Sunday, February 3, 2013

Turning hindsight into foresight

Ever wish you had the ability to know what would happen in the future when making decisions today? Yah, me too. That's called foresight, and while some may appear to have it from time to time, I'd be willing to gamble that hindsight bites our a$$es more frequently than foresight rears its beautiful head in our lives.

The Victoria real estate market peaked in December 2010 with a SFH average selling price of just under $640,000.

In January 2013, the average selling price of a Victoria single family home was not quite $535,000.

For the record, that's a price drop of almost sixteen percent (16%).

Meaningless numbers I know* when it comes to actual individual home owner experience, regardless, the numbers are indicative of general market experience and can't have many folks (there's probably only a handful really) who took the home buying plunge for the first time in December 2010 feeling all that good--Hindsight, she's a bitch. At this market stage, all you can do is sit tight and hope you don't have to sell your place anytime soon.

Which leads me to another story.

Some friends of ours decided last summer to leave Victoria for greener, sunnier pastures. They'd owned their home for almost a decade, so plenty of equity. They listed their house in the slow summer months at a price they believed reflected fair market value. It sat for three months with nary a showing. They pulled the home off the market, rented it out, left town for their new home, and recently put the house back on the market "priced for a quick sale."

How much did they drop their asking price? you ask. Eleven per cent or 11% if you prefer. They're working with a licensed full service agent, and I'm willing to bet that the agent had a lot to do with how the price reduction played out.

How much did VREB's SFH monthly average selling price change from the first month of list to current? Ten per cent or 10% if you prefer.

What's the point HHV?

Remember when I said above the average SFH price reported by VREB is basically meaningless* in the big scheme of things? Turns out it's not really meaningless--at least in my hypothesis anyway. I'm willing to bet that that data had a big part in how the agent convinced his sellers to set their price: "You have to sell. You need to be at the market or just below. Here's what the market has done in the past 6 months. Here's the market price of your home today."

Seeing as how I'm a gambling man, I'd bet dollars to doughnuts that the majority of sellers in today's market use the December 2010 high, or something close to it, to price their home.

So if you're a buyer and you find a home you love and want that you think is priced like it would have been in December 2010, I believe you're perfectly justified in making a first offer 20% below asking. You can work your way up a bit, say 4% max, and then you'll be at fair market value if you buy my meaningless data hypothesis.

Here's an example: Nice home priced at $600,000. Offer $480,000. Don't pay a dollar more than $504,000. Use VREB's own data to support your offer.

If anybody goes out and does this, tell us about it. Please. I'll get the popcorn ready. Beer too if it leads to a successful purchase. 

196 comments:

a simple man said...

Leo - this is exactly my perspective. Not saying it would be popular, or accepted, but it is logical.

Victoria said...

Excellent hypothesis and buying tactic.

It also assumes one would want to purchase now. Which - 'one' wouldn't given the downward trends.

Nevertheless very clever.



koozdra said...

I'm confused. I thought no one ever had to sell.

subprime11 said...

20% below asking is a good place to start if sellers are still clinging to peak prices but I've been through the process of educating sellers on the real value of their property and those deals fell through for me only helping seller realize the true value of their place. Then they sell to the next guy for the same amount I offered. I'll just sit it out till April of May untill sellers adjust their expectations.

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

Leo - this is exactly my perspective. Not saying it would be popular, or accepted, but it is logical.

Hey I'm as surprised as you are, but that article was posted by HHV.

DavidL said...

I've tracked quite a few properties that were originally listed in 2011,taken off the market and then re listed (different MLS, different agent) in 2012. Those that sold often had 5 to 15 percent drops in asking prices - finally selling at 15 to 20 percent below original (first listing) asking price. Many haven't sold as well. Some new listings seem to be priced to sell, so I think that these sellers must be listening to their agents.

totoro victoria said...

You could try this. I think the wait and see and if there is a big drop approach might work out better. It is a good time to offer below asking if you aren't set on a timeframe - has been for a bit although a seller would have to be motivated to accept. Motivation might not occur until a more widely recognized dip has occurred.

a simple man said...

I think we should ask the times colonist to put the vreb SFH sales graph on their front page - that would educate the masses.

totoro victoria said...

If that happened it would be quite motivating.... be worth submitting it and writing a story on it if you are hoping to buy at a discount. Way more impact than the chatter here.

If I was planning on buying I would count it as very high ROI to write and submit this article. Probably get picked up nationally.

subprime11 said...

agreed that wait and see is best for buyers right now. sellers are hoping for a rebound like 2009 but that requires buyers to support at current listing prices. don't think this will materialize so likely by June we'll see price reductions and possibly spike in new listings. Hopefully a soft landing for all involved but still potential for a freefall. The media whitewash is comical but proof the masses can be manipulated to think/act a certain way. Maybe they can orchestrate a soft landing but I don't think so.

Leo S said...

As for going to higher than 16% under ask, might be worth a try but this happens extremely rarely. For the 251 SFHs under $550k sold since August, only 1 has sold at 16% or more under ask. For SFH $550-$900k there were none.

10% under ask might be a more achievable goal (14 of the last 515 SFH sales went for that or less)

Renter said...

@ subprime11

That was our experience as well. We'd make an offer lower than the seller wanted, they'd turn it down, and then a week or two later it would be sold to someone else for the same price. Happened to us 2 or 3 times. And at least once we saw the same house come up for sale 6 months later at less than they bought it for and we were all "ooh, looks like we dodged a bullet there, lol".

We stopped making offers some time in 2010 and just decided to ride it out in a better rental.

Marko said...

Very few sellers are going to accept 20% below asking price. Some will accept 20% off original asking price but never off current.

If the home is worth $480,000 and they start at $600,000 they will probably drop it and re-list it a few times. If they were thinking $480,000 to start they would have priced it at $499,900 to start not $600,000.

People come to me all the day and say, "My friends just bought a house 15% off asking price," what their friends ignore to tell them is that is 15% off original and only 3 or 4% off current.

Marko said...

10% under ask might be a more achievable goal (14 of the last 515 SFH sales went for that or less)

And I would guess that out of those 14 a number had some major inspection issues or properties weren't desirable to start.

Marko said...

Sellers always tell me, well let's price it xxx,xxx and if the buyer likes it they are free to make an offer.

Well if the buyer looks at three somewhat similar homes at 500k, 525k, and 550k in this market they will offer 450k on the 500k home first. Reason being there is a much bigger chance of the deal coming together than offering 450k on the 550k home.

Therefore, for sellers in this market it is crucial to price correctly. Only the best priced properties sell.

CS said...

Some will accept 20% off original asking price but never off current.

I am sure that is generally true. But if there is something quite unusual about a property, the market price has to be very much a matter of opinion, and in that case, all offers may be considered, e.g., Swanwick Ranch: ask $8 million (down from 22); offered and accepted $5 million, or off 37.5%.

But bearing in mind that tourism destinations such as Victoria show quite large seasonal price fluctuations, one might expect prices to firm up or at least stay flat during the next six months.

If they don't, then why not offer 30% off the peak price, on the supposition that we're half-way to something like a 40% drop and the buyer is willing to accept half the loss going forward.

subprime11 said...

sold my house and now renting and coming to realize home ownership is just another form of serfdom...landowners letting the peasants live on and work the land and pay tax for the privilage. Today we work for most of our lives paying the bank interest and the government taxes. Why do we do it?

Giash said...

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Giash said...

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Leo S said...

And I would guess that out of those 14 a number had some major inspection issues or properties weren't desirable to start.

For sure. The chance of 10% or more off of current asking on your dream home are essentially zero. The market convinces much better than any individual buyer.

totoro victoria said...

"Why do we do it?"

The woman who just picked up a gas fireplace we sold her owns her house outright. She has two suites somewhere in Langford and doesn't have to work at all because of this.

That and you have to work to pay for shelter whether you rent or own.

patriotz said...

The woman.. owns her house outright. She has two suites somewhere in Langford and doesn't have to work at all because of this.

"This" being she bought at a fraction of today's prices.

koozdra said...

I wonder what the person is thinking that bought one of these. I guess the benefit is that you don't have any neighbours. After the unit sold they dropped the prices on the other suites to "match" the market. No biters yet.

http://www.realtor.ca/propertyDetails.aspx?propertyId=12704739&PidKey=1033968376
http://www.realtor.ca/propertyDetails.aspx?propertyId=12704737&PidKey=-1287779754
http://www.realtor.ca/propertyDetails.aspx?propertyId=12704735&PidKey=1806343820

Watching and waiting said...

Koodzra -- good thing this seller's realtor has a job in the public sector to subsidize her real estate sales or lack of. I thought you could not work part time and practice real estate at the same time? Guess you can - any idea when this changed?

No_Problem said...

Just curious, how long have those condos been on the market?
Heritage conversions or infill type living is not my thing, but it must of cost that builder a fair shwack of doh to convert\build\market.

Thanks.

dasmo said...

350k for a basement suite? Good god! That space should just be storage for residence. I will be curious to know what that unit goes for in the end...

Victoria said...

Owning income producing property is a fantastic way to get ahead, especially if the property has plenty of equity in it.

Vastly better is to buy low, sell high and then wait to buy back in again when prices are down substantially.

This market suggests the benefit to the patient buyer (and well-timed seller) will be
hundreds of thousands of dollars.

Yes, there are a myriad of reasons people don't/won't do this.

But at the end of the day, isn't several hundred thousand dollars worth it?

It certainly is to me.












dasmo said...

Good luck on shorting the market... Has to be a significant drop to make money doing that.

Victoria said...

Timing any market is pretty tough, I agree. But real estate is the least tough of them all because of the long lead time offered - if one is paying attention.

The exact month to sell and or buy is impossible to predict.

But watching trends and acting - either by selling or buying - doesn't matter which - pays off.

koozdra said...

"But at the end of the day, isn't several hundred thousand dollars worth it?

It certainly is to me."

Good things come to those that wait.

dasmo said...

Waiting to buy right now is a prudent decision. Selling in the hopes of buying back in at a lower dollar and making a profit is an idiotic one.

Victoria said...

I think selling high/waiting/buying low is actually a gutsy and bold move.

My expectation is that it will pay off very, very well.

At the risk of boring us all to tears with a repeat of the 'renting is just fine while I wait to take advantage of the correction' mantra - that is exactly what I am doing.

About ten years ago I had a great business idea. I kept thinking I was going to go for it. But I procrastinated. In reality I was too scared.

While I was waiting someone else did it. True story. Every time I walk by their now established and successful business- I have to grin.

It's a good reminder to me. I wish them continued success and I am now a businessperson with years of experience myself.

Opportunities come and go. You have to act when you see them.

No guts. No glory.



dasmo said...

How long were you in on your mortgage? when did you sell and when are you hoping to buy back in.

First you will lose the 1-2% on property transfer tax when you buy again, 4% in realtor fees when you sold, the cost of renting, and the cost of restarting a mortgage that is front end loaded with interest...etc. You will need at least a 15% drop just to break even.

Marko said...

Waiting to buy right now is a prudent decision. Selling in the hopes of buying back in at a lower dollar and making a profit is an idiotic one.

+1

Commission on the sale, PTT on the purchase, legal fees x 2, cost to discharge existing mortgage, inspection on purchase, moving expenses, etc., etc.

Introvert said...

Commission on the sale, PTT on the purchase, legal fees x 2, cost to discharge existing mortgage, inspection on purchase, moving expenses, etc., etc.

On the bright side, spending all that money will stimulate the local economy!

cumberland harbourga said...

Marina Development

Excellent content - as you always provide and inspire me to come again and again.

koozdra said...

"Greater Victoria’s real estate market took a beating in January as sales tumbled 27 per cent compared to a year ago."

Even though the press release got corrected to 21 per cent.

http://www.timescolonist.com/business/firm-offers-help-as-market-moves-to-condo-sales-1.64954

koozdra said...

"Dinner is slowing down and that’s a reflection of total disposable income," Bourree said. "People just don’t have the money to be dining out quite as much."

The negative wealth effect begins to rear it's ugly head.

Victoria steak-house out, Burger King in, as fast-food dominates in troubled economy

DavidL said...

I put together another chart ...

Active Listings vs. Months of Inventory - Victoria Real Estate
https://docs.google.com/spreadsheet/ccc?key=0Aj_0HTYHq-YsdEtvZU9MUTNoVVk5R1l3Rm14MjJPNmc&usp=sharing

The seasonal fluctuation of active listings in 2012 pretty much followed the same pattern as in 2011. However, the months of inventory (MOI, calculated as the number of months to sell all the active listings at the current sales rate) are dramatically different than the previous year. The rapid climb in MOI started last July - not too surprising, since the capping of CHMC mortgages at 25 years came into effect on July 9, 2012:
http://www.cbc.ca/news/business/story/2012/06/21/flaherty-mortgage-cmhc.html

Dave said...

Selling in the hopes of buying back in at a lower dollar and making a profit is an idiotic one.

Our friends and family thought we were idiots when we sold. Now that the property we sold is already $100,000 less, and so far saved an additional $34,500 by renting -- not so much.

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

Congrats for buying back your property for 100k less than you sold it for!

Victoria said...

I was just downtown having dinner with my fiance. One other couple and a single man were the only other patrons the entire two hours we were there.

My business is B2B. Many of our customers are restaurants. As indicated earlier by other posters - some of the old stalwarts are gone and/or barely hanging on.

I don't intend to follow them.

The wait strategy is a cornerstone of wealth in this environment. Just do the math. It is dead simple. After deducting all expenses associated with selling/renting/repurchasing those who are 'out' of the market right now will likely be, depending on individual circumstances, many hundreds of thousands in the black.

Watching Portfolio gains from the invested equity is icing on the cake - but that's the best part anyway, non?






koozdra said...

"Let's buy ten more houses!"

RMR: New Cough Medication

koozdra said...

Growing divide between rich and poor?

Why don't these "poor" people go out and get higher paying jobs? They must be lazy or something.

http://www.cbc.ca/news/business/story/2013/02/01/business-canada-society-report-card.html?cmp=rss

Leo S said...

Why don't these "poor" people go out and get higher paying jobs? They must be lazy or something.

Well we were out walking the other day and came across a fellow putting up the letters for this sign. Sometimes it's hard to get another higher paying job.

dasmo said...

"However, Canada still maintains a great level of income mobility, ranking ‘A’. Compared to other countries, there isn’t a very strong relationship between a family’s economic background and how much their children can expect to earn." Good thing the opportunity exists. Or are you proposing that SFH ownership should be part of our social assistance program?

koozdra said...

They were just talking on the radio about a job fair held in downtown Victoria. 500 people lined up for 15 employers.

Where is happychucky to quote me the unemployment rate from 2011 saying everything is fine?

Watching and waiting said...

some humour this Monday a.m.:

Hitler finds out Peter Schiff was right:


https://www.youtube.com/watch?v=HdFVu-s_97E

koozdra said...

This is a good one also.

Real Estate Downfall

patriotz said...

Or are you proposing that SFH ownership should be part of our social assistance program?

It is part of our social assistance program, which is the problem.

patriotz said...

Compared to other countries, there isn’t a very strong relationship between a family’s economic background and how much their children can expect to earn.

In Canada, just 19 per cent of a family’s disadvantage is passed on, while that is 47 per cent in the U.S. and 50 per cent in the U.K.


In other words we look good compared to the two most class-ridden developed countries.

We don't look good compared to Canada in past generations, which the article point outs.

dasmo said...

The article doesn't say that at all...How do you get that from it? It is pointing out that the rich are getting richer.

Victoria said...

Hilarious W&W and Koozdra! Especially when he asks how his 401 K is doing.

'Sup with the majority of people leaving the room when he asks 'whoever warned of the housing bubble' to leave.

Because in my experience it's the exact opposite - the minority warn of the bubble, not the majority!

Thankfully - I have nothing in common with Hitler except an appreciation for beautiful Europe :-)

subprime11 said...

5 price reductions today in the Oak Bay area..high end is taking a beating. 1621 prospect place assessed at 2,085,000 just reduced to 1,695.000. 20% below assessed.

Marko said...

Monday, February 4, 2013 8:00am

MTD February
2013 2012
Net Unconditional Sales: 19 497
New Listings: 104 1,318
Active Listings: 3,786 3,977

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

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

I think we all need to remember what happened during the crash of 08-09 in Victoria. Prices fell dramatically in a very short period of time. Lower lowball offers, in comparison to now, worked during that time of dramatic price decline.

Once prices start falling faster again (it seems that has already started) the rules to the game will change. Lower and lower lowball offers will be the trend. Sellers who pull their listings to wait for better times will lose a lot of money as they will eventually sell for much less. We saw this in the US as their market crashed. There will be no massive intervention this time to turn the market around. Greedy sellers will not be rewarded for being greedy this time.

DavidL said...

@info
Sellers who pull their listings to wait for better times will lose a lot of money as they will eventually sell for much less.

Good point. The property at 2878 Glenwood was originally listed at $695K. It had been on and off the market a few times over more than a year. When viewing the property in December, the agent told me that earlier in the year the owner rejected an offer of > $625K as they were "holding out" for a better offer. It didn't work out so well for them - it finally sold for $575K (17% lower than original asking price).

Al + TOH said...

@HHV: "So if you're a buyer and you find a home you love and want that you think is priced like it would have been in December 2010, I believe you're perfectly justified in making a first offer 20% below asking. You can work your way up a bit, say 4% max, and then you'll be at fair market value if you buy my meaningless data hypothesis."

I think the suggestion is fair, IF the asking price IS at two years ago level.

But sounds like some people give lower offer today with thinking of market value two years in the future, which might (or might not) be another 16% off from today. It is a good protection for the buyer, but is it the real fair market value of today? Isn't current fair market value means to be fair for both buyer and seller at present time? And people who are afraid of further price drop in two years should just wait to buy in two years time and pay fair price at that time?

I would think that anyone who could get a house today at 20% off 2013 assessment value is a special case, not norm, and, best of luck

patriotz said...

Isn't current fair market value means to be fair for both buyer and seller at present time?

Fair simply means the buyer is not coercing the seller or vice versa (no Luca Brasi). If the seller accepts the highest offer which the public is willing to pay, that's that market price.

SJ said...

One of the criteria that may work when looking at purchasing with a lower offer today (if you really wanted to) is to find out when the seller bought their property. If it was in the last few years, I think it would be extremely difficult to ask them to sell to you, at say, 20% off their asking.

If, however, the owner had bought their property 15-20 years ago or more, they would have purchased at a much lower price and may be more willing to negotiate lower in order to achieve that sale today.

It would depend on each individual circumstance, but I think it is doable. You would probably find the property would need updating, but if you are up for that, go for it.

I think realtors these days wouldn’t be opposed to presenting a low offer – better a chance of a sale that not.

SJ said...

By the way, I don't mean buying a place that needs a huge renovation - that could end up costing too much. Just something that is in a good condition, but could do with a lick of paint and a creative overhaul - getting rid of old wallpaper etc!

totoro victoria said...

Realtors are legally obliged to present all offers.

a simple man said...

Totoro - I know a couple that in the last two months had their realtor refuse to put in their offer for a home in OB and the house was sold for less than what they were going to offer two weeks later.

He was a very high-profile Oak Bay realtor with Newport.

You are right that it shouldn't happen, but it does.

a simple man said...

Average consumer debt load hits new high above $27K.

http://www.cbc.ca/news/canada/story/2013/02/04/business-transunion-credit-debt.html

"Debt loads ticked higher in every province except B.C., where they shrank by 0.09 per cent. TransUnion notes, however, that while consumer debt loads in B.C. are shrinking, at $37,244 the province still has the highest average debt load in the country."

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

He may have had direction from the owners to refuse all offers below a certain value - quite likely.

Leo S said...

47% of people borrowing from their RRSPs don't (or can't) pay it back.

Stats like this continue to cast doubt on the claim by the mortgage industry that the people buying homes today are well qualified. If you can't find a spare $1700 a year after your mortgage and expenses, you probably shouldn't be buying.

a simple man said...

He was the buyers' agent, and it closed for less two weeks later - meaning it had been pending for likely a week before that.

fatjay said...

Waiting to buy right now is a prudent decision. Selling in the hopes of buying back in at a lower dollar and making a profit is an idiotic one.

That really depends on your situation. If you're planning to move anyways then it essentially puts you in the same camp as those waiting to buy, and it is a prudent decision.

And if, like a lot of young couples and families, you're in a condo, townhouse, or even a smaller house and looking to upgrade, then selling now and waiting to buy back in makes perfect sense.

Upgrade to the bigger place you want, but rent for now at a cheaper price than owning, try out a neighbourhood for a couple years before you buy, and then eventually buy your "forever home" at a reduced price.

The downside is trying to find a good rental. We ended up overpaying a little for ours, but the upside is that we still save compared to owning, and there's very little chance that we'll have to leave this rental until we want to.

koozdra said...

So it seems that the home buyers plan is responsible for locking Canadians money in a depreciating asset.

Further depreciation would wipe out their savings. Totoro, still convinced that there is no economic theory to show that savings of the middle class will be wiped when this whole thing unravels?

reasonfirst said...

Info from previous blog post: Can you find the months that greater Victoria peaked in terms of average price and median price?

Victoria SFD Average Peaked Dec/09 @ 711K

Victoria SFD Median Peaked Dec/09 @ 674K

(assuming no typos in my spreadsheet and going back to Jan/06)

Leo S said...

At the risk of repeating myself, the peak can't really be identified on a monthly basis in a market with as few sales as Victoria. SFD median has fluctuated by as much as $40,000 month to month so any comparison between two individual months needs to be modified with a +- 10-15%.

dasmo said...

"If you're planning to move anyways" Fine, that is part of life and as you said, will happen anyway.

"you're in a condo, townhouse, or even a smaller house and looking to upgrade" also part of life. If you are looking to upgrade or downsize, selling first right now is not a terrible idea, although it depends on where you are at with the mortgage / equity etc. Might be a better idea to take out your next down payment as an equity loan, and rent the place out when you buy up. You don't incur the costs of selling, Condo prices have already been hit large, More money is going to the principle on that mortgage since it is later on it's amortization, and you have five years to sell your principle residence tax free anyway. No need to move twice.

"Upgrade to the bigger place you want, but rent for now at a cheaper price than owning"..."The downside is trying to find a good rental. We ended up overpaying a little for ours..."

dasmo said...

Why do the peak by month, why not by the day? wouldn't that be even more accurate ;-)

koozdra said...

Why has Canada been building houses for so long above household formation?

Because of advice like this:
"Might be a better idea to take out your next down payment as an equity loan, and rent the place out when you buy up."

A glut of housing you might call it.

subprime11 said...

koodra: "So it seems that the home buyers plan is responsible for locking Canadians money in a depreciating asset.

Further depreciation would wipe out their savings. Totoro, still convinced that there is no economic theory to show that savings of the middle class will be wiped when this whole thing unravels?"

agreed koodra. our economic system it's a pyramid scheme...wealth always moves up..rich get richer...monetary policy is set by those at the top of the pyramid so asset bubbles are intentionally created. We run around chasing profit during a bubble and when it bursts life savings are lost and wealth moves up. Mice in a maze chasing the cheese, never asking why is there a maze and who made it and why do they keep moving my cheese. lol.

reasonfirst said...

CORRECTION:

Victoria SFD Average Peaked Jan/10 @ 711K

Victoria SFD Median Peaked Jan/10 @ 674K

I agree with monthly fluctuation in a small market comments but if you stand back and look at the numbers from a broader perspective, Jan/10 still stands out as the likely peak.

Introvert said...

Fraudulent and/or incompetent ratings agency, Standard & Poor's, to be prosecuted by U.S. government

Plus, found this gem by Paul Krugman on the topic of ratings agencies.

Excerpt:

More broadly, the rating agencies have never given us any reason to take their judgments about national solvency seriously. It’s true that defaulting nations were generally downgraded before the event. But in such cases the rating agencies were just following the markets, which had already turned on these problem debtors.

And in those rare cases where rating agencies have downgraded countries that, like America now, still had the confidence of investors, they have consistently been wrong. Consider, in particular, the case of Japan, which S.& P. downgraded back in 2002. Well, nine years later Japan is still able to borrow freely and cheaply. As of Friday, in fact, the interest rate on Japanese 10-year bonds was just 1 percent.

Introvert said...

I think this February's stats will be the canary in the coal mine, for sure.

koozdra said...

Oh Introvert, you'll never be convinced.

Introvert said...

We can all feel assured knowing that once a boom ends in a bust, booms never happen again--thanks to politicians who always learn from their mistakes and never repeat them.

History demonstrates that after markets correct, they stay corrected forever.

koozdra said...

"History demonstrates that after markets correct, they stay corrected forever."

Who is saying this?

reasonfirst said...

I'm starting to feel sorry for you introvert.

fatjay said...

Might be a better idea to take out your next down payment as an equity loan, and rent the place out when you buy up. You don't incur the costs of selling, Condo prices have already been hit large, More money is going to the principle on that mortgage since it is later on it's amortization, and you have five years to sell your principle residence tax free anyway. No need to move twice.

That doesn't make any sense. If it doesn't make sense to buy (you said yourself that it would be prudent to wait) then it doesn't make sense to hold for five years either. You will have to incur the expense to sell eventually and the rental returns on almost all residential properties are too low to justify their price.

Why in the world would you increase your exposure unless you were speculating that prices will rise?

Leo S said...

I agree with monthly fluctuation in a small market comments but if you stand back and look at the numbers from a broader perspective, Jan/10 still stands out as the likely peak.

I'd say May 2010, but it doesn't matter in the end. Q1/Q2 2010 in any case.

@fatjay If it doesn't make sense to buy (you said yourself that it would be prudent to wait) then it doesn't make sense to hold for five years either. You will have to incur the expense to sell eventually and the rental returns on almost all residential properties are too low to justify their price.

Depends if you want to sell in 5 years. Could hold it forever. Rental returns can make sense depending on the place or if you bought early enough and don't want to extract the equity to invest elsewhere.

Leo S said...

As for selling now to avoid a loss, well it's kind of late for that. To really avoid a loss you should have sold 1 or 2 years ago. Selling this spring will be challenging.

reasonfirst said...

Q1/Q2 2010 in any case.

Agreed

Alexandrahere said...

A Simple Man: If I wanted to make an offer on a home and the realtor refused to present it to the owner and a couple of weeks later the sellers took less than my intended offer, I would go knocking on their door personally. I think they have a right to know that this happened. If they didn't know....they most certainly should have some talks with their realtor. If he doesn't come up with something/reason for his actions, then I would go to the real estate company and threaten legal action. There could be reasons of course such as the completion date. Six months after my offer....maybe....two or three weeks....hmmm...I don't think so.

dasmo said...

"Why in the world would you increase your exposure unless you were speculating that prices will rise?"

As Leo says, it's too late for selling at peak. Why try to sell in this market? If you bought a while ago, your mortgage payments are starting to shift to be primarily principle payments. So, If it works out, renting it can be a better long term strategy since it can eventually provide income with equity.

Selling now, to rent, and buy later has guarantied costs. You will take a hit on price now, you will have the cost of selling, you will have the cost of moving and the cost of renting. You will also have risks. The risk of actually selling at bottom. The risk of not finding the place you want before you run into a competitive market again.

If you plan to rent your existing place when you buy your new place you will retain the benefits of your time in with the mortgage. You will not have to find a place to rent and overpay for, You will not lose your equity building momentum by renting. If prices drop super low then you can buy and get the benefit of that without having to run the big risks of selling your existing home to short the housing market.

koozdra said...

This should be interesting...


Canada-U.S. price differences report coming tomorrow

caveat emptor said...

The correct time to sell would have been early 2008 because according to info the market crashed in 2008-2009 and was only saved by "dramatic emergency government intervention" which "no-one could have predicted".

And I actually agree with info! Late 2008 seemed at the time like the start of a sustainable decline in home prices. Most on the blog at the time (myself included) were not expecting a quick rebound in prices.

So now almost five years later the prices have finally fallen enough to come out ahead after costs if you bought back in now. But of course now that prices seem to be falling for real you might as well wait a few more years so you can really make a substantial profit for the trouble of selling, buying and moving twice. If you believe Canada will mirror the US experience then perhaps the time to buy back in here will be 2015 or 2016

As an aside lets assume you had deployed the proceeds of your house sale into a reasonably conservative 60/40 equity/bond mix in early 2008. By early 2009 you would have been down about 25% and possibly feeling a bit nervous. Though as long as you held tight you would be back above breakeven now (thanks partly to a very strong bond performance).

I had almost the opposite experience. I cashed in large equity gains plus another house in 2007 and early 2008 to buy a house here in fall 2008. I didn't think buying then was a particularly wise financial decision (and I still don't). It's been a satisfying life decision though as we lucked into what must be one of the friendliest streets I have ever seen.

Since we paid mostly cash we won't be hurt by a price decline except in an opportunity cost - "could have done better things with the money" - sense.

info said...

"Why has Canada been building houses for so long above household formation?

Because of advice like this:
"Might be a better idea to take out your next down payment as an equity loan, and rent the place out when you buy up."

A glut of housing you might call it."

It is interesting to note that at the peak of the US bubble they were 29% overbuilt in terms of housing units. The same stat for Canada about 2 years ago was 41%. I doubt that number has decreased since then.

dasmo said...

I didn't suggest to rent and buy an empty lot and build a new house...

Introvert said...

Drove around downtown Victoria today. So many closing sales and boarded-up shops.

Just kidding.

patriotz said...

Why try to sell in this market?

Because prices are going to get a lot lower, of course.

dasmo said...

This is an example of oversupply and athe creation of a total mess
http://www.globalpropertyguide.com/Europe/Spain/Price-History
We are not even close to that debacle...

koozdra said...

"I didn't suggest to rent and buy an empty lot and build a new house..."

People owning multiple homes in general is a problem.

Explain why we have been out building household formation for years.

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

"At the risk of repeating myself, the peak can't really be identified on a monthly basis..."

Most regulars on this blog know that.

As the market was moving higher in Victoria, the VREB was more than happy to repeatedly use the monthly average to pump the market. Now that the monthly average is clearly moving down, the VREB no longer uses it as a indicator of market direction or strength.

Leo, you are also guilty of this. Over the past 6 months, sales have plummeted in Victoria. Over this time, the monthly average has been artificially inflated due to the fact that the number of low end sales has dramatically decreased as a result of the new mortgage rules. Combine this with the low volume of sales over the last 6 months and you get 6 months of inflated monthly average price data.

January suddenly showed a much lower average price and you were quick to point out that sales are low and that this number is not representative.

The average price in January is, more than likely, telling us that the temporary price boosting effect of the new mortage rules is wearing off. As I mentioned, when a big chunk of first-time buyers are suddenly taken out of the market, the average price will reflect that with inflated numbers. The average house in Victoria was selling for less and less over the last 6 months even though the average price didn't reflect that.

a simple man said...

@Alexandrahere - I was stunned they stayed with the realtor. That would have been my last conversation with him.

Sadly, they stayed with him and they have now bought another house, for more money. And it is going to take even more to reno.

At least I learned who to avoid.

a simple man said...

@Introvert - January was the canary. No need to speak about the future any more.

dasmo said...

"People owning multiple homes in general is a problem."

So only government should own rentals?

"Explain why we have been out building household formation for years." There is a difference between this and overbuilding. Again, reference this link for an example of overbuilding

Introvert said...

@Introvert - January was the canary. No need to speak about the future any more.

Too early to tell, but at least you seem to be on board with my contention that canaries can only be identified after the fact.

reasonfirst said...

There were over 200 canaries employed in UK mining - 2 per mine - until 1986.

Maybe we could agree that one canary is down in Victoria and one to go!

http://news.bbc.co.uk/onthisday/hi/dates/stories/december/30/newsid_2547000/2547587.stm

Leo S said...

Most regulars on this blog know that.

So it's ok for you to repeat yourself but not me?

Over the past 6 months, sales have plummeted in Victoria. Over this time, the monthly average has been artificially inflated due to the fact that the number of low end sales has dramatically decreased as a result of the new mortgage rules

Perhaps. However I'm not about to accept an assertion without evidence. Yes it is logical that the mortgage changes would disproportionately affect the lower end, but I still want to see the proof. We've heard variants of "the average is distorted by higher end sales" for years on this blog. Averages can be distorted, but only in the short term.

A quick look at my data gives:
August 1 2011 - January 31 2012
284 SFH sales under $550k
337 SFH sales $550k-$900k

So ~46% of SFH sales in the 6 months starting August 2011 were under $550k

August 1 2012 - January 31, 2013
251 SFH sales under $550k
263 SFH sales $550k-$900k

So ~48% of SFH sales in the 6 months starting August 2012 were under $550k.

So in fact there doesn't seem to be much difference, with the last 6 months even having a slightly higher percentage of low end sales than in 2011.
Of course this is a very rough measure. To do a proper analysis you need to take a look at the histogram but at first glance it doesn't seem like low end sales were disproportionately affected this year.

January suddenly showed a much lower average price and you were quick to point out that sales are low and that this number is not representative.

Because it isn't. One look at the variability in the data will make this obvious. Just like the median of $595,000 in Jan 2010 was also not representative.

Alexandrahere said...

To get a truer picture of average market prices I decided about 21 weeks or so ago to track SE sales in the areas of Mt. Doug, Gordon Head and Lambrick Park. The criteria is min 3 beds and 2 baths priced between $375K & $775K.

From the time I began tracking:

2012 AVG Price: $591K
2013 AVG Price: $562K

patriotz said...

Too early to tell, but at least you seem to be on board with my contention that canaries can only be identified after the fact.

That's pretty funny, since the actual canaries that the metaphor comes from were used to identify problems before the fact.

subprime11 said...

maybe we're the canaries in the cage...feeling a bit lightheaded...because the bubble already burst...croak...after the fact.

Marko said...

If, however, the owner had bought their property 15-20 years ago or more, they would have purchased at a much lower price and may be more willing to negotiate lower in order to achieve that sale today.

I have never seen this theory play out in real life. Some of my most overpriced properties have been those that were purchased 10 or more years ago.

I've never had a seller say, "Well, we paid $250,000 for it 12 years ago so we'll be more than happy with $500,000 even thought the market supports $550,000." All sellers want top dollar whether they bought 12 years ago or 12 months ago.

Also most sellers are buying something on the other end so how much they walk away with is important.

I guess you see some deals on estate sales but almost all need extensive renovations. Rarely do you see a mint renovated home as an estate sale.

Marko said...

Realtors are legally obliged to present all offers.

I present everything including lowballs - after all that is my job. Sometimes buyers need to be rejected 2 or 3 times to learn personally that an offer of 400k on a 500k home won't fly despite what their friends tell them. Leo S gave us the cold hard stats, 10% under current asking is very rare and not on desriable properties.

I work with buyers all the time where I know the first few low ball offers are just part of the process for that particular buyer. I had buyers last year get extremely upset that their low 800s offer on a 899k newly listed home was not only rejected but the sellers did not even counter. It sold two days later close to asking. Slowly they got a bit more realistic with subsequent offers as properties sold at prices quite a bit above their offers.

Reality is the market is not crashing and people are not giving homes away at this point.

Marko said...

And if, like a lot of young couples and families, you're in a condo, townhouse, or even a smaller house and looking to upgrade, then selling now and waiting to buy back in makes perfect sense.

It all depends on the situation. An opportunity came up for me a weeks ago to house sit one of my client's homes for free for 6-8 months. My girlfriend and I are moving out of our condo March 1st. I thought about selling it but after commission I would be between 5k and 15k profit.

We put it up on craiglist fully furnished and had 10 showings in 4 days and 3 interested parties. Rented it just shy of $1,200 on a one year lease. Once we are done house sitting we will rent for a few months while our condo at the Bayview Promontory is finished.

The mortgage is cheap, why would I sell at $300+/month cash flow positive (after mortgage, strata fees, tax, and insurance). That doesn't even factor in principal repayment.

My realtor friend who also owns on the same floor ended up renting his unfurnished for $1,200 on a year lease two days after me. Previously he had a tenant for $1,100 and she was awesome, it still looked like new after 14 months. He was also going to list his unit but given the poor real estate market and strong rental demand decided to rent it out yet again.

The world is not quite ending, yet. I was surprised how many people on government contracts were looking at my unit. The full furnished component really appealed to them.

Marko said...

1020 Ridgeway Pl...my mere posting, 16 showings in 4 days.

I still think there are a few buyers out there :)

Animal Spirit said...

To answer the question about why the buyer's realtor wouldn't put the bid in, there is a good chance that the buyer's agent commission was discounted and that the buyer's agent wanted to get more from his clients. Less money with probably keen clients therefore a bias to a full commission house.

Malory "Innocent Meat" Knox said...

With the current Census Results, I do not think that the prices are sustainable at the current level. It is hard to predict future, but I think with the growing household debt, generations after the baby boomers will have their lives financially tougher, which will lead to lower housing prices. Selling right now in Vancouver is a good idea and I would strongly recommend for the sellers to drop their prices as you suggest (e.c. 16 %).

patriotz said...

Also most sellers are buying something on the other end

Which is why sellers pulling their listings off the market does not add support to prices. One less seller, but also one less buyer.

Marko said...

but I think with the growing household debt, generations after the baby boomers will have their lives financially tougher, which will lead to lower housing prices.

I agree with you that post baby boomer generations will have it much tougher; however, I don't think it will lead to lower housing prices. It will lead to a greater divide of those who can afford and those who cannot.

If prices dropped 50% not sure how it would be tougher for the current generation at these interest rates.

Chris said...

Marko said
“The mortgage is cheap, why would I sell at $300+/month cash flow positive (after mortgage, strata fees, tax, and insurance).”

One reason you would sell is prices are falling at over $2,000 per month.

I was once convinced that my rental property was +$500 per month, until I couldn’t understand why the account wasn‘t gaining. Let me tell you, there are alot more costs to consider than “mortgage, strata fees, tax, and insurance.”

Chris said...

Marko said
“I agree with you that post baby boomer generations will have it much tougher; however, I don't think it will lead to lower housing prices.”

The sheer size of the retiring Zoomers is what will lead to lower house prices. Loads of supply about to hit the market and lack of new demand as that picture clearly shows^^.
First they divest their vacation & investment property, then their personal homes. They will either downsize or rent to save money so they can travel, et cetera.

Jack and Cate said...

Marko said... 1020 Ridgeway Pl...my mere posting, 16 showings in 4 days.

I still think there are a few buyers out there :)
_____________________

Nothing to do on a rainy day but look at houses - still over assessed value and how many re-lists?

Lot's of tire kickers I would say.

Leo S said...

I still don't see any uptick in sales. Where's the spring market?

a simple man said...

Best Buy Uptown had a lot of showings, too. Problem was people were not buying as product was cheaper elsewhere.

dasmo said...

"They will either downsize or rent to save money" sounds like a good idea to hang on to that cash flow posative condo you are renting. Especially since the rate of divorce is going up so those empty nesters are going to need two rentals...

fatjay said...

The mortgage is cheap, why would I sell at $300+/month cash flow positive (after mortgage, strata fees, tax, and insurance)

That really depends how much you could sell for. Could the equity generate a comparable or greater amount with lower risk? I don't know the answer in your particular situation, but in the case of most homes, the answer is yes.

Just Jack said...

Interesting court ordered sale along Jasmine in Saanich. The home needed work, but it did have a basement suite. At one time this property was assessed at $482,000. Potential income for the property likely $26,500 per year.

It took over 300 days to sell. Final price $360,000 or roughly a gross rent multiplier (GRM) of 13.5

It isn't the price that's so interesting about this property. It's that this home would have been snatched up quickly in the past by those looking to "flip" a property.

This seems to be in contrast to what Marko is saying. But not when you realise that the marketplace has shrunk back to the heart of the inner city core. The market outside of that core is shallow and dysfunctional.

And that includes Oak Bay too. Now with over a year of inventory for sale. Asking prices in this hood are lagging behind other areas and are not reflective of current economics. Hence lots of listing and few sales.

Oak Bay is like the corner store that refuses to lower its prices. Eventually, buyers just go else where to shop.

fatjay said...

Could hold it forever. Rental returns can make sense depending on the place or if you bought early enough and don't want to extract the equity to invest elsewhere.

But would the rental returns make sense compared to the current value?

If you "don't want to extract the equity to invest elsewhere" that's one of the intangibles that may play into your decision to sell, but it still doesn't factor into the financial comparison of holding vs. selling.

dasmo said...

"Could the equity generate a comparable or greater amount with lower risk" not in the long run which at Marko's age he has got a long run. Say Marko could make 100k cash on his sale. At $300 cash flow positive/month that's a 3.6% yield. Not bad for now. At some point the mortgage will be paid off and rent will be higher so the yield will probably increase at that point to 25%. Real Estate is not so much about timing the market as it is time in the market....

Introvert said...

By the way, excellent grammar in your last post, JJ.

a simple man said...

And that includes Oak Bay too. Now with over a year of inventory for sale. Asking prices in this hood are lagging behind other areas and are not reflective of current economics. Hence lots of listing and few sales.

For example the new listing on Oakdowne. Asking price $829K with assessment at $693K. Some one ought to tell them that the rules have changed. Ask $693K.

Introvert said...

Oak Bay may not always have been the preeminent place to live for Victoria's affluent, but it is now and likely will be for the foreseeable future.

I think Oak Bay can sustain very low sales numbers for a very long time (relatively speaking) without a significant impact on prices.

vawr said...

@introvert

"By the way, excellent grammar in your last post, JJ"

Nobody cares but you.

a simple man said...

I think the very affluent live in the Uplands or in North Saanich, not really Oak Bay (I know the Uplands is in Oak Bay, but it is a very distinct pocket not representative of th erest of OB).

Introvert said...

Nobody cares but you.

Probably true!

koozdra said...

"Oak Bay may not always have been the preeminent place to live for Victoria's affluent, but it is now and likely will be for the foreseeable future."

Very wishful thinking.

a simple man said...

My wife had two separate acquaintances here in OB just this week confide in her about how financially hard it is right now being a home owner. "Month-to-month" was mentioned both times.

Is this the affluence you speak of?

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

The "very affluent" also live in various neighbourhoods of Saanich, including: Ten Mile Point, Queenswood, Arbutus, Ferndale, Broadmead and parts of Cordova Bay ... all having ocean views ...

Introvert said...

The "very affluent" also live in various neighbourhoods of Saanich, including: Ten Mile Point, Queenswood, Arbutus, Ferndale, Broadmead and parts of Cordova Bay ... all having ocean views ...

Yes! And my point applies to them, too.

koozdra said...

The number of affluent people seems to have increased proportionally to home prices.

When prices correct will the correlation hold?

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

My wife had two separate acquaintances here in OB just this week confide in her about how financially hard it is right now being a home owner. "Month-to-month" was mentioned both times.

Is this the affluence you speak of?


Where did I say that every owner in Oak Bay is "affluent" or "very affluent"?


I think the very affluent live in the Uplands or in North Saanich, not really Oak Bay (I know the Uplands is in Oak Bay, but it is a very distinct pocket not representative of the rest of OB).

The "very affluent" may have little interest in South Oak Bay, but the "affluent" still do, among a few other notable areas, as DavidL reminds us.

I know of two, I would say, "affluent" couples who, when they retired from the oil patch, just "had to move to Oak Bay" (South Oak Bay, to be specific).

I do not know why it had to be South Oak Bay, but it did. It's actually kind of funny.

a simple man said...

One thing that I do agree with you on, Introvert, is the oft strange fascination with South Oak Bay in some people - they will not consider crossing the Oak Bay Ave line. It is the tightest part of the tweed curtain.

DavidL said...

If I were among the "very affluent", I'd be checking out this place:
1524 Shasta Place, which is technically in Victoria. No I just need to win the lottery ...

info said...

"A quick look at my data gives:
August 1 2011 - January 31 2012
284 SFH sales under $550k
337 SFH sales $550k-$900k"

Condos and townhouses would need to be included as well. This is where the effect of the mortgage rules would be the most noticeable.

The data should include SFHs, townhouses and condos for Greater Victoria.


CS said...

Re Shasta Place, if I am not mistaken, that went for just over a million not more than five of six years ago. Hardly seems worth a lot more now.

Itz assessed at 1.758 million, versus asking of 2.698, i.e., 53% above the assessment.

Evidently green shoots are in view, at least in the view of vendors. But will buyers view things the same way.

Itz, by the way is my proposed homograph for the homonyms its, it's and 'its (the last as in estuary English, 'e 'its 'is 'ead). I trust Introvert finds this acceptable.

CS said...

Re: Shasta Place.

This sold, if I am not mistaken, for just over a million five or six years ago. It doesn't seem worth a lot more now.

At at $2.698 million itz listed 53% above BC assessment authorities valuation.

Evidently green shoots are in view. At least in view of vendors. Whether buyers will view things the same way remains to be seen, although, as Leo notes, not many buyers are presently at view at all.

Itz, incidentally, is my proposed homonym for the words its, it's and 'its (the last as in estuary English, 'e 'its 'is 'ead).

I trust that Introvert finds this innovation acceptable.

DavidL said...

@CS
Re: 1524 Shasta Place
Agreed, itz not worth the money ... itz just that it would be fun place to chill after a long cruise on the yacht. I don't expect that itz going to sell anytime soon ...

info said...

"A quick look at my data gives:
August 1 2011 - January 31 2012
284 SFH sales under $550k
337 SFH sales $550k-$900k"

Considering only SFHs, this data proves nothing. The average could still be skewed higher by the new mortgage rules despite what you have presented here. Is this data for Greater Victoria?

I would have to see the entire set of sales data to be able to agree with your conclusion.

The most logical conclusion is that the new mortgage rules skewed the average price higher over the last 4-6 months.

CS said...

Oops, don't understand how the double post occurred. The witticism was that great the first time. The second time it seems weaker.

koozdra said...

Perhaps we can start using the Spivak pronoun also.

Introvert said...

It warms my heart to see the topic of grammar elevated to relative prominence on this fine little blog.

Leo S said...

Considering only SFHs, this data proves nothing.

The burden of proof rests on the person making the claim. I only have the data that I'm interested in. Someone with an insider connection would have to do this analysis.

The most logical conclusion is that the new mortgage rules skewed the average price higher over the last 4-6 months.

Logical yes, but there are so many factors at play that it is tough to capture by simple cause and effect logic.

Mayfair Man said...

Shasta had major Reno’s done and I have a feeling there may not be much equity in the place unless they sell it for what they are asking.

The latest blog post from Ben.
http://theeconomicanalyst.com/content/real-estate-sales-vancouver-victoria-crumble-january-rot-worse-headlines-indicate

caveat emptor said...

re 1524 Shasta Place

I'm thinking annual maintenance on that grand place would buy you a house in some Canadian cities.

I hope there's a nice patio where you can sip your drink and watch your minions scurry around.

patriotz said...

I don't think it will lead to lower housing prices. It will lead to a greater divide of those who can afford and those who cannot.

You're essentially saying that someone is going to buy all those houses at today's prices (that the younger generation can't afford) and rent them out at a loss.

Why would anyone do that?

What's going to happen - just as in the US - is that prices are going to fall until they are attractive to investors.

Just Jack said...

Oak Bay may have been the only significant location for the more affluent 50 or 25 years ago. However itz significance has waned over the years. Last year there were 26 properties that sold over $2,000,000 in Greater Victoria. Only eight were in Oak Bay. Strong evidence that the best days of Oak Bay are behind her.

I think this Oak Bay bias is ingrained in some long term Victoria residents. A kinda sentimental longing for the past, like Buddy Holly songs and A & W drive-in restaurants. However, today's data does not support their contention. And like Buddy Holly, the good old days ain't comming back.

The pot holes are left longer before they are filled, the trees are rarely trimmed and the need for secondary suites have choked the roads with excess vehicles.

The best days of Oak Bay are gone. She's just an old broad who relies on too much makeup to cover her fading beauty. The decrepit stench of Estee Lauder wafting through her brambled lanes. As she peeks from her darkened windows awaiting the muscular city workers to fill the many craters that have sunken into her pock marked streets. But few come to her street anymore, as the bloom has fallen from her cheeks. For many years now, she has been left untouched and unloved to survive on her meager grammar school teacher's pension. Reliving her youth in so many tattered black and white photos. And like the Canadian penny she's to become a thing of the past. Simply a chunk of tarnished copper laying at the bottom of a forgotten bowl.

Then there's Langford - she's just a slut.

DavidL said...

Wow, JJ - such purple prose. Highly entertaining, though!

Anyone remember the old A&W drive-in on Oak Bay Avenue?

Leo S said...

Very interesting. Price/assessment for SFHs under $550k drops below 90% for the first time since I started tracking. 95% for SFHs $550-$900k.

Even more surprising is that it hasn't rebounded in late january, early feb like other years. It is just continuing to bounce along at very depressed levels and even decreasing.

koozdra said...

It's just the perfect storm. CMHC hitting the debt limit and coming under the control of OSFI. Amortizations being reduced back to 25 years and all the other associated changes. Just as the bubble begins to pop from being severely over inflated.


We have heard some rumblings/complaints from housing related industries. Get ready for a lot more.

No_Problem said...

Yeah, The FED is gonna accommodate housing related industries, cuz if they don,t they're F#@ed.

koozdra said...

"The FED is gonna accommodate housing related industries"

They'll try. But without access to credit the whole system grinds to a halt.

No_Problem said...

They will relax credit conditions.

koozdra said...

"They will relax credit conditions."

Why did they constrict them in the first place?

No_Problem said...

Cuz they F#@ked up...They know this.

koozdra said...

"Cuz they F#@ked up...They know this."

Did they "F#@k up" the last three times they constricted credit also?

Which one of the changes do you feel was not a prudent move?

No_Problem said...

-40 yr...no dice.
-35 yr...gonna happen(CMHC).
-30 yr...for sure gonna happen(CMHC).

koozdra said...

CMHC is at their debt limit. The government appetite for spending these days is not very high. They want to balance the budget to fulfil their election promise. Adding more debt by way of the CMHC is not in the cards.

a simple man said...

@ No_problem - those changes were largely what caused the problem. They won't reverse gears any time soon. But sometimes the stupidity of those in charge surprise me. If they did it would be a huge mistake.

It is time for those who have lived on a credit orgy for the past 8 years to pay the piper.

No_Problem said...

Why do you think they are still building? New Condo builds everywhere I look. New SFH by the block in Westshore. Sooke is exploding with new SFH builds.

Lenders know the market...market looks fine...lets lend to the builders!

They're gonna relax conditions.
Rates will be in the basement for some time.

Leo S said...

I wouldn't be surprised to see some sort of stopgap measure if the country melts down, but I doubt they would reverse their previous restrictions. Looks bad. Probably just introduce some sort of home buyers credit.
The US tried this, it didn't work. All it does is extend the decline.

No_Problem said...

"I wouldn't be surprised to see some sort of stopgap measure if the country melts down, but I doubt they would reverse their previous restrictions. Looks bad."

How much did those "Fast Ferries" cost to build again? what did we sell them for?

They Don't Care if they look bad!

a simple man said...

Why do you think they are still building? New Condo builds everywhere I look. New SFH by the block in Westshore. Sooke is exploding with new SFH builds.

Are you being serious? The condo market is in serious trouble here and the Westshore and Sooke are hemorrhaging.

SFH starts are way, way down.

No_Problem said...

"SFH starts are way, way down"

And its about time...past 12 yrs been run ragged.
Glad to see SFH starts back to normal levels!

koozdra said...

"past 12 yrs been run ragged"

Are you saying that there is too much inventory?

No_Problem said...

No, Just took advantage of the past 12 yrs...its nice when its calm.

Inventory will be rented.
No brainer!

totoro victoria said...

Old broads rule.

Leo S said...

Why do you think they are still building? New Condo builds everywhere I look.

You'd be surprised at how little analysis gets done. It appears we might have some overbuilding in the condo market given the terrible market. Not sure why you think this is a good thing.

koozdra said...

"Inventory will be rented.
No brainer! "

Go on Craigslist and take a look at the amount of vacancies available. People are dropping their rental prices and still having trouble finding renters. "No brainer" is an apt description of some the of the builders out there. The party is all fine and good until the music stops and you realize that all the chairs are taken.

No_Problem said...

Perpetual Growth...
70% Home Ownership...
They need More Feed!

-FTHB get relaxed term of 30yr(CMHC).
-FTHB get relaxed term of 35yr(CMHC).

Different applications for different qualified applicants will result in extended mort terms and basement rates.

You think they're just gonna pull the plug?
No...they're gonna pump it!
Why? No other choice!

koozdra said...

Did you hear what happened to the housing market in the states a couple years back?

No_Problem said...

Different Country with WAY Different policies(ARM).

koozdra said...

"Different Country with WAY Different policies(ARM)."

Different causes, same effect. Houses prices balloon during the boom. Then collapse during the bust. Or do you support the soft landing theory that's so popular these days?

DavidL said...

@No_Problem

The public sentiment has turned against real estate. Unlike a few years ago, very few people still think of real estate as an investment that keeps on appreciating. Even if the feds try to tweak policy to stop market contraction, they cannot change the perception of an increasingly wary populace. This concern is now reflected in most main stream media. Some people now consider their house/condo just somewhere to live - rather than their whole economic future.

No_Problem said...

People HERE actually have to be QUALIFIED to take out a 25 yr MORTGAGE based off income, age, and assets.

If you ain't qualified...You ain't get'n that Mc Mansion!

koozdra said...

"People HERE actually have to be QUALIFIED to take out a 25 yr MORTGAGE based off income, age, and assets.

If you ain't qualified...You ain't get'n that Mc Mansion!"

Oh, I didn't know this. Everybody I renounce my bearish view point and am now switching to the bull (you know what I mean) camp.

No_Problem said...

They will offer irresistible policy to stop market contraction.

They ain't gonna sink this ship.

koozdra said...

Introvert must be hemorrhaging by now.

DavidL said...

@No_Problem
They will offer irresistible policy to stop market contraction

Your optimism is great, but hope won't keep the market afloat. The past ten years has show that real estate is often an emotional investment and the rules of logic need not apply. With help from his parents, my neighbour purchased his house in March 2010, before he was "shut out forever". His house has lost 12% from the purchase price to the most recent assessment.

What kind of "irresistible policy" would help him (and the 1000's of Victorians in the same ship)?

Leo S said...

Introvert must be hemorrhaging by now.

It's amazing how tolerant of bad grammar he becomes when it's not a bearish viewpoint.

Leo S said...

We're doing well in comparison. 44 months of inventory in the south okanagan

nan said...

@ No_problem

I guess I could speculate all day about your personal situation, but I bet you are involved in RE in some capacity!

Remember, interest rates are going up. The govt is beholden to voters, who are mostly older and moving into their retirements, with little desire to vote for a govt that makes them feel uneasy about their income in retirement.

In addition' as mentioned, the cmhc is probably on its way out, influence wise.

Banks won't lend beyond25/25 without the gift backing the loans.

Higher interest rates + lower amorts and higher dp's = the perfect storm for declining re prices.

Its happening right now!

Music Man said...

the people screaming"Real Estate is falling" are the same people who can't afford to buy...truth is Real Estate should not be looked at as an investment..it's a place to live.LONG TERM..you will never get ahead RENTING...truth is! I could rent my place for more than my mortgage payment....give me a break....renting is better LOL....there will always be stupid opportunists...had I waited to buy 5 years ago...I wouldnt have the $50 K in equity I have now...the longer you wait.. the more you lose...this is Victoria...not India.

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