Monday, December 3, 2012

November Market Weak, Prices Flat

Another month, another slow market in Victoria.  Average and median prices jumped up, but surprisingly the VREB did not jump on this bit of good news, recognizing that increasing prices in a market with over 12 months of inventory is due more to statistical variance than demand.  The weakness has been felt more in the condo market, where the median is down 10% YoY.

So here are the highlights:
  • Sales down 24% YoY
  • Sales to new list ratio down 9% YoY
  • Months of Inventory up a whopping 37%
But prices are still sticky.  Median price is up 1% YoY.  Taking a rolling average we're down a percent or two but nothing to write home about.  As Just Jack said, we won't truly know where the market is until the spring when sales rebound and the statistics become a bit more meaningful.  Here's an update on the MOI situation.
MOI And SFH Price (Note this is residential MOI)
An astounding increase in the past few months, and if the last couple years are any indication we can expect continued high values for December and January.  Here's the full VREB story.

74 comments:

Marko said...

Residential inventory is 3,583.

koozdra said...

I know someone who bought a house and is now trying to sell their condo. Two price drops and still no interest.

Leo S said...

Thanks

SilverSurfer said...

Very useful graph. Thank you :)

totoro victoria said...

I agree with you that the price increase is likely due to statistical variance.

I did find myself thinking "what would the response be on this blog to a report of a one percent drop month over month"...

Most would be seizing on it as the harbinger of doom and as evidence confirming their prediction of a falling market.

Just sayin'

koozdra said...

"harbinger of doom"

Are you ignoring the MOI? Lets not forget that this does not include the people that pulled their houses of the market and will re-list when the "market rebounds". Spoiler alert: it won't.

Leo S said...

I did find myself thinking "what would the response be on this blog to a report of a one percent drop month over month"...

I've always maintained that movement in either direction month to month is not reliable. Only the trend shows where things are going.

totoro victoria said...

koozdra - i am ignoring nothing. are you ignoring the previous four or five years of this blog? repeated warnings and predictions of an imminent 30% or more crash. announcements over and over again that "it is happening" based on newspaper articles and leaps of logic.

my point is that there is a huge tendency for confirmation bias on this site. too many spoiler alerts about things that don't occur and credibility is impacted.

my view is that real estate is cyclical and if you keep predicting a drop eventually you are going to hit a downturn in the cycle. i could start to predict a rise and if you give me six years to be right i could be right and pat myself on the back for it in advance.

we have had a long run up. condos are showing a drop. sooke is showing a drop. i would agree that we will see an overall decline or at the very least a flat market in the core areas.

so, what is the purpose of all the prognosticating? to be right about a downturn? to time the market? to learn about real estate in general?

what has been most helpful for me on this site are the great graphs, statistical information and updates, and the debates/info on our specific local market conditions. i find predictions couched as expert facts less helpful and somewhat annoying.




Introvert said...

I've always maintained that movement in either direction month to month is not reliable. Only the trend shows where things are going.

Good on you, Leo. But most "bears" usually aren't as reasonable as you; totoro's point is valid.

Introvert said...

my view is that real estate is cyclical and if you keep predicting a drop eventually you are going to hit a downturn in the cycle. i could start to predict a rise and if you give me six years to be right i could be right and pat myself on the back for it in advance.

Nailed it.

koozdra said...

totoro

Perhaps when we get back to some sane price levels the conversation can return to being more constructive. Despite your proclamation that it is affordable to buy now, it isn't. "Well, given my situation, it is a good time to buy", good for you. As the CMHC leaves the market prices will drop. If we return to a time when the minimum to put down for a house is 20% (you remember? when Canada was actually financially prudent), people will have to save again to buy a house. An "entry level" house at $400,000 will require $80,000 dollars. We are in such a ridiculous bubble because nobody has to save to buy property.

The CMHC is the back bone of this housing market. No CMHC, no more sustainable housing market.

Jack and Cate said...

"As Just Jack said, we won't truly know where the market is until the spring when sales rebound and the statistics become a bit more meaningful...."

Are you saying these stats aren't meaningful now?

"Denial is a defense mechanism postulated by Sigmund Freud, in which a person is faced with a fact that is too uncomfortable to accept and rejects it ..."

totoro victoria said...

what denial?

i have never said that i was an oracle on house prices and what the market would do. i have said that i following two small sub-markets closely and have generally been accurate in predicting short-term movement (ie. six months).

i don't believe anyone has the overall housing market magic prediction formula. only overall formula i know based on statistical analysis is that past is the best predictor of future in housing. what does the past say? prices go up and down in cycles, but they always rise over a longer period of time.

the only other area of certainty i have are the personal circumstance i bring to the table. my age, health, stage in life, aversion to renting or owning, family size, income, risk aversion, debt aversion, creative thinking, reno skills, people skills, credit rating, willingness to move or not, amenities i am willing to pay more for.... these play as big a part in the decision to where, when and what home to buy as the market does.

you are time limited in life and at some point if you want to own a home these factors may converge absolutely ideally. more likely there will be a mix of ideal and less than ideal. of course the biggest drop might occur after a rise in interest rates, affecting your ability to borrow and monthly payments.

there is a big difference between presenting yourself as an expert who knows what the market will do next based on a single factor, and setting out a reasoned analysis with stats and a proposition that is supportable.

i say if you want to buy now and you have enough positives converging: do it. it is a good time to lowball imo. rates are excellent. on the other hand, prices probably will drop a bit more, who knows how much. there is no need to rush and every reason to wait if you have a huge down payment.

koozdra said...

"only overall formula i know based on statistical analysis is that past is the best predictor of future in housing. what does the past say?"

Let me introduce you to the appeal to tradition.

totoro victoria said...

There is a difference between tradition and statistical analysis.

Let me introduce you to:
1. Base rate fallacy:
http://en.wikipedia.org/wiki/Base_rate_fallacy
2. False dilemma:
http://en.wikipedia.org/wiki/False_dilemma
3. Ludic fallacy:
http://en.wikipedia.org/wiki/Ludic_fallacy
4. Reification:
http://en.wikipedia.org/wiki/Reification_(fallacy)
5. Straw man:
http://en.wikipedia.org/wiki/Straw_man
6. Belief bias:
http://en.wikipedia.org/wiki/Belief_bias
7. Bias blind spot:
http://en.wikipedia.org/wiki/Bias_blind_spot

Blah, blah, blah... I could go on and so could you.

Perhaps what we can agree on is that is a fact that we don't know what we don't know. We can make some guesses and predictions but we will not know if we are correct UNTIL we are correct.

So, I have my own personal hypothesis that markets are fairly cyclical. Could be proven wrong, but it goes into my decision-making matrix. Your hypothesis might be that this time is different. That is fine, use it to make decisions.

The only annoying part for me is the presentation of information that has yet to be proven true as a fact and not a possible outcome. One newspaper article does not form a great basis imo.

Imo the more data you have the better, but again, you cannot be correct in a hypothesis until proven true so perhaps presenting a hypothesis as fact could be... modified.

DavidL said...

@totoro
I did find myself thinking "what would the response be on this blog to a report of a one percent drop month over month"...

I maintain that the rolling six-month average is a much more accurate indicator. That said, I'm still sticking with my predictions from more than 2 years ago.

koozdra said...

Totoro

If you don't like speculative conversations, don't have them.

totoro victoria said...

No comment :)

koozdra said...

Perhaps we should use more "imo" in our discussions to differentiate the opinions for facts we are certain will happen in the future.

This scene from The Good Wife will explain how any statement should be made in the future.

a simple man said...

I follow Oak Bay, as this is where I live and will buy.

I have noticed that now houses are commonly selling below appraisal and below initial asking prices. this is a change from a few years ago where above asking was the norm.

I am also seeing that people are under a lot more financial stress now that I have seen previously here.

Married with the historically high debt levels (and increasing) during historically cheap credit all I can see is a storm brewing.

Just Jack said...

The stats are still meaningful, just with the low volume of sales, large geographic area and diversity of housing the stats will be subject to a greater variation. Your neighborhood or the type, design of your home can vary considerably from the overall market average and median. Case in point, it really sucks trying to sell a retirement rancher in Sidney these days.

Moreover; with only 17 condominium sales in all of the western communities last month, there is simply not enough data to do a month to month comparison.

Low sale volumes means that the market is shallow and may be dysfunctional in locations or types of properties. In this market, vendors can go months with no showings of their property.

The motivated sellers may choose to lower the price and bite at a low ball offer. That doesn't necessarily mean that all market prices are declining. In contrast, sales of starter homes may have slowed considerably, yet the high income market is still active, causing both the average and the median to rise.

Maybe it would be better to look at the last 400 sales rather than an arbitrary time period such as a month. Or maybe it would be better to look at specific type or design of a property that would attract the same target group of purchasers rather than the overall market.

That's the problem when you are using price as a parameter to determine what is going to happen to future prices. Better to look at months of inventory, days on market, and sales to new listings ratios. But that just ain't sexy.

The market can also act in an irrational manner. Which happened years ago when prices were rising. We had periods when inventory went up, demand went down; and prices went UP? Announce an interest rate increase and all those prospective buyers who had rate guarantees went out and bought. Later on, those buyers, realized the price they paid for their irrational exuberance was overpaying on the home.

There is no denial, the market trend is for lower prices. The government stimulus programs may have caused people to pay higher prices in the past, but these programs could not sustain high sale volumes.

totoro victoria said...

"I have noticed that now houses are commonly selling below appraisal and below initial asking prices. this is a change from a few years ago where above asking was the norm."

I have noticed the same thing.

Selling below assessment could be reflective of increased assessment values for this year but the below asking and days on market are more telling imo.

When I was looking to purchase in 2009 in OB prices were signficantly above assessed value (ie. say $80 000) in every case I saw, although they often sold for less than asking.

As far as increased financial strain, I have seen no evidence of this except that I have more than an average number of individuals inquiring for jobs at my company.

totoro victoria said...

"There is no denial, the market trend is for lower prices."

Thanks for the perfect example JJ. Of course people can disagree with this! They could say it is going to be flat or whatever they believe. If you had said "in my opinion" this would have been more palatable imo :)

If you are going to state "there is no denial" about a future event you better be able to prove your special psychic spidey powers through a youtube video we can all watch.

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

You have very good grammar skills. But you lack comprehension. Go back and re-read Jack and Cate.

totoro victoria said...

"facts we are certain will happen in the future"

an oxymoron... a fact does not occur in the future because facts are objectively provable today: they exist.

who is we - the real estate phrophets of Victoria?

if we change fact for "probably happen imo" and certainty for "seems likely" we might be closer to some speculative conversation.

totoro victoria said...

yes, i did realize they were referring to Leo's article. not interested in retyping. also, i make a few spelling mistakes and don't correct them too. typing too fast and this blog doesn't have an edit function so it seems onerous don't you think?

totoro victoria said...

and yes, i do understand that my comments may seem similar to a correct spelling obession. hyperbole and rhetoric suck (imo) when trying to predict trends.

if you are going to engage in speculative conversation then be clear you are speculating or you run the risk of being asked for a youtube psychic power video and we'd have to think of a special name for your character.

"we" being the admitted non-phrophets.

a simple man said...

I am not, and will never be, a real estate prophet. All of the comments made by me on this blog are speculative and are of my opinion and not of the Bank of Montreal

Covered.

I agree that the inability to correct text on this blog is frustrating.

axeman said...

Look at the house on Lodge that just sold for $80,000 below assessment, must have been close to forclosure.

I don't care what stats are showing, I have been watching listings. And sold prices via PCS.

Its dead. Even my Realtor (no not gonna tell you) is seeing it, but remains optimistic.

Of the six or seven houses in my area, Glanford, nothing has moved in over a month, and probably will still be there in the spring.

axeman said...

my comment has a garbage can beside it, and when I highlight it says delete... so yes I think you can delete a comment, but not edit once committed...

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

"i say if you want to buy now and you have enough positives converging: do it. it is a good time to lowball imo. rates are excellent. on the other hand, prices probably will drop a bit more, who knows how much. there is no need to rush and every reason to wait if you have a huge down payment"

comment on greaterfool said Victoria is not a buyers market, then what is it, its not a sellers market, I know several sellers who are pissed off.

For me the stars aligned, and the price was close to 2007 levels once the deal was cut. I had a substantial down payment, and got in with a 30 year 1 month before it was closed off. My payments are 1700 a month, on a house that I could rent, or would have to rent for $2000.00. $800 of the mortgage is paid by a student, as I rent a room. (I couldn't do that in my rental)

House crash another 10-20%? Interest rates up in 2013? Don't care I am locked in at 3.39% for 5 and will deal with it when the time comes.

I will keep this house for 20 years and give it to my kids when done... its not an investment.

Leo S said...

so, what is the purpose of all the prognosticating? to be right about a downturn? to time the market? to learn about real estate in general?

The purpose is to make a personal rent/buy decision. I don't really care about the real estate market in general, I just care about what is the best decision for us. Hence I never talk about condos because I'm not interested in them in the slightest.
I think most people here have similar motivations. The goal is to figure out whether to buy or rent. That question needs to be re-evaluated periodically as conditions change. So far our decision has been to rent because our place costs the same or less and we avoid a lot of risk. Maybe in 9 months that will change. Every month the market stays flat or declines the risk decreases for us.

Just Jack said...

The blog is the free exchange of ideas and thoughts. Implied in every statement as to the future of real estate prices is an opinion.

To hold bloggers to the level required of research papers is ludicrous.

Don't get so anal, it's just a blog. Or are you intentionally trying to obfuscate the commenter? Because that's worse than any miss-placed comma, run on sentence; or someone forgetting to add IMO. The act of this "policing", likely discourages those that have opinions from commenting on this blog.

Because somewhere in this blogosphere there is a friggin genius wanting to comment, but too timid to do so. And I want to read what they have to say and not someone cutting them down for ending a sentence with a god damn preposition.

Leo S said...

Are you saying these stats aren't meaningful now?

They aren't meaningless, but you have to know how to interpret them. Look at the history of median prices in Victoria. They can and regularly do vary by up to 40,000 from month to month. So do you think an month to month increase of 19,000 is meaningful?

totoro victoria said...

axeman, your example is a good one in relation to why personal factors are so signicant in a home purchase decision.

many believe they can cash in after a crash. they might be proven correct. they will have spent less money for the same house than you at the end of the twenty-five year mortgage as a result.

they win and you lose? nope.

everyone has to live their own lives and there are no redos that i know of.

if you can afford what you own and plan to keep it and give it to the kids you have satisfication built-in. you are paying less than rent for a home and you have rental income and you dont' mind tenants. again, personality influences satisfaction.

i think there is a line between analysis paralysis and magical thinking as to housing always going up.


caveat emptor said...

"you are time limited in life"

Bingo! That for me is the reason I bought a house when I moved to Victoria even though at the time I had every expectation the market was going to fall.

After having rented for multiple years and saved lots of money by doing so my family and I were ready for the stability and control of owning our own castle. Thankfully we have been able to do so without any significant financial stress.

However if you are truly happy with your situation renting then DON'T BUY! The rent vs. buy spreadsheets underestimate the true cost of owning. The true cost of owning includes (1) all the additional stuff you accumulate when you have space for it and know you won't have to move again, (2) The time you spend fixing/maintaining things, and (3) The upgrades to your house that all of a sudden seem perfectly justifiable even though you did without said upgrades for 20 years as a renter.

totoro victoria said...

anal? maybe...

on the other hand, if you are proposing a free exchange of ideas then you have to be prepared that someone will challenge your logic or presentation.

my sense from a number of posts is that they are presented as facts that only an idiot would dispute. i take issue with this because there are so many different ways to interpret facts and most "facts" are actually opinions or speculation.

i think it is counterproductive not to question when opinion is presented as fact. this is where reality gets disorted in my experience. if enough people don't question things then false facts become the norm.

totoro victoria said...

also, JJ, I appreciate your comments and the occaisional hyperbole and your sense of humour. you just happened to present a good example.

Leo S said...

Thanks for the perfect example JJ. Of course people can disagree with this! They could say it is going to be flat or whatever they believe.

When someone talks about the market trend they are talking about the past. Stating that the market trend is for lower prices is basically objectively correct (depending on how you want to define trend). A market trend is not a prediction of what will happen, it is an observation of what has happened.

The trend may reverse itself in the future, but that doesn't change what it is currently, which is downward (since mid 2010).

totoro victoria said...

"To hold bloggers to the level required of research papers is ludicrous."

Hmmm... I would say some of the stats here are research paper level. Anecdotal opinion is what it is and can provide valuable information. Opinion based on experience has lots of credibility.

No obsfucation intended.

And now I have to get to work.

totoro victoria said...

Maybe I misunderstood. If JJ was referring to the past its not a good example of opinion presented as fact.

Just Jack said...

Then question their opinion. But, don't be a sniper taking pot shots at their writing skills.

There have been a lot of great opinions and analysis on this blog that have been shown correct. Not necessarily in timing, but certainly in direction.

And IMO, this blog has been consistently correct relative to people like Cameron Muir. And they have paid staff and unlimited access to the data. The only issue the bulls tend to center on is timing. But that doesn't change the message.

I gave my puppy a bowl of water this morning. I know he'll piss on the floor today - I just don't know when today. When I come home today, will it matter when it happened?

Bull Shat said...

Totoro said:
So, I have my own personal hypothesis that markets are fairly cyclical. Could be proven wrong, but it goes into my decision-making matrix. Your hypothesis might be that this time is different. That is fine, use it to make decisions.

In my opinion, this accounts for a lot of the difference of opinion between bears and non-bears. Some of us think that this time it really is much more than a standard cyclical downturn: i.e., based on several indicators, we are in for a prolonged and/or steep decline in real estate prices with an uptrend many many years away. Others don't foresee in the near/intermediate term much more than a standard real estate cycle of down then up again.

Alexandrahere said...

The demographics of the Canadian population have changed and are changing dynamically, thus the "norm" in so many areas of our past and current standard of living is going to also change, and life as we have known it for the past 65 years or so will probably never return.

RealR said...

@totoro
of course the biggest drop might occur after a rise in interest rates, affecting your ability to borrow and monthly payments.

I notice many people still believe falling interest rates always cause home prices to rise, and vice versa like the commenter above. Often, like now, the opposite is true.
Examp #1
Examp#2
As the examples show, one of the better signals that prices have finally bottomed, will be when interest rates begin a long sustained rise. Albeit, that’s a long way off.

@Bull shat

Some of us think that this time it really is much more than a standard cyclical downturn: i.e., based on several indicators, we are in for a prolonged and/or steep decline in real estate prices with an uptrend many many years away.

I like your explanation of the bears and non-bears. I’m in the ‘prolonged’ camp. I think the standard 15 year downturns fit into a larger 80 or so year downturn.

Just Jack said...

Sometimes a market just ends.

People get bored of real estate.

It can be just that simple.

Real estate used to be exciting. But without appreciation, it's just an expensive long term holding with a vague concept that it may net out as a mediocre investment over the next 20 or 30 years. Nothing sexy about that anymore.

I'd even bet that if something along the lines of the dotcom hysteria happened again, real estate would be as appealing as having to watch grandpa in the bath so he wouldn't accidentally drown.

Although, if he owned a couple of buildings - maybe you would tug on his feet.

-just a thought for you rich landlords with grand kids.

patriotz said...

In my opinion, this accounts for a lot of the difference of opinion between bears and non-bears. Some of us think that this time it really is much more than a standard cyclical downturn: i.e., based on several indicators, we are in for a prolonged and/or steep decline in real estate prices with an uptrend many many years away. Others don't foresee in the near/intermediate term much more than a standard real estate cycle of down then up again.

Both groups you've described are bears, which simply means someone who thinks that prices will go down.

The difference you've described is between those expecting a secular versus a cyclical bear market.

totoro victoria said...

I'm currently bored with real estate in Victoria. I've taken to analyzing Parksville data as a fall-back. I think Victoria is neither a buyer or a seller's market but, rather, a patient person's market.

JJ - couldn't care less about writing skills or grammar or spelling. I was not operating under the implicit understanding that I should understand that something unequivocally stated as a future fact was really meant as an opinion.

Seems like a fairly good ground rule to distinguish these things but - hey - its a blog and communication is imperfect. I happen to equate the willy-nilly mixing of fact and opinion with lack of logic and false truths, but I wouldn't want to put a damper on the discourse that way :)

Alexandrahere - yes demographics are changing. Not sure how much? I plan to stay in my home a long time as do my parents as did my grandparents. Maybe lots don't and there will be a max exodus from SFHs. Doesn't explain the condo downturn right now but maybe the wave has not hit yet.





totoro victoria said...
This comment has been removed by the author.
totoro victoria said...

I too think it is likely that there will be a longer term downturn. My basis for this is that what has gone up for so long must come down and interest rates have nowhere to go but up eventually.

As for your charts RealR - do you think we are in the same boat as the US. Do you know they can get a 30 year fixed 3% mortgage? I wish we had this product here.

totoro victoria said...

Also JJ, love the new look.

DavidL said...

Yeah, the long hair gives JJ a more youthful appearance.

Bull Shat said...

Patriotz:
The difference you've described is between those expecting a secular versus a cyclical bear market.

Yup, I should have thought that through a little more.
But what I'm saying is that to some of of us, the data trends point to a long-term decline in prices along with an unusually large decline in prices. (Alarm bells are ringing.)
Others might not see the data pointing to anything more than a standard cyclical downturn, or maybe a little than the average, which wouldn't be consdered as alarming.
It seems to be these are the two major opposing points of view here on this blog: yes, a downturn could and will eventually happen; but are the data and trends setting off alarm bells for you? If not, you probably aren't considered to be a "bear" on this blog.

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

totoro said: "if you are going to engage in speculative conversation then be clear you are speculating or you run the risk of being asked for a youtube psychic power video and we'd have to think of a special name for your character"

Guilty as charged; thus to oblige, herein is my psychic power youtube video. I suggest you take me very seriously, given my many accurate predictions. So, as I've been predicting for years now, well since 1980 really, we're on the verge of a major crash - in real estate .... and everything else ;-)

Sleep well! :)

SilverSurfer said...

test...

RealR said...

As for your charts RealR - do you think we are in the same boat

I was simply trying to demystify the widely-held myth, that prices always move opposite to interest rates. Often they move together, in the same direction, for long periods. Our prices are now moving in the same direction as mortgage rates. The last three price bumps in the blogpost graph, mirror the same bumps in interest rates. I included the Japanese example to show how long these relationships can continue. Another long-term example to consider would be, the steady climb in our home prices from the 1940s to 1980, alongside interest rates rising from effectively zero to 20%. Like Alexandere pointed out, it’s much to do with demographics.

CS said...

When sale price to assessed for SFH under 550 K has gone from 106% to 91% in two years (Leo's plot of December 1), it seems slightly unrealistic to continue arguing that the market is flat.

That the mean and median price is not falling indicates that the market is skewed with increased relative activity at the upper end.

But there can be no doubt that there have been many downward price adjustments at the upper. Swanwick Road -- sold for $5 million, down from $21 million -- being a prime example of a price reduction achieving a sale with a significant positive impact on November's mean price.

Whether the resistance to sharp price reductions of those at the lower end will be vindicated remains to be seen. But it would not be too surprising to see a continued grinding down of the sale to assessed ratio at the lower end, until turnover returns to normal and the overall market mean price falls.

Leo S said...

Yeah, the long hair gives JJ a more youthful appearance.

Your avatar makes me want to call you Allan.

Just Jack said...

I think, that at the beginning of a cycle, interest rates play a much smaller roll in formulating prices. As the market matures, prospective buyers start to max out on amortization periods, debt service ratios and possible the amount of down payments. Eventually, enough prospective purchasers are now maxed out on the above, that prices begin to fluctuate directly with interest rates. A small increase in the interest rates might then have a much larger impact on prices than the same change would have had at the beginning of the cycle.

I think this would provide a good stress test on the marketplace. Just increase the rate by a quarter point, monitor the market, then drop the rate back to the previous level.

Leo S said...

When sale price to assessed for SFH under 550 K has gone from 106% to 91% in two years (Leo's plot of December 1), it seems slightly unrealistic to continue arguing that the market is flat.

Keep in mind that it is relative to current assessment, which is the most recent on the listing. Between 2011 and 2012 most assessments fell, so price/assessment ratio understates the price drop. However between 2010 and 2011 most assessments rose, so the big decline is only partially due to dropping prices.

Marko said...

I think most buyers max out or go to the top of their comfort level when buying; therefore, if prices drop some of them just buy more home versus before.

For example, I had clients looking for a townhome two years and I showed them three townhomes. Life circumstances changed and they decided to hold off on buying a property. They contacted me again last month and bought a single family home with a suite. Prices dropped a bit in two years; they still qualified for the same amount and moved up to a home versus buying a townhome they were initially looking for at a lower price.

Part of the reason the November numbers looked so good.

Leo S said...

I think most buyers max out or go to the top of their comfort level when buying; therefore, if prices drop some of them just buy more home versus before.

I could see that. The conventional wisdom is that you should stretch yourself when buying to maximize advantage from leverage and since most people expect their income to increase over time.

However any shift in the pattern of purchases can only be temporary. The mortgage rules knocked the first-timers out of the market so it makes sense that the condo market and the lower end house market got clobbered. But the market has to return to balance eventually. I don't know how long a market can remain unbalanced with fewer first time buyers than normal. Someone with full access to the data should do some analysis on price distributions over time to see how they relate to market conditions.

CS said...

However between 2010 and 2011 most assessments rose, so the big decline is only partially due to dropping prices.

But from January 2011 to the present the decline in sale to assessed is 14%, which is what I was looking at.

So if assessments were lowered between 2011 and 2012, we can say the actual nominal decline was greater than 14%, or in constant dollars, more like 20%.

Just Jack said...

I think that's true too.

Those that could not keep up with the rising prices, bought less home than they desired initially. They became part of the buy now or forever be priced out of the market group. That certainly helped sell the condominium market as well as some really crappy built homes.

Now, with prices softening, prospective purchasers may be more inclined to wait for the home they want, rather than just to buy anything to get into the market. This of course works against the condominium market, less desirable houses and properties in less desirable locations.

I think the market place has now shrunk to area of roughly 8 miles in diameter around downtown city hall. This small geographical area and the few sales that are occurring are all that is supporting prices through out the greater Victoria area.

- If or when Oak Bay goes - so does the entire market.

-In my opinion.

Just Jack said...

Is this better?

Leo S said...

But from January 2011 to the present the decline in sale to assessed is 14%, which is what I was looking at.


Sort of. Listings from 2010 (like December) were still listed with their 2010 assessments. So when they sold in 2011 they would show up relative to 2010 assessment.

Overall I'll be the first to admit it's a relatively crummy measure. However I find it useful to see the market direction, and the reading around mid-year should provide a clue for where assessments will be for the next year. This year we should see more drops in assessments than last year.
It would be interesting to see how this measure behaves in a market bottom as well. Unfortunately I have only the data I've scraped off PCS over the last couple years.

Leo S said...

Is this better?

Better, but could still be improved, or whatever.

totoro victoria said...

So much better. The pigtails help too.

totoro victoria said...

I take that back. I miss the pigtails.

Mayfair Man said...

Is there any other developed country (other then Canada) that hasn't had a housing correction since 2008?

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