Monday, January 28, 2013

Monday Market Update

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:  251 (177, 87, 32)
New Listings: 917 (701, 407, 161)
Active Listings: 3812 (3759, 3681, 3574)
Sales to new listings ratio: 27% (25%, 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

Last year at this point we were at about 293 sales.  Despite the small sales bump recently in the low end, we're still down 14% on sales, while listings are outpacing last year by ~5%.  At this rate we'll hit something like 315 sales by the end.  And unlike in previous years, sales/assessment ratios haven't recovered from the winter slump yet.  The spring market will be interesting to watch.

237 comments:

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Introvert said...

Months end is almost here, very interested to see what average and median prices are...

One thing is for certain, whatever the numbers are: they will be the canary in the coal mine.

CS said...

But then how many people were making this chronically wrong prediction in the last decade?"

Gold bugs, doomers, Austrian economists and the glibertarian right in the US in general. Failed US vice presidential candidate for one specific high profile example. Peter Schiff is another specific example. Doug Casey has also called higher inflation.


A bunch of crackpots, in other words. Not the people here.

Re: goldbugs.

Mish, who has been a gold advocate has repeatedly offered reasons why gold can do well in times of deflation. So not all "goldbugs" are driven by the same logic.

CS said...

I suggest Introvert volunteer as "Canary in the coal mine," while, of course, we will all keep our fingers crossed hoping that the air remains breathable.

Introvert said...

Keep guzzling that chardonnay you stupid spoiled Boomers because you're all about to get bent over a barrel by a younger hungrier generation.

I'm pretty sure that the spoiled Boomers will continue to bend Gen Y over a barrel. That is, until we receive a giant inheritance from them in 20 or 30 years.

God I hope they don't spend it all before they pass it down.

a simple man said...

I rarely find comments here offensive, but that one (the bending over one) crossed the line. Let's keep it civil.

CS said...

3000 Valdez offered at 90% off BC Assessment valuation of $1.25MM.

The canary's not dropped off the twig yet, but it's beginning to sway.

This is when "affordability," defined as loan service cost to income ceases to be of much relevance. You need to add the potential capital loss to the carrying cost when calculating how "affordable" a place may be.

CS said...

"I'm pretty sure that the spoiled Boomers will continue to bend Gen Y over a barrel."

One cannot be too sure about that. The Japanese Government apparently thinks spending billion on keeping alive millions of "tube people" is a poor investment. The Brits and the Dutch already have an involuntary euthanasia program in place. Will Canada remain far behind?

However, if they bump off all us wine slurping oldies, it'll crash the property market for sure. So Gen X, Y and Z, be careful what you wish for.

koozdra said...

This article is about Vancouver but I think the same things can be said about our rock solid market also.

"There is a crucial consideration that this technical analysis, such as it is, ignores. Even with a reversion to the most conservative long-term mean that can be extracted from the first 41 years of data, houses in Metro Vancouver will still be too damn expensive for average families. I think there might come a point when absolute or nominal prices become so overwhelmingly high that they break the model, even with a mean reversion. I wonder if Vancouver has gotten there. A growth rate of 3.62% above the rate of inflation is probably not sustainable indefinitely. Because it’s a compounding rate, that mean growth line is exponential, becoming increasingly steep. Like an aircraft, it may eventually stall."

koozdra said...

It seems that our export market is suffering right now. I have an idea. Let's export our expertise on running economies and banks. I mean we really must know what we are doing if we avoided the economic troubles of other countries. If things go bad in the country that we are running, we can just pull a Carney.

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

"It has the good fortune of having tons of oil and other natural resources."

It has the good fortune of having a financially illiterate populous that is willing to go into as much as debt as is necessary to keep our economy afloat. I heard that has limits though.

caveat emptor said...

@ CS re goldbugs - I don't think they are all crackpots though some are. Actually holding a small proportion of assets in gold or other precious metals seems like a good insurance policy if the SHTF.

Also how about a (non Rick Santorum) reference for "The Brits and the Dutch already have an involuntary euthanasia program in place. "

CS said...

Also how about a (non Rick Santorum) reference for "The Brits and the Dutch already have an involuntary euthanasia program in place. "

Who's Rick Santorum?

As for the British healthcare, or rather death delivery, system, it's not hard to find info:

Here's a most reliable source:

Now sick babies go on death pathway: Doctor's haunting testimony reveals how children are put on end-of-life plan

Read more

The end-of-life plan is I believe the standard routine for thoseof the sick and elderly in the "care" of the state.

If you look, I'm sure you'll find something on the Dutch program.

CS said...

My God, I just read that article are pointed out. Here's a quote:

"One doctor has admitted starving and dehydrating ten babies to death in the neonatal unit of one hospital alone.

Writing in a leading medical journal, the physician revealed the process can take an average of ten days during which a baby becomes ‘smaller and shrunken’.

Why don't they do it humanely? Bash them over the head with a two by four or something, instead of cruelly shrinking them for days on end.

dasmo said...

There is an old saying...an ounce of gold buys a good suit. Holds true to this day. Gold has shown itself to stick to inflation pretty closely. Speaking of investing, who here bought RIMM at 7 and sold at 17?

koozdra said...

"Why don't they do it humanely? Bash them over the head with a two by four or something, instead of cruelly shrinking them for days on end."

The discussion today has gone in a strange direction.

Unknown said...

Kermit is not a hermaphrodite. You are not up on your muppet lore.

Anonymous said...

"Speaking of investing, who here bought RIMM at 7 and sold at 17?"

We are all quite sure you did! LOL

vawr said...

@introvert

"Debt is constant? Then why does my principal owed decrease every two weeks?"

Yes, I can understand why you would be confused by that.

My point was that regardless of changes in interest rates or house prices the debt is still there. In that sense it's constant. What you contract to borrow you must pay back. For example if the market decides your house is worth 25% less your debt at that time remains the same.

Admittedly, poorly phrased by me but I think most people could figure that one out.

Even a modest correction in house prices from now will likely result (for those who have to sell) in losing their down payment as well as having to write a cheque to the bank.

Not a pretty thing.

caveat emptor said...

My Last OT comment on this thread I promise:
http://www.nhs.uk/conditions/Euthanasiaandassistedsuicide/Pages/Introduction.aspx

The NHS says euthanasia is illegal in Britain. A British tabloid says babies are being killed. Hmm who to believe.

As a semantic point "involuntary" euthanasia of a baby isn't possible since a baby couldn't give (or deny) informed consent. The appropriate term would be "non-voluntary".

OK back to real estate.

info said...

The only thing we know for sure about interest rates is that they will rise substantially.

caveat emptor said...

"The only thing we know for sure about interest rates is that they will rise substantially."

add "sometime in the future" onto the end of that statement and you'll almost have me agreeing with you!

info said...

@ Leo

Victoria's recent housing market crash in 08-09 is all the proof we need that Victoria, along with the rest of Canada, is not immune to a major housing market correction. In fact, that major correction has already started across Canada. We all know that the crash of 08-09 was stopped by a massive government intervention or it would have continued to correct until incomes were able to support prices.

It doesn't matter what might have happened in Victoria in 1994 because Canada was not in a housing price bubble at the time.

This chart proves that when any country reaches a housing price bubble and then peaks, it always corrects back the same amount. Note that this does not involve interest rates at all. It only involves two things: price and income.

The chart shows data for 48 different countries which would have involved, literally, thousands of cities across the world.

The evidence of thousands of cities across the world all correcting substantially when their country reached a housing price bubble is more than enough evidence to crush what might have happened in one city in a country that was not in a housing bubble at the time.

George Athanassakos of the Globe and Mail quantifies Canada's housing bubble:

"The ratio of house prices to income has historically averaged about 3.5 in Canada. It now stands at about 5.5. It is difficult to see how income growth in the future can bring this ratio close to the historical average within any reasonable period - so it follows that house prices will have to decline."

Canada's price/income ratio is currently 47% higher than its historical average, according to this article. Note that interest rates are not involved in this calculation.

There will simply be no small 10% correction in Victoria, going forward, before prices reach bottom. A conclusion like that can only be reached by ignoring the most important factors that have caused housing bubbles and subsequent housing market crashes in markets throughout the world for decades.

Victoria's correction going forward will be much, much more than 10%.

It is not different in Victoria.

info said...

"The only thing we know for sure about interest rates is that they will rise substantially."

"add "sometime in the future" onto the end of that statement and you'll almost have me agreeing with you!"

I would agree with your statement as well. But "sometime in the future" could mean 3 months from now.

Nobody can predict when it will happen. All we know for certain is that it will happen.

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

"The only thing we know for sure about interest rates is that they will rise substantially."

I'll bet you the exact opposite for awhile now. That is to say, fixed mtg rates will fall from here (for a lot longer than 3 months).

Time for another installment of
_Fun with Rates with your dear host Dave_

‘65-’69 -- 5yr rates soar from 7-10.5%, home prices soar
‘72-’75 -- rates soar from 8.5-12%, home prices soar
‘78-’81 -- soar from 9-18%, home prices soar
‘81-’84 --rates plummet, home prices plummet
‘08 -- 5yr mtg rates plummet, home prices plummet (pay attention introvert)
‘09-’10 -- rates rise, home prices rise
‘11-’12 -- rates fall , home prices fall

Rates are_not_always inverse to prices as everyone and their hamster thinks. Now is one of those times. UNTIL you adjust for inflation, rates are meaningless for predicting asset prices.

dasmo said...

You could have said the same thing about rates and the resulting risk to affordability in the 90's...And they did go up and back down again...

Introvert said...

Prediction is hard, especially about the future.

koozdra said...

"You could have said the same thing about rates and the resulting risk to affordability in the 90's...And they did go up and back down again... "

Throw caution into the wind and yell the battle cry of the next generation YOLO!!!!!!!

patriotz said...

You could have said the same thing about rates and the resulting risk to affordability in the 90's...And they did go up and back down again...

At no time during the remainder of the 1990's did mortgage rates reach the levels that they were in 1990 and 1991.

Also during every five year period in the decade rates went down. That means every person buying with a 5 year mortage faced a lower rate upon renewal.

Regarding such increases that did happen, a rise in rates from 12% to 14% has a much much smaller impact on affordability than a rise from 3% to 5%.

dasmo said...

no kidding... My point was we don't know what will happen and all evidence right now points to sustained low rates. Rates could have returned to 10-12% from 6-7% in the late 90's but they didn't. I ran rent vs buy calculations in the early 90's and renting was the way to go. Thankfully I thought about it then because I actually did rent and invest so when rates went down, I bought. Yes, that's right, prices didn't go down, rates went down...

That said, in the present, low rates are NOT a reason to buy. It does however benefit anyone who HAS bought...

Animal Spirit said...

Mayfair Man - median was running around 488K at the end of last week, average in the high 530's. Only 2 million + sales to that point. The average could change quite a bit, not so much the median (unless a whole bunch of 520K + houses sell in the last week and very little below 488K

For everyone - I'm finding the volume of inane back and forth comments overwhelming - can we set a ground rule for a maximum of, say five comments per person per day? Some of us work and want to contribute, but can't keep up with the chatter. Thanks.

DavidL said...

@ CS
... And even public sector wages have been tightly controlled.The inflation we may experience during the next decade will not likely be out of control, but it will be deliberately engineered with a view to lowering real wages. That is the only way out of the current depression.

Over the past 10 years, public sector wages have increased by approximately 20%. During this time: food prices have risen by 25% (dairy) to 60% (bread), BC Hydro has increased by 64% (6.23¢/kWh to 10.19¢/kWh), gasoline has risen 93% (60¢/litre to $1.16/litre), and housing has increased by 115% ($280K to $603K). With many of these inflationary items not included in the Core CPI (Consumer Price Index), this real-world inflation appears to go unnoticed by most. I feel like a frog in a pot of water on the stove ...

CS said...

Re: frog in a pot

Interesting stats.

I think the trend of inflation exceeding income gains has to continue. In Canada, with its large resource sector, we have some protection from four billion Third Worlders working for a tenth or less of N. American wages (although at least one mining company is presently trying to import cheap Third World labor to Canada).

But for the US and Europe to regain competitiveness real wages have to fall. Wage cuts are strongly resisted. Inflation achieves the same end less obviously. And it defrauds creditors. That is why China is angry about the US Fed's plans for continued money printing. Not only will it devalue China's $trillion plus in US Treasuries, it will reduce China's competitive advantage due to cheap labor.

But if the US dollar is driven down by monetary measures, Canada will have to make a comparable adjustment or suffer severe unemployment.

What this suggests is that it will be increasingly difficult for Canadians to service mortgage debt, a consequence that will tend to depress RE prices -- quite apart from any affect of inflation on interest rates.

In general, and counter-intuitively, inflation and RE prices seem to be out of phase. When inflation is high, RE prices fall because of high interest rates. When inflation declines RE prices rise with falling interest rates.

Victoria said...

January will turn out to be the cowgirl that rode the bull for more than 8 seconds!

*grin*

Signed: Dancing Bear!

patriotz said...

When inflation declines RE prices rise with falling interest rates.

Except when they don't, like in the US from 2006 to today. Or in Japan for two decades.

Don't confuse the declining interest rates of the 1990's, which were the result of beating double digit inflation and deficit reduction, with the declining interest rates of the last decade which were the result of threatened deflation. It's the underlying cause of that decline that makes the difference.

Leo S said...

@info. I think we're done. Clearly the debate is going nowhere.

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