Monday, November 19, 2012

Nov 19 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.

November 2012 month to date
Net Unconditional Sales: 210 (140, 40)
New Listings: 451 (323, 116)
Active Listings:  4577 (4648, 4397)
Sales to new listings ratio: 47% (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

Just over halfway through the business days of the month and we're on-track for about 400 sales, or continued sluggishness.

Meanwhile, the wailing and teeth gnashing about the new mortgage rules continues amongst those that stand to lose from them.  Some interesting tidbits from that article:
“…Simulations indicate that on average (based on 2010 real mortgage data), the additional down payment required is about $25,000, 7% of the purchase price.....  If we assume that these households can devote 10% of their pre-tax incomes to enlarging their down payments, on average it will take 3.5 years to re-qualify"
Looks like this time the hit is larger, and those people knocked to the sidelines will take quite a long time to recover.  This is all keeping in mind that this is under best case conditions of continued low interest rates and an optimistic savings rate.  

227 comments:

1 – 200 of 227   Newer›   Newest»
Leo S said...

From previous:

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.

Passing an arbitrary threshold isn't really a good measure of income. BC income is up about 20% in that period (8% in real dollars)

dasmo said...

Also from previous:
"how is Home Depot doing?"

There share price has pretty much doubled in the last year

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

Sale volumes for semi durables and the renovation market should be a good sign for real estate.

Improved sales for Home Depot should also mean a good market for home sales too.

Unknown said...

Question is are those viha salaries 'normal' wage or yearly wage plus overtime.

Bit of a game for some viha employees to rack up overtime.

How long is that going to last?

koozdra said...

FTA:

"The ‘housing wealth’ effect (the increased confidence, and willingness to spend and invest, that results from rising house prices) is the single most important driver of job creation"

This is sad.

Introvert said...

It's sad when someone predicts that the average price of an Oak Bay house will revert to $415k. Delusional.

And when I supposed a while ago that certain folks on this blog believed prices would drop that much in Oak Bay, I was accused of straw man argumentation. Hmmm.

StalJ said...

I think Home Depot would have doubled from people thinking the States has bottomed. Probably not the best bet quite yet. Home Depots are everywhere down there.

U.S. home prices decline in September
This is first month-over-month decrease since February


For the island, I think the switch in retirement destinations will be the biggest challenge going forward. I have many a flatlander in my family and I have noticed where they once always talked about the coast, now they are staying put and wintering in Arizona. It’s so cheap to live down there and they still get to see their grandchildren during summer and back for christmas. I think for the island to switch to being a destination again, States prices would have to match ours again but that could take a while as it’s not clear they have stopped falling.

Phil said...

It's sad when someone predicts that the average price of an Oak Bay house will revert to $415k. Delusional.

I know.. If the government ends up dropping the CMHC expect that number to be 250k.

The banks do still understand risk despite the events of the last decade.

Leo S said...

I know.. If the government ends up dropping the CMHC expect that number to be 250k.

I'm with you this time, Introvert.

Just Jack said...

If you go back and look at what I posted you will read that I wasn't predicting a return to 2003 levels. As it's equally plausible that prices could fall further and I don't want to be held to a prediction that may end up being too optimistic.

It's simply the reverse of what happened on the way up. No one knew where and when prices would crest. So any dollar figure for a bottom to prices at this point can be equally plausible. At this time no one knows.

But with so many people already owning a home and with home owners and investors stretched financially and now prospective purchasers shying away from the market, who is going to rally the market?

And besides, how long can we keep posting fewer and fewer sales before the wheels fall off this cart.

So go ahead a poo poo the idea of a return to 2003 price levels, Introvert. But you have no reason why it can't dip to that or any other level. If you took that same home out of Oak Bay and put it in Saanich or even in the Hillside area it would already be around $425,000.

Thank God, we have the high tech industry and all those young urban professional to save us.

Seth Perry said...

You're fired!

Trump hotel in Canada failing, investors suing after 7 years and no building

http://www.thestar.com/business/article/1289698--trump-tower-developer-suing-7-disgruntled-investors-to-close-deals-they-now-regret

"Dozens of purchasers trying to get deposits back and renege on final payments averaging over $500,000."

"Most were caught up in the get-rich-quick mentality of Toronto’s booming condo market and intended to flip the units or use them to generate retirement income."

"some buyers who readily admit they were so blinded by the flash and cash of Donald Trump that they didn’t do proper due diligence: Buyers weren’t purchasing so much a condo as a share in a high-end hotel that, so far at least, is losing money."

"Some buyers are sophisticated investors. But many others are hard-working immigrants who just want their life savings back — 20 per cent deposits now sitting in trust and due to be released to Talon on closing."

Just Jack said...

I don't think there is any "if" about the government dropping CMHC. I think Flaherty has consistently made his point clear on this. Five to ten years.

Marko said...

I know.. If the government ends up dropping the CMHC expect that number to be 250k.

Great, when this happens we can throw a HHV party at my 600k waterfront Oak Bay home.

Marko said...

Bit of a game for some viha employees to rack up overtime. How long is that going to last?

Well, the number of employees making over $75,000 has increased 10 years straight so apparently it can last a very long time.....

Dave said...

I surely wouldn't be counting on VIHA jobs to save Victoria.

B.C. not alone in facing deficit crisis

From the article:
Faced with a fiscal crisis in the mid-1990s. Alberta closed three of the eight hospitals in Calgary...B.C. had a $1.8-billion deficit in the fiscal year ending in 2012, up significantly from the previous year. Indeed, it could happen here too.

I also wouldn't be counting on federal transfer payments to save us. This year's federal deficit just rose 5 billion more than expected.

http://www.news1130.com/news/national/article/421362--deficit-to-rise-5-billion-to-26-billion-this-year-flaherty

Seth Perry said...

"Well, the number of employees making over $75,000 has increased 10 years straight so apparently it can last a very long time....."

Source? It just proves the growing inequality. Considering that the average income in BC is more like $45,000 or $25.50 / hour we actually don't have an endless supply of $75,000 + salaries. Besides all those people earning $75,000 already have homes and big mortgages. I don't think they are looking to "invest" in a second home - not in this market.

Here is what my research states for Victoria:
* In 2012 The Living Wage Edges Higher (the wage required to maintain an adequate quality of life)
* 2011 - Median Hourly Earnings Fall - In 2011, median hourly earnings in Greater Victoria were $18.09 (2002 constant dollars), down from $18.57 in 2010.
* 2011 - Cost of Food Remains High - up almost $160 per month from 2007.

It's not Disneyland out there. Let's not fool ourselves.

http://www.victoriafoundation.bc.ca/sites/default/files/vital_signs/attachments/victoria_vital_signs_2012_with_sources_october_1b.pdf
http://www.welcomebc.ca/wbc/immigration/choose/economy/income.page

info said...

Clearly, the steep rise in house prices over the last 10 to 12 years was due to the artificial stimulus of excess credit.

Quoting:


Consider how we got here:

•Prior to 1999 you needed 10% for a mortgage and that mortgage had a maximum amortization of 25 years. CMHC also had limits on how much you could buy with their insurance.
•CMHC then lowered the down payment to 5% down with price limits depending on the area. Amortizations were 25 years. There would be no price limit on what they would insure if 10% or more was put down.
•By Sept. 2003 CMHC allowed 5% down on 25 yr amortizations but they removed all price ceiling limitations. Now any mortgage would be insured regardless of the value of home purchased.
•March 2004 CMHC began allowing Flex-Down products which permitted the 5% down to be borrowed and 1.5% closing costs to be borrowed (essentially zero down, but 95% insured.
•March 2006 you had 0% down, 30 yr amortizations. This became 0% down, 35 yr amortizations later in the year. Interest only payments were allowed for 10 years.
•November 2006 CMHC began allowing 0% down, 40 yr amortizations along with interest only payments for 10 years.
•Canadian banks ramped this up by allowing up to 7% cash back offers is you would take on a mortgage with them. You could basically get paid if you bought a house.

All of these were exacerbated by the emergency actions taken during the financial crisis.

As we mentioned earlier, the Bank of Canada moved fast to slash interest rates to unprecedented lows, allowing banks to continue lending to businesses and consumers. The federal government established a $125-billion program to buy mortgages it had already insured from banks and financial institutions, providing even more liquidity. Ultimately the Fed's bought mortgages worth a stunning $69.4 billion.

CMHC had their lending cap increased. CMHC went from $100 Billion in insured mortgages in 2006 to $600 Billion in 2012.

Most Canadians simply do not appreciate just how artificial our housing boom is and what this change in thinking by the government means for house values.


Credit has been tightened significantly over the past few months. This will cause house prices in Victoria to drop significantly.


info said...

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

Quoting:


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.


This will add downward pressure on house prices in B.C.


info said...

Canadian Business Magazine: Canada's Housing Crash Begins.

The link to the original article no longer works.

patriotz said...

"how is Home Depot doing?"

There share price has pretty much doubled in the last year


Lest we forget Home Depot is a US firm and the US housing market has now passed bottom.

Simple and obvious.

patriotz said...

I don't think there is any "if" about the government dropping CMHC.

The name may be dropped but the government guarantees will continue. Privatize profits, socialize losses. You already have the model with Genworth, etc.

If the government truly got out of the mortgage business we'd see a crash far bigger than that of the US. Remember that Uncle Sam is still very much in the US mortgage market propping up prices.

Just Jack said...

The government would still honor the $600 billion dollar liability. It just would stop re-insuring renewals. Then the lenders would insure with private companies like Genworth.



patriotz said...

It just would stop re-insuring renewals. Then the lenders would insure with private companies like Genworth.

As I said, the taxpayers are already holding the bag for Genworth. True private mortgage insurance will not happen because private investors will not put their money at risk. Even in the US today almost all high-ratio mortgage insurance is guaranteed by Uncle Sam.

Marko said...

Source? It just proves the growing inequality.

VIHA website posts the list every year under the Finance Act. Inequality? Most individuals have relatively equal opportunity in terms of going to nursing school or similar. Secondly, plenty of jobs in Health Care across Canada. I personally thought as a Respiratory Therapist at VIHA that I was underpaid given the job description so I quit. I am not sure where you see inequality.

I surely wouldn't be counting on VIHA jobs to save Victoria.

It isn't just VIHA....BC Ferries, National Defense, BC Government, IT industry, etc.

There are over 1,000 people at BC Ferries making over $75,000 and that is a relatively small organization.

Besides all those people earning $75,000 already have homes and big mortgages.

Or like some of my clients they don't have a mortgage at all.

dasmo said...


US housing is recovering now

Marko said...

In February 2012, British Columbians earned an average weekly wage of $860.57, comparable to the national average of $855.69. The average hourly wage in the province was $23.77. Hourly wages in the province remain slightly ahead of the national level of $23.53.

The average person simply can't afford a SFH in Oak Bay, it is what it is.

The average person making $23.77 per hour with $20,000 down can qualify for up to $220,000 and that buys you a decent condo in Victoria in the current market. Two average people together can qualify for $440,000 and that buys you a newer townhome in Victoria or a starter home.

ks112 said...

So does this offset the hiring freeze thats currently going on for all bc government jobs? Some of the logic on this blog just boggles my mind...

ks112 said...

BC Ferries generates over 700 million a year in revenues and has over a billion in assets, last time i checked that does not qualify as a small organization in Victoria.... or anywhere else in the world.

Marko said...

Relatively speaking, it has 4,700 employees compared to VIHA's 18,000.

Marko said...

Some of the logic on this blog just boggles my mind...

I 100% agree.

Introvert said...

Hilarious letter to the editor

Leo S said...

The average person making $23.77 per hour with $20,000 down can qualify for up to $220,000 and that buys you a decent condo in Victoria in the current market.

Except that the ownership rate is 70%. So people with significantly lower than average income are also buying.

Introvert said...

This will add downward pressure on house prices in B.C.

Downward pressure. Downward pressure.

If I had a nickel for every time that "downward pressure" has been mentioned on this blog since 2007, my mortgage would be considerably smaller.

US housing is recovering now

OK, so the U.S. real estate market has colossally tanked and now is on the way to recovery. And Canada's prices, meanwhile, have only begun to
flatline (flatline!) over all this time?

Maybe, just maybe, the fortunes of Canadian real estate do not exactly mirror the fortunes of American real estate. I know it's difficult to fathom...

Just Jack said...

$600,000 for a waterfront home in Oak Bay seems pretty hard to fathom. The last time those prices were found in Oak Bay, the Commonwealth Games were here.

Not that you can't find waterfront properties in Greater Victoria for that and less today. There are a couple of waterfront homes listed for sale on Piers and Salt Spring Islands around $450,000. Properties with tidal waterfront along Portage Inlet in Saanich for $550,000 and some in North Saanich overlooking Satellite Channel around $725,000.

However, the cheapest waterfront in Oak Bay, probably starts at $1,300,000.

But there is no hurry to buy waterfront because with some 215 waterfront homes listed for sale, only 8 sold in the last 30 days. And none of those were in Oak Bay.

In my opinion,the asking prices for waterfront in Oak Bay just seem to be out of sync with what is going on in the rest of Greater Victoria.

But still $600,000 for Oak Bay waterfront does "sound" unrealistic relative to today's asking prices, but it could happen. No one knows.

It would probably take a recession like the one we had in the 1980's for that to happen. And in that case, you won't be making the income you are today as a real estate agent and lenders will likely want stronger covenants than they do today.

But BC's economy isn't in the crapper. Unless the real estate market goes belly up and drags us into one.

Or, maybe it is time to sell the condo and buy waterfront?

The only thing we do know for sure, is that there is no hurry to buy. And a better home will always be coming up for sale.

Russ said...

I'm curious what you guys think... My wife and I are mulling building new on a property in deep cove. The timing for our family, cost of the lot, location, etc are all great for us and financially it wouldn't be a gigantic burden.

What I'm wondering is, do construction cost changes lag changes in price for existing homes? I assume that it would take some time for lower sales volume to turn into less renovation projects, less new construction and therefore hungrier contractors. Are we at a point (yet) in the correction that contractors, material suppliers etc are feeling the pinch and have to lower their rates to stay busy.

Marko or anybody have an opinion, ancedote from people in the trades, or better yet a pertinent stat?

Also what is a rough estimate of $/sqft for a reasonably high quality family home that you plan to spend 20+ years in?

Just Jack said...

Check out your contractor. Have him give you the addresses of the properties that he has built. Go take a look at them and if your lucky talk to the owner.

Don't believe anything a relative or friend of a friend tells you. Expect to spend a lot of your time at the site. Get a cost estimate broken down by the contractor. If you disagree with some of the actual costs have the contractor show you the bills.

Never, never, never release that 10 percent hold back until ALL the work is finished. Make sure you and the contractor understand about the HST.

If you and the contractor are in opposition at the start of the build - part ways immediately, do not think that it is going to get better. The longer you wait, the more the next contractor will charge to fix the other person's mistakes.

Buy flowers for your wife every Friday.

Just Jack said...

Why don't you get the drawings made up, along with a specification sheet of what quality you want in your home and take it to an appraiser. For a couple of hundred bucks, you can have someone take an unbiased look at it and you will then have someone to talk with that now knows pretty much what you are intending to build.

Costs are important, but if you are building to live in the home for the next 20 years, paying 10 percent more for the right builder may be a wise decision.

At this point it sounds like you are more worried about being ripped off by the contractor. The more knowledge you accumulate the more comfortable you will feel about the building process.

-Don't use the appraiser suggested by your builder.

Just Jack said...

It's impossible to quote a cost per square foot, based just on "high quality" Kitchens and bathrooms are the most expensive areas to build, after that you are just adding square footage. The bigger you build the lower the price per square foot.

And build to what your neighborhood will support. The 5 million dollar home that just sold in Metchosin is a good example. The owners allegedly paid over 18 million to build the home. The home was over built for the neighborhood and the market would not pay that premium.

totoro victoria said...

CMHC latest report:

Resale prices: Consistent with a
relatively stable outlook for sales, the existing home market will remain in balanced conditions in the latter part of 2012 and in 2013. As a result, the average MLS® price should grow at a rate close to inflation, or slightly
below.

British Columbia
Buyers’ market conditions in the existing home market emerged in mid-2012 and are expected to continue into early 2013. However, balanced markets are expected to return by mid-2013.
Economic growth is forecast to be slightly stronger in 2013 than in 2012, reflecting increased non-residential investment and consumer spending partly offset by a weaker global outlook.

Marko said...

What I'm wondering is, do construction cost changes lag changes in price for existing homes? I assume that it would take some time for lower sales volume to turn into less renovation projects, less new construction and therefore hungrier contractors. Are we at a point (yet) in the correction that contractors, material suppliers etc are feeling the pinch and have to lower their rates to stay busy.

Marko or anybody have an opinion, ancedote from people in the trades, or better yet a pertinent stat?

Also what is a rough estimate of $/sqft for a reasonably high quality family home that you plan to spend 20+ years in?


Quality contractors/builders don't go hungry, big misconception. My father is a builder in-between projects right now and he is passing the time by doing high-end custom masonry work. He has clients waiting on him. A lot of registered builders have multiple skill sets. A number of them have real estate licences, some have a trade, a few are lawyers, engineers, etc. I sold a new house for one guy last year and he wasn't happy with the margins so he went back to working for the school board on the seismic upgrade projects, solid pay.

Regarding supplies, it isn't a Victoria market place for the most part. For example, the majority of builders use Milgard windows which are shipped up from Seattle. If the market in Victoria is slow I doubt Milgard windows will drop in cost. Concrete and a few other things fluctuate a bit. There are large fixed costs that don't fluctuate very much such as permits, engineering, warranties.

I would say $120 to $150 per sq.ft. for a quality home (garage included in sq.ft. calculation). There are so many variables, you can use a designer I really like for $3,000 to $5,000 or your can use Zebra for $15,000 to $30,000. You can go electric heating or infloor radiant. You can go Milgard windows or Pella (4-5x cost).

hap pychucky said...

Russ

Good Contractors and trades are always in demand. U may be waiting a long time to see their prices come down. Go with the best and not the bargain quotes. U will pay in the end. Get references, check BBB. Add another 15% for problems and changes. Good quality home with no foundation issues $200-$300 depending on how high end u go.

Marko said...

Labour costs are down a bit such as drywall which you can now find for $1.00 to $1.05 per sq.ft....

Still be prepared to pay for quality work thought.

hap pychucky said...

Marko

I Know u r in the business but 120 to 150 is not going to give you the best home once u add in all the cost involved in building. I know because i just went through it.

Marko said...

There is an absolute shortage of true tradespeople out there.

For example, there are a lot of carpenters our there but how many of them can look at a blueprint of a dome roof structure and quickly frame it without wasting too much time.

Just Jack said...

The builder should already have built in a contingency for cost over runs. Adding in one for yourself may just be redundant. But that is a question you have to ask your builder such as how much are you (the builder) allowing for kitchen cabinets and fixtures? How much of a contingency are you allowing. The good builders are not going to nickle and dime you for every change you make. If you are constantly making changes, then that's different. Moving a closet from here to there - not so much.

If the builder gives you an allowance, then you can go and start shopping for the cabinets you like, maybe even upgrade them at your cost. The same for the electrical fixtures.

As for the difference in builders. Building a house isn't rocket science, if a builder has been in business with a good reputation why pay anymore than 10 percent over the next qualified builder. Most of the stuff is fabricated off site these days anyway.

And that's another question to ask, what is the contractor charging to manage the build? How long will it take to build?

Just asking for quotes gets you a low of $120 to a high of $300. And that ain't any help to you.

Marko said...

Marko

I Know u r in the business but 120 to 150 is not going to give you the best home once u add in all the cost involved in building. I know because i just went through it.


I run the spreadsheets for my father and you can build an extremely nice home right now for $150 per sq/ft if you are smart with how you spend your money.

$110 per sq/ft spec home - http://www.jurasconstruction.com/?p=46

$120 per sq/ft + fixed management fee, custom build for owner -> http://www.jurasconstruction.com/?p=38

$120 per sq/ft spec home -> http://www.jurasconstruction.com/?p=41 (I haven't uploaded pictures for this one but it was spectacular inside). You can google 2223 Woodhampton and find pictures from a recent re-sale of the home.

As I said, you can spend $3,000 on your plans or $30,000. $30,000 may not necessarily be better than those that are $3,000.

You can hire a builder that is on site every day and saves you money via a lot of intangibles or you can hire a builder that sits in an office and has a marketing team.

Just Jack said...

Who builds roof trusses anymore? Get the truss company to design it.

Marko said...

, Who builds roof trusses anymore? Get the truss company to design it.

We've had roof trusses built on site on 2 of the last 5 homes. It is often cheaper. A truss company is cheaper for a straight forward roof, but often unique roofs designs are more practical to do onsite.

Just Jack said...

The $110 per square foot would be for a thousand square foot one storey home on a slab foundation? Or would it be for a 2,000 square foot home with a thousand square feet of unfinished basement? Or would that be a thousand square foot two storey home with the living area on the main floor and the bedrooms up? Would that include a single carport or a double garage? decks? landscaping?

hap pychucky said...

Marko

That includes landscaping, deck, driveway, All hookup, insurance, Building permits, Fireplace, foundation, excuvation?

Marko said...

As I said, $120 sq/ft to $150 sq/ft depending on all the variables within reason.

Introvert said...

Properties with tidal waterfront along Portage Inlet in Saanich for $550,000

Gotta love the Gorge-Tillicum area, the armpit of Saanich.

Marko said...

Marko

That includes landscaping, deck, driveway, All hookup, insurance, Building permits, Fireplace, foundation, excuvation?


Yes. For example, lot at 2529 Shakespeare was purchased for $340,000 plus add property transfer tax, demolishment, legal fees, mortgage costs (1 year turn around).

Home was sold $859,000 including HST or $790k + HST, subtract commission, legal fees, etc.

Home is 3200 sq/ft. At $110 per sq/ft we have $352,000 for construction costs or less than $90,000 profit on the project. At $130 per sq/ft it would be break-even.

Has to be $110 per sq/ft otherwise project would be a complete failure.

And yes, that included a Valor fireplace and a lot of other things.

Dave said...

Russ

Why not save yourself a whole lot of money, time and headaches. There will soon be oodles of better locations to choose from, with nearly new homes to your liking. The benefits are 40% off what you will pay now and you get to avoid all the headaches. Besides, if you wait, you will be in your dream house almost as quick. Had to ask.

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

off to an inspection, I've contributed enough for today :)

Just Jack said...

3,200 square feet is a big home for today. Would you charge the same for a 1,600 square foot home?

dasmo said...

Sorry Dave, Even if there is a crash, the dream home in the ideal spot will not be 40% off. What will happen is the crap will no longer command a fortune...So, your still stuck building.

Introvert said...

There will soon be oodles of better locations to choose from, with nearly new homes to your liking. The benefits are 40% off what you will pay now and you get to avoid all the headaches. Besides, if you wait, you will be in your dream house almost as quick.

Dave owns a great place on Mount Bullsh*t.

Introvert said...

Or maybe he rents there.

Just Jack said...

Okay Dave, I'll hold him while you get the blow torch and pliers.

a simple man said...

I would not call Swanwick Ranch "crap". There will be deals in all levels of housing.

info said...

#301 - 2022 Foul Bay Rd. listed for 35% below assessed value.



totoro victoria said...

Hmm... this couldn't possibly be the reason could it?

"The Woodbridge Complex has voted on doing a remedial makeover of the exterior of the building."

totoro victoria said...

Nothing like a $30,000 special assessment and months of noise and inconvenience to drop a price. Not to mention the fear of mould already in the building.

dasmo said...

I think Swanwick Ranch is a special case. Kind of like putting a whack of money into a custom car and trying to sell it for three times what you put in it and in the end having to sell it for less. All we know is they purchased the land for 1.7 million. Say 300/sq foot to build, that's 3 million for the house, say another million for landscape and site work, and say 500k for the guest house, That's 5.2 million my best guess. I think they pretty much broke even...

Dave said...

"special case" of mathematics

dasmo said...

Sorry, 6.2 :-) I guess they lost 1.2...

CS said...

"Except that the ownership rate is 70%. So people with significantly lower than average income are also buying."

Not necessarily so. Rather it means that people with lower than average incomes bought a long time ago and are now living in houses they could not afford to buy today (unless they sold one similar at the same price.)

CS said...

And many of those living houses they could not buy on their current income are around retirement age and thinking of downsizing to raise cash for retirement. Question is, who's going to buy them out? Not someone on a comparable income -- unless the price falls.

Just Jack said...


What happens with these over improvements is that they suffer from an additional form of depreciation from being a super-adequacy. Brand new and the building has 30 to 50 percent depreciation already.

And that's never going to change. And will probably get worse as the building ages. The property will always be a pain to find a buyer.

Because, just because you're rich doesn't mean you know anything about real estate.

In fact, I think a lot of people are making a serious SNAFU in some of these expensive properties they're buying today.

I spoke with a person yesterday, that wants to buy a house in Oak Bay. Even though she fully understands prices are coming down. I asked her why? She said that she simply only knows about real estate. Stocks, bonds are all a mystery to her. She knows that she'll likely loose a bundle - but that's okay she'll still have a house. Loosing a hundred or two hundred thousand means nothing to her. She earns less than $50,000 a year, has never lived anywhere else but Victoria, has never been to a warm beach in her life and owns a cat.

Welcome to Oak Bay.

CS said...

In fact, although I have no data whatever to go on, it could be that the increasing stagnation of the market is precisely because boomers expecting to cash out at the top of the market won't lower their prices at a time there are too few younger high-income buyers to supply the cash demanded. In which case, Just Jack's scenario of prolonged stagnation leading to market collapse seems a likely outcome.

Leo S said...

Rather it means that people with lower than average incomes bought a long time ago and are now living in houses they could not afford to buy today

Good point.

CS said...

Re: People " living in houses they could not afford to buy today"

This is what we saw when contemplating a move to Toronto in 1986. Our OB home was valued at $140K, and for that we could have purchased in Toronto a Victorian row house Jane Street, with a front door opening directly onto the sidewalk, and a frontage of 12 and one half feet. But we hesitated, perhaps because the "Jane Street Murder" was front page news in TO that week.

We then looked at some detached houses in the $400K plus range, but they were so run down it was hard to believe that the occupants were the sort of people able to raise $400 K -- except by selling their houses.

Not surprisingly, Toronto prices caved in a year or two later. It seems possible that similar dynamics will lead to a correction in Victoria's market.

Marko said...

3,200 square feet is a big home for today. Would you charge the same for a 1,600 square foot home?

3,200 square feet including garage is not big in the core, maybe in Happy Valley and Westhills.

Reality is no one is going to drop $350,000-$600,000 on patch of dirt in the core to build a 1,600 square foot home. Most people in the core max out on the zoning bylaw.

Marko said...

Not surprisingly, Toronto prices caved in a year or two later. It seems possible that similar dynamics will lead to a correction in Victoria's market.

It seems like we've been flat give or take for 5 years while other markets have continued up during that time so if Victoria was overvalued compared to Toronto it should have somewhat eroded over the last 5 years.

info said...

totoro victoria:

You brought up CMHC's latest report. Again, consider the source. You should expect any report from CMHC, almost all realtors, real estate boards, banks, etc. to be positive news. Nothing of note in that report. The same old.

What is interesting with CMHC's reports is that they seem to be getting less positive as time goes on. That is noteable.

Acting upon information from the above sources has led many to buy at the peak of this housing bubble. Unfortunately for them, this debt induced bubble is bursting as the very thing that produced it in the first place, excess credit, is being withdrawn.

info said...

Canadian housing prices are not sustainable: David Rosenberg

Rosenberg correctly predicted the US housing crash.

Quoting:


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?”

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.


It is noteable when one of our own banks says that Canadian real estate will experience a decade-long corection/slump.

info said...

Signs point to a severe housing correction in Canada: The Globe and Mail

Quoting:


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 and Vancouver's is 9.2. Make your own conclusions about the severity of the housing market corrections in these two cities.

info said...

In comments to the House of Commons finance committee, Mark Carney said Canada’s housing market is overvalued by 35 per cent.

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 housing costs 7.7 times the average income.

Both cities are considered to be extremely overvalued.

Find me one city in the world that had house prices double in a decade up to 7.7 times average income that had a soft landing upon correction.


Leo S said...

Info, those articles are fom September, July, and April. Pretty sure they've all been posted.

As for the likelihood of a soft landing, here's some contrarian thoughts on that

patriotz said...

Teranet October numbers for Victoria:

% change y/y -1.71%
% change m/m -0.56%
Year to date -0.01%

Have a nice day.

koozdra said...

The National had an interesting conversation last night.

Are we headed towards a recession

Patricia Croft, who sees a soft landing, seems quite delusional.

Just Jack said...

The home equity lines of credit and longer amortization periods had an important effect of stabilizing market prices for the last several years. The ability of a crown corporation and our government to expand and lengthen these in the past is what made us different from our cousins to the south and has mislead many into believing that our market will have a soft landing. The chief reason why some are expecting a soft landing has been the flat prices of the last few years.

In the game of who wants to be a millionaire, these were two of the lifelines available.

Now, that both lifelines have been curtailed, I expect the rate of price declines to accelerate as those selling under duress circumstances increase.

totoro victoria said...

I see flat or slightly declining prices as the most likely scenario at the moment. That could change if interest rates rise.

I could see ten years of flat prices which would, essentially, be a decline given inflation.

As far as CMHC goes, I find their reports much more reliable than most information published by the industry. They have some of the best data collection around.

Is their information skewed? I don't think so. What it is not good for is predicting longer-term market trends. CMHC doesn't do this anyway, maybe because it is difficult for anyone to do this with accuracy.

koozdra said...

"I see flat or slightly declining prices as the most likely scenario at the moment."

The problem with your prediction is that it is based on the assumption that the rise in prices is purely a function of interest rates. You conveniently ignore the role of the CMHC and the general availability of credit. Even now we are seeing credit being tightened up. Now that OSFI is watching the CMHC and not the human resources directorate, credit will be constricted.

Where will the buyers come from to keep these prices afloat? Or are you suggesting that "nobody has to sell"?

reasonfirst said...


Landcor Report Out:

http://www.landcor.com/market/reports/Q3_12_Residential_Sales_Summary.pdf

koozdra said...

^ Landcor

Call it a lesson in hubris and the very
human trait of ignoring what we don’t wish to see. Put directly below a wobbly
stack of anything, most sensible humans will carefully tiptoe away. Or if they
can’t, they’ll find some way to reinforce the pile, mitigate the wobbliness. They
certainly wouldn’t tug at the pile or put the boots to it. They certainly wouldn’t
bet the house on it.

...


Call it self-fulfilling or natural cycles of peaks and falls but there’s a creeping
recognition that markets have peaked, with estimates of the correction to
come ranging from 10 to 15 percent among the optimistic economists (yes,
that’s an oxymoron) to up to 40 percent among the most grumpy

Predictions are all over the place: status quo, slight easing, that Chicken-Little
collapse. If the latter, or even sort of, it will put a huge cohort of financially
stretched homeowners into negative equity and squashing the financially
weak and/or ill-prepared.
Underpinned by the shifting sands of historic low interest rates, bedded in
the reassurance of years of rising home prices and steady ‘paper’ gains,
homeowners and others blithely pile on new debt. The haystack is rising, even
as real estate markets finally go soft, their foundation bales chewed out . . .
. . . heads up!

totoro victoria said...

My armchair speculation is not based on the assumption that interest rates are the ONLY factor at play.

The tightening of credit has occurred with changes in criteria. This impacts the number of buyers out there to a degree. I cannot see prices rising because of this. This factor is similar to the impact of flat or slightly declining prices on consumer confidence is negative on prices overall.

I suppose what I always come back to is affordability as a baseline. I do believe many folks can save a down payment if this is a goal. I don't believe most folks can afford to pay an extra $500 or a $1000 more per month for the same home if interest rates rise.

I believe we are at a good place with affordability and that this overall has a stronger impact than easier credit or consumer confidence on prices.

The other factor that I see as persuasive is statistical trends. Prices tend to be cyclical. A run up cannot go one forever. Usually there is a downturn, but I believe a sharpish downturn in Canada is most likely to be caused by factors related to affordability.

Just my two cents. Prognosticate whichever way you wish. I don't even care if I'm right or not :) I'm the only one impacted because I've made my choices based on my view of things and my current circumstances. Same for everyone I guess.

Introvert said...

It is noteable when one of our own banks says that Canadian real estate will experience a decade-long corection/slump.

No, it's not. And you spelled "notable" wrong.

% change y/y -1.71%
% change m/m -0.56%
Year to date -0.01%


The declines look pretty gentle to me.

I expect the rate of price declines to accelerate as those selling under duress circumstances increase.

How many instances and variants of this notion have we read on this blog over the years? What makes anyone think this time it will be true?

Each time we read statements such as these, their hollowness becomes increasingly apparent. Not only that, but a sense of desperation becomes clear: "If I say it just one more time, it might come true."

That's my assessment. I could be wrong.

a simple man said...

I just know the crash is around the corner. I feel it in my bad knee.

dasmo said...

funny Simple :-)

"those selling under duress circumstances increase" The other thing affecting that is the drop in rates. I have friends that bought a large place in 2006 that was slightly risky because to afford it they needed to rent out both suites in the place. That was with rates at 4.7 for them. They have refinanced at 2.99 so for them there is less duress. Personally I think the low rates relieve financial stress because anyone who bought at peak is now renewing with lower rates. So unlike the states, where people who were sold on those special interests or less than interest ARM mortgages, suddenly had their mortgage payments double after two years, We have a situation where peoples payments are being reduced upon renewal.

I pretty much agree with Scotia though. We have hit a wall, wild speculation is over, -10% from peak, and long and flat with general boredom towards real estate investing. I think the the ten years has already been underway though so I give it another 6 years until things start to "bubble up" again. This will cause employment to shift IMO. Lot's of people employed in construction / real estate industries were not qualified and did not have a lot invested in there carrier anyway so they can move on to something else. Less real estate television is also a good thing IMO....

Just Jack said...

No despaaraton on my parte hear. Lots' of stuf fer sell. no hury to bye.

patriotz said...

Rather it means that people with lower than average incomes bought a long time ago and are now living in houses they could not afford to buy today

Never mind lower than average incomes, most homeowners of all incomes are living in houses they could not afford to buy today.

Just Jack said...

Those Teranet numbers do look very gentle and since I commonly do a re-sale analysis I can understand why.

There have been very, very few re-sales of the same home that have not been renovated. Our market has also fragmented. Oak Bay doing fine. Sooke not so much. So how much relevance does a re-sale in Oak Bay have to do with Sooke? There is no relevance in the magnitude, but certainly in price direction.

But, at least it's something. The direction of where prices are going being more important than the magnitude.

If you want something more specific, then you'll have to narrow your criteria to a neighborhood and certain style of home. For example, Gordon Head homes from the 1970's and watch how these are fairing in the market.

patriotz said...

The declines look pretty gentle to me.

It was pretty gentle in Japan too. 1/2% a month adds up over a decade.

I think the decline that we saw in September will be more typical going forward though.

Just Jack said...

More to that story than just the mortgage interest rate.

The seepage comes from other debts like credit cards in the game of who wants to be a millionaire.

"Regis, I'd like to use a lifeline.

-extend my mortgage
or
-consolidate my debts into my mortgage."


REGIS: "Sorry, you have only declare bankruptcy left"

dasmo said...

Renting does not relinquish one from credit card debt. The advantage of an owner is they can consolidate and move that debt into a 2.99% -3.5% interest rate instead of 7% - 12% or even up to 29.9% like on a Bay card...

patriotz said...

The advantage of an owner is they can consolidate and move that debt

You mean an owner who bought more than 5 years ago, in the case of Victoria. Those who bought later do not have that option - excluding those who had a large down payment, who are unlikely to be the types to run up CC debt anyway.

Introvert said...

It was pretty gentle in Japan too. 1/2% a month adds up over a decade.

So now Victoria is Japan?

Unfounded comparisons are fun, aren't they!

Let me try. Bank of Montreal is like Lehman Brothers.

Just Jack said...

The "advantage" is a deferring process, that a renter doesn't have.

This may become a new course in finance on how to pay debt with debt to become debt free.

Leo S said...

@totoro Is their information skewed? I don't think so. What it is not good for is predicting longer-term market trends. CMHC doesn't do this anyway

You quoted from the report: "Consistent with a
relatively stable outlook for sales, the existing home market will remain in balanced conditions in the latter part of 2012 and in 2013. As a result, the average MLS® price should grow at a rate close to inflation, or slightly below."

Sounds like a prediction to me. I trust data from CMHC and banks and the mortgage industry. Their predictions are likely more influenced by politics than any desire for accuracy.

I believe we are at a good place with affordability and that this overall has a stronger impact than easier credit or consumer confidence on prices.

It really depends. We're no longer at decade highs, so in that sense we are in a good place. However we are also still quite far from where previous corrections have ended up. If you're going on some sort of affordability correction like we've had in the past, then we've got another 10-15% decline ahead of us.



Leo S said...

@Introvert
How many instances and variants of this notion have we read on this blog over the years? What makes anyone think this time it will be true?

Your second statement does not follow from the first. The first, that the decline has not been as strong as some people predicted, is true. However what happens in the future is not influenced by what has happened because the conditions are different. Clearly many things have changed from years past, and if you count them all up they are much more on the negative side for real estate than the positive side.

totoro victoria said...

Maybe. It is a short-term prediction however. I think it is less likely that prices will grow at the same rate of inflation.

Don't forget to read the whole report. There are overall data and short-term predictions and region-specific data/predictions in the report.

axeman said...

I would not have been able to get my mortgage, had the rules been in place. this will affect a lot of people, but it needed to be done.

I should never have happened in the first place, but at least they saw the error in their ways.

The Mortage industry only care about themselves not the overall picture... left unchecked, the crash would have been much more severe.

Leo S said...

But, at least it's something. The direction of where prices are going being more important than the magnitude.

Not to mention that a 1% decline in an average house amounts to about what the average family saves in a year.

The advantage of an owner is they can consolidate and move that debt into a 2.99% -3.5% interest rate instead of 7% - 12% or even up to 29.9% like on a Bay card...

I recall reading some articles about the miserable rate of financial literacy in Canada. That would explain why people might think that spreading their debt over 30 years instead of paying it off is an advantage (I don't mean you, but in general). The ability to consolidate is an advantage only in a real emergency that could not have been feasibly prepared for. In all other cases it's a very poor bandaid for the underlying problem of living beyond your means.

reasonfirst said...

Here's an explanation to the gentleness of decline of Teranet that makes sense to me as it has been noted that crap isn't selling:

“In an up market everything sells, good and bad. In a down market, only the best properties sell. So it takes a while for transaction-based indices to reflect the true decline in prices"

Read more: http://www.vancouversun.com/business/Opinions+vary+extent+Metro+Vancouver+home+sales+downward+trend/7339942/story.html#ixzz2CtOlUJP3

Alexandrahere said...

Marko and all: Could you tell me what you think of mls316108 on 3500 block of Richmond Rd? Is it priced right now at $449K? It has a lovely in-law suite but only 2 beds & one bath up. I like the area as I once lived in a newer home just down the street. Thanks in advance for your input.

Introvert said...

Clearly many things have changed from years past, and if you count them all up they are much more on the negative side for real estate than the positive side.

Of course, Leo. But what frustrates me is that no matter the conditions, the same talking points prevail.

totoro victoria said...

Alexandrahere - not Marko but I looked at the listing and it looks lovely. Almost $100 000 under assessed. In an easy to rent area and four parking spots (needed on a busy road). Back faces west. It seems like it could be a good buy.

koozdra said...

"But what frustrates me is that no matter the conditions, the same talking points prevail."

Be patient, one of these days we'll have the crash and you won't be so frustrated.

Leo S said...

But what frustrates me is that no matter the conditions, the same talking points prevail.

Sure. Well I'm still hinging on the affordability correction theory. So far the data matches up well with this, but our affordability improvements have come from decreasing interest rates rather than significantly reduced prices. In the next year if we don't see an increased rate of decline (at least 5% YoY) I will admit that the theory is bunk and we are actually in for a repeat of the 90s market.

Leo S said...

Surprising that place on richmond hasn't sold yet. Seems like a very good price for the region and a reasonably up to date house. The road is busier than I would want but not terrible.

Just Jack said...

Relative to the past sales, the property on Richmond looks like a good deal.

Although there is one on Jasmine that is under foreclosure at $399,000. It has been up for sale for most of this year so I would probably drop a low ball offer on that one first.

A hundred thousand saved - is a hundred thousand earned.

dasmo said...

@patriots if you have 30k in credit card debt I am pretty sure you aren't buying a house right now...

@JJ, debt costs more at higher rates pretty simple. If your are in a situation where you have substantial credit card debt built up it is a good idea to "move" it to a lower rate. Trick is not to go out tomorrow and fill er up again. I certainly am not condoning going nuts because you can consolidate, just saying the option is there. I'm also not saying one should buy because of that!

info said...

Teranet index data shows Victoria leads the country in price deflation.

Quoting:


A new monthly analysis by Teranet shows Canadian housing prices declined last month compared with September — only the third time in 13 years of data that there was a month-to-month decline in October.

Twelve-month price changes continue to vary widely.

Vancouver and Victoria both saw price deflation of 1.0 and 1.7 per
cent respectively. (year over year)


It's definitely starting. Vancouver and Victoria are the two most overpriced cities in Canada, using price to income ratio (which Mark Carney uses).

This time we will not see a dramatic, unprecedented, emergency intervention like we did in 2009.

Leo S said...

@patriots if you have 30k in credit card debt I am pretty sure you aren't buying a house right now...

Average non-mortgage debt is $37,000 in BC. Pretty sure there are lots of buyers with other debt.

If your are in a situation where you have substantial credit card debt built up it is a good idea to "move" it to a lower rate.

Only if you're then proceeding to agressively pay down that loan with a lower rate. Problem is people just add it to the mortgage and extend the paydown period indefinitely.

Trick is not to go out tomorrow and fill er up again.

I think the problem is the people accumulating this debt are exactly the type that will fill er up again.

Alexandrahere said...

Just Jack: What is the mls on Jasmine? Thanks....and thanks to all for their comments on the Richmond Rd home.

Leo S said...

Aside from a less competitive market in general, another good reason to buy in the rainy season. Especially in Victoria with our aging housing stock and "love" of suites

totoro victoria said...

The Jasmine one is here: http://www.jennraappana.com/officelistings.html/details-23982414

It is in a different area: Marigold which has a lower valuation. And nowhere near the quality of the Richmond place. I wouldn't be interested in the Jasmine place.

Richmond is right near the college and extremely rentable.

dasmo said...

"Average non-mortgage debt is $37,000 in BC." I'm sure a lot of them own. I would think if you don't and you have that kind of credit card debt you are not going to be getting a loan for a house. Odds are if you don't own, you will have a standard rate of 12% on your cards meaning 1100/month for your debt servicing (unless you make minimum payments to bury yourself further). I doubt a bank will lend that person money for a house.
That 37k only adds a $175 to your mortgage payments at 3%.

koozdra said...

"I doubt a bank will lend that person money for a house."

Have you heard of the CMHC? The banks don't need to worry about risk because the full value of the loan is insured. Buyer goes belly up... the CMHC refunds the entire balance. And here's the kicker, no deductible. The banks have been turned into insane credit machines.

I personally know someone that had about that much debt and was approved for a 650k mortgage.

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

"The banks don't need to worry about risk because the full value of the loan is insured."
Well, not by my experience. I've gotten two mortgages with a decent level of scrutiny and concern about risk. I'm self employed and my first in 2003 was almost a no go because of that. I had to produce financial etc. The saving grace was knowing someone in the bank and the fact I was doing the same profession as I had been doing as an employee. The more recent mortgage I had to produce statements for the last two years, appraisals were done, statements for significant others... I'm sure some dodgy lending is going on but I'm not so sure it's being done by the main banks.

Just Jack said...

306544 for Jasmine

Another steal of a deal today.

A renovated custom quality 13,641 finished square feet on 2.8 valley and distant water view acres in Central Saanich. Tennis Court, indoor swimming pool and enough granite and marble to keep Michelangelo busy for three lifetimes.

Mortgaged at 4.2 million (again I ask what banker would approve a mortgage like this when there has never been a sale over 2.2 million for a non waterfront home in the history of mankind in Central Saanich) Makes me want to close my account with them.

At one time listed for $12,400,000

The property has just sold for

$1,690,000 or roughly $124 a finished square foot including the land. Or about what Marko's Poppa would charge just to build a 3,200 square footer without the land.

Introvert, that has gotta make you pee your shorts. What chance does Oak Bay have, when this is happening within a 15 minute drive of sleepy hollow. The buyer's can see Oak Bay from their front window!

Marko said...

Just Jack, I love how you always ingore the most important points...

"Extensive renovations were under way and nearly done."

What chance does Oak Bay have, when this is happening within a 15 minute drive of sleepy hollow. The buyer's can see Oak Bay from there front window!

I think Oak Bay's chances are pretty good. Someone just dropped 1.135 million on a home described as "Most owners will wish to upgrade & finish throughout the home, & this home would certainly be a worthwhile candidate for value appreciation with the right upgrades."

Marko said...

By the same token someone earlier in the month dropped $1,460,000 on a 1989 2,573 sq/ft home in Oak Bay on a bare land strata lot of less than 11,000 sq/ft.

13,641 sq/ft with a pool doesn't float everyone’s boat.

Marko said...

Relative to the past sales, the property on Richmond looks like a good deal.

Although there is one on Jasmine that is under foreclosure at $399,000. It has been up for sale for most of this year so I would probably drop a low ball offer on that one first.


I saw Jasmine a few nights ago, it needs a lot of work. It is fairly loud in the back yard from Interurban.

dasmo said...

Probably hard to sell a 12 million dollar house on a 400,000 street...

patriotz said...

"Extensive renovations were under way and nearly done."

You mean the builder went TU and the lender is going to take a bath?

Doesn't exactly inspire confidence in the market.

patriotz said...

. Someone just dropped 1.135 million on a home described as "Most owners will wish to upgrade & finish throughout the home, & this home would certainly be a worthwhile candidate for value appreciation with the right upgrades."

You forgot to mention that this property, 3110 Weald Road, is assessed for $1,415,000.

Leo S said...

Good post by Garth tonight on the piss poor quality of data available in Canada to the public.

Dave said...

re: the Saanich home selling for 85% below list price and Swanwick for 80% off -- great evidence of how delusional the market became.

Just Jack said...

I don't "ingore" the most important points. (where are you introvert?)

I mentioned
-renovation
-13,641 square feet
-2.8 acres
-indoor pool
-tennis court

I just didn't think "nearly done" was high on the list.

The world doesn't start and stop at Oak Bay. Perhaps I poke too much at those that have such a myopic view. Maybe real estate shouldn't be viewed in a humorous way and should be left to the self proclaimed professionals to tell us what we should or should not want.

But when I read phrases like "a worthwhile candidate for value appreciation with the right upgrades" You can't write better comedy than that!

Just Jack said...

Jasmine needs a lot of work?

That's kind of an open ended statement isn't it. That could range from carpets and paint to a complete gut of the home?

But it could be enough to discourage someone from taking a look at the property.

Leo S said...

Just Jack, I love how you always ingore the most important points...

For me the important point from Just Jack's post was not whether it was a good deal or not, but rather that a bank approved a mortgage of 4 million for a house worth just over a quarter of that. That just doesn't fit the daily narrative in the media that our banks are so conservative and prudent.

Introvert said...

I don't "ingore" the most important points. (where are you introvert?)

Typo vs. lack of understanding.

Above is an example of the former; most of your grammatical mistakes stem from the latter.

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

Re: Garth's post
We need the heavy hand of government regulation to step in and tell the real estate boards to stop being so greedy and let us access the data.

dasmo said...

No argument there...

Patient renter said...

Just my 2 cents but you could wait 2 weeks to let the dust settle on the new price, then pay 500$ to have the house inspected (be ready to lose that money) and mid December if the house inspection is good , make an unconditional offer for $400,000.

In my view, budgeting $3000 for 6 home inspections can be a good investment if that allows you to make low offers that will look very serious.

Patient renter said...

Indeed!! Very worth the read

Marko said...

That's kind of an open ended statement isn't it. That could range from carpets and paint to a complete gut of the home?

As a REALTOR® I can't comment too much on other listings especially if it is not positive. It needs a lot more than carpets.

Not a very good comparable to the one on Richmond.

a simple man said...

As a REALTOR® I can't comment too much on other listings especially if it is not positive. It needs a lot more than carpets.

Is that not your job?

Marko said...

There is a REALTOR® code. I can tell my clients that a property is garbage and overpriced but I can't do that publically.

a simple man said...

OK - fair enough.

Just Jack said...

In every market there are opportunities.

Most of us would agree, that if you're trying to "move up" the property ladder today, there is little to financially gain by selling and then immediately re-buying.

In most cases, you will end up with a disproportionally larger mortgage in relation to the gain in lifestyle.

But that's only when you're moving "up", the property ladder. I am using the word up in italics because most of the more prolific writers on this blog use price as the single most important measure of lifestyle. The more expensive the property, as long as it's in Oak Bay, the better the lifestyle and by extension the happier you will be in life. Your spouse will be prettier, your kids smarter, and your dog will no longer pee in the house.

But, suppose you've reached a point in life, call it enlightenment, where those things no longer matter as much. You can live with the wrinkles around your spouse's eyes, the kids don't visit anyway, and that damn dog is finally dead.

Then selling that trophy home may be a financially smart move.

-and then it's Hello Vegas!

koozdra said...

"That means an owner would need to spend 42 per cent of pre-tax annual income to pay for mortgage payments, utilities and property taxes — one percentage point lower than in the third quarter of 2011."

Would anyone recommend to their friends to buy if they have to devote 42% of their pre-tax income to housing costs? I wonder what the percentage is in post-tax. Last time I checked paying taxes was not optional.


Canadian home affordability rises

Just Jack said...

"Despite the recent improvement in affordability, RBC said the amount of income to service home ownership costs continues to be higher than long-term averages."
-from the report above

I would like to know what is the "long-term average"?

It would also be interesting to know how low that income to service a home ratio is during a down cycle in real estate.

I think most people would be extremely surprised at how little of one's income a prospective buyer is willing to spend on housing when the bloom has come off the real estate Rose.

My guess, is that it would be 15 to 20 percent of combined family income.

Just Jack said...

Worried about the coming real estate apocalypse?

Or that you will always be at the mercy of a draconian landlord?

Try a manufactured home in Sooke. Yours for only $30,000 and a monthly pad rental of $425. 930 luxurious square feet with your own yards for cultivating that special herb. For less than the cost of a new kitchen, you can have it all.

Because when you own a manufactured home - appreciation is just one less thing you have to worry about.

Leo S said...

Here is the actual RBC Affordability Report for the third quarter.

They don't state the long term average but it looks to be a couple points lower than current values.

Nevermind that their definition of "long term" appears to be the period since 1986, so the term is not accurate. That is medium term at best in the scale of real estate cycles.

The measure itself is highly suspect of course for multiple reasons. Their definition of a "standard" dwelling is explained as follows: The qualifier ‘standard’ is meant to distinguish between an average dwelling and an ‘executive’ or ‘luxury’ version. In terms of square footage, a standard condo has an inside floor area of 900 square feet, a bungalow 1,200 square feet, and a standard two-storey 1,500 square feet.

For condos, the standard of 900 sqft would exclude the majority of new 1BR construction. And a two storey of only 1500 sqft would be unusually small in Victoria. Does that mean all our 2000sqft 50s boxes are considered luxury homes due to their size?

In a roundabout way they admit that their own measure is more or less bollocks by saying that Typically, no more than 32% of a borrower’s gross annual income should go to ‘mortgage expenses’—principal, interest, property taxes, and heating costs (plus maintenance fees for condos)..

By their own measure the only place an average family would thus be approved to buy even a bungalow is in Edmonton. Clearly not the case.

These kinds of numbers are only useful for comparison to the past, they don't reflect the reality of people's finances.

Introvert said...

Try a manufactured home in Sooke.

As someone whose job is in the core, I wouldn't even consider a SFH in Sooke, let alone a manufactured home.

And judging by prices and MOI, I'm not alone.

Just Jack said...
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Just Jack said...
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Marko said...

Might set a record for SFH average this month, currently sitting at $657,114.

hap pychucky said...

Marko

Median?

Marko said...

$529,250.....highly variable there isn't much support to either side. Could be $520,000 or could be $540,000 - we'll see.

Just Jack said...

ingore the average

hap pychucky said...

Thanks Marko

Just more of same. Maybe next month the crash will start or maybe Jan or Fed or March.

Introvert said...

Just more of same. Maybe next month the crash will start or maybe Jan or Fed or March.

Or April or May or June or July or August or September.

patriotz said...

Maybe next month the crash will start

Your criterion is clearly something other than falling prices.

hap pychucky said...

My criteria is falling prices.

We have done SFA in Victoria since
2007. Median has been between 500 and 550. This is a stable market with lots of choice.

Just Jack said...

Just out of curiosity Hap, what are you expecting the crash to look like to you?

When I speak with knowledgeable Realtors® that have gone through a crash; they explain that on one day they were selling homes, and the next day the phones stopped ringing.

If not one single property sold for a week in all of Greater Victoria that would not show up as a crash in the stats.

For example, there were no homes sales in eight of the first 15 days of November in Oak Bay. Yet the median price was $715,000 and the average was close to $900,000.

The same in Sooke, 11 of the first 15 days of this month had no sales. Median price $505,000. Average price $521,000. Still no crash in the stats.

But there is certainly a crash going on for the 1300 Realtors® that depend on making a sale.

info said...

Moody's reviews 6 Canadian banks for downgrade.

Quoting from that article:


Moody's cited “concerns about high consumer debt levels and elevated housing prices” among its reasons, saying the banks are more vulnerable to a downturn in the Canadian economy than in the past.

This spring, the average ratio of household debt to personal disposable income reached a record 163 per cent, up from 137 per cent five years earlier.

A downgrade could result in higher borrowing costs for the banks, which would be passed on to consumers.


RBC's latest report is more of the same. Those reports are always suspect as they use pre-tax income and base it on a down payment which is much, much higher than the average down payment in Canada over the past 5 years.

Again, consider the source. Canada's home prices are overvalued by 54%: OECD/Deutsche Bank

a simple man said...

Median-wise, we peaked in late 2009 and have been coming down since. Doesn't look stable from that time frame.

Look at Leo's graph from the start of the month and notice the 6 month rolling median line with respect to the last changes that occurred with respect to the mortgage market - decline looks evident.

Just Jack said...

I understand the aggravation of someone looking to buy. The homes are not cheap. You have to compete with others that are looking to buy too. If a realtor® wants to sell a home they only have to price it slightly under comparable listings and they can get some action going. If the vendor will let them reduce the price.

But with all of the aggravation you may be feeling as a buyer, it is far worse being the seller in this market. Especially when you have to sell at a loss.

But, if you expect on Monday morning the front page of the Colonist will read "PRICES FALL BY 50% SINCE OCTOBER" It ain't gonna happen for you buddy.

CS said...

"But what frustrates me is that no matter the conditions, the same talking points prevail."

Ha! Sounds like some of the bulls are beginning to fear that events may soon prove the bears right and are preparing to distract attention from their own error by deploying the stopped clock argument.

Leo S said...

But there is certainly a crash going on for the 1300 Realtors® that depend on making a sale.

Indeed. One of the realtors with whom I have a PCS account has notified clients that he is leaving the business and his PCS accounts will be deactivated.

Marko said...

If anyone wants a PCS account feel free to email me with your criteria to markojuras@shaw.ca, no obligations.

Marko said...

But there is certainly a crash going on for the 1300 Realtors® that depend on making a sale.

The number of REALTORS® is very resilient for some reason. We've had more than two years of a very slow market and we've only dropped from 1300 to 1253 currently....I doubt will go below 1200 next year?

Certainly very difficult for new REALTORS®, the market doesn't help and consumers are becoming very savvy and looking for value.

Leo S said...

Lots of part timers.. At one point I found some stats on how many realtors were in BC over time which showed how few there were in the slow market of the late 90s compared to in the boom times, but can't find it right now. Probably takes several years of slow markets to drive people out of the business.

a simple man said...

I personally know 2 realtors that are leaving the business (TM) - both announced in the past two months.

hap pychucky said...

Just Jack

A crash is prices falling 20 plus percent in all segments.


People have stop buying overpriced crap and non crap. Price your house right and it sells.

I have no houses in my area for sale. Zero, this is the first time in years. Last one was 3 weeks ago and sold in 1 week.

Outer areas where overpriced and over built and need to adjust for buyers to come in.



a simple man said...

Based on the last two million + sales I have heard of (Swanwick and that other one in Saanich), I walked through the Uplands this morning imagining Black Friday 50% stickers on all of the many for sale signs up.

Leo S said...

Price your house right and it sells.

There has never been a real estate market in history anywhere in the world where this is not true.

hap pychucky said...

A lot of upper end prices had no business having the sticker prices they did. 24 million for that place on the Malahat. It is the Malahat!!!!! If I am not mistaken the tax are based on a value of 4.7million. High end home prices were out of wack in and around Victoria. You cannot judge the market by overpriced ocean homes.

koozdra said...

Price your house right and it sells.

What you are saying is that people should lower their prices to sell. However you don't see prices declining further?

hap pychucky said...

No what I am saying is nobody wants to move in and do renovations without a heavy discount. So if your placed is tired expect to discount it. There is no panic to buy these days so people are not so excited to buy crap.

hap pychucky said...

Kooz

I expect the median prices to stay between 480 and 560 for the next 5 to 7 years.

I was taking to a builder about costs of building. Costs for drywall have come down. Everything else has not really moved. He says he is challeged to find qualified good trades, seen a lot of them move to better things in Alberta.

As long as we have net growth of people and low interest rates and stable building costs. Prices are stuck around these levels.

But the overpriced areas and crap are going to suffer. The core SFH will be stable for quality.

a simple man said...

this is true, hap. Tell Oak Bay that as you have described 95% of the housing stock for dale.

koozdra said...

"Estate Sale $150,000. below assessed value."

Assessed: 768,000
Listed: 649,900

Interesting math.
768 - 650 = 118

http://www.realtor.ca/propertyDetails.aspx?propertyId=12429201&PidKey=1771013796

koozdra said...

"As long as we have net growth of people and low interest rates and stable building costs. Prices are stuck around these levels."

If only those were the only factors that affected housing prices.

hap pychucky said...

There is so much out dated stuff for sale. I would walk away from any house with an oil tank right now. No interest in the problems of oil, or outdated electricity or water problems. There is a good supply of houses that I can wait for something without a hassle. I think a lot of
people are thinking this way.

Introvert said...

Greater Victoria really does need to solve the oil tank problem. Human and financial tolls notwithstanding, I'm alternately saddened and furious every time I open the newspaper to read that another oil spill has fouled one of our salmon-bearing creeks.

a simple man said...

Introvert - I am with you on that one.

Introvert said...

It would be interesting to know how denizens of this blog feel about whether sewage-treatment should go ahead.

Perhaps someone here could create an online poll? If so, we ought to ensure that the poll's question is impartially phrased, and that voters wouldn't be able to vote multiple times.

Just an idea.

By the way, happy Friday, everyone!

Just Jack said...

I'm with you on this one, Introvert. Those tanks have to be eliminated or replaced on a regular basis.

My neighbor still has his original outdoor tank from when the home was built in 1975. From time to time he puts a coat of silver paint on it to hide the rust. When that tank goes, I could potentially have 500 litres of oil in my yard.

I have spoken to him once or twice about replacing the tank. His answer has always been that the Oil company would not fill it if they thought there may be a problem.

hap pychucky said...

Dumping waste into the ocean does not seem like a good idea. Mr Floatie need I say more. We are getting a bad reputation.

hap pychucky said...

JJ

They way to solve it is simple. Oil companies cannot deliver to tanks older than 15 years old. End of problem. We do it with propane tanks why not oil tanks.

People like this are playing with fire. Cleanup can cost 50k to 400k and is not insured.

koozdra said...

It seems to me that the whole pro treatment plant argument hinges on the "poo is gross" sentiment.

http://www.timescolonist.com/technology/Sewage+debate+plant+need/7599984/story.html

http://www.timescolonist.com/technology/Sewage+debate+time+build/7599987/story.html

hap pychucky said...

Kooz

The Starit does a good job of dealing with it. The problem is no one else in Canada dumps it untreated in the ocean. We are getting a bad reputation and trying to justify it does not work anymore.

koozdra said...

The problem is no one else in Canada dumps it untreated in the ocean.

Who else has this opportunity?

Introvert said...

Who else has this opportunity?

Every coastal city in Canada.

hap pychucky said...

Sorry I missed quoted
"Victoria is the only city in Canada that dumps all of its sewage, untreated"

It is not an opportunity. I am not tree hugger but come on dumping your waste that includes every drug that we take into the ocean is not a good idea.

Leo S said...

It would be interesting to know how denizens of this blog feel about whether sewage-treatment should go ahead.

Perhaps someone here could create an online poll?


What you're looking for is Vibrant Victoria.

More specifically, the 40 page thread and poll on sewage treatment.

Introvert said...

What you're looking for is Vibrant Victoria.

More specifically, the 40 page thread and poll on sewage treatment.


I didn't know about this. Cool! Thanks, Leo.

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

Oh, that's disappointing. The wording of both the poll question and the choices is dreadful!

I expected too much. I have to learn to stop doing that.

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