3.5 in Canada. It now stands at about 5.5. It is difficult to see how income growth in the future can bring this ratio close to the historical average within any reasonable period - so it follows that house prices will have to decline.

No Soft Landing Here

The current consensus is that Canada's real estate market has achieved a "soft" landing and that prices will flat line but not decline substantially over the next several years. I disagree. The housing market in Canada is already in bubble territory. Average house prices have doubled in the last 10 years, while rents have risen by only about 30 per cent. The ratio of house prices to rent is now higher in Canada than in any other developed country.


Victoria's price to income ratio is 7.7, Vancouver's reached a peak of 10.6. Make your own conclusions about the severity of the housing market corrrections in these two cities.

info said...

B.C. has the most heavily indebted population in the country.

Quoting from the article:

A growing number of B.C. residents are running this emotional gauntlet. Beset by stagnant incomes and rising prices, B.C. posted a 42 per cent increase in people going bust over the past four years - far higher than the 11-per-cent national increase.

It's little wonder insolvencies are surging: B.C. has the most heavily indebted population in the country. The average B.C. consumer has $37,879 in consumer (nonmortgage) debt. That's 40 per cent higher than the national average.


info said...

White Rock condo listed at 37% below assessed value.

Mark Carney stated that Canada's housing market is 37% overvalued. He used the price to income ratio in his calculation.

Victoria's price to income ratio is 7.7 while Vancouver's was 10.6 at peak. Anything above 3.5 is considered to be overvalued.

Vancouver and Victoria are both considered to be extremely overvalued using this metric.

As the above link demonstrates, Vancouver's housing correction is starting to heat up. Make your own conclusions as to what will soon happen in Victoria.

dasmo said...

Meanwhile the federal deficit increased by 25%... But the commoners are at fault for increasing their debt load? I guess it helps if you can just print more money. Expect low rates to continue for a while. This fact will maintain an affordability level that is less far away from historic norms than the value level. There isn't a lot of people buying homes with cash so I think the monthly payment guage is the one that has the most influence on peoples buying decisions.

Leo S said...

There isn't a lot of people buying homes with cash so I think the monthly payment guage is the one that has the most influence on peoples buying decisions.

Agreed. By that measure we've got another 10-15% to go.

info said...

OECD/Deutsche Bank:

Canada's home prices are overvalued by 54%.

Home price to rent: 73% overvalued

Home price to income: 34% overvalued

Leo S said...

@info The problem with those articles is they don't publish the methodology. For example the Deutsche Bank article says "Specifically, he looks at the relative valuation of housing markets as measured by price/rent and price/income and compares those ratios to historical long-run averages."

Well immediately I can see a problem, since a country like Canada has changed a lot more over the last 100 years than a country like Germany (which was densely populated even back then). So comparing our current ratios to our long run average (assuming this is even sensible) might not be valid. I wouldn't trust any measure without seeing exactly the numbers and algorithm they used.

patriotz said...

Well immediately I can see a problem, since a country like Canada has changed a lot more over the last 100 years than a country like Germany (which was densely populated even back then).

I would make the case that Canada has changed a lot less than Germany over the last 100 years, both politically and economically.

Anyway density has nothing at all to do with price/rent. It can affect price/income if the housing mix changes over time. However density does not uniformly increase with urban populations. All metros in Canada and the US are less dense than 100 years ago.

dasmo said...

Density has everything to do with price rent when comparing Canada to Germany. 100 years ago they were still giving away land in Canada...

Leo S said...

I would make the case that Canada has changed a lot less than Germany over the last 100 years, both politically and economically.


Either way it doesn't affect the argument or the problem of comparing current levels to long run averages in the country. If the long run average of price/rent has been 3.5 in Canada and now it's 5 then Canada looks severely overvalued, while another country that has a long run average of 5 might be 5.5 now and not be counted as overvalued.

The point is without the methodology and data sources metrics are useless. Looking at Numbeo and the situation is reversed with Germany having a higher price to rent than Canada. Both sets of numbers can be considered useless as far as I'm concerned.

dasmo said...

True Leo, according to that data Canada in in the top ten of the most affordable countries if you look at mortgage cost to income....

CFA Joe said...

I think this is a first! Victoria's Own "Short Sale Specialist" (end of third paragraph). Is the dam breaking? Finally some honest industry opinion.

http://victoriarealestateexpertblog.com/2012/11/05/federal-measures-make-impact-on-victoria-real-estate-market/

patriotz said...

Density has everything to do with price rent when comparing Canada to Germany. 100 years ago they were still giving away land in Canada...

You just don't get it do you? If I can own a house for very little, I'm not going to pay more than very little for rent. Right? I'm talking about the ratio of price to rent.

Leo S said...

I think this is a first! Victoria's Own "Short Sale Specialist" (end of third paragraph). Is the dam breaking? Finally some honest industry opinion.


And yet it's still always a good time to buy. Ron says: "Personally I think most of the correction has already taken place and that it is an opportune time to buy"

Yes, it's always a good time to buy.

"Our underlying economy is strong and when the HST issue is soon history and consumer confidence starts to recover prices will too."

Nevermind that the HST has had zero or near zero impact on resale house prices.

"Warren Buffett said in February that if it was practical he’d buy a couple hundred thousand homes in the US."

Wow, and that is so relevant to the Victoria market! I heard that Buffet guy is smart so I should smart too!

Leo S said...

You just don't get it do you? If I can own a house for very little, I'm not going to pay more than very little for rent. Right? I'm talking about the ratio of price to rent.


0/X doesn't make for much of a ratio.

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

The price to rent ratio is a crude method of comparing home values. It's simplicity is what makes it popular. Even a news reporter can understand it. However, it's like using an axe to remove an appendix.

It will work - but it won't be pretty.

ks112 said...

Joe are you actually a CFA charterholder? Just curious

ks112 said...

Joe are you actually a CFA charterholder? Just curious

koozdra said...

One mortgage helper not enough? How about two?

"This is a great house and when you factor in the mortgage helpers will carry approximately $400,000 at 3% interest rate. You can't go wrong!"

http://www.realtor.ca/propertyDetails.aspx?propertyId=12607725&PidKey=-2098963927

Dave said...

0/X doesn't make for much of a ratio.

They gave away land AND houses built on that land?

Dave3

Simon said...

"He notes that though British Columbia represents about 13 per cent of Canada’s population, it represents more than 17 per cent of the country’s mortgages, "

But he did not notes that British Columbia represents about 21% of Canada's Real Estate value. I am guessing but I am not joking.

Introvert said...

Video: Stephen Colbert speculates Earth's rectum is Windsor, Ontario. Or possibly Winnipeg. Victoria not mentioned.

soperj said...

@Introvert
Dude, we get it, you're a chump that hates the praries. Seriously get over it. If you actually like Victoria more, go enjoy it instead of hating everything else.

Just Jack said...

I don't know about anyone else here, but I would find it difficult to not have a rectum. However, I can live without a tit like Stephen Colbert.

koozdra said...

"Despite the decline, Robert Kavcic, an economist with BMO Capital Markets, said overall “it looks at this point like the elusive soft landing is taking shape.”"

Based on one month's data? Did this guy get his degree from a cereal box?

http://business.financialpost.com/2012/11/15/canadas-home-sales-slide-in-latest-sign-housing-market-is-cooling/?__lsa=9f59333e

info said...

Like him or not, Garth Turner is definitely in the know when it comes to Canadian real estate. He is well connected and knows many influential people in this country.

He did a piece on Victoria not too long ago. He interviews a Victoria realtor and the manager of Victoria's big-talk radio station. He either quotes or paraphrases what they said. The following words are not Garth's opinion.


Every day new listings and price reductions pour in. In less than a year, high-end homes have lost up to 20% of their value, most of that in the last 100 days. It’s been a long time, Bruce says, since he’s seen this many properties come available.

But while the real estate board says things are balanced, nobody believes it.

Not the manager of the city’s big-talk radio station, for example. Before we hit the air he described the anxiety that’s everywhere now, as the local economy stutters and people doubt the holy grail of Victoria wealth – their houses. Looks like the Boomers have stopped coming from Etobicoke and Edmonton, he says. After all, how can anyone afford to move here now and retire?

Worse, the kids are leaving. His words were reinforced this week by a report that record numbers of recent university grads are abandoning the Lower Mainland, driven out by a cost of living badly out of sync with opportunity.


Make your own conclusions as to what is currently happening in our housing market. The average price, as reported by the VREB, is easily skewed when there are so few sales, as is the case now. If there are more high end sales than normal in a month, that will push the average price higher. This can give the impression of stable prices when that is simply not the case.

The Teranet house price index is much more representative of where prices are in Victoria. Victoria had the biggest price drop of any Canadian city in September.





info said...

Link to the piece Garth did on Victoria.

Alexandrahere said...

Marko or anyone: Could you tell me what MLS 312891, #405-1025 Southgate went for? It is a condo and they were originally asking $299K and recently dropped to $199,500. Thanks

Alexandrahere said...

sorry, that was #405-1035 Southgate.

dasmo said...

Garth Turner: Turner makes one thing clear: there is nothing wrong with home ownership per se. He owns a home in Caledon, a former inn built in 1855 that he and his wife restored at a cost of hundreds of thousands of dollars. (He calls heritage properties—“musty old buildings full of mould and creatures”—his personal fetish.) “We all need a place to live,” he observes. “But we have allowed that one asset to overwhelm everything else. All of a sudden, people wake up and 90 per cent of their money is in one thing.”

SilverSurfer said...

Crash...And there goes Europe (again). Today they officially acknowledged Europe is in a double dip recession , and no, there is no chocolate involved.

If you ask me, 1/2 the PIIGS are already in some flavour of a depression or definitely trending in that direction. This matters because it impacts China's exports, which source raw materials from the likes of Canada.

Now let's just see if the USA doesn't get downgraded again due to the already in progress political theatre surrounding the 'fiscal cliff'. Even if they don't get downgraded, just the mere uncertainty of what exactly will transpire is already impacting the major indexes. And this after the Fed is just about all-in with the recent QE-infinity on MBS.

But surely, as they say... 'There is always a bull market somewhere' - just not in Canadian real estate, of that I'm pretty sure.

There's only so many bullets the global economy can dodge, and they are nowhere near running out of bullets.

Marko said...

sorry, that was #405-1035 Southgate

Went for $185,000. Condos with major restrictions getting hammered in this market.

CFA Joe said...

KS112, yes I am a CFA. Like to remain anonymous. Very strong research on this blog I must say. I invest on emotion (when others are most fearful)coupled with a reasonable expectation of return of +12%.

Leo S said...

I invest on emotion (when others are most fearful)coupled with a reasonable expectation of return of +12%.

Lots of opportunity for that with the panic around the fiscal cliff in the next little while

CFA Joe said...

Yep. Last year when the fiscal cliff Part 1 happened, I loaded up on US stocks, especially financials, and made a tidy profit this year. My bet is it will happen again, over Xmas to boot. Wish I had a bit more cash. Like most of you, I think the RE leverage will be sponged out pretty soon here and people like me will be looking for opportunities, like "ITB" 12 months ago. Look it up. Too bad Canada doesn't have a similar vehicle because I'd be shorting it if I could.

happy renter said...

Just Jack (or anyone else who knows): how much would you say that prices on Salt Spring are down since the peak?

Watching and waiting said...

another builder goes bust on a home gambling it all:

http://www.courts.gov.bc.ca/jdb-txt/CA/12/04/2012BCCA0419.htm

I wonder if he stooped to a low and stripped the "castle" of it's fixtures before the bank/CMHC took possession on Nov 15.

Introvert said...

I wonder if he stooped to a low and stripped the "castle" of it's fixtures

Well, we know people's grasp of grammar is generally low:

its = possessive
it's = contraction of "it is"

-G.N.

hap pychucky said...

Why is CMHC buying that house. What are they going to do with it?

What is the address?

Just Jack said...

When it comes to looking at peak prices on Salt Spring Island, there is just not enough data.

You have waterfront, you have acreage, you have fractional ownership and there were only 7 sales last month.

I just look at re-sales of the same property to determine where the market is today. And most of that information implies that values are back to 2004 prices.

But there is no hurry to buy with over 220 houses for sale, the trend of declining prices can't be reversed. It will take years to clear that much inventory. It's a bargain hunters paradise.

When I look back on the assessment records, it appears that peak prices may have been in 2009 and are some 20 percent or more down from that time. But that's a real guestimate, because of the fuzzy data.

If you're thinking of buying on Salt Spring in the next few years, I would just concentrate on the kind of property you want and put in offers where you can comfortably manage the debt. If you don't get the property, no worries, there will be another one coming along. And you never know, some sellers might just bite.

There will be a lot more Estate and Court Ordered sales coming onto the market too.

happy renter said...

Thanks, Just Jack -- that's really helpful.

info said...

Mark Carney, the governor of the Bank of Canada, uses house price to income ratio (and not average price) when talking about the overvaluation of the Canadian housing market.

Quoting from that article:


But that number is very conservative compared to what Bank of Canada Governor Mark Carney hinted Wednesday might be the actual scale of a Canadian housing correction.

In comments to the House of Commons finance committee, Carney said Canada’s housing market is overvalued by 35 per cent. While house prices historically in Canada have hovered around 3.5 times average income, they are now at 4.75 times average income.

Vancouver housing is estimated to cost 9.2 times the average income.


Victoria's ratio is currently at 7.7. Vancouver and Victoria are both considered to be extremely overvalued. In fact, they are the top two cities in Canada in this department.

We all know that properties in Vancouver and area are being listed for as much as 37% below assessed value. Make your own conclusions about where Victoria's prices will be headed soon.

I wouldn't be surprised to see a 15% price drop in Victoria over the next year. But it will not end there. Even Scotiabank expects Canadian house prices to correct/slump for the next decade.

Alexandrahere said...

Marko: Wow, thanks for the info. $185K for a 2 bed condo (only one bath) in Fairfield seems like a pretty good buy. As I said, it started out at $299K....obviously too much but if they had started last May or so at $238K, they may have sold it for that.

Leo S said...

We know that no sane and sober person would buy in Vancouver right now.

Solution: Get them drunk first

info said...

Canadian housing prices are not sustainable: David Rosenberg

Rosenberg correctly predicted the US housing crash.

Quoting from that article:


As the U.S. begins to recover from its housing bubble, concerns have been escalating about a housing bubble in Canada.

“Canada is carving out a top, while the United States is seemingly carving out a bottom,” writes Gluskin Sheff economist David Rosenberg.

Canadian home prices are on average twice the level of home prices in the U.S. Historically, average home prices had been close to parity. Rosenberg asks, “which of the two do you think is going to correct relative to the other?”




Just Jack said...

What other metric can Carney use? Canada is a big friggin country!

One of the things that makes me scratch my head when I real these articles is when they say "overvaluation".

-Are properties not being bought and sold in a competitive market?
-Are not properties being bought at fair market value?

So, where is the overvaluation?

If you bought a home today, is it unreasonable for you to expect to sell the home for close to the same amount as you bought it for - next month. So where is the overvaluation?

I have an understanding of what they are trying to say. Houses are too expensive and people are committing too much of their lifetime income to the purchase of a single asset.

But that's not overvaluation.

patriotz said...

So, where is the overvaluation?

I think the problem is that there are two different meanings of over/under valuation for RE.

From an appraisal perspective, it means whether a particular price is above/below the price that would be obtained in an open market.

From an investment perspective, it means whether a particular price is above/below an accepted multiple of rent or income.

The two really don't have much to do with each other.

Just Jack said...

I think so too. In my opinion, it isn't an overvaluation as underestimation of the risk of real estate.

Before, lenders would charge a higher interest rate or tighten credit, because of the increased defaults on the loans. That would put the brakes on the price rent ratio from climbing higher and higher and higher.

But when both the buyer and the lender perceived risk at close to nothing, those multiples went ballistic.

And I don't think we can return to those price rent ratios of the past, until buyers and lenders evaluate risk correctly. Which they still are not doing. And that means a soft landing is not possible and we cannot avoid a crash.

Watching and waiting said...

thanks Introvert for being the grammar police on my last post... Henceforth I will be sure to pay closer attention to your posts from now on to glean from your grammatical acumen .. :)

Happy Chucky: the house is located on on Lorimer in the highlands:

http://www.binabstrasser.com/project.php?sec=New%20Construction&cat=Castle%20Highlands

google "castle highlands GE Miller"

dasmo said...

What the? He was building a crazy castle spec house in the highlands??? too much cocaine....

Leo S said...

another builder goes bust on a home gambling it all:

Very interesting read. I too wonder what CMHC wants to do with the house. I can't imagine that this is SOP for CMHC whether or not the mortgage was insured with them.

Just Jack said...

Interesting info on the Highlands Castle.

I am surprised that any bank would be that gullible to lend so many millions of dollars in a district that has never had a property sell for more than 1.4 million EVER. And that was for a near new mansion home on 7 acres!

The Royal Bank appraiser that had to estimate a market value in excess of 5 million to finance the project should be sued for damages. This is not just a difference in opinion, it comes down to basic competency. The appraiser's Error and Omission insurance should pay for the loss not the Canadian taxpayer.



Marko said...

Just Jack,

I represent a lot of buyers each year so I get to see a ton of appraisals. Some of the sold comparables I see are absolutely absurd. My question is, when an appraiser uses a comparable is there some kind of expectation that he or she has viewed the home or at least driven by it or similar?

I've also see ridiculous appraisers for my father construction business. Appraiser will state home is approximately 80% finished when it is closer to 40%.

Just Jack said...

It is unrealistic to assume that an appraiser has viewed each of the comparable sales used in the analysis. There are hundreds and hundreds of sales each month from Sidney to Port Renfrew.

However, there is an expectation that the appraiser is familiar with the neighborhood and with the type of construction. Just because a property has sold, does not make that sale a comparable to the home that is being valued. Appraisers have the same access to the real estate board as you have, complete with interior and exterior pictures, satellite photos of the neighborhoods and past sales histories. Like anyone else, the appraiser can google the street and do a computer drive along the road. In most cases, this is sufficient for the purpose of estimating a market value.

There is no valid reason that I can think of, that would justify an estimate to be that far off in millons of dollars from reality or why the appraiser would estimate the completion of a home at 80 percent when clearly the home doesn't even have the windows installed, floor coverings, kitchens or bathroom yet installed which would be at 40 percent completion.

The only thing left is incompetency. And why would any lender use an appraiser that is incompetent? And I leave that up to you, to draw your own conclusion.

You say your father has had inspection reports that show 80% complete - then what has your Dad done about it? Because the error was in his favor, he likely just let it slide.

He could have complained to the lender or sent that report to the professional practice committee of the appraiser's Institute. Then that appraiser would have been disciplined and probably would have to take or re-take courses in construction estimating. But by doing nothing that has allowed that appraiser to continue on in their practice.

A good appraiser presents a well researched and well documented report that supports the final estimate of value. A "good" appraiser is not one that hits the lenders, brokers or agents required price to make a deal.

Yes, your opinion and the appraiser's opinion as to the value can be different. But, if both are acting in an unbiased manner then the difference should only be a small percentage.

SilverSurfer said...

Hmm, and here I was thinking it was common knowledge that appraisers make the numbers work in favour of whomever they are working for.

Back in 2005 or so, when I was shopping for a second investment home (multi-tenant unit), I had to get my main residence appraised as its value (part of my networth) was used in the bank's loan calculations.

To my surprise, when the apraiser showed up at my residence, in slightly less obvious wording he basically asked me: How much do you need it to be worth?

Then his appraisal came within $1,000 of what I said I needed. But of course those were the crazy days of a white hot real estate market. Even with a 10-15% inflated apraisal of my residence, my own math showed that it would take me 5 years just to break even if I were to buy the multi-tenant unit... and that included 7% annual asset value increase, which was conservative for those days. In the end, I'm glad I didn't go for it. I also discovered later there were multiple neighbours that filed complaints against the title because there were too many parked cars on the street and that the extra suites (5 of them) were illegal. This was in fairfield.

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

Strong traffic at my 4 open houses this weekend. Seems like a lot of people looking but not many pulling the trigger.

Alexandrahere said...

Marko: Wish you could sell my place....but alas, it looks like I am here for the duration. Good luck today.

MD80 said...

@Marko:
Must be good marketing or something. We went to 3 open houses between 2-3pm on Saturday and did not see a single soul. Just three very lonely realtors whose first questions were "Are you working with anyone??" SFH $450-$550.

Marko said...

Monday, November 19, 2012 8:15am

MTD November
2012 2011
Net Unconditional Sales: 210 482
New Listings: 451 847
Active Listings: 4,577 4,329

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

koozdra said...

http://business.financialpost.com/2012/11/19/tighter-mortgage-rules-threaten-economys-recovery-brokers-warn/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NP_Top_Stories+%28National+Post+-+Top+Stories%29&utm_content=Google+Reader&__lsa=9f59333e

CAAMP shouldn't be worried. First time buyers will return when prices collapse and homes become affordable again.

Introvert said...

... when prices collapse ...

Yes, when prices collapse. When will that be again?

koozdra said...

Introvert

The article pretty definitely states that first time home buyers are being pushed out of the market.

Are you saying that the housing market doesn't need first time home buyers? Is this the "nobody needs to sell" argument again?

patriotz said...

Yes, when prices collapse. When will that be again?

What does a 1.3% monthly decline get you over 2 years? That's a faster decline than most US markets saw.

Simon said...

The interest rate is so low. And it will be kept low for another while. With this in mind, It is hard to see a significant drop of housing price. It will be slow to drop futher. Without higher inflation, there will be no interest rate hike. Owning is comparable with renting. This situation holds on for another 3-8 years. Then after that, inflation kicks in and insterst rate gets high. But then? Economy is really good and people's salary increases dramatically. Money are floating around plenty as a result of so much printed cash for so many years. Guess what is the result: housing price is flying again. Soon after that, price tag of one million is an average house like today for $525,000. That is what I think. The timeline for this hike is 17 years to 25 years later.

Just Jack said...

I suppose if your thinking that the market will "crash" you need to be a little more precise. For example, the condo market could "crash" but the single family market could remain stable for awhile.

The same with Sooke versus some of the neighborhoods that are perceived as better by most prospective buyers.

And you can't over generalize by these districts either. For example the Maplewood neighborhood in Saanich has typically higher prices than parts of Oak Bay like say the Henderson hood. So, not all of Oak Bay is perceived as a better place to live than other districts.

And then what is a crash? Is it a decline in prices of 10 percent over a year? Or 10 percent over a month?

In my opinion, we are not going to see a complete market crash, unless listings soar in the urban core.

Even today, 20 homes a month are selling in Oak Bay. That's a respectable 5 months of inventory. Prices are a bit wobbly with some hoods rolling back to 2007 levels. Like the current listing on Kings Road at $519,000. In relation to years past, that's a very aggressive asking price. But I suspect the market has shifted and buyers are not as demanding of the location and more for a home that is big enough to suit their needs for the next decade.

Marko, may correct me if I'm wrong - and I'm sure he will.

But, I believe we are in a different market that we have experienced in over a decade. Prospective buyer's are much more cautious. The right home in the right location is still very saleable, but move a block or two over and maybe a quirky floor plan and that property listing goes stale.

And in my opinion, this would not be a good market to sell your home without a real estate agent. You need maximum exposure to the market. And you can not do that part time on weekends with an add on UsedVictoria.

Introvert said...

Just as in the children's game, it's important to listen to what "Simon says."

Introvert said...

A Globe and Mail article this morning points out that Canadian inflation is very low--lower than anticipated.

Plus, most economies in the world still aren't doing very well, and aren't forecast to be anytime soon.

Result? Low interest rates as far as the eye can see. Result of that? No housing "crash."

Will prices keep declining gently? Probably. But crash? Not very likely.

Just Jack said...

Nationally, it isn't very likely that Canada would have a crash.

But, locally anything can happen.
70 to 80 percent of our market is local.

A national crash would turtle our market, but a local event could do the same too. And that could simply be a substantial drop in construction starts and home renovations.

No jobs = no mortgage payments

So, how is Home Depot doing these days?

koozdra said...

I'm still of the opinion that we have a national bubble. I also think that despite interest rates being low we will have a crash. To be clear, I consider a crash to be a return to pre 2003 prices.

Just like any pyramid scheme must be fed from the bottom, real estate is dependant on first time home buyers to create move up buyers. If first time home buyers are out of the picture, prices decline.

Perhaps the argument is about the rate of decline. Some say it will be a slow melt. I think it will be a hard fast correction based on panic. There are too many people with too much at stake not to panic at a real estate decline. Everyone is so sure that a decline is not possible. So what happens when the impossible becomes reality?

Only time will tell.

Introvert said...

Some say it will be a slow melt. I think it will be a hard fast correction based on panic.

koozdra, you could be correct, of course. But guesses along these lines have proved incorrect since this blog's inception.

Just Jack said...

I think 2003 prices are entirely possible and would be a good shot in the arm for sales activity to pick up.

For all of the Western Communities there are only selling 1 to 2 homes a day!

That's terrible!

The core districts are doing better at close to 3.5 homes a day. But compared to when the market was sizzling at close to 7 homes selling each day on average in the core, there isn't much money flowing in commissions and salaries in the housing industry. And that trickles through to semi durable sales like appliances, furniture and cars. Kiss the sale of luxury goods good bye, the busiest place in town is the Salvation Army stores.

In my opinion, we cannot sustain these high prices with these low sale volumes. Of course it still has to get worse before it can get better. So, I think we will have to go through a period of low sale volumes and low prices.

totoro victoria said...

Good luck with 2003 prices. I wouldn't bank on that personally unless interest rates rise a fair bit.

I expect the market will continue along as it is for a while with stable or slightly declining prices in the core areas.

I don't see strong consumer motivation to purchase under these circumstances. Probably not the greatest time to be in the real estate industry unless you have a niche.

Just Jack said...

Depending on what and where you are looking to purchase, some prices are at 2004 levels now.

Seeing that happening is some of the fringe market areas, I couldn't rule out a return to 2003 levels.

And prices were not cheap in 2003 either. The typical Oak Bay home still set you back $415,000 for 1950's box. Of course you didn't need a tenant in your basement to afford to live in that neighborhood back then.

Just Jack said...

And it doesn't look like basement suites are that much in demand in Sooke anymore. With the lower prices, people don't need a mortgage helper. So only 2 of the last nine sales had a suite in the basement.

That could happen in Victoria and Oak Bay too. The biggest reason to buy a home with a mortgage helper suite is because your job doesn't pay enough.

And as prices decline, maybe homes with suites could become more difficult to sell? Why pay for something you don't need or want?

That was true a decade ago - why not again.

Dave said...

@Simon
The interest rate is so low. And it will be kept low for another while. With this in mind, It is hard to see a significant drop of housing price. It will be slow to drop futher.

The present situation is seeing price declines of around 1% per month, at the same time that interest rates have been setting new record lows. Some recent buyers may see drops of 10-15% per year as significant.

@Intorvert
Plus, most economies in the world still aren't doing very well, and aren't forecast to be anytime soon.
Result? Low interest rates as far as the eye can see. Result of that? No housing "crash."


@totoro
I wouldn't bank on that personally unless interest rates rise a fair bit.

The myth is that low and falling interest rates always equal stable or rising home prices. The last year and a half should have shattered the myth. Prices have dropped a lot, at the same time the 5 year mortgage rate has fallen by 50%.

Dave said...

correction: ...at the same time the 5 year mortgage rate has fallen by a third over two years. The point is, rates have fallen a lot at the same time prices have.

Just Jack said...

What we're seeing today is that people are loosing confidence in real estate. And without those big increases in prices, real estate gets pretty boring.

Open houses aren't worthwhile to go to, because their is no excitement. Even the agents are boring...

"this is the living room, and over here you have the kitchen with the bedrooms at the end of the hall..."

You no longer hear that you should act quickly because prices are only going up and the agent will be showing the house to a couple this afternoon that are very interested!

Gawd, sniff, sniff - I miss the good old days!

totoro victoria said...

Prices haven't fallen that much in Oak Bay or the other area I monitor. Good luck at getting to an average of $415 000 in OB without an interest rate rise.

All armchair speculation anyway. Sometimes I just get tired of the rhetoric.

koozdra said...

Following real estate prices will make you the last informed person in the market.

Just Jack said...

Okay, how about this..

Right now there are about 100 homes for sell in Oak Bay and 20 are selling each month.

What would happen to prices if there were 200 homes for sell and only 10 were selling a month?

Look Ma, no change in interest rate needed!

CS said...

@Simon,

"Then after that, inflation kicks in and insterst rate gets high. But then? Economy is really good and people's salary increases dramatically."

Two assumptions here seem questionable: (a) that inflation hasn't already kicked in and (b) that incomes are set to increased massively over five to eight years (implied by the projected doubling in Victoria house prices).

On the contrary, I suggest that high food and energy costs mean that income available for housing is being squeezed. And since interest rates seem unlikely to fall further, that means house prices cannot significantly rise.

Further, I suggest that the the return of a good economy will be delayed longer than 3-5 years. Globalization continues to hollow out the industrial and IT sectors of the economy and it seems doubtful if China can continue indefinitely to consume half the world's production of copper, steel and cement, which means that our resource industries may not boom again for many years.

Marko said...

Good luck at getting to an average of $415 000 in OB without an interest rate rise.

I agree, to qualify for $415,000 with a down payment of $25,000 one needs an income of $80,000 based on 3.19%, 25 year amortization.

Since 2004 things have changed a bit. For example, back then 739 VIHA employees made over $75,000 and now that number is at over 2,700 and growing every year. Interest rates are lower than 2004 and Oak Bay is not growing in terms of supply.

Can't see a big tank in Oak Bay without a major increase in interest rates.

patriotz said...

To be clear, I consider a crash to be a return to pre 2003 prices.

A fall from peak just to June 2004 prices would be 40% nominal. I don't see that's likely. As I've said before I see 25% nominal off peak as very likely, which is a fall to about Sep 2005 prices.

I consider 20% or more off peak a crash as it would cause a major disruption for the RE sector and for a lot of people, but I don't care what definition you use.

patriotz said...

Oak Bay is not growing in terms of supply.

Irrelevant unless you think there is a fixed pool of buyers who are willing to pay an unlimited premium to live in Oak Bay versus elsewhere.

Dave said...

The reason Oak Bay will fall as hard as other areas, is referred to as the substitution effect. It may surprise OB owners how many buyers will say... substitute for Swanwick Road properties at 80% off. Who knows, the person who bought Swanwick for 5Million (originally listed at 24Million) may have been looking at 10Million dollar properties listings in Oak Bay. Turns out, they ended up with three times the house and land, and with the spare 5 Mill they can buy a yacht to be cruising Oak Bay in minutes, or pull into the inner harbour in style.

Simon said...

Dave: bought Swanwick for 5Million (originally listed at 24Million)

which house is that? This deal is super impressive.

Dave said...

@Simon

Click 'older post' below. Marko mentioned it about 10 comments from the bottom of the last post.

Listed for 24 million originally, sold for 5 million. I think it was around 70 acres waterfront and around 10,000 sq ft main house, 2006 built. Likely 10 million plus for replacement cost. Marko and others were estimating replacement.

Alexandrahere said...

Marko and all: What do you think of mls 316108 for $449K? It is on the 3500 block of Richmond Rd. Has lovely suite by the look of it. I lived just down the street at one time in a newer home and loved the location.

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