Monday, January 14, 2013

Jan 14 Monday Market Update

Time for another post from your resident "wannabe buyer sitting on the fence" in this sad, empty pre-blog forum of the 90s (it was quite an epic thread over at GreaterFool).  :)

MLS numbers update 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.

January 2013 month to date (previous weeks in brackets)
Net Unconditional Sales: 87 (32)
New Listings: 407 (161)
Active Listings:  3681 (3574)
Sales to new listings ratio: 21% (20%)

January 2012
Net Unconditional Sales: 372
New Listings: 1088
Active Listings: 3715
Sales to new listings ratio: 34%
Sales to active listings ratio: 10% or 10.0 MOI

I'm surprised no one has mentioned that sales have completely collapsed compared to the first two weeks of January 2012.  One year ago we started the month with a sales rate of 15.4 sales per business day.  So far we're at 9.7.  Sales are going to have to seriously accelerate if we're going to get anywhere near last year's crappy numbers.

New listings rate is also down a bit but not nearly as much.  While sales rate has taken a 37% hit, new listings are only down by 9% compared to the same period last year.

Tony Joe provides the entertainment video of the week.
"So what you're saying is don't be afraid of that 5% down, or whatever"

258 comments:

1 – 200 of 258   Newer›   Newest»
dasmo said...

From Garth's post tonight:
"When I punted a Victoria realtor last weekend for using the blog to drum up sales leads, then trash this site elsewhere, I almost felt remorse. Almost. After all, I like entrepreneurs and go-getters. It takes a contrarian streak to come here and try to sell houses, especially in a city with the economy of a glorified car wash, a population of advanced wrinklies and real estate selling for about double what it’s worth."

Sums up his narrow view of the world around him...

dasmo said...

Next time you shouldn't let him lift one of your graphs without crediting it...

koozdra said...

Just got back from downtown. The amount of for lease signs is staggering. I heard on CBC the other day that it's because of the crazy property tax they are charging for downtown businesses. The person on the radio said "the fundamentals of downtown are strong". We'll see.

Marko said...

I really have to stop participating in blogging to this extent, 8:10 pm still in my office doing data input and trying to catch up on emails.

I can see what attracts people to Grath's blog. It is non-sense (especially the comments) to a large extent but very entertaining. I introduced my future father in-law to Garth a few months ago. He is now hooked and he doesn't even care about or follow real estate.

Marko said...

I heard on CBC the other day that it's because of the crazy property tax they are charging for downtown businesses.

I believe that. I am listing a commercial property downtown in a few weeks and I nearly fell out of my chair when I saw their property tax.

jesse said...

Is it just me or is Victoria going to be close to halfway through a correction as of April 2013? Lucky!

totoro victoria said...

gosh darn... was that you he was referring to marko?

while i don't agree with Mr. Turner, i can't fault his business acumen.

"So this blog has tried to show that paying off a 2.5% mortgage when you can earn 7% on liquid assets instead makes no sense" - well some finanicial advisors/authors know how to use a blog to drum up sales!

maybe we should come up with a hhv blog to fame and fortune strategy.

Leo S said...

Next time you shouldn't let him lift one of your graphs without crediting it...

Information wants to be free!

Is it just me or is Victoria going to be close to halfway through a correction as of April 2013? Lucky!

Sounds about right. 6 years peak to trough wouldn't be out of the ordinary. I suspect after year 4 or 5 we will hit bottom and bounce for a bit.

dasmo said...

"Information wants to be free! " true, it's the BS that sells...

caveat emptor said...

First ever visit to greater fool today. His prediction record is pretty spotty when you read back a few years. Also he grades himself pretty easily when he looks at his past predictions.

Also noted that there is a whole blog devoted to trashing him. http://garthturnergreaterfraud.blogspot.ca

Canadian Capitalist and Worthwhile Canadian Initiative (brilliant site) both have posts on why his "take out a HELOC and earn 8%" idea may not be sheer brilliance.

patriotz said...

The amount of for lease signs is staggering. I heard on CBC the other day that it's because of the crazy property tax they are charging for downtown businesses.

But the owners have to pay the property tax anyway whether they have a tenant or not. Also, the high property tax means a high market price which means that someone is willing to pay a high price to buy them.

IMHO there's only one logical explanation for why an owner would let a commercial property sit empty and that's because they want to convert it to residential.

Happy camper said...

Gary Shiller presentation - I like this perspective for younger people:
Rental apartments will continue to benefit from the separation that Americans are beginning to make between their abodes and their investments. …At the front end of the life cycle, young couples may decide that because houses are no longer a great investment, there's no reason to strain their financial, physical and emotional resources to buy big, expensive houses as soon as possible."

Read more: http://www.businessinsider.com/gary-shillings-2013-investment-themes-2013-1?op=1#ixzz2I3zVdqs8

Happy camper said...

Oops - Shillings not Shiller (sick kid, I'm tired)

a simple man said...

Lots of price drops and few sales in Oak Bay. This is getting interesting.

dasmo said...

Gary Shillings was a good article. The note on young couples and housing rings true to me. Going all in in for a monster house your twenties always seemed crazy to me...

RE: the number of for lease signs. I have noticed more. I have worked in town for the last ten years and it isn't a lot more but it's more. I have seen some areas that were vacant for a long time fill up as well. Fort st and lower Yates are being hit for sure. But then again, with the lack of housing activity, I couldn't see Nood lasting, nor all the antique furniture stores along fort. Then again look at the resurgence of lower Johnson st and even market square is picking up in general. I think it's symptomatic of relatively flat growth, changing demand (can we have more coffee shops and Yoga studios?), To high of rents for the tenant(Fat Phege's Fudge speaking of market square) and expanded retail space elsewhere like Uptown and Langford... I wouldn't use the term "staggering" though. Then again I'm not one to fling around extreme adjectives...

koozdra said...

"A high number of vacancy signs in Victoria are causing concern for some retailers.
The city’s downtown retail vacancy rate has more than doubled since 2008, and now sits at about eight per cent."

Not staggering?

http://bc.ctvnews.ca/high-retail-vacancy-marks-downtown-victoria-1.1091438

Victoria said...

I am in business. I follow commercial real estate closely, especially downtown.

Lease rates are indeed outrageous, especially along LoJo and Yates. The retailers down there who are thriving are few and far between. Lululemon is an outstanding example of a fabulously successful retail spot on Johnson. One of very, very few. They also moved from Lower Johnson to a bit farther up in order to take advantage of the gov't street traffic.

As usual, TIME will tell us the real story about who will be right and who will be wrong about real estate.

Marko - you still didn't answer my original questions about your 60+ listings last year. How many sold? How many relisted with you or elsewhere? How many sold above/lower than assessment? How many had listed elsewhere before you and at what price, etc?

Again, if you are going to claim something on a public forum and you want to maintain credibility you must be prepared to provide the facts.

I want to repeat again - I'm not trying to pick on you. I require facts if I am to take your professional opinions seriously. You post on this blog and elsewhere under your own name. Kudos to you for doing it. Now back your stuff up.


dasmo said...

Maybe it's because I have listened to my brother say "downtown is dying" for about 15 years now...So the increased vacancies I would say is noticeable but not "staggering" or "alarming" or "frightening". As I said and your linked article notes, the region has had a lot of retail space added in the last ten years. Langford especially.

Marko said...

What I said, "From my experience (I listed 61 properties last year) 50% or more of the time the seller lists at a higher price than what I suggest."

Marko - you still didn't answer my original questions about your 60+ listings last year. How many sold? How many relisted with you or elsewhere? How many sold above/lower than assessment? How many had listed elsewhere before you and at what price, etc?

Again, if you are going to claim something on a public forum and you want to maintain credibility you must be prepared to provide the facts.


I made a claim based on experience.

My detailed personal stats are meaningless information to the blog. My sold to assessment ratio would impress you, why? Is it because I am a great guru REALTOR®? No, I just sold 7 units in my own building all above assessment last year, some 25% above assessment which skewed my stats. It had nothing to do with my great "marketing" skills; it simply had to do with the fact that the units were under assessed at the time of sale.

Too many other variables, 30% of my listings are mere postings. So yes, in 2012 out of the 61 listed properties I lost two listings to other brokerages which were both mere postings. Is that good, bad, average? Does anyone on the blog even care.

A detailed analysis on a small sample size is not useful. You also have to limit variables that is why I would never do a sales analysis on a company like Fair Realty to prove a point. 60% of the REALTORS® are full commission and the other 40% all have UNIQUE business models.

I've been collecting data on a local brokerage for 3 years but they have a uniform structure in terms of commission model. As I noted I haven't had time or the energy yet to sit down to scientifically analyze and publish, but the trend is very evident.

REALTORS® always quote their list to sale price ratio. For example, they will have a property listed at 600k for 90 days. They will relist for 549k and it will sell for 545k and all of a sudden their list to sale price ratio is close to 99%...

There is not set of standardized stats and everyone spins them to their advantage.

Marko said...

But the owners have to pay the property tax anyway whether they have a tenant or not. Also, the high property tax means a high market price which means that someone is willing to pay a high price to buy them.

If they have a tenant most of the time it is a triple net lease, tenant pays all property taxes.

Marko said...

Let me give you a quick example of how stat in real estates work.

One REALTOR® will list for 599k, it won't sell, she will relist for 549k and it will sell for 545k.

She will go to the neighbour and say my list to sales price ratio is 99%. She will ignore the fact that her list to sale ratio is 50%.

The other REALTOR® will list for 599k and he won't relist, he will do a price reduction to 549k and it will sell for 545k.

He will go to the neighbour and say I have a 100% list to sale ratio, but won't mention his list to sales price ratio.

There are hundreds of ways to spin things.

I have 20 listings and I'll tell a seller that activity and sales performance matters, the next REALTOR® will come in after me and say they only have 1 listings which means they can devote more time to the property; whereas, I am too busy with my 20 other listings, and blogging :)

Leo S said...

Well said. The only way to solve this is to have access to all the detailed data and have an independent third party provide the same stats on everyone. And even that isn't foolproof. Is a realtor bad because their client insisted on an unrealistic price? Is selling a multimillion dollar place worth more than the average shack? How to weight it?

Overall more data would lead to more educated consumers though. Now to convince the VREA to hook me up with a feed. I'm gonna go out on a limb and say they don't exactly share my desire for all data to be public.

happy renter said...

Interesting article on Whistler RE in the Globe today:

"Landcor Data Corp. data shows the current median price of a Whistler condo at around $358,500, at the same level as 2001 prices. Overall, volume of sales has plummeted in the last couple of years, with a minor spike in 2010, during the Olympics."

http://www.theglobeandmail.com/life/home-and-garden/real-estate/whistler-real-estate-a-bargain/article7321682/

Just Jack said...

I don't know, go offer VREB $5,000 for a one year subscription.

Might just happen.

Victoria said...

Leo, I like it!

info said...

"Is it just me or is Victoria going to be close to halfway through a correction as of April 2013? Lucky!"

"Sounds about right. 6 years peak to trough wouldn't be out of the ordinary. I suspect after year 4 or 5 we will hit bottom and bounce for a bit."

The Canadian housing bubble formed because of lax lending standards that created excess credit that pushed house prices far above the support of fundamentals, such as income.

National housing bubbles, such as the one Canada is in right now, correct in a very predictable way. History shows us that when any country experiences dramatic house price increases, over a relatively short period of time, it creates a housing bubble which always corrects back to the level where prices are once again sustainable and supported by income.

This chart shows 48 different national housing bubbles over the last 40 years. In each case, it shows that when a country's price/income ratio forms a peak, it always corrects back the same amount. It happened this way in 1978 in Norway, 1989 in Great Britain, in 2005 in the US and in 45 other countries over the last 40 years. Canada's price/income ratio peak likely formed about a year ago. As you can see from the chart, Canada's price to income ratio is set to correct 30%. Once that happens, incomes will once again support house prices.

Canada is nowhere near to being half way through its correction. It is only in the beginning stages right now, at least in terms of the amount of correction.

Victoria and Vancouver reached the two highest price/income ratios of all Canadian cities. As has been the case with other national housing bubbles, we can expect these two cities to experience the biggest corrections. Some Canadian cities will see much smaller corrections and it is obvious that Vancouver and Victoria will have to correct much more in order to bring the average price/income ratio correction (Canada-wide) close to 30%.

Scotiabank says that Canadian house prices will drop, stay down for a decade and cause unemployment. Note that it is a Canadian bank making this prediction, which gives it a lot of weight. Even they don't see the Canadian housing market hitting bottom any time soon.

StalJ said...

Chalk another one up for the funny things realtors(/comedians) say...

“You can get pretty good housing for $1-million or less that’s only a relaxing one-hour, 20-minute drive away.”

It almost rivals Tony Joe's..
"So what you're saying is don't be afraid of that 5% down, or whatever.."

dasmo said...

You need some new material info. Those are getting a little stale.

DavidL said...

There seems to be an abundance of "new" listings showing up on my PCS accounts, complete with summertime photos of the yard. It's like seeing old friends from last year, and the year before ...

patriotz said...

If they have a tenant most of the time it is a triple net lease, tenant pays all property taxes.

Yes, if they have a tenant. So why are the landlords letting the properties sit empty and paying the taxes themselves and getting no rent?

Introvert said...

"Is it just me or is Victoria going to be close to halfway through a correction as of April 2013? Lucky!"

"Sounds about right. 6 years peak to trough wouldn't be out of the ordinary. I suspect after year 4 or 5 we will hit bottom and bounce for a bit."

The Canadian housing bubble formed because of lax lending standards that created excess credit that pushed house prices far above the support of fundamentals, such as income.

National housing bubbles, such as the one Canada is in right now, correct in a very predictable way. History shows us that when any country experiences dramatic house price increases, over a relatively short period of time, it creates a housing bubble which always corrects back to the level where prices are once again sustainable and supported by income.

This chart shows 48 different national housing bubbles over the last 40 years. In each case, it shows that when a country's price/income ratio forms a peak, it always corrects back the same amount. It happened this way in 1978 in Norway, 1989 in Great Britain, in 2005 in the US and in 45 other countries over the last 40 years. Canada's price/income ratio peak likely formed about a year ago. As you can see from the chart, Canada's price to income ratio is set to correct 30%. Once that happens, incomes will once again support house prices.

Canada is nowhere near to being half way through its correction. It is only in the beginning stages right now, at least in terms of the amount of correction.

Victoria and Vancouver reached the two highest price/income ratios of all Canadian cities. As has been the case with other national housing bubbles, we can expect these two cities to experience the biggest corrections. Some Canadian cities will see much smaller corrections and it is obvious that Vancouver and Victoria will have to correct much more in order to bring the average price/income ratio correction (Canada-wide) close to 30%.

Scotiabank says that Canadian house prices will drop, stay down for a decade and cause unemployment. Note that it is a Canadian bank making this prediction, which gives it a lot of weight. Even they don't see the Canadian housing market hitting bottom any time soon.


Great post, info. Thanks!

Just Jack said...

You're showing your age when you say triple net.

They're just net leases not net,net,net leases.

Leasing commercial space is a different world. There can be a long lease up period for commercial properties. The right tenant has to come along. 6 months or a year lease up can be quite typical. You keep your lease rates high because of this. Because lowering them, isn't going to get you a tenant any quicker.

Leo S said...

@info

National housing bubbles...

You could have stopped here. The comment specifically said Victoria and has nothing to do with the national bubble.

Victoria's peak was in 2010. According to the chart of national housing bubbles, they correct for about 4-7 years, so the correction being halfway in one year would fit that timeline perfectly.

Introvert said...

As for Tony Joe's quotation, people should be afraid of 5% down. If you have a 5% down payment or less, you're not ready to buy a house in Victoria.

And if you don't have the discipline/means to come up with a 10-20% down payment in a reasonable amount of time, then you should ask yourself how you're going to have the discipline/means to come up with the $515,000 that you will owe to the bank (keeping in mind, also, that it won't be $515,000 that you owe but much, much more when you factor in the interest the bank collects on your loan).

Having said all that, I'm glad that the sub-5% down cohort represents a small fraction of buyers in this town. And let's hope it stays that way.

Just Jack said...

And what happened then...? Well...in Who-ville they say
That Introvert's small heart grew three sizes that day!
And then the true meaning of HHV came through,
And Introvert found the strength of ten Introverts… plus two.

koozdra said...

@introvert

"If you have a 5% down payment or less, you're not ready to buy a house in Victoria."

Making this comment means you are detached from reality. Everybody puts 5% down these days.

"Having said all that, I'm glad that the sub-5% down cohort represents a small fraction of buyers in this town. And let's hope it stays that way. "

Where are you getting your information. When I talked to my financial advisor he told me CMHC insurance is extremely common. In his words "houses are so expensive these days, it's just another cost of buying".

This is what led me to initially consider that we are in a debt fuelled bubble. No CMHC, no housing market.

Without CMHC insurance prices have to drop significantly for buyers to return. The banks have turned snobby again when lending.

POP!

totoro victoria said...

I bought my first place with 5% down and used my RRSP.

I was still in university and it was an excellent way - and the only way at the time - for us to get into the market at the time. It really paid off in a rising market to get in at an earlier point. We paid less than for our mortgage than our prior rent and were able to have some rental income as well.

Credit can be a wonderful thing if used responsibly. The size of the down payment is not the only test of ability to manage this privilege. Things like work history, credit score and professional designations can point to ability to pay despite current equity position.

That said, I now would not purchase a primary residence without 20% down so I can avoid the CMHC premium. Still have gratitude for the 5%.



koozdra said...

I wonder if we'll get one of these from CREA or CMHC...

"David Lereah, former chief economist of the National Association of Realtors (NAR), distributed "Anti-Bubble Reports" in August 2005 to "respond to the irresponsible bubble accusations made by your local media and local academics."[60]"

Wikipedia - United States housing bubble

dasmo said...

At these rates it makes sense to put as little down as you can....but not to pull everything out you can, or do an interest only loan etc. If you can, put zero down. It should be a personal benchmark to have 10% down at least. Then you know what you can afford and go from there. Perhaps well built condos from the past will be the thing to get into as a first timer this spring? If the Silver Tsunami rolls in as predicted you might be able to trade a boomer your condo for thier house they will so desperately need to sell.

Jack and Cate said...

"There is not set of standardized stats and everyone spins them to their advantage."

Marko you wonder why you get miss quoted or flamed on blogs. Your statements do it themselves.....

Introvert said...

And then the true meaning of HHV came through,
And Introvert found the strength of ten Introverts… plus two.


I feel that the "true meaning of HHV" is not "have a decent down payment" but rather "Victoria is basically no different from anywhere else in Canada, so our prices ought to match that of Regina, for example."

And I obviously disagree with that.

The record will show that I've consistently argued against low down payments--not because they are always irresponsible, but because they're usually not a good idea for most people in the context of Victoria's high prices.

Haven't always been a grinch! ;)

--------------------

I bought my first place with 5% down and used my RRSP.

I was still in university and it was an excellent way - and the only way at the time - for us to get into the market at the time.


My nuanced argument (perhaps not always clearly expressed) is that 5% down is fine for certain people. You, totoro, seem to be one of them. By all accounts, you're extremely financially savvy and--perhaps more importantly--you know what you don't know. This cannot be said for most people.

Moreover, 5% down in Victoria's market is not the same as 5% down in Regina, Kitchener, Halifax, or even Edmonton. House prices and incomes vary.

DavidL said...

I don't agree with all the points, but it makes for an interesting read ...

From CBC:
Looking to invest? Pay down your mortgage instead
In a volatile market, a mortgage is a safe investment with a guaranteed rate of return

Just Jack said...

For Victoria to match Regina a prospective purchaser would have to consider each city as equals amongst all the variables.

Pretty impossible, when you consider that we have a significant difference in prices just between Sooke and Victoria City. And Sooke has more in common with Victoria than Regina.

Having said all of that, it isn't impossible for Regina to be more expensive than Victoria. Just as Fort McMurray is more expensive than Victoria.

I don't disagree that Victoria is a pretty city when (if) the sun shines, but so is Whitehorse or any other city in Canada.

As for the retirement boom coming to Victoria. That is pretty much over. Generation X is now moving into retirement mode and that is the lost generation.

DavidL said...

@Introvert, Totoro

After 15 years of working, in the late 1990's I returned to school to get the credentials I needed so that I could get a well-paying job allowing me to: [1] buy a house, and [2] raise a family with minimal financial stress. I graduated in December 2001, was employed within days, and then bought a house in June 2002 with 5% down - withdrawn from my (and my wife's) RRSP's.

At that time, it was obvious that the housing market was "taking off" and any delay would have significantly increased the purchase cost. Now we are in the opposite type of situation, where it is better off to reduce debt and increase savings for a down payment, while waiting for the "right moment" to buy.

DavidL said...

@Just Jak
Generation X is now moving into retirement mode and that is the lost generation.

Speaking on behalf of my fellow Gen X-ers, few of us are anywhere close to retirement - particularly considering most of us are between 40 and 50! (Yes, I know there are many definitions of Gen X.)

dasmo said...

˄˄˄ What DavidL said.

RE: Looking to invest? Pay down your mortgage instead.
Do both...or if you are afraid and can't dedicate to investing in stocks yourself, then make those extra payments. Debt reduction after all is your safest bet. Certainly better than borrowing 200k for your "financial adviser" to whittle away at....

DavidL said...

@dasmo

Doing both is exactly what I've done! I also have self-directed RRSP's, RESP's and TFSA's - which denies the "financial adviser" their commissions, but has significantly increased my long-term savings.

Just Jack said...

That's why I said moving into retirement mode.

At 40, you realize that you haven't started on your retirement plans, you better start getting serious. At 50, early retirement might be just 5 years away. So, if you are planning to retire to some other city, you would start to look around at job prospects in that city now.

Much like where the Baby Boomers were, some dozen years ago.

dasmo said...

retirement = death
Us GenXers are more likely planning a retirement career or business, as I am. Or planning to just work less. It beats rotting on a couch and becoming sedentary both in mind and body. One would get bored of RVing around after about 6 months. We have been taught to enjoy life as you go. I have, with a few missed opportunities along the way prioritizing work, oops. I don't feel some need to be done work so I can finally enjoy life... I think boomers are actually the same. Hell, my Aunt and Uncle have both retired...about five times now.

koozdra said...


Is this Canada's real estate tipping point?

DavidL said...

@JJ
At 50, early retirement might be just 5 years away.

I seriously doubt there are many people at 50 who are pondering retirement ion 5 years.

More likely, some of them are realizing that they will be working until 75 to pay off their recent house purchase. Granted, that they may realize that at some point it may be best to sell and recoup their equity - but most will hang onto their home, pay their mortgage and wait for prices to go up to 2010 levels again. Unfortunately, I just know too many people in this situation ...

info said...

"You could have stopped here. The comment specifically said Victoria and has nothing to do with the national bubble.

Victoria's peak was in 2010. According to the chart of national housing bubbles, they correct for about 4-7 years, so the correction being halfway in one year would fit that timeline perfectly."

Canada's national bubble started to inflate in 2003, according to that chart. The peak was in late 2011, 8-9 years later.

Again you fail to understand that Victoria's house prices increased dramatically over the last 10-11 years because of Canadian government policy that brought in lax lending standards. All Canadian cities experienced out of the ordinary price gains because of these lax lending standards.

This graph helps to explain that from 2000 to 2010, house prices in Canada increased 110% while family incomes increased much less, only about 35%. It also shows that the average house price in Canada, today, would be about 33% less if house prices would have increased at the same pace as family incomes. What made house prices increase at a much higher rate than family incomes? Lax lending standards. For this reason, Victoria, as part of Canada, is subject to the price correction that has already started in Canada.

Policy creating lax lending standards in Canada started in 1999. Canada experienced its average price peak in 2012, 13 years later. House prices really started to take off in Canada in 2002-2003, 10 years before peak. Canada experienced at least 10 years of extreme lax lending standards that pushed prices far above the point where incomes were able to provide support.

It is reasonable to expect Canada (and Victoria) to experience 10 years of house price declines before reaching bottom. Looks like we have 9 left to go.

dasmo said...

The market started to slow in 2007. You can best see that in average condo prices. So statistical peaks aside, The slump started at the end of 2007. So we have been going on for five years now...

"Victoria's house prices increased dramatically over the last 10-11 years because of Canadian government policy that brought in lax lending standards"

Yes, that helped it to overshoot but it's not what started it. What started it was interest rates coming down to historic norms after a long flat period of no price inclines. In the early 2000's rates came down to the 6% range making buying cheaper than renting. Then, rates dropped further, amortization periods extended, down payments lowered. So in reality it was a combination of intervention with a catching up... In 2003, amortization was still 25 years. Down payment just dropped to 5% and mortgage rates just turned to 4.5%. So in reality it was only a few years of "lax lending standards"

a simple man said...

I think that from Leo S's graphs it is pretty clear that SFH prices peaked in the latter part of 2010. So, we are just getting started.

Leo S said...

Marko you wonder why you get miss quoted or flamed on blogs. Your statements do it themselves.....

Yeah funny how a realistic perspective of how people market themselves attracts flames...

Leo S said...

My nuanced argument (perhaps not always clearly expressed) is that 5% down is fine for certain people.

I think it depends more on the market than the person. When house prices are increasing at double digit rates, it doesn't really matter if you're the dullest knife in the drawer, it's hard to go wrong getting in soon and with minimum down.

Same goes the other way. When the market is decreasing no matter how smart you are your equity will disappear.

StalJ said...

"Victoria's peak was in 2010.”

The only peak that matters for BC is Van. Van peaked in 2011. Other cities will be just ripples on the pond water. As this graph points out, prices will not bottom until at least 2016.

StalJ said...

SUre, you have to think in standardised money when you are viewing that graph. Which is of course US currency.

Leo S said...

It is reasonable to expect Canada (and Victoria) to experience 10 years of house price declines before reaching bottom. Looks like we have 9 left to go.

The exact peak is debatable, but at the latest that would be mid 2010. So we are 2.5 years into the correction. Previous corrections have lasted 4-7 years, so saying that 3.5 years will be about halfway is a pretty good guess.

The stuff about Canada is not relevant. Real estate is local and different markets peak at different times. Just like Phoenix collapsed 2 years before Seattle started declining.

totoro victoria said...

"Speaking on behalf of my fellow Gen X-ers, few of us are anywhere close to retirement - particularly considering most of us are between 40 and 50! (Yes, I know there are many definitions of Gen X.)"

I'm gen-x (early forties) - went into business for myself working pt at 35 - two years after graduating - and plan to retire by fifty.

It is very very easy to retire early in Canada if you really want to even if you do not make a spectacular living, have kids, and have gone through setback like, for example, a divorce. Only exception to this might be long-term illness. IMO North Americans spend too much on unecessary stuff and it gets in the way of retirement.

I don't have a workplace pension plan or an inheritance. There is no secret. Just read up on it, live as far below your means as you can do without sacrificing happiness - which is quite a bit I think for most folks. Then invest in things that make a bit of money each year that you don't spend but reinvest.

There are loads of books on this - like your money or your life and wealthy barber. The strategy works. Lots of websites too.




Just Jack said...

And DavidL that is my point about Generation X. Very few will be pulling up stakes in Ontario or Alberta and moving to Victoria.

That's a lot different than what happened over the last dozen years with the Baby Boomers.

I too, was hoping for the Freedom 55 plan. And I realize now that I will always be working. But working isn't all that bad. Far worse if I had to use my back all day to make a living.

Happy camper said...

Leo S said:
When house prices are increasing at double digit rates, it doesn't really matter if you're the dullest knife in the drawer, it's hard to go wrong getting in soon and with minimum down.


Time will tell on this one. People who put 5% down because that's all the money they have (e.g. not strategic investors) will likely find that they have minimal skills at savings and budgeting and that carrying costs of housing along with mortgage debt and other life-related costs will break them. It will break them financially and sometimes in other ways too. They will also discover the costs of exiting home ownership are expensive and they will be the ones to do this on the down-side of the market. I think that 5% down is a mistake for the majority.

The other side of your comment was lost equity when the market is going down and you indicate it's unavoidable. I agree that this would have more risk but buying at a good price, good time, good location where value can be added may reduce or even stop this from happening. It also requires a longer term perspective. Buy well and enjoy for many years.

Leo S said...

The market started to slow in 2007. You can best see that in average condo prices. So statistical peaks aside, The slump started at the end of 2007. So we have been going on for five years now...

Yes but you have to be consistent in measuring it. In the 90s the peak year for prices was 1994 and the bottom in real prices 6 years later.

But if you want to go by monthly prices, you could argue that the slump started in June of 1993 and lasted all of 2001, which makes the correction 7.5 years.

Leo S said...

They will also discover the costs of exiting home ownership are expensive and they will be the ones to do this on the down-side of the market

Absolutely agree. I know someone who bought when the market was hot. Completely stretched themselves to get the biggest place they could and it worked out well because the market was appreciating. So now they're in Vancouver and because their house was the best investment they ever made they want to do the same thing. Stretch themselves to the max because real estate will only go up.

patriotz said...

I agree that this would have more risk but buying at a good price, good time, good location where value can be added may reduce or even stop this from happening.

In other words it's best to buy at the bottom. Well of course, but that argument is tautological. What people disagree on is whether we are at the bottom or what is a good price, which are pretty much the same issue.

Certainly you're right that it's about how much you pay, not how much you put down. Paying too much will lose you the same amount of money regardless of down payment.

DavidL said...

@totoro

I suspect that people like you and me are not the norm. I also suspect that both of us earn quite a bit more than the average family income of $80K in Victoria. When earning a good income and living a modest lifestyle, it is much easier to save, invest and plan for retirement.

Twenty years ago, I was living "hand to mouth" with barely enough to make ends meet. I don't want to sound pessimistic, but I think that many Gen Xer's are still living this way. Financial literacy is very low, and many succumb to the marketing hype to buy the biggest, latest, greatest _____(fill in the blank). It is a pervasive attitude within our society.

When I bought my house in 2002, the plan was to pay it off as quickly as possible. I'd seen my father paying off his mortgage until he retired at age 62. I want to ensure that I am mortgage free and can save for many years before retiring. Our generation can probably expect to live until 90, and the final years can be very expensive. I've recently seen this first-hand with the final months and weeks that my father (and three of my wife's uncles) were alive.

Just Jack said...

The market in sale volumes did peak in 2007. But the government interfered with the marketplace and re-vamped the cycle in 2009 and for a year the sale volume returned.

That likely deferred the inevitable by a few years, at a massive cost to the Canadian tax payer of some 800 billion dollars in loan guarantees to CMHC and Genworth.

Frankly, I think all of the politicians that were in favor of this increase should have their real estate property seized and sold to pay down the loan guarantees.

Happy camper said...

Patri...
In other words it's best to buy at the bottom. Well of course, but that argument is tautological.

Firstly - I had to look up 'tautological'. It's really disturbing to my personal sense of well-being to have such big words on a blog! Ok, it seems that you think I'm repeating 'buy at the bottom'. I'm not intending to but maybe my small vocabulary is a hindrance to my ability to convey my intended meaning. What I meant is that it's the combination of buying at a good price, good time, good location that is necessary. I don't believe in assessing tops or bottoms of markets. I'm not capable of this. But I am somewhat capabable of making an astute purchase that will be a good choice for my family as well as a good investment. I may not get financially rich but I also am unlikely create personal financial risk. I'm in this position of intending to buy and I will likely not be doing this at the bottom.

It's really irrational in many ways that I would buy an asset that is likely to go down, possibly for many years. But there will be a point when it makes sense for us. I also buy cars which are completely irrational purchases.

dasmo said...

I did say the market "started to slow in 2007". Sure the price peak was 2010 but the "Correction" started at the end of 2007. Am I the only one that can see this?

Just Jack said...

We are just talking cross purposes here. I'm looking at sale volumes. Sorry for the confusion.

DavidL said...

@dasmo
No, you are not the only person to notice the 2007/2010 discrepancy. Trends in sales values always seem to lag behind sales volume. Although sales volumes affect the price, ultimately it is the price that matters most to me.

@patriotz, happy camper
My data shows that the market peaked in May 2010. Of course hindsight is needed to see when any market peaks at the top or troughs at the bottom. Knowing when buying makes sense for your income, lifestyle and risk tolerance can be based upon rational analysis, not a visceral emotional reaction.

patriotz said...

What I meant is that it's the combination of buying at a good price, good time, good location that is necessary.

OK.

So it's a good price if prices go up later.

It's a good time if... prices go up later.

It's a good location if... well you get the idea.

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

"Financial literacy is very low, and many succumb to the marketing hype to buy the biggest, latest, greatest _____(fill in the blank). It is a pervasive attitude within our society."

Yes, but you can change this! If you are complaining about real estate prices yet failing to save because of this - good news folks - you can do something about it!

As for living hand to mouth - been there and done that. Good news again- you can still save in Canada by working harder and reducing living expenses as much as possible. Many immigrants do this. The more you work and save and then invest the less you need to work later on.

I think it is interesting that if I had just bought a house with a suite or had roommates out of high school (working two jobs and no higher education) and stayed at a $50 000/year job in my hometown - had some rental income and invested the surplus... I probably would have be retired now.

Introvert said...

I'm in Gen Y. I was in high school when many lucky--I mean, financially brilliant!--folks bought a house in Victoria.

Sure, could have rented until price-to-income ratios reverted to 3:1, but a) don't like renting, and b) don't think that type of ratio-reversion is likely to occur in Victoria.

I think I'm being realistic about retirement, though, when I say that we'll probably have to sell our house and move to a lower-priced city up-Island in order to make a comfortable retirement possible. And I say this even factoring in the defined-benefit pension my partner will receive.

But I'm looking forward to retirement. It's going to be sweet! That is if our world is still a decent place to live in in 30-35 years' time--so far, I'm not liking where we're headed.

koozdra said...

A popular topic these days. The even interview Ben.

Prices steady, but sales down 17%

Leo S said...

From CBC:
Looking to invest? Pay down your mortgage instead
In a volatile market, a mortgage is a safe investment with a guaranteed rate of return


That's my strategy once we have a mortgage. Maybe it's because I'm a bit thick about investing but I'm not confident I can beat that return in the markets over the long run. Paying down a 3% mortgage will be equivalent to an ~4.5% return on a GIC outside a tax shelter. That's good enough for me.

dasmo said...

What? Your not going to give Garth a call so he can sell you some of his ETF's he needs to unload?

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

Yes, but you can change this! If you are complaining about real estate prices yet failing to save because of this - good news folks - you can do something about it!

I am doing something about it. It's called renting.

Except failing to save is not an issue for me, I could buy a house for cash right now.

totoro victoria said...

You are complaining about high real estate prices yet failing to save because you are overspending on consumer goods? And then you are correcting this by renting? Not sure how the comments tie together.

Leo S said...

Sales starting to pick up this week..

koozdra said...

"Before every housing correction, there’s a Looney Tunes moment. In the animated universe, there’s a gravitational peculiarity that briefly suspends an overzealous pursuer in mid-air, just long enough to flash a HELP! sign, before plummeting off the cliff he failed to navigate. When it comes to overheated real estate, there is a pause that follows the outset of a correction, during which the market fails to realize there is nothing below but air."

Canadian Business - How low will house prices go?

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

Each Spring we go through the same scenario. Sellers are not willing to lower their price and buyers are not willing to pay that price.

For most of the last decade, the sellers have won this real estate "Face-Off". As buyers could dig deeper into their pockets, bankers were more willing to let things slide on applications, and brokers could be more creative in what is income knowing that CMHC or Genworth were always quick to come up with the loan guarantee.

This time around it may be different. Prospective purchasers may not be able to dig deeper, and have less ability to stretch that income or get approval.

But there is always marketing! Repetitively saying a consistent message can change a want into a need.

Swarmy agents or economists pumping the real estate market, trying to get that horse to drink one more time at the real estate water hole. But this required cooperation between the media and the real estate industry to send out a unified message. They had to say the same story.

Could it happen again?
-Tell you in April

Marko said...

Sales starting to pick up this week..

Not really seeing it. Still slow; however, showings have picked up a bit of pace.

January will be bad in terms of sales; however, I have a feeling there is a small amount of pent-up demand. My feeling is February and March will match last year.

Looking at new listings, shocking at how many sellers continue to over price. Few are in touch with reality.

Leo S said...

Not really seeing it. Still slow; however, showings have picked up a bit of pace.

Maybe just an artifact of where I'm classifying sales. What does it mean when a sale is marked as pending, but with a date from last year? For example, 4048 Cedar Hill Cross Rd showed up as sold today or yesterday, and yet the pending date is 2012/02/03.

Glitch in the VREBMatrix?

Chris said...

from the end of koodzra^ article

“The proportion of Canadians of the age when homes are typically purchased is at a turning point and is set to decline, which historically has been a powerful indicator of housing trends. “The long cycle is most of the time affected by demographics,” he says. And a very long cycle it could be. He foresees a 20-year span of declining home prices.” (bold added)

Sorry but that’s a friggin lifetime for a young couple to watch thier house price fall,..worse if taxes, et cetera rise. I think I’ll take my chances around 2020. Most will walk by then, recourse or not.

info said...

"The stuff about Canada is not relevant. Real estate is local and different markets peak at different times. Just like Phoenix collapsed 2 years before Seattle started declining."

The stuff about Canada is very relevant.

You actually provided evidence that I am right about this. I agree that Phoenix started to decline 2 years before Seattle. However, if the US has actually hit bottom, they both would have hit bottom at the same time - December 2011.

The same can be said about Miami and Los Angeles. Their peaks do not coincide, however, Miami and Los Angeles also reached bottom in December 2011.

So we can apply this to Victoria. Victoria will reach bottom at the same time as Vancover, Montreal, Toronto, Edmonton, Calgary,...

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

Thinking of buying for the first time in Victoria?

Don't. Now is not the time to buy. The market has only recently started its long journey down. If you buy now with a minimal down payment, you will soon owe more on your mortgage than what you will be able to get for your property.

The US housing correction/crash is valuable to us as Canadians as it provides a warning that buying real estate at bubble prices is never a good idea.

Victoria and Vancouver have formed the biggest price bubbles in Canada, just like Miami, Phoenix, Los Angeles and Las Vegas did in the US. We all know what happened to house prices in those cities.

In Miami, this house lost a full 65% of its value. Also note that, officially, Miami's median price corrected about 48%. It will definitely be worth it to take your time and make many lowball offers when you do decide to buy.

This Phoenix house lost 76% of its value, while, officially, prices in Phoenix dropped about 54%. Lowball when you buy in a declining market. You will be in control.

In Los Angeles, this house lost 62% of its value. Officially, prices in Los Angeles declined about 42%.

Canada is actually in a bigger price bubble than the US was at peak. Price/income ratio, price/rent ratio, overall average price, home ownership levels and household debt levels all support this.

Wait it out. Much lower prices are on the way. You will thank yourself.

dasmo said...

You want a bubble? Look at Amazon.com Shares...It's Price-Earnings ratio is 3,220!!! Apple's is 11.39. Yet Apple shares have been going down as of late and Amazon's have been going up. The world is an odd place full of illogical injustices.

Bottom line is no one knows what the future holds. Now could be the best time to buy again because you can lowball, take your time, still get money at low rates etc.
To doll out "advice" like the above conjures up a reading of Matthew 7:15 and I'm not even religious....

Introvert said...

info, your repetitive, annoying implorations won't influence the local real estate market in the slightest. But go ahead and persist, if that's what you want to do.

patriotz said...

He foresees a 20-year span of declining home prices.

He must mean real not nominal prices. The nominal price of anything can't decline for 20 years at any significant rate without becoming practically free.

If he does mean real, he may well be right.

totoro victoria said...

I was speaking with an elderly man today who was married in 1953.

He had just purchased a booklet for his wife of major events and stats in 1953. In 1953 the average salary was 4,000 and the average home cost 9,500...

Today the average home in Victoria is around $600 000 and the average salary is around $45 000 (?).

Over this time period houses have gone up by a factor of 63 while wages have risen to 11x what they were in 1953.

Of course there are loads of other variables like an increase in homeowner equity overall and interest rates and dual income families and...

But those were the good ol days to buy in for sure.

DavidL said...

@totoro

In 1969, my father's salary was $12,500. He purchased his Ten Mile Point home for $32,500 - 2.6 times his annual income. Mind you, the fixed interest rate was 8.5% - for 25 years!

His rent for a house just off Gorge Road was being raised to $200/month - so buying the Ten Mile Point home was only slightly more expensive.

Chris said...

“…what they were in 1953.”

Indubitably, the 50s/60s were good timing. But just think of the poor saps who bought 20 to 30 years before that.
Without a doubt you want to time the long cycle right. Like that guy in the paper said “a very long cycle it could be.”
Indubitably. Love saying that word.

Jack and Cate said...

So how low will prices go??
http://www.canadianbusiness.com/economy/how-low-will-house-prices-go/

info said...

"info, your repetitive, annoying implorations won't influence the local real estate market in the slightest. But go ahead and persist, if that's what you want to do."

Maybe some of it is repetitive to you, but you spend a ton of time on this blog every day. Perhaps there are others out there who are not in the same boat as you.

You gave me an idea. I will post this on Garth Turner's site as well, since there is probably 10,000 times as much traffic there daily.

patriotz said...

But those were the good ol days to buy in for sure.

The other conclusion, almost as obvious, is that today will likely become known as the good ol days to sell.

Chris said...

“He must mean real not nominal prices. The nominal price of anything can't decline for 20 years at any significant rate without becoming practically free. If he does mean real, he may well be right.”

Pretty sure he meant nominal. -3% per annum for 20 years doesn’t even cut something in half. OTOH, 20 years at -6% would be -70%, which is I’m guessing what you meant by significant. And that ain’t going to happen, as we’d reverse back into the late 90’s.

dasmo said...

I must admit it is a good plan to tell everyone that owns its time to sell and everyone looking to buy its not the time to buy. It just might work.

Leo S said...

Look at Amazon.com Shares...It's Price-Earnings ratio is 3,220

Completely insane. The thing is, Amazon is driving other retailers out of the business, and they're doing it by losing money. Once the collective investor community realizes that the business is fundamentally unsustainable we'll be left with no real competitors and Amazon will have to raise their prices to survive.

totoro victoria said...

"almost as obvious"

Yes, Pat, almost as obvious. Just like the past is as much a fact as what will happen in the future.

totoro victoria said...

Am I the only one that finds it hard to resist extending Pat to Pat the Bunny? Honestly, that is not directed at you Patriotz but the contrast of Pat the Bunny and your persona online is pretty funny.

totoro victoria said...

Kermit agrees.

koozdra said...

"Today the average home in Victoria is around $600 000 and the average salary is around $45 000"

Totoro, do you think this is sustainable?

Leo S said...

But just think of the poor saps who bought 20 to 30 years before that.

How do you figure? I haven't seen any price data before 1960. Was it flat or declining before that time?

Leo S said...

You gave me an idea. I will post this on Garth Turner's site as well, since there is probably 10,000 times as much traffic there daily.

Good plan. And while you're at it tell that "coastal" person to drop by here. I'd ask him/her myself but it seems I've been banned from greater fool. My last two comments didn't appear at all. No dissent allowed.

totoro victoria said...

"Totoro, do you think this is sustainable?"

I think there will be a drop as I've posted many times. How can there not be -there has been a long run up and RE doesn't run in straight up slopes.

Are current prices sustainable? I think we are far too used to having it pretty easy in Canada in all sorts of ways. I've travelled a lot - so much that more travel is not a goal unless it is with a specific purpose in mind.

What I have seen is that the income/price ratios in many countries is as high or higher than in Canada. Other places where small multi-generational living space is just the norm. Some places are so high that most of this generation will rent forever.

Sustainability is so complex that I'm afraid I don't have an easy answer. I expect there will not be a long-term reversal (ie. ten-year timeframe) in Canada or return to previous income/price ratios.

Two-income families, rising land costs, ingrained sense of value of owning a home... I don't think we are likely to see a long term return to past numbers.

I do also believe that many places in the US that have been hard-hit will recover within ten years.

Some won't because of other reasons - like Detroit. When I visited it was clear that there is nothing solid to support the economy and tax base. Crazy crime rates and inner city decline...

I do think we will see a correction and a time to buy in at lower prices and then another run up in prices. Interest rates will impact whether there is any difference in your monthly payments at any point and time.

totoro victoria said...

Banned hey Leo. You always struck me as a troublemaker. Too much logic and statistical analysis will do it every time.

dasmo said...

Garth's Blog is what's known as TVP. Hey is building his brand to sell books and his investment vehicle you can only buy through him and his kind. It's not a place to find informed analysis and debate. I mean he says this about Victoria: " especially in a city with the economy of a glorified car wash, a population of advanced wrinklies and real estate selling for about double what it’s worth.". And we are supposed to take his advice on the future of our finances when that is the depth of his analysis of one of the countries key markets...

dasmo said...

Sorry introvert...

Leo S said...

I don't think Victoria is a key market. A medium sized backwater perhaps.

dasmo said...

chuckle...

Chris said...

“How do you figure? I haven't seen any price data before 1960. Was it flat or declining before that time?

This shows 30plus years before 1960. It looks like prices fell 60% over that 20 year period. Nominal would be the same since like now, there was next to no inflation during that period.
He doubtless has more data -> when “He foresees a 20-year span of declining home prices.”

Leo S said...

This shows 30plus years before 1960.

US data unfortunately. Wonder if Canada had a similar pattern.

dasmo said...

Sorry Chris, those darn inflation adjusted graphs will get you every time.

Looks like nominal prices might have even gone up a bit during the 40's

Marko said...

Everybody puts 5% down these days.

2011 VREB Market Pool Results

- 22.52% of buyers put less than 20% down. 54.80 put 20% down or more, 22.68% paid all cash.

2012 VREB Market Pool Results

- The numbers haven't been tallied but I quickly looked over the individuals months and it will be less than 22.52%.

Marko said...

"Today the average home in Victoria is around $600 000 and the average salary is around $45 000"

Totoro, do you think this is sustainable?


To some extent yes. $45,000 qualifies you for my condo or slightly bigger/better. Not exactly sure why a single person wouldn't be more than content with it. I have to share it and I am happy with it. Not to mention it is environmental friendly. Hydro in the summer time is $20-$30 for 2 months, winter never has it been over $100 for 2 months. Strata fees $150/month and with my assessment dropping nearly 10% I'll be under $1000 in taxes for the year after the home owner grant. It is downtown and we got rid of one car.

What are the bench marks we set? In Canada they've been very high in the past and I don't think they can be maintained going forward.

If someone making $45,000 a year could afford a starter home in Fernwood, for example, my girlfriend and I, not to brag, could afford waterfront or a solid house in the Uplands. This doesn't make sense to me. A house in the Uplands is something one day in 25 years, maybe if I am ridiculously lucky, and I work 60 hours per week, I might be able to afford; however, if I am in Fernwood in a solid home I'll still be happy. Certainly don't feel entitled to waterfront or Uplands as a late 20s discount realtor :) However, it the market dropped 50% it would be well within reach, at current interest rates.

patriotz said...

Nominal would be the same since like now, there was next to no inflation during that period.

That is quite wrong, as there was substantial price and wage inflation during and after WWII. Wars tend to do that.

The nominal price bottom for RE was in the mid-1930's, as one might expect.

vawr said...

@introvert

"info, your repetitive, annoying implorations won't influence the local real estate market in the slightest. But go ahead and persist, if that's what you want to do."

I, for one, appreciate info's contributions to this site. There may be some overlap and repetition in some of his posts but the point he is making bears repeating as many still can't decipher the writing on the wall.

Rest assured, redundovert, there is an inverse relationship between quality of his postings and yours.

totoro victoria said...

I think introvert has good comments.

I tend not review infos posts too much because they do have similar messaging - but they might not be repetitive for someone who does not come to the board often.

Posts that seem like public service announcements warning me of market dangers come across as a little pompous to me. No-one knows the future and talking about it as a known fact is just prognostication.

I do appreciate statistical analysis and opinion based on experience with our local market conditions.

nan said...

@ Marco: Loose lending doesn't increase the size or quality of house you or any other family can afford relative to everyone else. It just enables you to spend too much on the house you are eligible for as a product of your place in the income/ wealth heirarchy in society.

Loose lending only increases prices, it doesnt upset the social strata - if you can't afford in the Uplands now, you wouldn't be able to afford it if prices were half what they are now.

The best houses still go the the wealthiest/ highest income earners, regardless of price, because they can afford to pay the MOST relative to everyone else.

Of course willingness to take on debt is certainly a factor when people are spending like drunken sailors but in my opinion, price is largely irrelevant in allocating housing across society overe the long term - its the social stratification that decides who gets which house. Ability to borrow just determines how much you will pay for it, which is the problem right now.

If you're going to get the same house regardless, why would anyone be willing to pay double simply because a bank is willing to lend them an exhorbitant purchase price?

koozdra said...

"If someone making $45,000 a year could afford a starter home in Fernwood, for example, my girlfriend and I, not to brag, could afford waterfront or a solid house in the Uplands."

No you wouldn't. No bank in their right minds would lend you that kind of money. The banks are drunk on CMHC insurance. We'll see if your girlfriend is still employed when the BC gov't starts bringing in austerity measures. The BC gov't runs on real estate money.

Think back ten years and remember how difficult it was to get a mortgage. The banks also insured their prime mortgages. This provided further liquidity.

Without the government guarantees the banks will decrease their lending. Prices will come down.

I mean what happened? sales were decreasing slowly and now in December and January things suddenly fall off a cliff???

I guess it could be a coincidence that it is at the same time as the CMHC hit it's debt ceiling.

"22.52% of buyers put less than 20% down. 54.80 put 20% down or more, 22.68% paid all cash."

Is one quarter of the market insignificant? Remove them from the equation and the pyramid scheme collapses under it's own weight.

Marko said...

Two-income families, rising land costs, ingrained sense of value of owning a home... I don't think we are likely to see a long term return to past numbers.

A lot of people ignore rising land costs, not the land itself so much but the cost to develop it is getting to be crazy. I frequently stop by construction sites to talk to builders and to try and pick up listings. Some of the stories are ridiculous. A guy building a duplex on Bay Street had to get a traffic study done amongst many other things. 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.

A real clear example of how land/construction costs have gone up is mandatory engineering.

10 years ago you built a home in the City of Victoria, simple box, 2''x6'' frame. Inspector inspected it, you got occupancy, it cost hypothetically 300k. Now, you have to hire an engineer for the exact same house. If none of the other factors changed that house now costs 302k. Exact same house but you have a fancy signature from an engineer. I can understand an engineer if you have 6'+ foundation walls etc., but an engineer for a box on a flat lot is burning money in my opinion. They basically ask you to add a few nails here and there and that is it. Inspector can do the same thing. I haven't seen this cost add significant value.

There have been so many things like that added that provide for more paperwork, but the end product is the essentially the same. Someone has to pay for the paper work, the buyer.

Marko said...

Is one quarter of the market insignificant? Remove them from the equation and the pyramid scheme collapses under it's own weight

One quarter is less than 20%, from my experience many people put down 10 or 15%. You can't assume that everyone under 20% is automatically at 5%.

dasmo said...

Again with the extremes....a pyramid scheme? Social stratification?

totoro victoria said...

I bought ten years ago and had no trouble getting a mortgage without a large income.

I also disagree with the social stratification theory - although I may be misunderstanding the point.

You do not have to be wealthy or have a high income in Canada to own a very nice home. You have to spend less than you make, invest wisely and be willing to work hard and work your way up to it and make it a priority if that is what you want.

Many people, imo, complain too much and do too little to change their circumstances.

nan said...

@ totoro: agreed: I should probably have used the term "wealthiest" & "most efficient earnners". As we all know, earning well is only loosely correlated with accumulating wealth.

koozdra said...

pyramid scheme

People buy at the bottom to create move up buyers who have more money because of appreciation.

Remove appreciation (housing downturn) and entry level buyers (regulation on mortgage lending) and the pyramid scheme collapses.

Am I getting the analogy wrong somehow?

Marko said...

Loose lending only increases prices, it doesnt upset the social strata - if you can't afford in the Uplands now, you wouldn't be able to afford it if prices were half what they are now.

Exactly why not? Let's say my condo goes from 225k to 115k and wipes out the equity and I have throw in another 25k to clear title. Total write off; however, we still have enough savings for a 20% down payment on a $700,000 home and can qualify for $850,000 at current interest rates on a 25 year term why wouldn't the bank give us $700,000 (our deposit included, so actual mortgage 20% smaller).

Last year sales volume was down 5% but my personal business went up 50% so even in a severe downturn I can assume at least I would be flat or slightly up in terms of income (people still need to sell and buy places for a variety of reasons).

The best houses still go the the wealthiest/ highest income earners, regardless of price, because they can afford to pay the MOST relative to everyonelse.

I know, I agree, my $1.4 million dollar Uplands home is not dropping to $700,000 any time soon. Exactly my point.

We'll see if your girlfriend is still employed when the BC gov't starts bringing in austerity measures. The BC gov't runs on real estate money.

If the BC Government starts cutting in masses might as well buy a farm out in Sooke so at least you have a food source.

totoro victoria said...

I see - I misunderstood - I would agree then.

The nice thing is that in Canada it is possible be more efficient and do pretty well with smaller incomes.

nan said...

@ dasmo:

I don't think there is anything "extreme" about a social stratification theory...?

I mean maybe in a communist society but we aren't "quite" there yet in Canada...

totoro victoria said...

I would agree that appreciation has created a lot of wealth for folks. Some of that may reverse but to call it a pyramid scheme is untrue and hyperbole.

A pyramid scheme starts out as a con and is fake from get go. Market conditions that create a run up in prices are market conditions. There is a real commodity at base, which usually there is not in a pyramid scheme.

To enhance credibility, most such scams are well equipped with fake referrals, testimonials, and information. Pyramid schemes are illegal for a reason. Free market conditions are not a pyramid scheme.


Chris said...

“That is quite wrong, as there was substantial price and wage inflation during and after WWII.”

Easy now compadre, I was simply pointing out that overall nominal ’29 to ’46 would be very near the end result of the adjusted data I linked^.
Don’t believe me, use an inflation calc. like this and input 1929 to 1946 same as the dates in that linked graph^. A meagre 1.3% per year inflation ‘29-’46, higher than our inflation rate now. Sure, if WWIII breaks out in the 2020s, I can assure you it would lead to lots of inflation. I was simply posting some real data in response to Leo’s request. Is what it is. You're welcome to adjust it back to nominal if it turns your crank.

Introvert said...

Rest assured, redundovert ...

Your name-calling skills are quite something.

Posts that seem like public service announcements warning me of market dangers come across as a little pompous to me.

That's precisely it: many of info's posts read like public service announcements. As if he is some higher authority educating the unaware for the benefit of all...

You can't assume that everyone under 20% is automatically at 5%.

Sure you can! It fits so well with this blog's popular narrative.

Marko said...

I stopped by my folks place last night and they had a few of their mid 50s friends over. One couple was telling me how they are helping their daughter and son in-law with the 20% downpayment as they are currently shopping for a home.

I think this plays into the market somewhat.

a simple man said...

Wow - this blog can't win - Greater Fool's comment section has several people calling this out as a bulls' paradise while the local bulls/halibuts say that we a enveloping perma-bear "narrative".

I guess we are truly balanced, then.

koozdra said...

You sell your house after you have made money on appreciation to some sap that is willing to pay more for it than you. You take your gains and buy a more expensive place becoming the sap that paid more than the previous owner. Money enters the economy that has been created out of thin air. The whole model is based on growth based on debt.

After it all unravels the only people who will have money are the people that have realized their paper gains at the expense of every one that is still in "the game". Leaving the burden of debt on the people lower down. Hardest hit are the people at the very bottom and the moron "investors" that hold real estate as the holy grail of wealth generation.

Perhaps pyramid scheme is a bad analogy. The effects will be the same nonetheless.

dasmo said...

RE: The social hierarchy...We are talking about home ownership. This has nothing to do with the 1%. There are no societal barriers stopping you. My father was dead poor starting out. He was even a French Canadian in Alberta in the 60's and had a peer tell him "you'll never get anywhere in a town like this with a name like that". He did just fine. This is my lineage and I own my home. I don't come from wealth, In fact I've made more from working and investing than from appreciation in my home.

RE: pyramid scheme. What Totoro said. Foundation of a pyramid scheme is nothing, a lie, vapor, nada, zilch....

Just Jack said...

Best Deals of the Month (In My Opinion)


A third floor, two-bedroom condo along Foul Bay. The building needs remediation. Opportunity knocked for someone, as this home was bought for $100,000 less than it was purchased for in April, 2008.

A half duplex along Richmond road. $375,000 bought you 1,480 square feet of home, a yard, a suite, and the bragging rights of living in Fairfield.

West facing tidal water front along Portage Inlet on Glenwood Avenue in Saanich West. 3,000 square feet of home and your own dock for $575,000. Originally asking $750,000. The property sold for a hundred thousand or 21% more than it was bought for 8 years ago in 2005. To put that in prospective for you Oak Bayers - this would shave 10 percent off your current home price.

These were just three of several in the Victoria Core. What they seem to have in common was they were just a half step out of tune with what the mainstream buyer is looking to purchase.

Happy camper said...

I agree that 'social hierarchy' doesn't stop people from advancing financially but this assumes that they are making good/reasonable choices. Unfortunately some people do start from a very difficult position that their breadth of choices are much less and the 'climb' is much harder. On the other hand, I scratch my head at choices that others make and I believe many of the poor choices are due to ego - "I deserve xyz...". Marko's comment about a parent helping with the downpayment makes me think it's more the parent's ego to brag about their kid.

In the past week or two someone on this blog made a statement that really stuck with me. I needed the jarring simplicity of it. I wish I had kept it so I could refer to it. It was about the value of a house in Victoria and we've lost our perspective when we think $480,000 (or whatever number it was) is an appropriate price to pay for some old house. That single comment has given me a really good kick to get a grip on value and to get my ego out of the way of ownership.

totoro victoria said...

"the moron "investors" that hold real estate as the holy grail of wealth generation"

really? we are calling people morons now?

why?

you certainly will suffer no loss if an investor does. do we need to insult people? you seem to imply that you are superior to such folks.

i don't know... i may be a moron who has invested in real estate but i'm a happy one with lots of free time and early retirement because of it.

koozdra said...

"you certainly will suffer no loss if an investor does. do we need to insult people? you seem to imply that you are superior to such folks."

These are the same people that are creating the glut of housing and driving this bubble to astronomical levels.

Don't get me wrong, not every person that invests in real estate is a moron. But there are a lot of morons investing in real estate.

totoro victoria said...

Just because someone chooses to invest in real estate when you think it is a bad idea does not make them a moron.

There are loads of good reasons for buying a home including security and stability and disliking rent.

I would say that it is a less intelligent choice to pay top dollar for consumables each month than it is to buy a home you can afford.

It is not fair to call folks names when they make choices you don't agree with. They get to live with the choices, not you.


dasmo said...

I remember having similar conversations with my work mates in the 90's. I couldn't buy a house with my wages then. We analysed it and consensus was it was better to rent and invest. It was. Then came 2003. Rates shifted, prices remained flat. It was no longer better to rent. Even still, many involved in our discussion back then thought 200-250k was just way too much to pay for a house. They were wrong...Not that I will recommend you rush out and buy, just pointing out that old perceptions and paradigms are not necessarily the best thing to grip onto. Hell I didn't think Facebook was worth a penny more than $16 but I still bought at 19 because I had the feeling the rest of the world might not agree....

Introvert said...

Wow - this blog can't win - Greater Fool's comment section has several people calling this out as a bulls' paradise while the local bulls/halibuts say that we a enveloping perma-bear "narrative".

I guess we are truly balanced, then.


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

It's getting better, though. I would say before dasmo and totoro arrived (and thank heavens they did), it was pretty much me and Bubble N' Fizzle (remember that guy?) in one lonely, pathetic camp.

(And before all of you jump on me for creating "camps" ... let me offer a disclaimer:

It's wrong to treat "bears" as a monolith as well as "bulls." I agree. And I also agree that it's imprecise to use the terms "bears" and "bulls" in the context of this blog. But hey, those are the best terms we've got, so I say we use 'em. And "halibut" is a good term, too.)

koozdra said...

"There are loads of good reasons for buying a home including security and stability and disliking rent."

The only reason these people can afford a home is because of the ridiculous monetary policy in this country. Debt fuelled economic growth is not sustainable. The people that buy because they "dislike" rent will be burned by a housing decline.

Stability? what stability? The housing market has outpaced inflation and income growth. Buying a house is not about what you can afford, it's about how bad at math you are and your willingness to take on exceedingly huge debt. Before you get defensive Totoro, I'm not talking about you.

Stability would be if the housing market moved up with inflation. Stability is renting. Where your monthly payments move up with inflation. They are not controlled by some obscure system that nobody can predict, interest rates.

totoro victoria said...

My guess is that there are lots of people out there like me - but perhaps I am wrong.

A housing decline only impacts those that have to sell. Rising interest rates impact those that have debt.

Best you can do is mitigate risk - unless you believe the market will never ever rebound.

I don't think I'm being defensive really - more like taking issue with the put down which I would respond to the same way if someone called renters morons.

Introvert said...

If we clumsily divided HHV contributors into two camps ("roughly bears" and "roughly halibuts and bulls"), I think we're looking at around a 3:1 or 4:1 difference.

That's my impression and, if correct, it means we're not that balanced a blog. But again, we're infinitely more balanced than the Greater Fool. Which explains why some Greater Fool contributors regard us as a bull haven. It's all relative.

By the way, in my view, Garth Turner is sort of the Glenn Beck of Canada.

Happy camper said...

Totoro - a housing decline will impact many of the people using credit. It will diminish their future ability to purchase other goods on credit. This has a ripple effect on the economy. I believe this is unpredictable at the moment because so many Canadians have bumped up their use of consumer credit and how they respond to a decreased price in their real estate, as well as how the financial institutions place pressure on these people, is going to be interesting to watch.

totoro victoria said...

Yes, a house decline will impact heloc use. I don't pretend to know what effect this will have exactly.

The more I analyze the market the more I realize that there is no way to reliably predict what will happen next, except in the way of general direction/trends.

What general trends?

1. What goes up will come down and then back up higher. Sometimes the swings are dramatic.
2. Consumer confidence (or lack thereof) can influence markets.
3. People like to own a house.
4. There is a snowball effect when markets change one way or the other.

I think it is hard to be more precise than is because the market responds to many factors which are occurring with unpredictable timing, at a local level, and today's buyers are not exactly like yesterday's buyers and so on...

I've never been a fan of consumer credit. I have no credit card debt or loans. It seems illogical to me to finance a depreciating asset.

On the other hand, I see credit as a blessing for buying a business or a home.

If anyone is going to get on a soapbox I think the don't buy on credit message should be directed towards consumer goods and depreciating assets like cars and boats.

Introvert said...

Stability would be if the housing market moved up with inflation.

You fail to acknowledge that innumerable other cities around the world are not "stable" by your definition, and haven't been for decades and decades.

Canada has been lucky in that up until fairly recently houses in almost all major cities have been relatively affordable by most measurements. Now, even though prices will and probably have to decline for the next few years, places like Toronto, Vancouver and Victoria will never return to previous ratios, IMO.

koozdra said...

"My guess is that there are lots of people out there like me - but perhaps I am wrong."

Canadians are binging on cheap credit and the banks are more than happy to oblige.

I know what you are saying. People should be careful and mitigate risk. I agree completely. However most people don't think that much about these things. They narrow their vision on the dream of home ownership and ignore everything else.

They go to the bank and see how much money they can get then go buy a house for that number. They don't do a monthly budget to take into account the total cost of ownership of owning a house. They only realise these things after they buy. If they find that they can't make the payments they start paying the bills from the line of credit the bank was so generous to set up for them. Paying debt with more debt.

This is just fine when things are increasing. Worst case scenario you sell your house and you can even make some money form appreciation. As the market starts it's downward descent, this will no longer be the case. Look at the surveys done by the banks saying that an extra couple of hundred dollars per month would break them.

koozdra said...

"Toronto, Vancouver and Victoria"

I wouldn't be so quick to keep Victoria in that list.

Just Jack said...

Before they "give" their daughter 20 percent down for a home they should realize what is going to happen when she hooks up with someone and that person moves into "her" home.

Imagine the conversation they'll have when she starts shagging a guy/gal they don't like.

"He's only after you for your house."

"He/she can't move into that house we bought you!"

There really is no such thing as a "gift" from your parents. What happens when the home drops by 10 percent and she wants to sell it and move to Nairobi with her boyfriend.

And what if the parents want to be on Title. She's been paying at least 20 percent more in mortgage payments, repairs, etc than if she rented the home. Are they going to be helping with that too or are they going to want a one-fifth cut on any gains?

And do you think, they are not wanting to have a say in what she buys.

"No honey, I think an older condo will be better for you"

What a way to really $%#^ up your kids life. Give them a "gift" that ties them economically to you. It's like giving someone a cell phone for Christmas, all your doing is giving them debt each month. Or putting a down payment down on a car where they have to come up with $400 a month in payments.

It's not like parents are evil, but they really are not doing her any favors. I say give her a cheque and let her decide if she wants a house, to travel or shove it up her nose. The parents should never make stipulations on a "gift"

CS said...

Totoro, do you think this is sustainable?

To some extent yes.


LOL.

Reminds me of an old Punch magazine cartoon about the curate's egg.

Current prices are sustainable so long as nominal interest rates remain exceptionally low, which means that we are entering what will have to be considered an exceptional period if current prices prove sustainable.

RE prices have two components: land and improvements. The value of improvements tends to be much more sustainable than that of land, since there is a minimum below which the price of maintenance and additions cannot fall, while the rise in universal entropy means that the stock of improvements deteriorates and eventually disintegrates entirely, thus creating constant demand, even if population is stable.

The relative stability of construction prices means that most of the variation in RE prices must be reflected in land costs. Thus if nominal interest rates rise, we will see that the income/price measure of affordability is nonsense, as many people find that what they thought they could afford, they cannot afford. If that happens we will see land prices fall. However, I doubt we will again see seven acres in Oak Bay for less than a million dollars as was available at the end of Island Road, in the 1980's.

Just Jack said...

The value of real estate cannot be separated into land and improvements. The real estate value is "in situ".

For example, your BC assessment may have the value of your home at $200,000. You won't be able to sell the home without the land unless you remove the home. And you are not going to be getting $200,000 for a house on blocks by the side of the highway.

totoro victoria said...

Umm... you are not quoting me there and it makes it seem as though you are. My response was not "to some extent yes". My response was:

"I think there will be a drop as I've posted many times ect....."

Please do not quote my name with someone else's response.

a simple man said...

Sales non-existent under a million in Oak Bay this week (over a million?). A number of price drops.

Just Jack said...

Your assumption that high construction costs create stable real estate prices may be an over simplification.

An Ipad only cost $8 to make but it's sold for $400.

A new 2000 square foot home costs $750,000. But a ten year old home sells for $600,000.

High construction costs are more of a sign of a strong economy. A strong economy underpins high prices.

Costs do not equate to market value. As builders who have to sell in a down market will quickly learn.

CS said...

you are not quoting me there and it makes it seem as though you are.

I was cutting and pasting from Marko. Sorry that my post implied Marko's comment was yours.

CS said...

An Ipad only cost $8 to make but it's sold for $400.

LOL. A condo selling for $400 K will not likely ever be built for $8 K.

The fact is, construction is always priced more or less at cost, since if the profit margin expands, so does the construction industry thereby driving down prices.

And the only way for construction costs to fall sharply is a complete technological transformation of the industry. This may occur, but there's no evidence that this will occur in the near future.

CS said...

your BC assessment may have the value of your home at $200,000. You won't be able to sell the home without the land unless you remove the home.

Which Nickel Bros will be pleased to do!

Sure there's a transaction cost, but a used house can fetch a decent price. Frankly, I think that one was overpriced.

Chris said...

"The fact is, construction is always priced more or less at cost..."

I can point out oodles of examples over my lifetime where I've seen the building component sell for up to triple the cost to build, and at the other extreme, bank sales at half the cost to build. Like any market, supply and demand will soon rebalance, but I have to disagree with your blanket statement.

a simple man said...

"The fact is, construction is always priced more or less at cost..."

But what is cost? Materials and labour. Materials can inch down a bit, but labour has a lot of room? A plumber does not have to make $75/h. It is possible for them to make $30/h.

Thus, cost just went down.

nan said...

"LOL. A condo selling for $400 K will not likely ever be built for $8 K."


http://www.youtube.com/watch?v=uPSxt5A23MI

Build them like this and they will.

Leo S said...

Link courtesy of my wife

It's always interesting to see discussions about real estate on sites that otherwise are not related. More of a real insight to what people out there are experiencing.

So while Canadians are still buying near the top, Americans are struggling to get out near their bottom. Buy high, sell low as the saying goes.

Introvert said...

"Toronto, Vancouver and Victoria"

I wouldn't be so quick to keep Victoria in that list.


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.

That must have happened for a reason.

One would conclude this unless you're a "bear" type, in which case you probably think that it must have been a total fluke that Victoria's prices skyrocketed to $600,000.

Next time, it'll be Halifax's houses going to $600,000. Or Regina's, or Kitchener's, or Quebec City's. It's all random, right?

Sure.

CS said...

I can point out oodles of examples over my lifetime where I've seen the building component sell for up to triple the cost to build, and at the other extreme, etc.

But while I am lacking in examples by the oodle, I qualified my statement that "construction is always priced more or less at cost..." That covers an oodle or two of variation.

koozdra said...

"Next time, it'll be Halifax's houses going to $600,000. Or Regina's, or Kitchener's, or Quebec City's. It's all random, right?"

It is precisely this fact that will make a period of credit contraction felt more in Victoria than anywhere else. It's definitely not random that BC has the most indebted population in the country.

http://www.theprovince.com/news/people+debt+most+heavily+indebted+population+country+number+growing/7496191/story.html

CS said...

A plumber does not have to make $75/h. It is possible for them to make $30/h.

Yes, and if the plumber has reaped the benefits of a long-running boom, he may just decide see out the slump by enjoying the good life at his Hawaii condo.

For supply and demand to be connected, there has to be scope for variation in price. But it may not take a huge change in price to cause a substantial change in supply.

CS said...

Re:
Build them like this and they will.


It's interesting, isn't it, to think what will happen to condo prices in Victoria when someone does devise an acceptable factory construction technology that cuts costs by a huge margin. They could fly in the units from China using one of these.

CS said...

Speaking of rapid prefabrication of condos, the Chinese a planning an almost one-kilometer-high apartment building to house 17,000 people. It will be assembled next year in three months. We need one of those in Oak Bay. It would keep the mil rate down.

info said...

@vawr

"I, for one, appreciate info's contributions to this site. There may be some overlap and repetition in some of his posts but the point he is making bears repeating as many still can't decipher the writing on the wall."

I appreciate that. My goal is to expose as many young, potential first-time buyers to the risks and dangers of buying at this time. If it was a good time to buy, I would be the first to say it. If Victoria was Phoenix or Miami right now, I would definitely be encouraging people to take the plunge.

a simple man said...

I, too, appreciate info's posts. We need all sides here.

info - visit the vibrant victoria website in the median price thread to share your voice there.

Introvert said...

"Next time, it'll be Halifax's houses going to $600,000. Or Regina's, or Kitchener's, or Quebec City's. It's all random, right?"

It is precisely this fact that will make a period of credit contraction felt more in Victoria than anywhere else. It's definitely not random that BC has the most indebted population in the country.


Your response makes no sense in relation to my question.

koozdra said...

It's not random. People here have been very willing to take on astronomical amounts of debt to purchase homes. As such prices have soared. Personal debt levels have soared also making BC residents have the highest personal debt in the country.

Now we are entering an era of credit contraction. As such, the effects of said contraction will be felt more here than in the rest of the country.

Introvert said...

We need all sides here.

The highly repetitive, preachy side is particularly valued.

I think I speak for everyone when I say, info, please post more! Your message hasn't been getting through.

info said...

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.

Well, it isn't a good time to buy in Victoria. Has there ever been a worse time? In no way are current prices sustainable.

Monthly mortgage payments, in some cases, might (for now) make your monthly cheaper than renting, but this is due to temporary, extreme, emergency interest rates, which will be moving much higher in the future.

Even without interest rates moving higher, the fact that prices are declining and will be doing so for the next number of years also makes it a bad time to buy.

Imagine buying today and watching your property decline in value for a year and then trying to sell it. Sure, your monthly over the past year might have been less than renting, but now you give up (10%?) due to depreciation, plus closing costs, land transfer tax, etc. As well, you paid property taxes and maintenance costs for a year.

There has never been a better time to rent in Canada. Renters in Victoria have actually been making money compared to mortgage holders over the past 2-3 years. This trend will definitely continue for a number of years as renters line their pockets, in comparison to mortgage holders, who can look forward to.... well, nothing.

CS said...

"Now we are entering an era of credit contraction."

Yes, we're entering an era of credit contraction, until that is, the contraction ceases. One needs to be careful to distinguish between a current trend and a future eventuality.

The Feds will do what they can to prevent a RE slump, since an RE slump will do for the Federal Conservatives what it did for the US Republicans.

Question is, what can they do? I'm not sure, but you can bet they're working on it.

koozdra said...

"Your message hasn't been getting through."

Looking at the sales numbers, maybe it has.

a simple man said...

info - I would have to say that the worst time to buy in Victoria in recent memory was about two years ago. It is bad now, but not as bad.

If you take dasmo's approach (the Halibut Maneuver), simply take the assessment and remove whatever you feel the market will drop by before it stabilizes, factoring in future inflation, current low interest rates and long-term rental expenses.

My equation is: 2012 assessment * .8

a simple man said...

^and then offer that amount today.

Introvert said...

It's not random. People here have been very willing to take on astronomical amounts of debt to purchase homes. As such prices have soared.

But why were they willing in Victoria but not in every other city except Vancouver and Toronto?

Introvert said...

... but this is due to temporary, extreme, emergency interest rates

Don't forget "massive" and "dramatic."

Introvert said...

... but this is due to temporary, extreme, emergency interest rates

And the word "temporary" is starting to lose its meaning as we enter the duration of half a decade.

totoro victoria said...

Temporary, extreme, emergency rates... but available for a 10 year fixed with a 25 year amortization... loads can happen in 10 years while you enjoy emergency rates.

totoro victoria said...

Lots of chatter today - prices must be dropping.

koozdra said...

"Question is, what can they do? I'm not sure, but you can bet they're working on it."

I'm thinking:
Raise the CMHC debt ceiling.
- unlikely, but could happen

Move back to 30 year mortgages.
- likely

I doubt we'll be seeing cash back mortgages coming back any time soon though.


"But why were they willing in Victoria but not in every other city except Vancouver and Toronto?"

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.

Introvert said...

Renters in Victoria have actually been making money compared to mortgage holders over the past 2-3 years. This trend will definitely continue for a number of years as renters line their pockets, in comparison to mortgage holders, who can look forward to.... well, nothing.

Sure, some of the renters on this blog have been lining their pockets, but renters in general are in a far worse financial position than homeowners in general. Always have been; always will be.

Introvert said...

Yes, can't wait to lock in my second 5-year fixed term at yet another dramatic, massive, emergency, extreme, temporary rate!

info said...

@Introvert

"The highly repetitive, preachy side is particularly valued.

I think I speak for everyone when I say, info, please post more! Your message hasn't been getting through."

Imagine yourself as a potential first-time buyer in Victoria about to make, by far, the biggest financial blunder that you could possibly make - which would be to buy a property right now. Let's assume that the information that would have prevented you from buying is on this blog, but hidden in the comments section of another thread, 4 months back.

Some things need to be repeated. There is only so much information out there and new visitors to this site deserve to be exposed to it. My recent post that compared Victoria to other bubble cities in the US was presented in a different way than before as it showed the actual percentage drop in value of the homes. I also added other different information to it. It isn't as though I copy and paste from my computer to this blog.

I know you want me to be banned from this blog and we all know that you will continue to whine. I'm sure there are others on this blog who are irritated by the constant complaining and name-calling, etc. that both you and dasmo do on a daily basis.

Other regulars on this blog repeat stuff as well. Marko has repeatedly expressed his (biased) opinion that the market is stable (it isn't) and that current prices are affordable (they are not). You should be on him about that, if it is repetition that really irritates you.

CS said...

It is bad now, but not as bad [as two years ago].

Unless it's gonna get a whole lot badder!

Introvert said...

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.

So what explains the "local" phenomenon of Victoria's averages ballooning to $600k?

CS said...

I think Info's message can, in part, be generalized:

Buying with leverage is hazardous. If the market moves in your favor, the profits can be huge. If the market moves against you, the losses can mean bankruptcy, divorce (it was your dumb idea to buy now -- before mortgage rates go up, etc.), and kids with broken homes. Further, when interests rates seem to have little room to fall, the future trend in rates is more likely to be up than down, which could be hazardous to those with plenty of leverage.

But then again, and this goes beyond Info., the Feds may engineer sub-zero real interest rates which could give RE a further upward kick, in which case all you prudent folks avoiding great risk, will lose out.

Life's tough. There are real hazards you have to negotiate, and you'll only be successful if prudence is accompanied by good fortune. Both Virtu et fortuna, as Niccolo Macchievelli, put it, are the prerequisites of success in any venture.

Introvert said...

Some things need to be repeated. There is only so much information out there and new visitors to this site deserve to be exposed to it.

You're essentially admitting to being nothing more than a public service announcement distributor.

That pretty much says it all.

I know you want me to be banned from this blog...

You've done nothing to warrant a ban and that's not what I'm seeking.

Marko has repeatedly expressed his (biased) opinion that...

Marko doesn't use the same phrase over and over and over again, the way you do. We all know what phrase that is. Lord, do we know.

Happy camper said...

Totoro - in referencing your post of January 18, 2013 at 10:55 AM

It doesn't matter what any of our opinion's are regarding the use of credit. The facts are out there. Canadians have ramped up the use of credit and more concerning ramped up consumer credit to an unprecedented level. When the secured asset decreases in value, for those with credit, their ability to purchase anything else on credit is diminished. It can also be destroyed if the consumer credit is 'called' by the loaning institution. People are going to become aware of new terms such as acceleration clauses which they have signed but did not pay attention to. This type of thing will add to the downward spiral.

Happy camper said...

CS said: Buying with leverage is hazardous. ...plus much more so see Jan 18 2:24 for more context.

I did want to address the 'hazardous' term because I think it's rather dramatic. This is the part of Garth's message that I think is excellent. He is recommending a balanced approach to real estate purchasing. Buying a home with leverage is not hazardous if it is a portion of one's portfolio. And a portfolio includes business, personal investments, time horizon for earnings, earnings potential, etc.

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