Monday, December 10, 2012

Christmas Shopping Early and the Danger of Metrics

First an update on the 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.

December 2012 month to date
Net Unconditional Sales: 112
New Listings: 179
Active Listings:  4215
Sales to new listings ratio: 63%

December 2011
Net Unconditional Sales: 339
New Listings: 505
Active Listings: 3780
Sales to new listings ratio: 67%
Sales to active listings ratio: 9% or 11.2 MOI

A boost in sales in the first week of the month indicates Victorians are getting their Christmas house shopping done early, although we are still at a lower sales/list than last year.  Expect sales to deteriorate quickly as the season gets into full swing.  This is the month where most listings fall off the board so it will be interesting to see where we're at come the new year.

There's been some great lively discussion today about different metrics and how they compare to other cities or to long term averages.  I wanted to add my 2 cents to interpreting these measures, and since it's market update time I'm going to abuse my posting privileges to prosthelytize my opinions from up here.

One of the common graphs that are used when talking about a long term trend for real estate is the Case Shiller 100 year history of home prices in the US.   It's only up to the end of 2010 so prices have declined somewhat since the end of that graph.  However it also seems increasingly clear that prices are now on the rebound in the US.  I suspect the rebound will moderate, but I don't think anyone believes that prices will deteriorate another 30-40% to achieve that long term mean from 1945 to shortly before 2000.

To me this underscores the importance of interest rates and availability of credit, and any metric that doesn't take this into account will not be a very accurate predictor of overvaluation in the market.

Price to rent and price to income are used extensively because they are simple metrics and easy to calculate, but again it ignores the price of credit.  If someone is grossing $60,000 and paying 8% on a mortgage, using CMHC's guideline GDS ratio they could afford a house of about $210,000, or a sensible 3.5 times income.
Now we've got that same individual paying 3% for a mortgage, and suddenly they can afford a $335,000 house which works out to a concerning 5.6 times income.

So what actually changed?  Well savers get punished in the second scenario as pre-payments are much less effective at reducing those interest costs.  Also the second borrower is at a higher risk because there is more room for interest rates to increase.  However overall default risk is likely quite similar.  Price to income (and similarly price to rent) paints a somewhat misleading picture in these situations.

Even what seems to be an apples to apples comparison like price/income between cities is more complex than it seems.  One obvious problem is differences in the ownership rate, especially when you start comparing Victoria to cities we know nothing about.  A place might have a high price to income ratio, but if their ownership rate is not substantially similar to Victoria then the numbers are not comparable.

The multitude of studies out there pointing at either massive overvaluation or perfectly normal prices illustrate how little consensus there really is.  Sites like Zillow and Numbeo should be taken with a huge grain of salt given their partially croud-sourced nature.  In fact any study or comparison should be questioned to matter how impressive the name behind it may be.   If the data is not sourced you might as well ignore it.

234 comments:

1 – 200 of 234   Newer›   Newest»
Leo S said...

From previous comment article.

@dasmo That is the market down south, not a wholesale decline in prices across the board to previous affordability levels. More a leveling of the stats due to two poles being created.

This isn't really true. If you look at the price tiers, they all declined significantly. The low tier was the most volatile, rising the most in the boom and falling the most in the crash, but even the top third declined by 27%.

@info CMHC insured many high-risk, high-ratio mortgages before and after 2009. It certainly is not the case that post 2009 CMHC suddenly started to ignore high-risk, high-ratio mortgages to the point where they only comprised a small percentage of their overall numbers. My point stands.

Your point was that CMHC vastly increased the number of high risk borrowers they were insuring. That point is not well supported.

Also what does it mean to say CMHC insured "many" high risk mortgages? Many could be 10 or 100 million. What does it mean for the market?
As a math major you should appreciate that the formula: ( many + some ) / few * smidgeon is not very useful.

Introvert said...

Good post, Leo. No matter the issue, it is rarely useful to ignore complexity; and you understand this. I sometimes like to think of you as the (usually nonpartisan) auditor general of this blog.

Now on to some partisanship...

Sooke and Victoria have a lot more in common than any of the comparisons made between Victoria and other cities.

Not really. How can one usefully compare a town of 12,000 to the core of Greater Victoria? Plus it takes a good two hours' drive to Victoria during rush hour. By your logic, it would be fair to suggest that what happens to real estate in Chilliwack is an accurate precursor to what will happen to real estate in Vancouver.

Really?

But what about Saanich East - what no comment?

Isn't Gordon Head in Saanich East?

That you can't see the bus coming that is going to hit you in the arse is evident through your denials.

The lashings out of another desperate renter whose hopeful predictions stubbornly won't come true...

Perhaps, it's too good of a comparison that is the most worrisome to you.

I repeat: no one tosses a coin between living in Gordon Head (or any place in Saanich East) and Sooke. They just don't. And the same goes for Salt Spring Island. Obviously.

dasmo said...

@ Leo my point was the stats do not paint a true picture, not that the stats are wrong or should be ignored. That graph is an abstraction and a simplification of the data. Useful to visualize vs a huge list of individual numbers however, 1,2,3,4,5,6,7,8 is a lot different than 4.45...

There was distressed sales in all tiers. My buddies place was a 750k house that the bank flogged for 380k. I don't think the effect of this can be overlooked.

It's not unlike my Comox valley experience where one property in the area buckles and sells for a reasonable amount. That did not set a new price. No one else who was selling (three other properties) would come anywhere near that price. However if you did the stats for that micro area the result would read that prices have dropped by 40%. Lucky for the person that bought but no one else is selling at those prices.

JJ, I'm not a bull, I'm a Halibut...

Leo S said...

There were distressed sales in all tiers but I think the majority are in the
low end.

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

That's a strawman argument Introvert trying to switch this thread to a comparison of Chilliwack to Vancouver.

Because Victoria is no Vancouver. And it never will be a Vancouver.

Greater Victoria is more like the Fraser Valley. But the Fraser Valley is bigger, more populated and has a larger downtown business core than Victoria. And their real estate market is not doing any better than ours. Yet, comparing what is happening in Aldergrove to the City of Surrey is not a stretch in most people's imagination.

Besides, it's already happening in Saanich East. Months of inventory has been rising everywhere in Greater Victoria, as has the days on market.

The glory days of price appreciation are over for Greater Victoria. Those days lasted from roughly 2000 to 2007. A blip in time, most likely never to be repeated. And the immediate future will have prices continue to roll back in the core as they have been doing in Sooke and Salt Spring Island.

A little over a year ago, the months of inventory in Sooke was similar to what Saanich East is now experiencing. Now Sooke is at 2.5 years of inventory. And there is no reason for that not to continue to increase. And we certainly have the makings of a glut in housing. Most obviously in condominiums.

Booms have come and booms have gone. And every time, the market resets to allow that first time buyer back into the game. Because those are the buyers that will stabilize prices. Not the buyers of today, but the buyers several years from now. The ones that are just finishing up trade school or university. Yet they are also the ones leaving Victoria for better pay and jobs too. Just like they did before.

In my opinion

patriotz said...

By your logic, it would be fair to suggest that what happens to real estate in Chilliwack is an accurate precursor to what will happen to real estate in Vancouver.

It is.

What happened in the US - particularly on the West Coast - is that the outer fringes of the metros first showed weakness and then it rolled toward the centres. People will only pay so much of a premium to live in the centre rather than the fringes. Price drops on the outer fringes work their way in.

And it's been happening in the metro Vancouver market in the last couple of years. The outer Valley started falling first, then the inner Valley, now the core.

patriotz said...

It's only up to the end of 2010 so prices have declined somewhat since the end of that graph.

Real house prices in the US are back to 1999 or 2000 levels depending on which index you look at.

Calculated Risk

One factor which I think will significantly affect house prices for decades is demographics, which have lined up behind rising house prices since WWII and are now pushing in the other direction. Low interest rates will moderate the effect (as long as they last), but I don't expect any significant rise in real prices in the US nor do I expect that real prices in Canada won't fall to match the US.

dasmo said...

@ Leo, My buddies $750k home was flogged for $380k. It was far from low end...

@JJ, Victoria and the Fraser Valley? Really? Now that is funny!

Since you brought up seattle again...
I would love for someone who was actually hunting there to report in. If you look at home sales it doesn't look like it's anywhere near 2000 levels. It's more that you have a major drag on the stats because there are houses going for 70k on 500k streets
Lucky if you can get it but not the norm.
The stats should really filter this stuff out IMO.

Leo S said...

@dasmo Doesn't change that the low end is the one most affected by foreclosures. Foreclosures drive down the price of all houses.

Leo S said...

Real house prices in the US are back to 1999 or 2000 levels depending on which index you look at.

Thanks. So on the 100 year chart a reading of about 124 or about the level of the peak of the 80s boom. I don't think they're coming down to 110 again, but I could certainly see them stabilizing at 130ish for a long time.

Just Jack said...

Again, you don't have to compare Victoria to Vancouver, the Fraser Valley or Seattle. It is happening right here in Greater Victoria.

The only districts that have less than 6 months inventory are:

Colwood
Victoria City
Oak Bay
Central Saanich

Total Population for the above in 2011 was some 112,000.

The remaining districts of the Victoria core, Western Communities and the Peninsula (population of roughly 224,000), have more than 6 months of house inventory.

About 85,000 people now live in districts with over 7 months of house inventory.

Leo S said...

About 85,000 people now live in districts with over 7 months of house inventory.

I don't see how this reconciles with our overall inventory. You're saying the rest have lower inventory?

hap pychucky said...

JJ

SFH inventory means SFA unless people are forced to sell. Right now in the core it seems as whole people are not forced to sell and are just pulling their listings instead of selling.

In 1992 sales peaked at 5000 a year fell to 3220 in 2000. JJ what happen to prices???? NOTHING

Just Jack said...

That's right, about 140,000 people live in districts that are more than 6 months but less than 7. And with inventory most likely to increase this spring, those 140,000 people are in that transitional band between a balanced market and one that favors buyers.


koozdra said...

"Home prices are rising due to historically low interest rates"

... wait, haven't I heard this before somewhere??

http://abcnews.go.com/GMA/video/housing-market-home-prices-report-december-2012-home-17882752

koozdra said...

Pacifica partners is becoming the new Garth Turner... perhaps a little less colourful.


http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/canadas-housing-market-a-victim-of-demographics/article6185296/

info said...

Leo

Correct, my point was that CMHC vastly increased the number of high-risk borrowers from 2009 until recently.

You disagree with me. However you cannot come up with anything to support what you say.

Up to 2006, CMHC had been around for about 60 years. Through those first 60 years, the average amount in insured mortgages that CMHC added to its books was about $5 B per year.

In 2010, 2011 and 2012 that number was close to $100 B per year.

We know that CMHC's general purpose was to help high-risk borrowers to obtain high-risk mortgages.

Even if we cannot come up with an exact percentage for the increase in high-risk borrowers that was suddenly created starting in 2009 through CMHC, we can get a general idea by looking at what I have demonstrated above.


info said...

It's interesting when people on this blog argue that Victoria's housing market is safe from a crash because most buyers have been and currently are either cash buyers or buyers that do not require CMHC insurance rendering it almost immune to the affects of the tightening of the mortgage rules.

This would also have to suggest, therefore, that Victoria's housing market did not benefit greatly from the lax lending standards that were put in place starting about a decade ago.

We all know that isn't true.

Victoria house prices more than doubled from 2003 to 2008 as a result of the loosening of lending standards.

We can, therefore, conclude that Victoria's housing market is not immune to the affects of the tightening of the mortgage rules and that we are as vulnerable to a price crash as any other Canadian city. This is true even if the vast majority of buyers are cash buyers or do not require CMHC insurance (I disagree with that, but it isn't needed to prove my point).

info said...

Richmond records a property sale at -50% below assessed value.

Maple Ridge house is listed at -60% below assessed value.

"Naturally it is another property with 'issues' that breaks this barrier. As we have noted before, these are the properties that will lead the way."

It's only a matter of time before we see this in Victoria.

koozdra said...

We have a new front runner in our race to the bottom.

Listed: $549,800
Assessed: $837,000

66% of assessed. It's vacant too.

http://www.realtor.ca/propertyDetails.aspx?propertyId=12542167&PidKey=1228274251

dasmo said...

I bought my house nine years ago and lending standards were far from lax then. Max amortization was 25 years. Minimum down payment had just switched to 5%. I was recently self employed and even with producing solid financial data for the year (plus the previous two as an employee) and having cash in the bank, I just about didn't get the mortgage. I was saved by some pull from an insider at the bank. I was also "only" qualified for 200k. Hardly lax. I don't think the laxatives were put into place until around 2009 so IMO we just don't have a significant volume of high risk mortgages especially with rates staying low....

No market is "safe" from a crash. Money is an illusion and our financial system is faith based. We have nothing to fear but fear itself. Good thing the majority doesn't really think about it too hard....

info said...

Leo

No matter how much you try to cut up the price/income and price/rent ratios, they are still the best metrics the world has.

As I have said, Mark Carney prefers the price/income ratio. Indeed economists and governments worldwide have used these metrics for decades and will continue to use them.

If anything you should be warning Victorians about reading too much into the average price that is published by the VREB. I can't think of anything more misleading than that in terms of where Victoria's housing market is headed.

You think Victoria's market is immune to a price crash because of it's unique characteristics. They said that about Miami, Las Vegas, Phoenix and L.A. among other US cities. What happened there? It was also said about Victoria before we experienced the crash of 08-09.

hap pychucky said...

Kooz

Location, location, location. Since the core has become more affordable in the past 5 years. Everything else is going back to where it should be. That place is going to take a few dollars to update.

koozdra said...

"Location, location, location."

Listed: $998,000
Assessed: $1,169,000

85% of assessed.

An interesting list prices. Is it a coincidence that there is no insurance for properties over a million dollars? The dependence on such insurance has been downplayed by the bulls. I have a sneaking suspicion that without it, there is going to be some carnage.

http://www.realtor.ca/propertyDetails.aspx?propertyId=12665435&PidKey=-1502106245

hap pychucky said...

Info

Vreb sales info is the best info to understand where the Victoria market is. Under and over valuation can go on for years and even decades, so ratios are not useful in predicton out 1 or 2 years. Sales data reflects what is actually happening.

SFH in the core are stable and have been for 5 years.

Condos prices are weak everywhere. SFH in the non core are down 10 to 20% or more.

These are the facts.

40 years history show us that even though recessions, downsizing, Victoria core has really only seen 1 decline that was 80 to 81. I think that is when interest rates went up to 20%.




info said...

David Lereah was chief economist at the National Association of Realtors in 2006. He is now blamed for helping convince Americans to buy houses at bubble prices. He is also blamed for the harsh consequences that millions of Americans faced as a result of buying houses at the wrong time.

Below are some of his famous quotes. The US housing market started to implode in 2006.

“The continuing shortages of housing inventory are driving the price gains. There is no evidence of bubbles popping.” - David Lereah, NAR’s chief economist, August 2005

"We are really on track for a soft landing. There are no balloons popping.” - David Lereah, NAR’s chief economist, December 2005

Does this sound familiar? I've heard plenty of Canadian politicians, real estate associations, bankers, economists, etc. tell Canadians that there is no evidence of a housing bubble or balloon. All you hear is that Canada will experience a soft landing. Soft landing.... yeah right.

hap pychucky said...

Kooz

No pictures of the inside must be a real beauty.

info said...

hap pychucky

Some questions for you...

Would you have seen Victoria and area houses listed at -34% below assessed value in 2011?

The answer is, of course, no.

This should give you a very good idea of where Victoria's housing market is headed. How can it not?

How is the VREB's average number more indicative of the health or direction of Victoria's market than listings that are -34% below assessed value?

hap pychucky said...

Info

You canot data mine for favourable information and call it a trend. This is one strata house which I am assuming is not updated since there is no photos.

Kooz data mines for stuff like this and calls it a trend.

Just Jack said...

Victoria did have a correction in house and condo prices in the mid 1990's. That happened after the Commonwealth Games as BC slid into a recession. At that time there were more people leaving Victoria for work that those coming here.

This time around, prices have been weakening and we are not in a BC wide recession. Yet, we are experiencing the lowest sale volumes in a decade and almost the worst in 30 years. Even during that BC recession there were more homes sold then than are selling today.

When BC slides into its next recession, you might see the greatest number of home owners in history (over 70 percent of us - own our home) trying to sell their homes to the smallest group of potential buyers in history.

In my opinion.

hap pychucky said...

JJ

Not sure I see a correction. I see alot of nothing

1990 4,017 $719,643,460 $179,149
1991 5,496 $1,053,987,873 $191,774
1992 5,103 $1,134,983,104 $222,415
1993 4,220 $1,041,186,228 $246,727
1994 3,608 $923,736,439 $256,025
1995 3,117 $754,352,403 $242,012
1996 3,812 $922,160,197 $241,910
1997 3,639 $905,823,209 $248,921
1998 3,145 $773,727,660 $246,018
1999 3,288 $821,769,582 $249,930
2000 3,220 $809,503,125 $251,398

Introvert said...

The glory days of price appreciation are over for Greater Victoria. Those days lasted from roughly 2000 to 2007. A blip in time, most likely never to be repeated.

That's the great thing about markets: once they correct, they stay corrected forever!

Just Jack said...

The smart people are looking at the marginal properties and seeing a trend developing. Even the agents are spinning the assessments into a positive selling point.

"listed below assessment"

Obviously, there are still some delusional buyers left who think Victoria is different. Or maybe they have sold a property or two and want to buy into the neighborhoods that they assume to be recession proof. But by doing so, they are ballooning those neighborhood prices higher, so when a correction does occur those areas will fall hard.

"The bigger they are - the harder they fall"

In my opinion

hap pychucky said...

Yep house prices will never rise again because people are getting old and will all sell together. Nobody is having kids and we do not have immigration. Its going to cost 150 a square foot to build a house forever because there will never be inflation again. Oh ya we are going to find more land in all the core city centers so land will never be an issue again. Houses will be like TVS and only go down in price from know on.

I HAVE SEEN THE LIGHT....

Introvert said...

You think Victoria's market is immune to a price crash because of it's unique characteristics. They said that about Miami, Las Vegas, Phoenix and L.A. among other US cities. What happened there?

The similarities between Victoria and Miami, Las Vegas, Phoenix and L.A. are too numerous to list. It's uncanny, really.

hap pychucky said...

"Obviously, there are still some delusional buyers left who think Victoria is different. Or maybe they have sold a property or two and want to buy into the neighborhoods that they assume to be recession proof. But by doing so, they are ballooning those neighborhood prices higher, so when a correction does occur those areas will fall hard"

or just maybe, people found a house they like at a price they can afford and do not treat their house like a speculative stock. Wow just like our parents did.

Introvert said...

Yet they are also the ones leaving Victoria for better pay and jobs too. Just like they did before.

And then there are people like me who moved to Victoria for a lower-paying job and no guarantee of one, either.

(As an aside, does that make me a rational or irrational free market participant? Hmmm.)

Just Jack said...

Introvert, your not really suggesting that there will be another world wide financial crisis and bail out like we experienced between 2000 to 2007.

Because before that can happen we would have to bring the level of home ownership down to create pent up demand. Then crash interest rates,loosen lending standards and increase the CMHC cap to stimulate that demand. You would also have to assume that the largest age group of home owners, the Baby Boomers, are never go to die or go into nursing homes.

Really Introvert, you're loosing equity in your home now, can you think of any plausible event that can reverse that trend for the next decade?!

Marko said...

See no signs of a crash so far this month.

SFH average 614k
SFH median 537k

hap pychucky said...

Marko

Those number are useless. It all about data mining below assessed.

Please stop posting useless sales info!!!!

Marko said...

or just maybe, people found a house they like at a price they can afford and do not treat their house like a speculative stock.

+1



Just Jack said...

I didn't say people would STOP coming to Victoria. The only way your actions will effect Victoria's price is if you buy another home or sell one. If you're not buying or selling you will just have to sit out the roller coaster ride. Which is fine, as long as you are not hoping that real estate will fund your retirement.

a simple man said...

"or just maybe, people found a house they like at a price they can afford and do not treat their house like a speculative stock."

Unfortunately, a lot of people in Victoria that bought between 2002 and 2009 were using their houses as ATMs and expected ever-increasing valuations. Now that it is no longer happening there is some suffering as many over-extended their credit.

a simple man said...

And the market is coming down, we all can see it in our own neighbourhoods if you have a PCS account and watch carefully - I am seeing it in the vaunted Oak Bay where I follow RE.

Introvert said...

*Anecdote Alert*

My aunt just bought a house in Victoria a couple weeks ago, as she had planned to do.

My mom, who lives in Calgary, is retiring this month and plans to sell her house in the spring and move to ... you guessed it.

But don't worry, I'm sure these two are the only ones. And Victoria is just as desirable as any other Canadian city--if not less so!

koozdra said...

Introvert

If you want to be a good son, tell your mom not to buy. I heard there's a housing crash coming.

hap pychucky said...

"Unfortunately, a lot of people in Victoria that bought between 2002 and 2009 were using their houses as ATMs and expected ever-increasing valuations. Now that it is no longer happening there is some suffering as many over-extended their credit"

The point is what. Houses will soon flood the market??? I know lots of people who have 0 mortgage and pay their bills. So what!!


koozdra said...

"The point is what. Houses will soon flood the market??? I know lots of people who have 0 mortgage and pay their bills. So what!!"

How calm will they be when they start hearing whispers of their property value going down? I'm sure they'll just take it in stride. They aren't relying on their house to fund their retirement, right?

Just Jack said...

Marko, when you are looking just at prices, you will never see the "signs" of a crash. You'll see the effect of a crash, but not the signs.

Certainly people will find homes that they like at a price they can afford. That's true in almost any market. But, prospective buyers also get greedy. They'll want more home for their money. Last year they would have been content with a town house - this year they want a detached home.

Fear and greed are equal motivators on the way up as they are on the way down.


Just Jack said...

If you are not buying or not selling you have ZERO effect on the market.

So your friends with no mortgages, just get to watch. But it does have an effect on their purchases. Falling house prices cause people to pull back from purchasing big ticket items. Maybe get that fridge repaired rather than buy a new one. Maybe just a repaint of the kitchen instead of new cabinets and appliances. Replace a few shingles or double shingle that roof rather than a new roof altogether. Maybe put some plastic on the windows rather than new windows.

This town can get damn frugal when it needs to survive.

But the good news, is there are some damn fine deals on used contractors' trucks.

hap pychucky said...

"How calm will they be when they start hearing whispers of their property value going down? I'm sure they'll just take it in stride. They aren't relying on their house to fund their retirement, right?"

Oh so everyone`s retirement is their house. Again another load of crap. 25% of my neighbours are over 75. Guess what they are still living in their house. The only way they are leaving is by the van with flashing lights.

hap pychucky said...

JJ

Again a load of crap. I am building a house and everyone of the subs is busy. I have talked to them all because of crap I read on here. They may not be getting 2006-07 money but they are all earning decent money and finding work.

Just Jack said...

25% of your neighbors are over 75 years old!

Where the hell do you think they're going to be in 10 years!

koozdra said...

Don't worry everybody, the market is doing just fine. Look at this listing in the prestigious Fernwood area. Surely they did their market research and came up with a price they thought the market can handle.

Listed: $579,000
Assessed: $416,000

http://www.realtor.ca/propertyDetails.aspx?propertyId=12665414&PidKey=873130590

hap pychucky said...

JJ

Dead and younger families will move in. This started to happen about 5 years ago.

Just Jack said...

Hap pychucky that only makes them underemployed.

You can get all the work you need if you charge half the rate of your competition.

You would have more credibility if you would look at housing starts rather than ask one of your subcontractors if they are "busy" or not. Really, how stupid do you think they are. Any sub contractor that tells a potential client that they are "slow" is looking to have his job quote cut.

Just Jack said...

You mean it started to happen back in 2007 with the lacks lending policies of that time. Not so much today.

hap pychucky said...

JJ


I am not paying the Subs. I have a fixed price. I am getting them to do extras and it takes weeks to get them back so I am not sure about them lying.

The 2 guys I am dealing with directly to pay. I had to wait 3 weeks to get them in because of there other jobs.

I think there is work for the good quality guys.

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

If you're not buying or selling you will just have to sit out the roller coaster ride. Which is fine, as long as you are not hoping that real estate will fund your retirement.

Well, considering I won't be realistically retiring for another 30-40 years, I should be all right, thank you very much.

You, on the other hand, may face some difficulty funding your retirement. You're probably in your forties with kids and are still renting. You've probably never owned a house. I bet your retirement plan is hoping for a big inheritance from that rich uncle in West Van.

And you lecture others about retirement planning and prudent financial choices?

Just Jack said...

You're not paying the subs? You're paying a fixed price. Sounds more like your general contractor is keeping the subs busy.

Having worked in the sub trade, no one likes being called back for extras. Especially when the home owner wants them done cheap. Time consuming and not that profitable.

Once the job is done, you don't want to ever see it again. Rather go to the pub for a beer than fiddle with putting in an extra with everything else now built around it. Move this, move that, take off your shoes, cut a hole in the drywall and then have to patch it, make sure your butt crack ain't showing.

You know it might not be that they are busy- it might just be that they don't like you.

Offer them more money!

hap pychucky said...

JJ

OMG I give up. Every contractor and sub has no work in Victoria. They all have their trucks for sale and their houses for sale at 75% of assessed value. They are on there way to Alberta. Will this end your stupid comments.

BTW i just banged my head against wall 50 times and I now see how Salts Springs is just like Victoria and the same thing will happen to house prices here.


dasmo said...

The mid 1990's had a condo crash because of the leaky condo scandal. something one wouldn't see in stats alone....

hap pychucky said...

JJ

As an appraisor will you know be basing your appraisals on Sooke and Salts Spring because that where prices should be in a year in Victoria.

Let me know how that works out for you.

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

Ouch, Introvert was that a nerve I just drilled into!

Would you really be that upset to see someone less fortunate that yourself get a leg up in life. A young couple being able to have a home and enjoy life in Victoria without being chained to a mortgage. Or an elderly couple not having to carry a mortgage through their retirement years.

You have to ask yourself, why are you are so angry at the idea of anyone having an easier time buying a home than yourself. And really Introvert, it was pretty easy for you.

Because, you didn't really "earn" this appreciation, it was a gift given to you and to 70 percent of the population so that a government could get re-elected.

But every herd is fattened up just before the cull. And in the eyes of various government bodies you are a very fat cow.

Just Jack said...

The leaky condo was a big factor in the drop of prices in the mid 1990's. It still is by the way.

Leo S said...

Correct, my point was that CMHC vastly increased the number of high-risk borrowers from 2009 until recently.

You disagree with me. However you cannot come up with anything to support what you say.


The burden of proof is on you. You made the claim that CMHC has significantly increased the number of risky mortgages in their portfolio. Your evidence for this is that the size of their portfolio has expanded.

An increase in portfolio size does not say anything about the risk in that portfolio.

You ignored the fact that the majority of this increase is from their bulk insurance business which is for conventional low-ratio mortgages.
I also gave the credit scores of their portfolio which has not deteriorated in the last 3 years (and in fact has increased). If they are taking on more risky borrowers you would expect it to decrease.

No matter how much you try to cut up the price/income and price/rent ratios, they are still the best metrics the world has.

I don't agree and have stated my reasons why. And you don't think my example illustrates a problem with those metrics? The fact that Price/Income can increase by 60% without a borrower paying any more per month means that there is room for improvement.

You think Victoria's market is immune to a price crash because of it's unique characteristics.

I've never said anything of the sort.

mrmike said...

Any contractor with a half a brain would Never, Ever, tell a customer they're slow. It's bad ju ju. Busy, busy, busy...get to it when I can.

Leo S said...

My aunt just bought a house in Victoria a couple weeks ago, as she had planned to do.

My mom, who lives in Calgary, is retiring this month and plans to sell her house in the spring and move to ... you guessed it.


What a fantastic coincidence that your mom and aunt decided to move to a city and by pure chance their son happened to already live there!

Leo S said...

Oh so everyone`s retirement is their house. Again another load of crap. 25% of my neighbours are over 75. Guess what they are still living in their house. The only way they are leaving is by the van with flashing lights.

Keep thinking you've almost got it. Now what exactly will happen to their house once that van leaves the driveway?

Leo S said...

Every contractor and sub has no work in Victoria. They all have their trucks for sale and their houses for sale at 75% of assessed value. They are on there way to Alberta.

This black and white disease is really rampant today.

hap pychucky said...

Leo

The area is changing. The 35-40 year old professionals with families moving in and doing renos when the houses come up.

Just Jack said...

I can understand, your head banging Hap, you've likely paid a small fortune for a new home that will likely be worth less money before you get a chance to move one piece of furniture into it.

But, you've been reading this blog for a while now. You knew better. Like hitting your head against the wall. It hurt the first time, did you think by it doing over and over again another 49 times that it would stop hurting?

hap pychucky said...

Leo

"Every contractor and sub has no work in Victoria. They all have their trucks for sale and their houses for sale at 75% of assessed value. They are on there way to Alberta.

This black and white disease is really rampant today"

The doom and gloom gets tiring when most of it is baseless.

hap pychucky said...

JJ

"But, you've been reading this blog for a while now. You knew better. Like hitting your head against the wall. It hurt the first time, did you think by it doing over and over again another 49 times that it would stop hurting"

I needed to lose that many brain cells to final understand your saltspring logic.





Leo S said...

The area is changing. The 35-40 year old professionals with families moving in and doing renos when the houses come up.

The problem is that looking at demographics there aren't (or will not be) enough to take up the slack. So whereas the boomers were previously driving prices up in their buying years, they are now starting to push them downwards in their selling years.

Marko said...

25% of your neighbors are over 75 years old!

Where the hell do you think they're going to be in 10 years!


My observation in recent estate sales I've dealt with is the estates aren't being split up into 5-10 pieces. More like one or two and those one or two inherting are sometimes already well off to boot.

So yes, they will probably unload mom's home but will upgrade or help their kids (grandchildren of the state) buy something.

hap pychucky said...

Leo

That where u and I differ. I think the demographics is changing. More youger people want to stay here. We still have people moving here. There is zero land left in the core.

Just Jack said...

Let's see.

We have the young urban professionals living in condos downtown.

The 35-40 year old professionals living in Hap's hood.

And the retired professionals in Oak Bay.

That's the problem with Victoria we have too many professionals.

koozdra said...

"More youger people want to stay here"

Wow, this is a delusional statement. When was the last time you tried to find a job here? Especially one that would allow you to service a mortgage. Every job the GF tried to apply to had HUNDREDS of applications. When she eventually found a job, she asked some lifers who they hang out with. They said nobody because all their friends moved away because they couldn't find jobs.

"There is zero land left in the core."

Lets relocate Ross Bay cemetery outside of the city, nobody will notice.

hap pychucky said...

I think the rain is starting to impact everyone`s mood. The sun will rise again one day and we will all realize why this place is a tad better than most places.

hap pychucky said...

Kooz

Some facts about the real situation on jobs.

"Greater Victoria's unemployment rate inched down to 5.4 per cent in November as the number of people working climbed by 700 from the previous month.

Statistics Canada said year-to-date the total number of people working has increased by 7,000 compared with November 2011, when the region's unemployment rate was 6.1 per cent. Jobs growth is split between full-and part-time work.

Last month, the number of people working in Greater Victoria was at 185,200, up from 184,500 the previous month, Statistics Canada said. The total size of the labour force (those working and looking for work) rose slightly to 195,800 in November, from 195,400 in October.

Victoria has the sixth lowest employment rate among the 33 major communities surveyed monthly by the federal agency. Regina has the lowest rate at four per cent.

In the past year, employment has grown in educational services, health care, and information, culture and recreation, Statistics Canada said. Declines were seen in accommodation and food services and in construction"


Just Jack said...

Sure it is a tad better than other places. I live here, and that by itself makes it better than other places.

-Hey, if you're going to have an ego, might as well have a big one.

koozdra said...

Unemployment is low because you can't afford to be unemployed here.

Happy camper said...

I'm still a renter who moved here from another province. I remain baffled by the Victoria marketplace but really enjoy the 'camaraderie' on this blog! What's with listings like the one Koozdra mentioned: http://www.realtor.ca/propertyDetails.aspx?propertyId=12665414&PidKey=873130590. Realtor admits it's ugly on the outside but makes it sound great on the inside and then shows no interior photos. But hey, it's got a yurt so it should be priced substantially over assessment. I disagree with JJ that someone who isn't buying or selling isn't affecting the market. We don't live in isolation from one another's actions (i.e. viewing homes) and conversations (i.e. home owners here know I'm looking and tell me they think I should wait it out more).

hap pychucky said...

To really understand what we have here is Victoria. You really have to have lived in Montreal and or Toronto. Is Victoria special and deserves a premium yes. Fact is a sfh in the 416 area code is 250k more than victoria core.

Introvert said...

What a fantastic coincidence that your mom and aunt decided to move to a city and by pure chance their son happened to already live there!

And if I had moved to Kitchener, Ontario, do you suppose they would follow me? Hells no.

hap pychucky said...

Kooz

"Unemployment is low because you can't afford to be unemployed here"


Wow is all I can say to that comment.

Just Jack said...

So, is 5.4% unemployment good or bad?

A lot of those sub-contractors are not entitled to unemployment benefits and are not counted. Still more are underemployed.

Take for instance Marko. If Marko packed it in and quit selling real estate would he be counted? The plumber, the electrician or any other subcontractor?

Quite a different story from a few years back when it was hard to get employees. Now hundreds of applications for a job.

Of course if you are good at what you do, there will always be a job for you - if you drop your price!

reasonfirst said...

"Wow just like our parents did."

My parents paid 3 times their income....

backinVictoria said...

@hap

In one post you mention how busy the trades are, but then quote Stats Canada who says construction jobs are declining. So which is it?

hap pychucky said...

JJ

Contractors dropping their prices from the joke that they were at from 2004-08. Roof costing 15k when it should be 6k like Ontario. If a contractor deals in reality he will have work today.

5.4 is bad I guess in your world. In my world it is good.

hap pychucky said...

Reasonfirst

What was the mortgage rate?

hap pychucky said...

BackinVictoria

Good trades with competive pricing have work. Ask Marko he is in the business. Maybe I am wrong, I am just going from my recent experience.

mrmike said...

Never mind contractors, I often wonder as I drive up Douglas St and peer into these shops as I'm stuck at a light, and think how do these guys keep their doors open? How does that shop owner do it? How much does he pay per month just to sell what he sells...if he can sell it?

Just Jack said...

But we are paying a premium to live here in Victoria right now. We are also paying a price to live on an island.

Now if the prices in other cities fall, will not Victoria's too?

Well, not really - who cares about Montreal or Toronto. What is important is your local economy.

Happy Camper, wanting to buy a home in a city does not increase prices. Prices are set by a bidding process. If you are not bidding you're not influencing prices. Same if you're not selling.

There is this little village in Switzerland where I'd like to retire. I would say the name, but I'm afraid that would make their prices go up!

mrmike said...

^ Contractors have it easy, talk about low to no overhead.

Introvert said...

How calm will they be when they start hearing whispers of their property value going down?

"Psssst ... Did you hear? Our property values are going down. Keep it quiet, though. We have to whisper..."

"Where did you hear this?"

"There's this blog I found ... it's the only source of truth. It's called House Hunt Victoria. I'm so glad I found it. The blog has all these renters, telling the truth about real estate ... but we have to keep our voices down..."

"Is everything going to be OK?"

"No. I don't think it is. I think we're straight up screwed! There's no other possibility."

"Oh, God. So what do these oracle-bloggers recommend that we do?"

"They say we should sell. And sell fast."

"And should we accept the first lowball offer that we get?"

"I'm afraid so."

Renter said...

Re: How do the small business do it?

My partner and I are trying to start up our own small business and it certainly isn't easy. We're home-based and selling off a website and at fairs and honestly, we don't know how any 1 or 2 person start up can afford commercial rents.

And please forgive me for this little link, since it seems tangentally on topic...

Quarky Science

reasonfirst said...

"Some facts about the real situation on jobs."

Some more facts:

Victoria's employment peaked in 2008 at 190,600 and 3.3% unemployment. Coincidence that was when house prices peaked?

reasonfirst said...

Some facts about the real situation on jobs.

link: http://www.bcstats.gov.bc.ca/StatisticsBySubject/LabourIncome/EmploymentUnemployment.aspx

Introvert said...

And please forgive me for this little link, since it seems tangentally on topic...

That would be "tangentially."

reasonfirst said...

happy

circa 1960, 6.5% 25 year term.

Just Jack said...

Most home owner's will likely not care about the price of their home.

As long as it is more than the owe on it, or bought it for.(FYI)

Yet, there are some home owners that obsess over it.

-And we know who they are... ;)

mrmike said...

If your over 30 most probably do own more than they owe. IMHO if you own a condo, town house, or even a duplex it aint yours and never will be. Be prepared for sky high strata fees forever. And I hate the core, And no I don't live on saltspring or sooke, but I hate the core and can't wait to get outta there whenever I have to go there.

mrmike said...

And I think everyone on VV works at city hall.

Happy camper said...

Hey JJ - those who don't care about the value of their homes are those who don't manage their assets well. For example, if your neighbourhood is going in a downward direction an astute person might decide it's time to sell and protect the value of their investment. Regarding opinion not influencing prices or decisions - really reflects on the value of a real estate agent doesn't it.

Gotta love putting in ideas to this blog - some folks jump on them rather than explore them.

dasmo said...

Sorry, but buying and selling your home to try and protect "your investment" is a fools game. If you tried that in this town at any point you would have failed...If you have an investment condo maybe, unless it's cash flow positive, then I'd still hang on to it.

vawr said...

Info, you have been seriously knotting the knickers of a small number of the regulars here.

It's fun.Keep it up.

Introvert said...

Most home owner's will likely not care about the price of their home.
...
Yet, there are some home owners that obsess over it.

-And we know who they are... ;)


There might be a few renters who obsess over it, too.

mrmike said...

Investment condo?

Introvert said...

... if your neighbourhood is going in a downward direction an astute person might decide it's time to sell and protect the value of their investment.

I thought one shouldn't consider one's home as an investment. I'm confused.

totoro victoria said...

I don't care about the value of my home in the short term. Asset management challenged? Maybe :)

I have no plans of trying to time the market in the next ten years. I'm planning on staying put. I'm enjoying renovating at a slow pace and watching the humming birds at the feeders outside my window.

Knowing that I am planning to stay "forever" makes the market somewhat moot - by the time I would sell the place it will be paid off anyway - mostly by rental income.

Also, if you are trying to sell to preserve capital you'd better factor in selling costs and costs to rent in the interim plus the risk of higher interest rates.




patriotz said...

I thought one shouldn't consider one's home as an investment. I'm confused.

The problem is that people use the term with different meanings:

The popular one: something that is guaranteed to make you money.

The smart one: something that will make or lose you money depending on how much you pay for it.

Marko said...

Good trades with competive pricing have work. Ask Marko he is in the business. Maybe I am wrong, I am just going from my recent experience.

Definitely correct, if you are a solid trade and you are willing to work hard no shortage of work.

There is an absolute shortage of trades and it will only continue to get worse. It isn't "cool" to be a trade in my circle of late 20s friends. Most of my friends, me included, are over-educated with useless degrees and have jobs that don't really contribute any production to the economy. Flipping paper type jobs making 50k to 200k depending on how lucky and capable you are. I have a friend with an associate degree that recently landed a 70k provincial government job, flex Fridays, pension, sick days, etc. Why do a trade?

So no way you'll get a quality stone mason for cheap these days. Maybe when immigrants filled those jobs, but now days 83% of immigrants have university degrees. They are teaching at Uvic, not building rock walls.

In summary, I think trades are a smart way to go. There would be a crisis if we had another boom.

Marko said...

Part of the reason I decided to not follow in my father's foot steps as a builder is I make more money than he does opening doors to homes and scanning paper. Doesn't make any sense whatsoever but I'll take it.

totoro victoria said...

Having some recent experiences with renovating I would say good tradespeople are not short of work - they are hard to find and scheduled for months in a row.

mrmike said...

The way I see it is Anything "Strata" is unknown. My Aunt has had her strata fee double. They have to do an annual depreciation report now and people can expect huge hikes on their fees. Detached houses on decent sized lots will hold value (no kettle creek, westhills, hazzel wood shit).

a simple man said...

Good trades will always have work, undoubtedly. the the best in any profession will. The pertinent question is how many are being driven out of the trades or away from Victoria due to lack of work?

Let us all take a breath and try and stay civil. This blog has been largely able to do so for years - let's not change that now.

Open exchange of ideas. Discussion. Argument. Respectfully.

Just Jack said...

It's more to do with how you get paid Marko.

If you had to be paid up front with a cheque from your client before selling their home you would make a lot less money. The same with a doctor, dentist, mortgage broker, etc.

That one degree of separation between you and who writes the cheque makes all the difference.

It also depends on where you are in the food chain of construction too. The excavation company digging the hole for the foundation always gets paid, the landscaping company not so likely.



Marko said...

Good trades will always have work, undoubtedly. the the best in any profession will. The pertinent question is how many are being driven out of the trades or away from Victoria due to lack of work?

How much work is lacking? Lots of huge projects under construction, shipyard, more projects scheduled to start early in the New Year (DUET just announced they are breaking ground in January).

There will be more buildings going up in the next 24 months downtown than 1990 to 2000 combined.

I know I know, jobs for 24 months, and than the market will crash and burn because of oversupply :)

mrmike said...

My two cousins, both carpenters took camp jobs up north...they fly them in and out, 14 days in 7 out. They feed them and guarantee them a minimum of 125k per yr...they both own homes and big trucks in Vic and no they aint for sale.

Marko said...

^ then.

a simple man said...

mrmike - I should have never gone to University for as long as I did!

Mind you, I live a pretty idyllic lifestyle working when I want to, strolling the Avenue high-fiving Totoro and having lattes with Hap.



a simple man said...

Even more condos being built - when the condo market is in decline? Sounds haphazard to me, but again, I am an Avenue strolling, latte sucking, soccer coaching, Oak Bay professional. Renter.

Dave said...

In summary, I think trades are a smart way to go.

Only if you want to be unemployed.

As even the Big 5 have been noting,

"Canada still has overbuilding concerns. The level of household formation does not support the level of construction activity that we are seeing each month."

Trades apprentices will make it to the carnival right at closing time.

Marko said...

and those of us flipping paper will continue to be just fine as construction completely collapses?

Just Jack said...

Those depreciation schedules are a nasty thing. You can get an insurance valuation on a strata complex for under a grand. Call in an engineer to do a depreciation schedule and that's several thousand.

And there is a lot of guess work in those reports. For example, whats the present value of a 10,000 square foot torch membrane roof that is likely to be replaced 14 years from now? Windows?, Stucco? Boiler? ????

Then the engineer will give you several levels to choose like economy, standard or deluxe. And not guarantee any of them. But the thickness of the report and the graphs dazzle the old timers at the strata meeting. Lots of minute details about prices then at the end, the costs are just simply doubled for contingency reasons. Kinda like holding up something shiny in front of their crinkly little eyes.

Adds a couple hundred bucks a month to the strata fees to build a reserve for replacements.

mrmike said...

Depreciation schedules are a nasty thing, from what I hear they project 30 yrs into the future to prepare the contingency fund...then divide by said yrs and months to adjust the now defined monthly strata fee. This will get ugly. And guess what? there is nothing you can do about it...that condo owns You!

totoro victoria said...

Yes, and we have a secret HHV handshake too when the high-fives are... ya know.. inappropriate for the occaision. Like in the library.

Leo S said...

That where u and I differ. I think the demographics is changing. More youger people want to stay here. We still have people moving here.

I find it very hard to believe that Victoria is going to buck the trend of the rest of Canada and have more young people. If anything Victoria has a higher weighting of old people.

Leo S said...

Fact is a sfh in the 416 area code is 250k more than victoria core

Yes absolutely shocking that a detached home in Canada's biggest city is more expensive than in little Victoria. Nevermind that your data seems to be questionable. Detached average is the same as here, between 600 and 650k.

mrmike said...

A library to me has about the same purpose as a seed vault. They have their place...in the Arctic Circle buried miles below grade in some kind of time capsule.
Logs onto itunes ;)

Leo S said...

And if I had moved to Kitchener, Ontario, do you suppose they would follow me? Hells no.

Sure. Most people don't randomly decide to move further away from their kids in retirement.

That would be "tangentially."

"Typo vs. lack of understanding."

Leo S said...

and those of us flipping paper will continue to be just fine as construction completely collapses?


Hope so....

...

*flips paper*

Renter said...

@Introvert.

That's right, I forgot. You never suffer from typo-itis.

Introvert said...

That would be "tangentially."

"Typo vs. lack of understanding."


This one could legitimately be either.

However, I've encountered more than one person who mistakenly thinks "tangental" and "tangentally" are correct forms.

That's why I did it, Leo!

Introvert said...

@Introvert.

That's right, I forgot. You never suffer from typo-itis.


I do, but rarely. ;)

Chuan Si said...
This comment has been removed by the author.
Trent Sze said...

that's right, too many professionals living in this plain beautiful island.(i think i am one of them..or professional to be)
After work, I just had my dinner, listening to 107.3, and read all the funny comments. you guys just made my day better..

I make 40kish, 29... hoping the price will be drop down into 400k-500k for sfh...(

HouseHuntVictoria said...

Would you folks please cool the chatter? 142 comments in what, 24 hours? How's this working fool with limited acces to the Internet during the day expected to keep up? *goes back to munching popcorn in the corner*

totoro victoria said...

I know right. How can there be anything left to talk about on this topic?

hap pychucky said...

leo

416 average was above 800 in april now 741,000. I was using just the 416 area.

Detached 764 1,954 2,718 $741,480

Their mean and average are close so they are now 200k more in the 416 area using the mean.
http://www.torontorealestateboard.com/market_news/market_watch/2012/mw1211.pdf

Dave said...

Any thoughts on dependency ratios? The lines do fit well with what happened to prices since the fifties.

"The chart identifies that the economic boom witnessed in Canada over the last decade was not only a function of global commodity demand and increasing leverage, but was also assisted by the tail end of a massive demographics boom. This demographics boom began in 1965 and lasted until 2010."

Just Jack said...

The Baby Boomers now become the Baby Headwind?

I think the solution is simple eliminate child worker laws and restrict access to the medical plan by the elderly.

I know that's crazy, but not as nutty as my first thought which was to bring in temporary immigrant workers. No kids, no elderly - just taxes for the government. One temporary immigrant alone could generate $25,000 to $50,000 a year in taxes if they worked in the tar pits.

Never happen?!

koozdra said...

Perhaps a little premature?

Housing market appears to have achieved soft landing: Scotiabank report

dasmo said...

"However, with the Canadian economy continuing to post healthy job growth and sellers proving responsive to the underlying shift in market conditions, a sharp decline in prices nationally is unlikely."

dasmo said...

In other words, Halibut territory ;-)
Don't worry, All you Bears can claim victory in a few year in real dollars.

Just Jack said...

Show me the bubble!
Show me the bubble!

Some bloggers have asked this very important question. Surely, we would see some kind of extraordinary losses by now indicating a bubble in at least one market niche?

And we are, in the retirement market. Best exemplified by complexes with age restrictions.

One example, is that of a condominium on Mills road in Sidney that sold back in June 2008 for $319,000; and now fetches $235,000 on the market.

Incidentally that same condominium sold back in May 1994 for $156,000.

And it wasn't too long ago that the bulls were stating that one of the underlying reasons why our prices would continue to rise - was the flood of retirees about to beach themselves on our shores.

info said...

HHV

The increase in chatter is likely due to the fact that Victoria's market is starting to crash. I think we will look back on this time (and earlier) as the beginning of the end of Victoria's housing bubble.

The same thing happened in the US immediately prior to and at the beginning of their crash.

hap pychucky said...

Info

The only thing crashing is your dream of owning a home. Happy renting.

Introvert said...

The increase in chatter is likely due to the fact that Victoria's market is starting to crash. I think we will look back on this time (and earlier) as the beginning of the end of Victoria's housing bubble.

That has to be the most likely reason! (Sigh.)

The same thing happened in the US immediately prior to and at the beginning of their crash.

Yes, blogs were on fire then! It's a well established fact that when people are about to lose a giant chunk of their equity, the first thing they do is blog about it.

Thanks for the laughs, info. I hope you stick around.

totoro victoria said...

Really? There was an increase in chatter in the US? That was the marker?

Hmmm... maybe HHV chatter volume (not content of course) should be added to the CMHC statistical analysis for the Victoria housing market.

Introvert said...

Welcome to House Hunt Victoria

Now proudly celebrating over five years of people saying a huge price correction is around the corner, and none ever happening.

info said...

Leo

You can deny that the government made the decision to dramatically increase the pool of new buyers in 2009 to stop the housing crash if you want. You have provided nothing to prove otherwise.

As I have said, starting in 2009, self-employed workers didn't have to provide proof of income. Immigrants with little or no proof of income or employment were given mortgages, etc. The list goes on. Prior to 2009, the rules were much stricter and these groups of people were not able to qualify for mortgages.

I can think of many examples of people from these groups that were suddenly able to buy a house. The taps were opened and these people took advantage.

One example is hair stylists. Many are considered self-employed, depending on their situation. I've talked to many who were able to qualify for mortgages during that 3 year period. The banks were more than happy to lend a hand. About 2 months ago this all came to a grinding halt. Now, the self-employed are not able to obtain a mortgage without proof of income.

CMHC doubled the amount of insured mortgages on their books in 3 years. You want to believe that this did not create a whole new group of buyers that were previously unable to qualify. You can believe what you want if that's what it takes for you to maintain in your head that Victoria will experience only a minor correction.

Introvert said...

Fed to Hold Rates Down Until Jobless Rate Is Below 6.5%

The decision to publish economic objectives replaces the Fed’s earlier guidance that it expected interest rates to remain near zero until at least mid-2015. The Fed said, however, that it expected to reach its targets on roughly the same timetable.

The economic projections showed most members of the policy committee expect unemployment to fall below the target of 6.5 percent by the end of 2015.

info said...

There are many similarities between Canada's housing bubble and that which existed in the US recently.

The US housing market began to crash in 2006. The economy really began to hurt in 2008 as a result of this crash.

Canada's crash in 08-09 was suddenly halted by a massive, unprecedented, emergency intervention. Victoria, Vancouver and Toronto were, in my opinion, the cities that experienced the most dramatic crashes. Victoria is currently witnessing the start of another crash.

What's important to note about the US crash is that the US government intervened and slashed interest rates to emergency levels which prevented their housing market from correcting completely. Canada will not have that option to stop its crash as interest rates are already at emergency levels. For this reason, we can expect a more dramatic crash than what the US experienced. Other reasons support this as well.

Just Jack said...

Well Introvert, it has to start somewhere.

Many of us suggested that the first market likely to see a major correction or bubble burst would be the condominium market.

And that appears to be what is happening today in the retirement condominium market. It may also be happening in other age groups too, but it is much easier to quantify when the complex imposes a limitation on buyers.

Will what is happening in the retirement condominiums spill over to other market segments? I suppose if the bubble burst can be contained to just 55 and older complexes it might. I don't think this has happened anywhere in the world, but it is a possibility.



a simple man said...

"Now proudly celebrating over five years of people saying a huge price correction is around the corner, and none ever happening"

Come on - you know that is not true. Let's all try to return to rational discussion.

CS said...

Leo writes of the need to take interest rates into account when assessing the current property market. This is surely true, but what abnormally low real interest rates and loose lending standards seem to predict is a highly unpredictable market, for they incite folks with very little cash to take a large leveraged bet in what is bound to become a speculative market.

This is a recipe for a boom and bust cycle.

And when you think about what people are buying, the craziness of the market seems all the more apparent. In OB, for example, if you buy a "cheap" bungalow, you are paying half a million or more for a small patch of dirt, then another hundred thousand or so for a more or less clapped out box to live in.

Buying dirt at over $100 per foot looks very much like investing in an opportunity of great advantage, nobody to know what it is, as the promoters of the South Seas Company put it.

True, if you are earning enough, paying big money to live within walking distance of the office or whatever, may make sense. But for ordinary young folk,there are other options, which an increasing number will chose to take now that house prices have acquired downward momentum.

info said...

Leo

The numbers for high-ratio homeowner insurance through CMHC have always been higher than their low-ratio portfolio.

Both high-ratio homeowner and low-ratio portfolio have increased, as one would expect, over time. The increase for low-ratio was higher than that of high-ratio in 2011, however, high-ratio still dominated. In 2010, high ratio increased more than low-ratio.

High-ratio homeowner insurance was dramatically increased from 2009 through 2012, as I previously stated. This accounts for the newly created high-risk pool of mortgage holders that I have talked about.

Introvert said...

Let's all try to return to rational discussion.

Rational? Are we talking about the same blog?

Just remember: there's a grain of truth in every joke!

info said...

Canada's bank bailout.

Quoting from Macleans:

However, the 2011 CMHC annual report reveals clear evidence that taxpayers did in fact take on significant risk in propping up the mortgage market during the financial crisis and Ottawa owes Canadians some answers on exactly why this was allowed to happen.


This demonstrates that Canadians have been led to believe a more optimistic version of what has really happened in our country, especially over the last 5 years.

I remember this bank bailout when it happened. It was interesting that it barely made the news at all. Professionals who should have been in the know told me they had not heard about it. It was intentionally hidden from Canadians.

Our banks and government then bragged to the world that our banks were more conservative and that we were better than everyone else.

I know many who think the CMHC is hiding information as well.

CS said...

Now proudly celebrating over five years of people saying a huge price correction is around the corner, and none ever happening

Bears cannot win here.

If prices rise the bulls sneer.

If prices fall, the bulls deny it.

totoro victoria said...

Q: Why did HHV create this blog?

A: In order to make weather forecasters look good.

totoro victoria said...

"I know many who think the CMHC is hiding information as well."

The lack of evidence proves the conspiracy is working.

koozdra said...

Q: Why did HHV create this blog?

A: So that bulls can come here and argue with real estate bears to make themselves feel better about being over leveraged in the housing market.

Mayfair Man said...

Now that the regulators are making mutual fund fee's more transparent, I wonder when the fee's on Real-estate sales might change where each party pays a commission for the transaction? Having the seller pay the whole fee is a like a never ending Differed Sales Charge(DSC)...

CS said...

Oops! That link I provided to a chart of falling prices doesn't work, and now I cannot find the chart I linked to.

Never mind.

Believe me. Prices are falling!

info said...

Victoria is obviously in a housing bubble.

This property, in Atwater, California, near Sacramento, is a 4 bedroom, 3 bath ranch with 2258 sq. ft. It is listed for $139,000.

This is only one example, of course. It took me 10 seconds to find it.

What would this house be listed for in Victoria? I'm sure it could be listed for $500,000 easily even if it was located in Langford.

Sunny California homes cost only a fraction of Victoria's current bubble prices. We have a long way to fall. Fasten your seatbelts, kick back and enjoy the ride.

info said...

totoro

Now is not a good time to buy.

Introvert said...

But for ordinary young folk,there are other options, which an increasing number will chose to take now that house prices have acquired downward momentum.

Wouldn't "young folk" be more likely to enter the housing market now that housing prices have downward momentum? "Hey, look, now I can afford a house!"

Plus, even though prices may be declining right now, everybody intuitively knows that prices do rise over the long run.

Leo even crunched the numbers, just in case we were all hallucinating: Victoria's prices have increased at an annualized rate of 4% (inflation-adjusted) since reliable stats started being kept.

This 4% figure will likely drop a bit, depending how much prices fall, and for how long; but even a longterm 3% real appreciation is quite respectable, in light of the fact that we're not even supposed to be considering our house as an investment!

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

even a longterm 3% real appreciation is quite respectable

More than respectable, if the long term real price appreciation was >0 eventually even Jim Pattison (or someone like him) would be unable to afford one.

Think.

info said...

David Lereah, chief economist at the NAR in the US in 2006 will probably be remembered as the biggest bubble denier of all time. Some regulars on this blog are close, however.

"We are really on track for a soft landing. There are no balloons popping.” - David Lereah, NAR’s chief economist, December 2005

This is exactly what our banks, government, real estate associations, realtors, etc. keep telling us.

Marko: "See no signs of a crash so far this month."

He is of course, quoting VREB's average price. He is ignoring the fact that there are houses listed for 34% below assessed value. Does this happen in a stable, flat market?


Introvert said...

Now that the regulators are making mutual fund fee's more transparent, I wonder when the fee's...

People, please. Don't add apostrophes when pluralizing words.

Not the first time this has happened.

SilverSurfer said...

Introvert said: "Now proudly celebrating over five years of people saying a huge price correction is around the corner, and none ever happening."


Try adjusting for inflation. Then tell me prices have been flat for the past 5 years. And of course everyone agrees on the definition of "huge price correction" right? Regardless, no major crash until Black Swan or interest rates start rising, until then I'm enjoying watching continuous price decreases and renting my 3 bedroom house for much less than it would cost to own it.

How many more signs do we need on the wall?

* CMHC insurance limit about to hit the wall.
* Multiple rea estate negative government policies introduced in 2012
* Sales crashing >20% for past few months.
* Global Macro picture continues to get worse
* US Fiscal cliff risk = Canadian Recession. Even without cliff impact, some argue US is already in recession.
* Recovering employment figures are relative to market recovery in the sense that there is little proof these are good high paying jobs. Wage stagnation is what I've been seeing.
* Mainstream Media has jumped the fence in the past year and all you hear now is mostly negative news about the real estate sector.
* Canadian Government heads continue to warn canadians on debt and future consequences and are not changing minds on recently implemented policies.
* Renting is easily proven on average to be much cheaper than buying, so why buy now?! It's not a buyer's market, it's a renter's market.
* Interest rates can only go up from historic lows, be that in 1 year, or 3.
* How does it make sense to buy when prices are declining and an eventual set of continuous interest rate hikes await over the horizon?
* As the clock ticks more and more boomers are retiring with no investment savings, and needing to sell their homes to suplement their retirement.
* 1 Million price policy will have a big impact on average prices.
* New proof of income requirement has supposedly crushed the HAM (hot asian market) myth, whether it was real or not.
* First time home buy'ers tax credit of $10,000 will end March 2013.
* Black swans are inevitable.

I probably missed a dozen or so points, these are just off the top of my head. Now please, feel free to list off the PRO-Real estate "it's a good time to buy now" arguements, and I mean "now" not always, such that we can weigh the pro's and con's, and have a better idea about the likely near-term (1 year) trend.

Introvert said...

Q: Why did HHV create this blog?

A: In order to make weather forecasters look good.


Nearly powerwashed the screen with coffee when I read this. So good.

Leo S said...

416 average was above 800 in april now 741,000. I was using just the 416 area.

So then you have to compare apples to apples. If you want to compare only detached properties in the core of Toronto then you need data for only the core of Victoria as well. Comparing it to all of Victoria is misleading.

Dave said...

...but even a longterm 3% real appreciation is quite respectable.

Introvert, you're not quite grasping the concept of 'long-term' and 'real'. The long-term real appreciation of home prices is near zero (~0.5%). That Victoria has been so high is precisely why it must now change course.

Did you misspell 'long-term'?

Introvert said...

Victoria is obviously in a housing bubble.

This property, in Atwater, California, near Sacramento, is a 4 bedroom, 3 bath ranch with 2258 sq. ft. It is listed for $139,000.

This is only one example, of course. It took me 10 seconds to find it.


Time to ignore complexity!!!

(Somewhere Leo is bashing his head into a wall.)

Introvert said...

Did you misspell 'long-term'?

You're correct: it should probably be hyphenated.

info said...

Leo and Introvert

Your complexity theory holds no water at all. It is your attempt to justify your continuing denial of the facts and arguments that present clear, opposing evidence that contradicts your wishes.

Canada and the US have approx. the same household incomes. Historically, house prices have been on par in the two countries. Currently, house prices in Canada are double that of the US. A crash is coming.

Victoria house prices more than doubled from 2003 to 2008 (125% is an estimate). Incomes did not increase by 125% from 2003 to 2008. In fact, to this day they have not come close to increasing that much compared to 2003. Victoria incomes, therefore, do not support current Victoria house prices.

There are other factors, of course, but this is the big picture.

You can deny this all you want and try to complicate this, but it will not falsify it.

Leo, I'm not sure why you don't spend more time explaining how misleading the average price has been the last number of months. I think that would be valuable and informative.

You want to dismiss the price/income ratio and price/rent ratios, but they are the best metrics we have. As I have explained at length, governments and economists worldwide have used these metrics for decades and will continue to use them.

The case for a housing crash in Victoria is not entirely tied to these ratios. There are many other factors and indicators that point to a crash as well.

Let's not forget the crash that Victoria experienced in 08-09 and all the ammo that had to be used to stop it. That type of intervention will not happen this time. Victoria is in the beginning stages of a crash that will achieve prices that will be truly affordable for the average family. This is a good thing. I think it is misleading to try and convince people that now is a good time to buy because low interest rates make it affordable, in your opinion. Rates will rise inevitably, starting soon. I have not even bothered to use rising rates as part of the equation, you may have noticed. Victoria's housing market is so unhealthy that it will crash regardless of where rates are. Victoria's housing market was already weak and in decline before the new mortgage rules came along in the past few months. This market is correcting right now and there is nothing anyone can do about it.

Price/income ratio tells us a lot and Victoria's market is indeed in bubble territory.

A crash would mean that the average Victoria house would be affordable to the average Victoria family, without having to rely on emergency level interest rates which can only go up. The current market conditions and emergency interest rates are extreme and cannot be sustained. Victoria needs this correction. The effects of rising interest rates should not be a threat to home ownership like it is today.

Marko said...

Victoria is in the beginning stages of a crash that will achieve prices that will be truly affordable for the average family. This is a good thing.

Okay, I agree with you on something. It would be a good thing.

Will it happen? Probably not. The world (globally) is changing and I think you can forget about an average family being able to afford a home in Victoria.

Rates will rise inevitably, starting soon.

Garth Turner has been saying this for 5 years, I am still waiting and still enjoying my variable low 2% mortgage.

info said...

A crash would be a good thing in terms of creating market conditions that would allow the average Victoria family to afford the average Victoria home.

totoro victoria said...

"Totoro: Now is not a good time to buy."

Thank you for the info info. Of course it is an opinion masquerading as info, but that is okay... imo.

I'm not going to repeat my views... or maybe I should so we can get to 200 posts and set a record because all that HHV chatter will definitely cause prices to drop - like totally crash.

totoro victoria said...

Wait a minute... has anyone noticed that info is chattering A LOT lately. Hmmm... seems like it is not only CMHC that is part of a hidden conspiracy.

info said...

Marko

Would you rather see rates stay this low for 20 years like they have in Japan? Japan is a prime example of what that does to an economy and a housing market. Prices crashed regardless of the low emergency rates.

We cannot ignore examples of things that have happened in other countries such as Japan and say that it can't happen here.

That's like saying that the war in Europe (WWII) was a bad thing for Europe, but wouldn't be a bad thing if it had happened in Canada because Canada is different.

Marko said...

A crash would be a good thing in terms of creating market conditions that would allow the average Victoria family to afford the average Victoria home.

And those of us that are willing to work a bit harder, or are a bit luckier than the average family will be on the average waterfront property I presume?

And those below average will have to settle for those crap condos we have all over Victoria?

I agree with you that it would be a good thing, but there is nothing average about the average Victoria home. Having grown up in another country and done lots of travelling (25+ countries) Victoria is one of the best places to live in one of the best countries in the world. The average house is huge compared to global standards; the lots are massive, lots of parks, etc.

Marko said...

Would you rather see rates stay this low for 20 years like they have in Japan?

Did I say what I preferred? No. I just made the point that various individuals have been predicting a rise in interest rates for a while now.

More then a year ago when I went to get a mortgage I didn't ask myself, "What do I prefer?" rather I made an educated choice to go with a variable based on the facts available.

People have continued to predict that rates will go up any minute, hasn't happened. That is reality. What I prefer, who cares?

totoro victoria said...

Exactly. War and local real estate markets are pretty similar things when you really think about it.

Marko said...

That's like saying that the war in Europe (WWII) was a bad thing for Europe, but wouldn't be a bad thing if it had happened in Canada because Canada is different.

How do I even argue this one? I am just not going to waste my time to be honest.

totoro victoria said...

Don't Marko, don't. I know I've fallen for the bait but you don't have to be part of the chatter crash. It wouldn't be good for business.

koozdra said...

The longer historically low rates are around the harder the impact will be when they rise. Anybody who is basing affordability on interest rates is not being financially prudent. Yes, interest rate have not risen yet.. Marko are you suggesting that no one should be concerned about them rising? Are you saying that the current rates will not rise?

Dave said...

How do I even argue this one? I am just not going to waste my time to be honest.

Good way to sum up this whole thread.

Dave3

vawr said...

"People, please. Don't add apostrophes when pluralizing words."

Please, please. Time to stfu, analvert.

Dave said...

Victoria is one of the best places to live in one of the best countries in the world.

Marko, it was in 1985 too.

totoro victoria said...

Hey, play nice. That acronym is out of bounds imo.

I may poke a bit of fun at info but I appreciate his/her comments. I'm even okay with introvert's grammar obsession too.

WCUWTELANIGTKWTM

«Oldest ‹Older   1 – 200 of 234   Newer› Newest»