Friday, January 18, 2013

A balance of probabilities

Based on the Totoro Info Inverse Index of comment activity, it's been a terrible day for the Victoria real estate market.  Time for another post.  I'm working on some more data regarding affordability, but it's not quite baked yet so here's a random thought instead.

The information out there in the media and in the stats is massive, and there are many factors and nuances to consider.  In the end the only thing that matters is what you do with it.   The real estate market is not really predictable, so I always come back to the balance of probabilities.

There are three options of what will happen in the next year:

1.  Prices will go up.  In this case we'd be making a mistake not to buy now when rates are low, the market favours buyers strongly, and selection is large.  But even the strongest bulls will admit that the chances of this are slim to none.  Nothing is impossible, but when even the extremely pro-real estate voices are forecasting a small slide in prices, the chances of increases are essentially zero and we can dismiss this possibility.

2.  Prices will remain roughly flat.   I think this is the best possible case for real estate right now, and every month that the market conditions deteriorate the probability of this scenario decreases.   However if it happens then whether it was correct to rent or buy depends on your rental and what you want to buy.  Luckily Roger has developed the excellent Rent VS Buy Calculator so you can figure out the balance for your own situation.  For us it works out to be a toss up.  If prices stay flat we lose nothing by waiting.

3.  Prices decline.   In this case it's almost impossible not to come out ahead by waiting.  We can debate the magnitude until the end of time, but it hardly matters because any decline is money saved, and when you're thinking of spending north of half a million dollars, even a few percent is big.

Right now I'm thinking the probability of option 1 is 0-1%, and option 2 less than 15%.   The conclusion for renters seems obvious.

71 comments:

Leo S said...

And a chance to reply to some posts from the previous thread:

@Marko The City of Victoria does not give a **** about economics. A guy building a new house in Scott Street says he would never build in Victoria again. Just basic permit fees were $18,000 on a spec box.

I think once the slowdown hits there will be pressure to reduce this bureaucracy. Also I'm not convinced that Victoria is significantly worse than any other similar sized city in this respect.

@Introvert Compared to Greater Fool, HHV is balanced. Compared to "balanced," HHV is not that balanced.

Depends. Certainly the news stories people tend to link are the ones negative about real estate. But there are all kinds of views, and most importantly nothing gets censored. Compared to a mythical totally balanced site, HHV isn't, but compared to just about any other source I think we're doing pretty well.

Why not? In the past decade or two, Victoria's prices have skyrocketed--along with Toronto's and Vancouver's--relative to all other major Canadian cities.

This isn't true. Many Canadian cities saw comparable percentage jumps in value in the same period. Those three just started higher.

Not only is Victoria desirable, but it's more desirable than almost all other Canadian cities. And prices back this up

Sure. Currently prices in Victoria are about 70% higher than the Canadian average. So let's assume this is because Victoria is 70% more desireable than the average place. Now the Canadian average declines by 15% because Vancouver is crazy, Toronto has too many condos, and people suddenly wake up and realize that Winnipeg has too many mosquitos. Well it doesn't make sense that the "Victoria premium" would increase to 100%, because it hasn't gotten more desirable. So if we keep the premium of 70% then the Victoria average would have to decline to $500,000.

And if price gains are a measure of desirability, Victoria has been the least desirable major market in Canada for the last couple years.

@info I have to laugh every time I hear people talk about current Victoria house prices as being affordable in some way. They are attempting to give the impression that now is a good time to buy.

Affordability can be measured. If you measure it you will see that we are at about middle of the road compared to historical values. I think we will drop further, but we are below historical highs.

Imagine buying today and watching your property decline in value for a year and then trying to sell it.

Obviously it's not a good time to buy a house and keep it for only a year.

@koozdra They were willing but the banks wouldn't give them the ridiculous amounts they were willing to lend here. Apparently they were under the notion that real estate is local. Lending someone $600,000 here is the equivalent of lending someone in Winnipeg $400,000.

Why do you think the banks in Winnipeg are more conservative? That doesn't seem likely.

@totoro Wipe you out? Really?

Yes. Hasn't the US, and Ireland, and Spain made this abundantly clear?

There are mitigation strategies with real estate that are just not available with stocks at all.

Just as there are many mitigation strategies with stocks that are not available with real estate at all. You can sell a stock any time, even automatically with a stop loss order. If you hold a stock until it reaches zero, that is your own fault, just like selling a house in a down market.

As for the US, we are already starting to see an upswing in Arizona and a bit in Las Vegas. I don't know other areas.

Yes, after a 60% drop they've recovered a couple percent. Everything is just peachy there.

totoro victoria said...

Just goes to show you how stats are different depending on your point of comparison.

Leo, you are comparing to peak and your graph is dated. I am comparing year over year.

Phoenix Home Price Appreciation – August 2011 to October 2012

• Low Price Tier = Up 44%
• Middle Price Tier = Up 28%
• High Price Tier = Up 15%

Your graph stops at 2012 sometime... here is the same one to 2013:

http://www.arizonarealestatenotebook.com/2012/12/28/phoenix-case-shiller-index-high-price-tier-slowing-low-and-middle-price-tiers-still-increasing-fast-december-2012-report/

I'd be really pleased with 48%, 28%or 15% up in one year and I think it more than supports the proposition that there has been a significant upswing in Phoenix.

As far as peachy goes, very peachy for someone who bought two years ago when I was considering it but didn't. Rosier for someone who bought at peak and is holding.

Yes, there are mitigation strategies with stocks but when you use a financial advisor as many do sometimes things go south and you only find out on your statement. (bet this sounds familiar to lots of folks) Houses are easier to understand I think and to self-manage.

You can't live in a stock or rent it out and you have to live somewhere anyway. Income generation and the cost of living factor are pretty significant.

As far as "wipe you out". Yes, a huge drop can wipe out equity but you don't realize this loss until you sell. Some will have to, but most sales, I would argue, are avoidable on a potentially income producing asset such as a house.

Paper losses scare people though. The fear factor can cause all sorts of reactions. I would say impacts on affordability are much more difficult to manage.

totoro victoria said...

Also, while I appreciate the credit, it is really the info index.

koozdra said...

"Why do you think the banks in Winnipeg are more conservative? That doesn't seem likely."

I wouldn't really call it conservatism. Introvert was asking why prices had not risen in all major markets to an average of $600,000 like they did in Victoria. It also has to do with your comment that Victoria started at a higher level. I used the example of Winnipeg, where prices have inflated substantially but not to this level. As such the banks don't need to loan such high amounts.

The banks want business in Winnipeg and Victoria. Lending someone $300,000 in Winnipeg would be equivalent to lending someone $500,000 here. It will buy you a decent home that needs work. I have a few friends that have bought in this price range recently.

Also the pervasiveness of rental suites drives prices up. They are very uncommon in Winnipeg.

I guess banks are doing a different kind of lending here. In Winnipeg they rely on two incomes. Here they rely on two and a half incomes (dual income + rental suite).

Leo S said...

Leo, you are comparing to peak and your graph is dated. I am comparing year over year.

Ok that graph is out of date, I just did a quick search and that was the first one.

• Low Price Tier = Up 44%
• Middle Price Tier = Up 28%
• High Price Tier = Up 15%


But this is very misleading because percentages will be inflated when you compare drop from peak to gain from bottom.
The reality is last year the middle tier was down ~60% from peak. This year they are down 48%.

Yes, there are mitigation strategies with stocks but when you use a financial advisor as many do sometimes things go south and you only find out on your statement. (bet this sounds familiar to lots of folks) Houses are easier to understand I think and to self-manage.

Perhaps. Certainly the financial world is more complex than real estate, but an individual investment isn't that complicated.
A house is easy to understand, but how many people that buy one actually understand the investment and how it can be influenced?

Yes, a huge drop can wipe out equity but you don't realize this loss until you sell. Some will have to, but most sales, I would argue, are avoidable on a potentially income producing asset such as a house.

I think we have very good case studies from many countries to illustrate how people as an aggregate behave when their house declines. Many people are wiped out. Like the link I posted where people were relieved to get out of their underwater house and pay to get out of their mortgage, even though at this point they've likely ridden out the decline and should keep the house.

Hence the cause of the declines that go on much longer than affordability would suggest. So for people that are savvy enough to avoid selling, it's a good idea to wait out most of the decline to reduce the risk of having to sell at the wrong time.

Also, while I appreciate the credit, it is really the info index.

Fixed.

totoro victoria said...

"But this is very misleading"

Not misleading at all.

This graph/data is a fact presented in an accurate manner to support my statement that "we are already starting to see an upswing in Arizona".

Of course recovery takes a while. The drop was so huge.

I really agree that fear takes over in the underwater scenario.

I suppose that I think that part of this blog is to examine real estate from various angles and opinions. Knowledge and analysis can go a long way to help decision-making.

Finally, I read Mr. Turner's response to Marko. Sorry he is doing so much to try to discredit you. It is almost at the point of slander. I don't find it funny or amusing, more like a bully with a pulpit.

Marko said...

Depends. Certainly the news stories people tend to link are the ones negative about real estate. But there are all kinds of views, and most importantly nothing gets censored. Compared to a mythical totally balanced site, HHV isn't, but compared to just about any other source I think we're doing pretty well.

This is the only blog where I've actually seen the discussion improve over the last 2-3 years. A lot of blogs of this nature deteriorate over time into people trading insults.

Marko said...

Finally, I read Mr. Turner's response to Marko. Sorry he is doing so much to try to discredit you. It is almost at the point of slander. I don't find it funny or amusing, more like a bully with a pulpit.

I personally don't care, I've been questioned and flamed before. Any intelligent person should question what I say and hopefully it leads to rationale discussion. I have my opinions on the real estate market and I've been wrong before and I'll be wrong again. The market is complex and it is difficult to know with great certainty what comes next.

However, Garth on the other hand, is not so receptive to being questioned or flamed himself.

The great thing about the internet is he can't delete his interviews. As we approach 4-5 years since the first interviews started popping up on youtube it truly exposes how off he has been on the market, interest rates, and other things.

Sorry, typo, he isn't off, just the timing is.

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

So for people that are savvy enough to avoid selling, it's a good idea to wait out most of the decline to reduce the risk of having to sell at the wrong time.

You don't have to worry about selling at the wrong time if you buy at the right time. That's what savvy means to me.

Leo S said...

This graph/data is a fact presented in an accurate manner to support my statement that "we are already starting to see an upswing in Arizona".

Sure. Is anyone arguing that point? As for "already", there is nothing short or shallow about what happened in Arizona. I'd say after a shocking decline we're finally starting to see evidence that the bottom was hit last year.

Victoria said...

I'll take my DRIP monies, my invested equity, my growth and my peace of mind along with me over the next few years as I watch residential affordability grow.

Yes, this is predicated on the market declining.

I'm liquid and I can act quickly when and if I'm proven to be wrong.

I like this. I'm in power. I don't need to sell anything or wait for anything to turn around so I can reclaim my once glorious equity.

To me real estate has always been and will always be fundamentally about two things. Location. Timing.

One without the other isn't nearly as much fun as both together.

totoro victoria said...

Yes, buying at the right time could be called savvy. Sometimes it is, sometimes it is lucking out.

People buy a homoe for all different reasons. Making money is one of them. Being "savvy" imo also means taking the best deal of the day that matches your needs and that you can afford and planning for contingencies.

If we look back to the crash of 1981 you are correct that people who bought after were well off. Those who held were up on their initial purchase within eight years.

Timing the market would be great if we were not time limited and if we actually knew the future.

Yes, Phoenix had a long decline. I have friends that live there and bought two condos and a house about eight years ago and have lost loads of equity. It is stressful, especially because they are in their mid-sixties.

Leo S said...

Those who held were up on their initial purchase within eight years.

I believe 8 years is more than the average time that people own a home. Of course this might be different when prices have declined.

Timing the market would be great if we were not time limited and if we actually knew the future.

Despite my level of bacon consumption, I'm reasonably confident that the Victoria market will expire before I do.

patriotz said...

Those who held were up on their initial purchase within eight years.

No they weren't, because they were paying way more than rental value right into the 1990's, and the present value of this deficit compounded at the high interest rates of the time.

Being ahead means being ahead on all cash flows and imputed revenues, not just purchase versus selling price.

Marko said...

Being ahead means being ahead on all cash flows and imputed revenues, not just purchase versus selling price.

People aren't thinking cash flows when they buy a house. They are thinking is this the elementary school I want my kids to go to? Can my 60'' TV fit in here, etc.

CS said...

People aren't thinking cash flows when they buy a house. They are thinking ... can my 60'' TV fit in here, etc.

LOL. No wonder so many people find they're in over their heads when markets turn against them.

Marko said...

Some people are way in over their heads; however, some people have had success in their career or business and they just buy what they want for personal enjoyment.

Just because someone isn't thinking cash flows nor isn't crunching rent versus buy numbers doesn't mean they are way in over their head.

CS said...

some people have had success in their career or business and they just buy what they want for personal enjoyment.

No doubt, although success in a career usually means being able to view the world analytically and, when appropriate, crunch numbers.

It's hard to believe that most of the people who buy OB waterfront property don't consider the investment potential.

But maybe you're right. They just made millions over the last decade by pure chance.

DavidL said...

@marco
However, Garth on the other hand, is not so receptive to being questioned or flamed himself.

A couple of years ago, I talked to Garth after one of his presentations - challenging him on his notion that you are better off selling your house, renting and investing the proceeds. (In some cases, this is a good idea, in others it is not.) Garth was unreceptive and flippantly discounted my ideas. When I challenged him, using some of his own arguments "against him", he tried to back out of the conversation as quickly as possible. It was rather amusing... As my latest father would say: "My mind is made up... don't confuse me with facts."

Garth is an entertaining writer and seems to be able to read the pulse of the securities market. His ideas about real estate are somewhat jaded, however I agree with his concerns about many people lusting after real estate and not building a solid long term financial plans.

Introvert said...

This is the only blog where I've actually seen the discussion improve over the last 2-3 years.

I began contributing to this blog two or three years ago. Coincidence?

Introvert said...

This isn't true. Many Canadian cities saw comparable percentage jumps in value in the same period. Those three just started higher.

Why did Victoria start higher? Because it was more desirable.

Chicken and egg.

So if we keep the premium of 70% then the Victoria average would have to decline to $500,000.

As long as we agree that Victoria does and probably will always have a noticeable and sometimes significant premium attached to its prices, one that 99.5% of Canadian cities do not have, then I'm content to drop the issue.

I flatly disagree with the notion, sometimes only implied, that Victoria's prices have no business being higher than anywhere else in Canada because all cities are more or less equally desirable.

totoro victoria said...

Absolutely must be correlated.

"Those who held were up on their initial purchase within eight years.

No they weren't, because they were paying way more than rental value right into the 1990's, and the present value of this deficit compounded at the high interest rates of the time.

Being ahead means being ahead on all cash flows and imputed revenues, not just purchase versus selling price."

Correct I believe. A $100,000 mortgage cost $1500/month in 1981 at 19% interest. Not sure what a family home would have rented for back then but probably significantly less than this.

Interest rates were the killer factor. Unless you had cash, you were stuck with crazy rates. High interest rates would discourage me from buying.

Leo S said...

As long as we agree that Victoria does and probably will always have a noticeable and sometimes significant premium attached to its prices, one that 99.5% of Canadian cities do not have, then I'm content to drop the issue.

Makes sense to me. Although these things can and do change so I wouldn't put too much weight on the "probably will always".

DavidL said...

@totoro

The peak to 19% interest rates in 1981 was very short lived. Worst hit were people with variable rates. Most people had fixed rate mortgages at mush lower rates. The unfortunate few (about 1 in 50) who had to renew their mortgage in 1981 were screwed.

The high interest rates meant that there were very few new jersey entering the market, so the only way to sell was to slash prices. The prices kept plummeting through 1984, but didn't regain their value (accounting for inflation) until about 1991.

However, during the 1990's, prices went up by only 10% while inflation was close to 40% - meaning that housing prices at the turn of the millennium were particularly inexpensive.

DavidL said...

Oh boy, typing on my phone is fun!
mush = much
new jersey = new purchasers

DavidL said...

Does anyone have thoughts or comments on 3024 Quadra Street? It looks like it has been on the market for a while...

totoro victoria said...

Thx, it is hard for me to analyze 1981 - I was more concerned with bubble gum and basketball at the time.

The owners of 3024 have comments:

http://victoria.bizcaf.ca/housing-house-for-sale-$510000--3br---1947ft%C3%82%C2%B2-the-truth-about-real-estate-3024-quadra_bizcafAd_1786891.ad

Leo S said...

Good find Totoro!

There are some real gems in that description, it really deserves a link for easier access

Lots of anger there about the slow market.

"Let`s face it, if you are looking at this house, the $700,000 Fairfield house is out of your range. You have champagne taste but a beer budget."

The first step to a successful sale: insult the buyer.

"But Quadra - isn`t it noisy? My cell phone app says it`s 40db. "

At 2AM I assume.

This house is assessed at $514,000. It should be selling for $565,400.

Despite the slow down in house sales - prices are still generally going up.


Damnit my house is worth what I say it is! Nevermind it's not selling at $510,000, it should sell for $565,400! By the way the assessment dropped to $492,000 this year.

When prices soften you`ll have to fight everyone else off who`s going to jump in early, pushing the prices go back up.

Yup, lots of people out there fighting for places right now. Must be why sales are down they're all being killed in the streets before they get a chance to buy.

You want 10%? We are selling it for less than what we bought it for and before we sunk $25,000 into fixing up the studio in back. (A 4th bedroom, studio, office...) (Our timing is crap and we`re taking a loss.) Oh well.
Note to self: Never sell your house in the fall.


Or the winter, or the spring...

Introvert said...

Thx, it is hard for me to analyze 1981 - I was more concerned with bubble gum and basketball at the time.

And I was but a twinkle in my mother's eye.

Introvert said...

I wrote:
As long as we agree that Victoria does and probably will always have a noticeable and sometimes significant premium attached to its prices, one that 99.5% of Canadian cities do not have, then I'm content to drop the issue.

Leo replied:
Makes sense to me. Although these things can and do change so I wouldn't put too much weight on the "probably will always".

You're right: I shouldn't say "probably will always" since I can't see the future.

OK. But on the rest we agree.

Can we give this particular agreement a name? Maybe the Leo-Intro Clause? I'm open to other suggestions.

I want it to have a name so I can refer back to it at a later time, because I think it's important that you and I agree on this.

info said...

"The great thing about the internet is he can't delete his interviews. As we approach 4-5 years since the first interviews started popping up on youtube it truly exposes how off he has been on the market, interest rates, and other things."

Garth Turner has been 100% correct, 2 out of 2, in predicting major housing market corrections in Canada over the past decade. Predicting when the BoC will pull the trigger on interest rates is almost impossible because there is nothing solid to base a prediction like that on. However, predicting a major downturn in the housing market is easier. He, like many economists in this country and around the world, uses price/income ratio, price/rent ratio, household debt levels and so forth to predict the direction of house prices. It is logical and based on factual information.

In 2008, he predicted the crash of 08-09, which was halted by a massive, unprecedented, emergency intervention. Nobody could have predicted that. No realtor did. Marko, you don't get it. I have posted this many times before on this blog. Victoria's market was crashing in 09 and the government intervened to stop it. You do not understand that this happened. Garth was still correct with his prediction that the market would correct/crash and it did.

Garth also correctly predicted the current major market correction that has recently started for most of the country.

You have always tried to discredit Garth. If you would open your eyes to information other than what real estate boards and other realtors use to convince people to buy houses, you might actually learn something about the good that Garth has done for so many people in this country.

patriotz said...

some people have had success in their career or business and they just buy what they want for personal enjoyment

That warm fuzzy feeling about home ownership went out the window in the US once the population caught on that prices were falling, and I would think that those people in Victoria who are selling their properties for less than they paid for them (already numerous examples on this forum) wish they had thought more about the numbers than "personal enjoyment".

totoro victoria said...

Marko you are in good company with being bullied by Mr. Turner. Ben Rabidoux had a very similar experience:

http://www.theeconomicanalyst.com/content/more-bit-disappointed-garth-turner

A bully is a bully - being all grown up just makes it less excusable. You'd think we'd learn with examples like Lance Armstrong that some things are just not okay - especially if you are a public figure.

I thought this comment on Ben's site kind of summed some things up:

Here's Garth's cycle of argument:
1. Get out of real estate, invest in the markets. If you own, don't pay off your mortgage but invest instead.
2. Laugh at anyone that suggests safe investments like GICs.
3. Laugh at anyone that suggests passive investment strategies like Couch Potato.
4. Laugh at anyone that suggests investing yourself ("you'll lose everything")
5. Encourage everyone to get an advisor, but make sure they are fee based
6. When people ask about where to find an advisor, he suggests you email him personally.
7. Well my brother emailed him once and asked for fee based advisors in Vancouver. Garth says he doesn't know anyone (laughable) and suggests himself as an advisor.

http://garthturnergreaterfraud.blogspot.ca/2012/12/garth-turner-real-estate-prophet.html

Leo S said...

Ah that old thread. And with comments from HHV, Garth Turner, and yours truly to boot.

DavidL said...

@totoro, leo

Thanks for the 3024 Quadra link. Interesting to read the owners comments - they seem a bit upset having to sell.

Victoria said...

The guide map to wealth has many roads. The industrious traveller will meet with young and old, rich and poor along the way.

My roadmap is comfortable to me. I know what lies behind me and I know what its hills and valleys have held.

I do not know what is ahead. I can only go by the light of the stars, the wisdom I've earned and the occasional salty sailor's tale.

I have no need to disparage anyone else's journey. I sincerely hope each person finds their way to be both true and scenic.

There is value is each side of this debate.


koozdra said...
This comment has been removed by the author.
Leo S said...

Kidding aside, it is surprising that the quadra place didn't sell. Seems like a decent deal.

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

Say, that the timing is right for you and your family and you've chosen to buy. You've been to the bank and gotten pre-approved, found a home and want to make an offer.

What subject clauses, if any, would you put in your offer to purchase?


A clause stating that the seller pays for grammar lessons for the buyer, Just Jack.

(Why would you put a comma after "Say"?)

Just Jack said...

Better for you.

DavidL said...

@JJ
Not a bad looking home on Quadra. And if they would consider offers around $475,000 they could move on with their lives.

Well, considering the owner reduced the asking price by just $1000 when recently relisting with a new agent, and are currently renting the house - I guess that they must not be in a rush to sell.

vawr said...

@intro

"A clause stating that the seller pays for grammar lessons for the buyer, Just Jack.

(Why would you put a comma after "Say"?)"

You appear to have a pathological need to expose minor imperfections in others. Are you self aware enough to tell us why?

jesse said...

patriotz: "Being ahead means being ahead on all cash flows and imputed revenues, not just purchase versus selling price"

Not to mention expenses that were likely poorly accounted for and almost certainly higher than originally budgeted, if they were budgeted at all. I doubt most homeowners kept detailed records of all expenses, even those who are attempting to write them off.

Jack and Cate said...

Totoro - Predicting when the hardest hit US states will recover is like predicting the weather. Depends on the source and what you want to believe. There isn't a day that goes by that you or I could find resources to support our positions - sort of like this one from 2009 by Moodys. Even then they were saying 2030 before California etc sees full recovery.

Long past my due date.

Jack and Cate said...

http://www.ritholtz.com/blog/2009/09/when-will-real-estate-recover-its-losses/

totoro victoria said...

I'm not even sure how we got on the when there will be a full recovery in the US and how this is any way attributable to me as expressing an opinion on this. Not my area of expertise.

Facts, however, are facts.

My post only pointed out that there has been a significant upswing in value in Phoenix year over year - supported by credible and reliable statistical facts and not opinion.

I don't know what will happen in the future. Only what has already occurred can be measured.

I only form opinions on things I have experience with - the future of the US real estate market is not one of them.

Introvert said...

Not to mention expenses that were likely poorly accounted for and almost certainly higher than originally budgeted, if they were budgeted at all. I doubt most homeowners kept detailed records of all expenses...

I track all my expenses and income monthly in a spreadsheet. I'm sure almost no one else does, though.

totoro victoria said...

We have separate bank accounts and credit cards for each property. Easy way to track things.

Mint.com calculates expenses for you and emails them to you monthly for free.

Jack and Cate said...

Totoro - Then why would you so interested in posting upswings and not downswings in recoveries? Both sides of the coin so to speak.

I get what you are trying to say but Arizona is not here and their failures started years ago, it is only in the beginning stages here.

totoro victoria said...

Perhaps you should read my post on the last board which got carried over to this one. Read here: http://www.blogger.com/comment.g?postID=9007189432915768879&blogID=7123542260692860177&isPopup=false&page=2

I was merely pointing out that selling during a downturn is not the only way to manage an underwater mortgage. I was not pointing out that there was only an upswing. I was pointing to current market conditions and a potential reason to hold on rather than lose equity.

There is a leap of logic here in attributing me to only posting an upswing.

If you follow my posts, you will see that I have consistently stated that it is my belief there will be a downturn in the local market. How can there not be at some point. It is also my view that local conditions will return or surpass peak within ten years.

Another opinion I have expressed is our local market will not mirror the US unless interest rates rise, but we will see.

I have no crystal ball.

Marko said...

Anyone have any thoughts on 637 Cornwall St for $539,900? Purchased in February 2008 for $589,900.

5 years later down $50,000. Auch.

dasmo said...

Did it sell for that or is it listed for that?

dasmo said...

Did it sell for that or is it listed for that?

Leo S said...

Cornwall... Maybe it's a good deal if you're into the whole Fairfield thing, but I don't see the value. For the same price you can get 2000 sqft on a full size lot in east saanich rather than that little bungalow on a postage stamp.

Marko said...

Listed at $539,900...has not sold.

patriotz said...

It is also my view that local conditions will return or surpass peak within ten years.

Ten years from peak (which was mid-2010) or ten years from now?

I think either one is unlikely.

totoro victoria said...

Peak. In my opinion.

Marko said...

2007/2008 were pretty close to 2010, condos probably higher during the 2008 peak then 2010.

Dave said...

In real dollars, a person (now ghost) who bought at the 1736 peak in Amsterdam, is still below what they really paid 277 years ago.

Yet the person who bought in 1709, is presently up 2.5 times in real terms.

Wealth is much to do with timing, and being wealthy is having time. Now if you will excuse me, I have no more time to be commenting on here as I have to get ready for work this week :(

CS said...

It is also my view that local conditions will return or surpass peak within ten years.

"Local conditions? Is this a long-range weather forecast?!

Or are you talking property prices?

If so, are you talking nominal price or in constant dollars?

And are you talking SFH prices or condo prices or averaged over every category?

totoro victoria said...

OMG - are we back to Herengracht again! I refuse to engage in that debate. I'm just not that theoretical nor do I believe in a 300 year cycle.

I'm more like a real person who lives in Victoria today, has an old lady shopping cart and a single level home already (my version of doomsday prepping), and hopes to make my statistical average lifespan because things are already pretty good and I'm okay to stay to the end of the party.

I know that in my lifetime I have had and will have a total of approximately twenty years to invest aggressively, of which 3/4 is over. This leaves me with maybe five years to buy real estate and/or other stuff that makes money and then - yep, I'm off fishing or writing my novel and maybe making some slightly crankier posts here once in a while.

So, my concern is the current window of time. I follow trends closely - especially local trends. I look at what my cohort is doing. I see what sells and what doesn't. I'm aware that, for example, our high rate of divorce makes furnished rentals pretty popular. I know what works in the Okanagan vs. here - different markets call for different strategies. I don't care about canal stats, I really don't.

I run these numbers and look at lifestyle enhancements or level of fun I will have out of a property. I make contingency plans. And then I make the best decision I can if the numbers are favourable for pay-off in my life-time.

Yes, CS, I am talking about the weather. I predict our peak temperatures will be up above where they were at peak in ten years. I recommend against low bank waterfront.





dasmo said...

RE cornwall: I think they possibly over paid. The Renos look ok, not high end or anything. The yard looks crapy since the house is set far back in the lot and the backyard neighbour is right to the edge of your lot line peering down at you. No lounging smoking pot in your house coat back there. Also with a 40X90 lot there is no easy demo and rebuild since the setbacks are too big to allow for a larger home. Thus it's variance time and asking your neighbours if you can build what you want...But, it's not the nicest location or street in Fairfield so also not enticing to do that. (there are pluses to the house but who's interested in that)
I put the lot value at 280k, house value at 220k for a top value of $500k.
They made a mistake and probably got in a bidding war. Possibly a bought from a flipper that bought for an actual price....

totoro victoria said...

As far as the local market goes, not much is listed in OB right now and places are not selling quickly unless they are great.

There are a couple of OB border properties that have been on the market for a long time and are reasonably priced, but in poor condition. A year ago they probably would have sold within two months.

I'm not sure about Cornwall as I haven't toured it, but the location above Fairfield is not, imo, as good as closer to the village. That said, that area is still pretty popular.

Iggy_12 said...

Landlords 'powerless' as tenants get free ride

http://www.cbc.ca/news/canada/british-columbia/story/2013/01/18/bc-badtenant.html?cmp=rss

Marko said...

Monday, January 21, 2013 8:00am

MTD January
2012 2012
Net Unconditional Sales: 177 372
New Listings: 701 1,088
Active Listings: 3,759 3,715

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

Marko said...

Landlords 'powerless' as tenants get free ride

If you are renting out an entire house some heavy duty due diligence is definitely necessary.

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