Saturday, March 2, 2013

Projections

Subtitle:  Towards a better different sales projection algorithm

A couple weeks ago there was some talk about sales projections, and whether it was better to project monthly sales based on business days or days of the month.   I've used business days before just because I've seen it used elsewhere, but DavidL made the point that sales will happen on any day, and it really doesn't matter whether they get entered on Sunday or Monday (unless the month ends on a weekend).

However both methods have a fundamental shortcoming which is that they assume a constant market. Both methods project the sales rate of the month to date out to the full month, which only works when the sales rate is more or less constant and there is no such thing as seasonality.  This leads to chronic underestimation of sales when the market is heating up in the spring, and overestimation when it is cooling down in the fall.  The projections for last month illustrate this quite well:

Feb 2013 Feb 2012
Wk 1 Wk 2 Wk 3 Wk 4
Uncond. Sales
19
121
209
322
497
New Listings
104
405
632
889
1318
Active Listings
3786
3886
3964
4031
3977
Sales to New Listings
18%
30%
33%
36%
38%
Sales Projection
--
338
344
376
Months of Inventory
8.0

The final sales for Feb 2013 came to 394.  We can see that halfway through the month our simple linear projection was still off by 50 sales, or 12.6%.   An attempt to make a prediction at the start of the month would have been even worse.  Hence the need for a new model that tries to take into account the rate of change in the sales rate for the current month to improve the projection.

First we have to estimate how the sales rate will change from the previous month to the current one.  To do this, I look at data from the previous year.  For example, in Jan 2012 we had 372 sales, for a sales rate of 12 sales/day, while Feb 2012 yielded 497 or 17.1 per day.  Assuming that this year will behave similarly to last year, we can use a linear approximation to estimate the sales rate on a given day.


Where y is our expected sales rate on day x, a is the slope calculated from last year's data (0.17 in this case), and b is the sales rate from Jan 2013.  Now that we have an equation for how the sales rate is expected to behave, all we have to do to calculate the projected sales is integrate over the month of February.  In case anyone is interested, here's the VBA code.

Using this method, the prediction for this month would have been 407 sales, or only 3% off the actual number.

Of course the key assumption is that the market will behave similarly to last year's.  This happens to have worked out well for February 2013, but can work out quite spectacularly badly during times when the market is shifting.  Let's have a look at the accuracy of the predictions using this method over the last few years.


The model does well when the market is stable year over year, and extremely poorly when the market is unstable, or was unstable in the previous year (fall 2008 being the obvious example).   The market has been relatively stable (read: boring) for a while now, and I expect that will continue.  To improve the model, one could add another component of the current market conditions, such as the mid-month numbers.

So, how many sales can we expect this month?  Computer says 474.

207 comments:

1 – 200 of 207   Newer›   Newest»
Introvert said...

This blog is getting ever geekier.

DavidL said...

Very interesting approach, Leo. As a software developer, I have spent a lot a time with data modelling and think that the formula might be improved by adding a trend component (rate of change, up or down) based on the current three month rolling median price as compared to previous years. Thoughts?

DavidL said...

@Introvert

Yup, no argument there. Maybe this is what makes Victoria different! ;-)

patriotz said...

Ownership costs definitely increased significantly since 1995, as shown by the RBC affordability report. So unless rents massively decreased relative to income, or there was a huge increase in people with no mortgage whatsoever, I'm gonna say the OECD stats aren't accurate.

Leo, you are confusing the cost of buying at current prices with the total expenditures of all owners and renters, I point I made to Marko in the last thread.

We all know how much interest rates have declined since 1995. This decreases expenditures greatly for those who bought more than 5 years ago, who comprise the great majority of homeowners.

Real rents have also declined in many markets including Vancouver.

Back on topic, thanks for the latest graph and analysis.

SJ said...

I know this post is about Projections, but I was just looking at the VREB historical numbers.

Looking at the February totals since 2006, it is interesting to note that February 2013 had even less sales than February 2009 (during the five month slump after the financial crash).

2013 394 *
2012 497
2011 488
2010 621
2009 403 *
2008 619
2007 707
2006 658

2007 was a really good month – I wonder how VREB reported that one – must have been lots of “Sales Surge!” in their headline.

jesse said...

The best way to think of sales per working day as opposed to calendar day is that buyers don't care whether they buy on Feb 28th or March 1st. Because of so-called "framing" effects it's better to use working days that partially compensates for weekends falling on month boundaries. I found it a better gauge of the market, most notably in Vancouver in October/November, where if one used total sales it would have looked like there was a surge in October when the reality is it was a giant nothingburger in historical context.

Good analysis, though. When I predict sales levels for Vancouver I simply look at the average month-over-month change of sales per working day and extrapolate. Obviously since averages are used it won't well capture outliers like the GFC, however it worked disturbingly well predicting sales through the back half of 2012.

On that note, though, my estimate for February was about 100 too high this year based on that simple method. That puts me on watch for potential increasing weakness this year, and it's not just the "technical analysis" of sales that is making me sit up straight: credit growth, population growth, and housing completions are all going to be headwinds for 2013 compared to 2012.

Leo S said...

@DavidL
I don't really see a relationship between recent price movement and sales. What do you anticipate it is?

You might be interested in Jesse's predictor though using MOI

jesse said...

The data are in this spreadsheet if you want to grab the numbers and the formulas I use.

My next improvement is converting the predictor to use logarithmic base, right now it's linear.

Leo S said...

We all know how much interest rates have declined since 1995. This decreases expenditures greatly for those who bought more than 5 years ago, who comprise the great majority of homeowners.

If they stayed in their houses and didn't upgrade. I read once that the average time between moves was something like 7 years. So in the 17 years since 1995 you'd expect the majority of existing owners to have bought a different house and hence been exposed to higher prices. However I see how it could go either way.

Leo S said...

Thanks jesse.
The problem with Victoria is there's just not enough data for these kinds of kinds of tools to be particularly meaningful. The Teranet might be a better target for predictions, although I am struggling to explain the disparity in the price measures to the Teranet index right now.

Leo S said...

Very impressed at the accuracy you're getting on that predictor, especially recently.

Just Jack said...

I keep it simple when I need a quick approximation for the month totals. I back date my information by a week.

Not having the information for the last week in February, I would add in the last week of January.

Months are arbitrary as well. For median trends, I have used blocks of 500, 400, 300 or even 200 sales. Showing how the last 200 sales of condominiums in Victoria compares to the previous 200 sales.

Just Jack said...

I have also heard that the average was 7 years between moves. When the market was hot, hot, hot I looked at the turnover rate for homes and found it was three years. When the market went cold, I found that the homes that were selling had been bought over a dozen years before.

Perhaps, the seven year turn over rate is only for a "normal" market.

Marko said...

I've used business days before just because I've seen it used elsewhere, but DavidL made the point that sales will happen on any day, and it really doesn't matter whether they get entered on Sunday or Monday (unless the month ends on a weekend).

Sales don't really happen on the weekend.

February 22nd (Friday): 32 Sales
February 23rd: 4 Sales
February 24th: 2 Sales
February 25th (Monday): 19 Sales

Most offers are made conditional to financing, inspection, insurance, lawyer review, etc., and buyers typically make them conditional on a business day for these reasons.

koozdra said...

"With first-time buyers having more difficulty getting in, it has slowed condo sales, meaning condo sellers have had more trouble using their equity to move on to a single-detached home."

What is wrong with these people? How many times do we have to say it? Victoria doesn't need first time buyers. People here have wealth and have paid off their homes. Nothing will happen here.

"However, if a house is priced properly, within the market-value range, it will likely sell more quickly."

Stop saying this. This implies that you have to lower your price to sell. I repeat DO NOT LOWER YOUR PRICE. You are hurting everyone. Remember nobody has to sell. You bought your home for a reason so now live in it. Who cares if the value is going to sink by 50%. Be a good trooper and continue paying that huge mortgage.

Real-estate slump could clip forecasts

koozdra said...

Leo

Interesting approach. Love the code and calculus!

koozdra said...

Courting the Asian vote? The shocking news to me is that this is shocking news.

Premier Christy Clark's Chinese New Year Message

Victoria said...

I've seen two home purchasers up close this past month.

The first one was a divorce where the buyer received his monies after a protracted battle. He bought a prestigious home, in a well known area. It is not a move-up but rather a lateral move. He feel he got a fantastic deal as the purchase price was considerably less than it would have been a year ago. In that respect he is right. Of course, it may look like a dog of a deal after another year passes. We shall see.

The second purchase was a townhouse in a 'blah' area. It was a stupid move by a notoriously bad with money purchaser. Another lateral move, this time at a much lower price point than the first. They are already looking to sell - seriously. Maybe 2 months after purchase. Change in personal circumstances with a possible move to the States in mind.

Anecdotes, nothing more, nothing less. Just interesting to me who some of the recent purchasers are.

Leo S said...

Sales don't really happen on the weekend.

Sure, the conditions on a sale are removed on a weekday, but that's just an artifact of the process. The actual sale happens on any day when the buyer and the seller agree on the price. So the weekend sales are just spread to weekdays.

However given framing effects as Jesse mentioned it is better to at least consider the weekday problem.

Leo S said...

Using week days for this algorithm actually made it slightly worse in aggregate for the last year. However this was due almost entirely to October, which should have been a good month due to more week days, but instead was absolutely terrible.

cacahuates said...

I really appreciate you think about this problem. I have realised some months ago how it is easy to manipulate sales/listings ration just by the length of a month. Three days can make a huge difference.

On the other hand, it is very simillar to an effort to map traffic in Vancouver and help people avoid traffic jams. It can help in a certain moment, but it is not sufficient to be able to break through twisted and complicated mechanisms of confusion/traffic.

Red Light. said...
This comment has been removed by the author.
Red Light. said...

koozdra, when do you think values are going to sink 50%?
Are you a basement dweller?
You seem very frustrated and bitter.

koozdra said...

"You seem very frustrated and bitter."

Thank you.

koozdra said...

"koozdra, when do you think values are going to sink 50%?"

Didn't happen in the states, won't happen here.

It's more different here than it is different anywhere else.

koozdra said...

"this classroom of life to enjoy yourself, Quality of life counts. I am guessing most bears on this weblog want to buy a.. "

I now divulge a very personal story. My quality of life is terrible. I spend my days wishing I could own real estate and my nights crying that I can't afford it. Maybe one day when I'm a home owner all my dreams will come true. Until then I have to identify with the under class, the despised, the renter. Especially disgusting is the basement dweller.

Others like me give into to the temptation because "money is super cheap right now". But unlike others, I know there is a collapse coming. I'm going to wait. If that's okay with you.

koozdra said...

"Home prices in the core, OB, surrounding good areas have pretty much come down as low as they are going to go."

Haha, boy are you going to be surprised.

Leo S said...

Amazing. 3024 Quadra sells for $525k (over ask after 44 DOM on this listing) after not selling all fall at $510k. The spring market can do wonders sometime.

Red Light. said...

I see we're deleting posts now?

Red Light. said...

I don't think HHV would approve of that so I'll re post:

Lets say you live to 75, I would assume you're at least 20 to have interest in a housing weblog. That leaves 55 years in this classroom of life to enjoy yourself, Quality of life counts. I am guessing most bears on this weblog want to buy a house at some time. After all, Home is where the heart is, a man/woman's home is their castle. Considering 25 years to hammer down the mortgage, leaves you only 30 years of quality...regardless if it goes up/down in value.

Sure home owners have property tax, maintenance, insurance, etc...If you rent you pay this anyway, just bundled up so you don't see it. I simply couldn't live under a landlord, perhaps I could short term, like a year at the very most.
Every year you rent comes out of that 30 years of quality.

Money is super cheap, 10 year fixed at 3.59% through Dominion Lending...that's 10 years of stable, easy living.
Home prices in the core, OB, surrounding good areas have pretty much come down as low as they are going to go.
You might get lucky and pick up some anomaly forced sale.

People hoping for a 50% drop in the core areas and wishing prices would revert back to the prices of the early years remind me of this
Guy

Marko said...

Amazing. 3024 Quadra sells for $525k (over ask after 44 DOM on this listing) after not selling all fall at $510k. The spring market can do wonders sometime.

Probably a subject to the sale of a home offer made early on in the listing.

CS said...

Home prices in the core, OB, surrounding good areas have pretty much come down as low as they are going to go.

Hey, Leo, HHV, time to wind up the blog, I guess.

LOL.

Two open houses in OB within 100 m of where I live. Heard some muttering by passers by about crazy prices people are asking, which suggests that insofar as sentiment affects the market, there's still room for a little bit of downward adjustment.

Red Light. said...

There is a breaking point! Hurting or not, they won't/can't just give you the house!

Its going to be the bank selling the home.
Then you must cough up an immediate deposit, go to court and more than likely compete against several others with way more money than you.

People dreaming for cheap houses are just that "dreamers".

The court will more than likely sell the dwelling above FMV!
They are obligated to help and will favor the individual in trouble.

They Don't give away houses!
I suggest you keep renting.


Red Light. said...

^
koozdra.

Leo S said...

>> I see we're deleting posts now?

Uhh no. Only 2 people can delete your comment: HHV and you. Given that your deleted comment says This comment has been removed by the author. I'm gonna go out on a limb and say it was the latter.

koozdra said...

Red Light, your thorough market analysis is fascinating and thoughtful. However I'm going to have to disagree. I think there is much more decline to go.

Red Light. said...

nice try leo.

This comment has been removed by the author.

we can clearly see that is NOT the case as the post in question was deleted after...look at koozdra posts.

Delete my posts again leos, I'll contact HHV, then destroy you on VV.

You're not a dictator are you?

Red Light. said...

If Marco didn't still posts his numbers here I wouldn't visit.
This blog is the geekiest.
Soon you'll just be bitching at yourself leos...cuz you're fucking boring!

Delete that!

koozdra said...

Red Light,

Please don't stop visiting this blog. The comments section wouldn't be the same without you.

"This blog is the geekiest."

Get with the times grandpa, geeky is the new cool.

Just Jack said...

The month of Februay and Oak Bay homes.

16 detached homes sold with 10 of those selling below assessed value.

The lowest price was $520,000 and highest came in at $2,235,000. Only two homes sold over a million. And both sold for less that what the vendor originally paid for them.

Just looking at the Sales to Assessment ratios. A property on Sutherland sold at 88 per cent of the assessed value. And the most costly home that sold this month also sold at the highest ratio at 117 per cent.

The typical Oak Bay home sold for $705,000. For that kind of dough, you get a 62 year old renovated home with a 2,179 sq. ft. of finished floor area (including basement) on a 8,510 sq. ft. lot.

Last year in February 4 homes out of a total of 15 sold for over a million. 10 selling for more that their assessed value. Cheapest house then was $584,000.

The typical home went for $850,000 and you got a renovated 2,311 square foot home on a 8,625 square foot lot.

I don't think you can do a straight across conclusion that values in Oak Bay have decreased from $850,000 to $705,000. There are many factors that have to be accounted for - such as where in Oak Bay these typcial homes are situated.

However, you would have to being smoking some really good shit to say Oak Bay prices have stabilized.

Red Light. said...

I expect the boot..sub 30 BTW!

Red Light. said...

Weblog should have been left to Marko...at least he would have capitalized on the space instead of whining and crying all the time!

Leo S said...

>> If Marco didn't still posts his numbers here I wouldn't visit.

You realize he posts them on VV too, right?

Marko said...

45' wide lot on Ryan Street just sold for $364,000!

Building lots continue outperforming other market segments by a wide margin. I attribute this to lack of building lot inventory and tremendous development costs to bring ready to build lots to market.

Better deals on lots could be found in this area in 2010 (top of market for other segments including SFH and condos).

Red Light. said...

Yes, But I would rather someone positive who knows WTF they're talking about moderate this weblog.

HHV was a good read for the past 5+ years.

would rather see someone who can capitalize on this space, make the calls.

Red Light. said...

It could be darren day for all i care.
As long as they have a clue.

Chris said...

Marko said
“I attribute this to lack of building lot inventory”

I attribute it to out-of-work carpenters trying to buy their crew a job. I can’t blame them. Most have nothing to lose when the bank forecloses on their limited companies. At least they’re putting food on the table in the meantime. They’re an optimistic bunch; still believe the market will bounce back by the time they’re tacking up that last piece of trim.

DavidL said...

@Leo S, @Marko

Regarding the sale of 3024 Quadra... The realtor told me in late January that a full price conditional offer had already been made. I expect that a second offer was made, resulting in further bids. I don't think that the house is worth $525K in the current market, however it is a unusual property with few comparables. It is a nice move-in ready home, too.

I expect 1950's stucco and 1970's split-levels will have a harder time getting multiple bids.

Red Light. said...

same thing goes for all these new condo builds, the lenders based the financing at 2010 levels...if builders pulled the plug now they'd be titters. That's why the show is still going on, would be certain bankruptcy for builders to just stop.

DavidL said...

@ Koozdra
Until then I have to identify with the under class, the despised, the renter. Especially disgusting is the basement dweller.

Been there, done that - from the mid 80's through the 90's. For some reason, there was less prejudice against basement dwellers back then. You wouldn't be confused with a troll for living on the bottom floor of a house. We now live in a more enlightened age, where property ownership is valued above all other things. ;-)

DavidL said...

Driving along McKenzie Avenue from Quadra towards Saanich Road, I noticed that each of the four apartment buildings managed by Devon Properties all have rental vacancy signs out front. This is the first time I have seen this in more than twenty years. Coincidence?...

Red Light. said...

land acquisition, rezoning, permits, financing...takes years. that's why the new builds continue. They arranged the finances 2-3 years ago and if they quit now they are simply done.

Marko said...

I attribute it to out-of-work carpenters trying to buy their crew a job. I can’t blame them. Most have nothing to lose when the bank forecloses on their limited companies. At least they’re putting food on the table in the meantime. They’re an optimistic bunch; still believe the market will bounce back by the time they’re tacking up that last piece of trim.

There are so many things with the above comment that show complete lack of understanding I can't even count them all on one hand.

You think you start a limited company go to the bank and they give you a mortgage?

The way to employ a framing crew is to invest $700,000 into a project so your framing crew can have work for 6 weeks?

Etc., Etc., Etc.

Marko said...

Big developers have a pre-sale and build out period of 2 to 4 years. Timing the market is impossible.

Look at The 834, started in an extreme buyers market (April, 2009), then went through the peak (2010) and the building was finished when the market was softer (November, 2011).

Some of the properties take years to rezone, etc. Developers have to roll the dice sometimes and take risks. It is always a bad time to build - either the market is soft or construction costs are too high and the market is solid. Successful developers take calculated risks all the time. Playing it safe you won't get far. Who would have thought if you started a project in April 2009 that it would almost be sold out on completion at much higher prices than initially offered at the onset of the project? Not many, certainly no one on HHV at the time.

DavidL said...

Please don't "lump us all together", Marko. I rate called that presale units at Tuscany Village were about $250K before construction started and close to $450K when complete. Such are the "laws" of supply and demand...

Leo S said...

>> Look at The 834, started in an extreme buyers market (April, 2009)

April 2009 was actually a pretty strong sellers market with an MOI of 5.2. We're currently at double that.

Marko said...

Yea but if they launched in April 2009 they were looking at Jan-March 2009 for guidance.

I would argue that Feb 2009 held much more uncertainty (usa potentially going into depression) then Feb 2013 despite the sales numbers being lower in 2013.

Leo S said...

>> Yea but if they launched in April 2009 they were looking at Jan-March 2009 for guidance.

I assume they started long before then. Lot, zoning, planning, etc. Probably things were still looking rosy in 2008 when they started planning the thing.

The massive collapse in housing starts in Victoria during the financial crisis would indicate that developer did try to time the market.

Chris said...

“You think you start a limited company go to the bank and they give you a mortgage?

Where did I say they just started their companies? I know full well what banks want to see as far as balance sheets and income history.

“The way to employ a framing crew is to invest $700,000 into a project so your framing crew can have work for 6 weeks?”

Come now Marko, are you trying to tell me you don’t know any contractors out there building on spec right now to buy themselves a job?...believing the gravy train will return, convinced they can turn a profit if they negotiate hard on the idle subcontractors. If you don’t, I do.

What’s the “Etc., Etc., Etc.?” Did you run out of fingers?

“Playing it safe won’t get far.”

Like I said, contractors know there isn’t any risk when the market heads south. Often they run a shell company under a parent company to secure financing, further separating any personal risk. Heck I know some who buy the land with 100% vendor financing, finance all the materials and make their subs wait ‘til the bitter end. How could you play it any safer?

Leo S said...

Who would have thought if you started a project in April 2009 that it would almost be sold out on completion at much higher prices than initially offered at the onset of the project? Not many, certainly no one on HHV at the time.

More importantly, almost no one in the condo building industry did either.

Condo starts went to essentially zero from Nov 2008 to Aug 2009.
Only when it was clear that the market had rebounded did developers start building again. The 834 appears to have been almost the sole exception. Either the developer was psychic, or they just had no choice but to build and decided to roll the dice.

Marko said...

Chris, I can actually see who is buying the lots, what city they are from, etc. The large majority of lots in the core right now are being bought by individuals having custom homes built.

Come now Marko, are you trying to tell me you don’t know any contractors out there building on spec right now to buy themselves a job?...believing the gravy train will return, convinced they can turn a profit if they negotiate hard on the idle subcontractors. If you don’t, I do.

You really have a low opinion of contractors? I do a huge amount of business with people from all walks of life and most successful contractors I know that can afford building lots exhibit more common sense and life skills than people with masters/phd degrees.

I worked with several builders a few years ago that ended up doing different things when the margins erroded. One ended up with a very good job with the school board working on the sysmeic upgrades. Absolutely loves it, no stress, gets the weekends off, good pay, etc.

I'll say it yet again - there is an absolute shortage of trades. No skilled tradesperson is going to come begging to you to work for $15/hour.

Like I said, contractors know there isn’t any risk when the market heads south. Often they run a shell company under a parent company to secure financing, further separating any personal risk.

Yes, maybe in 2007/2008 but certainly not 2013. You have no idea how much the lending game has changed for new home construction.

Marko said...

Either the developer was psychic, or they just had no choice but to build and decided to roll the dice.

He did have a choice not to build as he rode two successful projects prior.

StalJ said...

You HAVE to see this 12 minutes that was on 60 minutes tonight! Do not watch before bed, as it will keep your head spinning as to what it means to everyone.
http://www.cbsnews.com/video/watch/?id=50142079n
And here i thought Toronto might affect us..Ha!

eLouai said...

@StalJ
This has been a problem for a while. (China Real Estate)
Jim Chanos was one of the investors warning people.
Here is a video that tries to give you both sides
https://www.youtube.com/watch?v=_J4g-H--5yg

The danger of bankruptcy is what Hemming famously said (about his own insolvency), it starts slowly, then happens all of a sudden. I certainly hope it gets diverted, but someone usually pays and it was normally their working class (in the form repressed saving rates)

koozdra said...

@StalJ

That might affect stupid countries like China and the US. But it's different here.

Our housing prices can double, triple in some cases, in a short span of time and everything will be fine. Why?

Because no wants to see it here. By sticking our heads in the sand we don't have to be afraid of the danger ahead. Simply ignore the problem and it will go away (hopefully). It's the Canadian way.

Leo S said...

He did have a choice not to build as he rode two successful projects prior.

Sure. So they made a good call.
The point is that despite long lead times, it does appear that the entire condo industry tried to time the market in the last downturn.

Of course given the recent condo boom one might see that as a vote of confidence for the market. However starts have dropped off in Dec and Jan so it will be interesting to see how this develops.

Leo S said...

Hard to imagine what effect a collapse in China would have here.. Resource demand would collapse so Canada would likely go into recession, but on the other hand it might lead to more money leaving the country looking for safe parking.

Marko said...

Monday, March 4, 2013 8:00am

MTD March
2013 2012
Net Unconditional Sales: 30 570
New Listings: 119 1,385
Active Listings: 4,011 4,274

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

koozdra said...

Flaherty warns banks over igniting mortgage war as BMO cuts rates

"Finance Minister Jim Flaherty is issuing a warning to the country’s banks, as stiff competition for mortgage customers is prompting lenders to cut rates heading into the key spring home-buying season."

Shut up Flaherty! At least someone is trying to keep this bubble going. All you're doing is crippling it.

Don't listen to that wind bag BMO, lower the rates. There is absolutely no risk. There is definitely NOT a housing collapse coming.

koozdra said...

“My expectation is that banks will engage in prudent lending – not the type of ‘race to the bottom’ practices that led to a mortgage crisis in the United States,” Mr. Flaherty said in a statement to the Globe on Sunday

Haha, oh of course not. Not in this great country of ours. Nothing bad can happen here. NOTHING!

Has Flaherty forgotten that our banks are financially prudent? They are the best regulated banks in the world.

Leo S said...

Wagging your finger at the banks is such a laughable strategy. Probably done more for appearances than anything else. If flaherty is serious about preventing a race to the bottom then he can go ahead and tighten lending requirements again.

a simple man said...

Thanks for the numbers, as usual Marko.

And Leo - thanks for all of your insightful analyses.

Red light - please keep it clean. All of us knew how to swear in 3rd grade but it is not becoming of a blog of this quality.

koozdra said...

Market View: Are we on the brink of a mortgage-rate war?

Related to the story above.

My favourite part:
"information about how much people are leveraged into the house market is scarce."

Scarce indeed. Good thing the protectors of real estate information are trust worthy and a bunch of decent folks.

I'm sure they'd let us know if something was going on. We can trust them.

koozdra said...

Interesting article on what a minimum wage earner could buy.

Urban Mortgages on an Extreme Budget

Grandpa used to able to buy on minimum wage. Could that happen again?

koozdra said...

Ok proletariat of Calgary time to double up!

Oh by the way a suite in your home is super easy. Don't worry about it.

http://www.youtube.com/watch?feature=player_embedded&v=RPpCxmsrVw8

Introvert said...

koozdra, quick tip: sarcasm is more effective when it's not used 100% of the time.

koozdra said...

Introvert has gone from correcting grammar to now correcting style.

Introvert said...

Didn't happen in the states, won't happen here.

The First Law of Real Estate: whatever happens in the United States must happen in Canada.

koozdra said...

Interesting post from Whispers today.

Could people be holding off on listing/buying till April because of HST?

If this is indeed the case then we can expect the flood gates to open in April.

Will March Real Estate Sales be horrible because of HST/PST?

Introvert said...

People hoping for a 50% drop in the core areas and wishing prices would revert back to the prices of the early years remind me of this Guy

Where have you been all my life, Red Light! Droppin' truth-bombs on this place.

I agree. The ultra-bears on this blog are going to be sorely disappointed when this slump is said and done: the losses will not have been nearly as dramatic as their fantasies projected.

koozdra said...

"...the losses will not have been nearly as dramatic as their fantasies projected."

Of course not. It's impossible for that kind of thing to happen in the most sound housing market in the universe.

koozdra said...

"Not every suite/building/location town is worth renovation effort---BUT THIS ONE IS!!! Ideally Located. ON Beach Dr. Oak Bay! (walk to the village+walk to the Marina). 2010 torch on roof. Well managed Bldg w/Depreciation reportt. (strge #307- Pkg stall #34) NO Rentals..Adult (45+) building"

Terrible, terrible deal.

http://www.realtor.ca/propertyDetails.aspx?propertyId=12815331&PidKey=-1360064775

Introvert said...

koozdra's 32nd consecutive sarcastic statement:

Of course not. It's impossible for that kind of thing to happen in the most sound housing market in the universe.

Stylin'!

subprime11 said...

60 minutes last night did a piece on the newly built ghost cities scattered over china. They spent trillions on infrastructure stimulus on residentual construction and now sitting on a real estate bubble of epic proportions. Wonder if that could effect prices on Cavendish Street?? Nooooo...different here. Sequester budget cuts..no impact on jobs here...UN proposed a new world currency backed by gold for international oil purchases instead of USD...that will never happen will it??
The housing correction thus far are under stable, low interest rate conditions. We live in an unstable and heavily indebted world so heads up folks...INCOMING!!

koozdra said...

"koozdra's 32nd consecutive sarcastic statement:"

Is it sarcasm or is it what you believe?

koozdra said...

Fitch isn't taking into account the jump in unemployment that's about to happen. Over dependency on the housing market for economic growth will have dire consequences.

Canadian home prices 20% overvalued, says Fitch

caveat emptor said...

Since when is banks offering low mortgage rates a problem? Should the government be regulating the interest rates that banks charge? I know as a consumer I sure hate price wars. I feel a bit cheated if I am not being charged top dollar.

The low mortgage rates are a direct result of the interest rate policies of the BoC.

If the government really wants to cool the housing market further they have many more effective tools at their disposal than jawboning the banks (increased down payments, tweak CMHC, bank capital requirements)

koozdra said...

"I feel a bit cheated if I am not being charged top dollar."

The problem is is that these are equivalent to teaser rates in the states. People who base their affordability on very low rates buy in thinking/hoping/praying that rates won't go up. They will and these people will cause a large foreclosure wave. Same thing that happened in the US after the rates reset after the initial offering.

Flaherty wants to cool the housing market and the banks aren't helping matters.

If we had a free market here the banks would have to price risk. Getting a mortgage today would be more difficult because of down side risk. However the banks are throwing caution into the wind and lending like there's no tomorrow.

The banks are drunk on "too big to fail" wine.

vawr said...

@ Introvert

"koozdra, quick tip: sarcasm is more effective when it's not used 100% of the time."

Self awareness is not your strong point, Intro. If it were you might apply the advice you give to others to yourself.

Introvert said...

Self awareness is not your strong point, Intro. If it were you might apply the advice you give to others to yourself.

Why would I apply my advice on 100% use of sarcasm to me when I don't use sarcasm 100% of the time?

Making good points is not your strong point, vawr.

dasmo said...

Speaking of anecdotes... I was on a job with someone from Chicago who defaulted on their mortgage intentionally after his neighbours apartment was sold for 15k in a foreclosure sale. He had bought for 120k the year before. He stopped paying the mortgage and have now declared bankruptcy. This has resulted in him and his wife living in the same place for free, for almost two years! He bought before being married so the wife is untarnished by it all and they are now shopping for a new home but waiting until the bank finally kicks them out. They might even buy their own place back under the wife's name if they can get it for under 30k. The neighbours place that was bought for 15k was flipped after some paint and fixups from the disgruntled previous owner for 50k. The market has improved since then and they would have not improvements to make so it could be a quick buck for them to put into the new house down payment. In the meantime they continue to save 1200/month for the new house as they live rent and mortgage free. Give me an anecdote like that in Victoria and I might join the doom squad....

koozdra said...

Strategic bankruptcy. Coming to a housing market near you...

Dave said...

caveat
The low mortgage rates are a direct result of the interest rate policies of the BoC.

BoC, like the Fed, is more of a follower.The free market indirectly pressures BoC by way of the short end of the yield curve.

As bill (bond) yields keep sliding this year, it will likely force the BoC to lower the overnight (variable) rate later this year. Falling yields mean the free market sees a very weak economy with low inflation going forward.

That's why one must always adjust rates for inflation, if you want to know if they are 'really' rising or falling.

CS said...

When does allowing a housing bubble to burst become politically unacceptable?

When a burst bubble means an economic implosion, violence and regime change.

That's China's position, which is why they plan to rev up construction with a $6-trillion-dollar 10-year urban development program that will bring 400 million country-dwellers to the city. That will fill the empty cities many times over.

How will folks pay for apartments costing 40 times, or is it 140 times, family income?

Easy: low interest rates and multi-generational mortgages, as in Japan before they dropped the ball and let the property market collapse.

All we need is a Commie government here and the real estate boom can roll on for, well at least another ten years. And for BC, a Commie government is likely what we'll have come the May election.

dasmo said...

It's interesting since there is such a backlog of forclosures that they haven't even gotten to his case yet. When I first heard he was planning this I thought he was crazy. Now that I hear he is living rent free it's hard to argue against his "strategy". Even though house prices are low there right now, living rent free kinda puts a wrench into the calculator...

Just Jack said...

Chicago is a pretty big place Dasmo. A condo for $15 to 50K sounds like it is pretty far out from the hub of the city. Probably farther than say Port Renfrew is from our downtown core.

And in Port Renfrew house prices are now down to $165,000 or about half what they were selling for at the height of the market.

But who wants to live in Port Renfrew? Obviously about the same amount of people that want to live in your bud's condo in Chicago.

Introvert said...

Give me an anecdote like that in Victoria and I might join the doom squad....

dasmo, welcome back, buddy! We missed you.

And your point is a good one.

info said...

@ Red Light

"Home prices in the core, OB, surrounding good areas have pretty much come down as low as they are going to go."

Take another look at this chart. It shows that SFHs in Greater Victoria have lost 12% of their value since peak. The average SFH in Victoria has lost $45,000 in value since June of 2012. The 12-15% correction we have seen so far in Greater Victoria is only a fraction of the total correction that is on the way, all areas included.

Los Angeles experienced a housing price run-up similar to that of our city.

In December 2007, this Los Angeles house was valued at $465 K. It decreased in value to $200 K after the US housing bubble burst.

Victoria will experience its own major price correction.

The US was in a housing price bubble and it burst. Canada is in a bigger housing price bubble that has recently burst. Victoria is second only to Vancouver in terms of overvaluation in Canada. All neighbourhoods in Victoria have a long way to go before they reach bottom in terms of a correction.

Introvert said...

Today in Grasping at Straws: Port Renfrew/Victoria/Chicago equivalencies.

Leo S said...

Give me an anecdote like that in Victoria and I might join the doom squad....

Detroit is down 50% from peak. There is plenty of room to be concerned about declines far less than that.

"We aren't as bad as [terrible place]" is not the same thing as "Everything is fine".

Marko said...

Leo_S

How much was Seattle down again from peak to bottom? Was is close to the US average of 33-34%?

Leo S said...

How much was Seattle down again from peak to bottom? Was is close to the US average of 33-34%?

Yes. 33% using Case-shiller. That bottom didn't last long though and would have been very hard to hit as a buyer. They were more or less stable at ~25% down for about 2 years.

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

You know things are rough when the landlords are getting angry with the rent to own realtors.
http://victoria.en.craigslist.ca/apa/3592017730.html

Introvert said...

Jack Knox is a beaut!

News item: Regina city council might change a bylaw that bans residents from running extension cords across the sidewalk to the block heaters of their cars. The cords are a tripping hazard, but frozen vehicles won’t start if not plugged in.

In related news, it’s Victoria Flower Count time.

For those who haven’t heard of the flower count, it’s a light-hearted, good-natured promotion intended to make other Canadians feel even more miserable about the bleak, frozen, featureless, pestilential hellholes in which they live.

...

We who live in the City of Gardens know that the flower count isn’t actually based on real science (if it were, Stephen Harper wouldn’t let us talk about it).


Love those Harper jabs.

Stephen Harper: great prime minister, or ... greatest prime minister?

Introvert said...

It's different here. I'm talking about our climate compared to the rest of Canada.

info said...

Seattle's bubble price run-up was about 95%.

Victoria’s bubble price run-up to peak was 147%. That 147% gain is comparable to the gains of the biggest bubble cities in the US that have now crashed. Victoria compares to Phoenix (+125%), Las Vegas (+135%), San Diego (+150%) and Los Angeles (+175%), but not Seattle.

Corrections in Los Angeles, San Diego, Phoenix and Las Vegas ranged from 45% to more than 65%.

info said...

"It's different here. I'm talking about our climate compared to the rest of Canada."

In the US, the cities that experienced the biggest bubble price run-ups were, generally, those with the mosts desirable climate in the nation. It may have had something to do with people investing in a second property in a city with a nice climate.

The same can be said about Canada with Victoria and Vancouver experiencing the biggest bubble price run-ups.

It is no secret which cities in the US exprienced the biggest price declines from peak (see my last post). Victoria and Vancouver will experience the biggest price declines in Canada as our housing bubble deflates.

koozdra said...

I don't know why but this reminded me of Introvert...

dasmo said...

It is different here. We have only one very small area in our entire country that has a Mediterranean climate. About 200 km² out of 9976140 km². The US has a much larger ratio of favourable climates.

koozdra said...

"It is different here."

You speak as if everybody from all over Canada dreams of moving here. They don't. Not only is it too isolating for many but there are no jobs.

Comparing Victoria to Seattle is comical. Vancouver can be compared to Seattle but not Victoria.

If you want a preview as to what's going to happen here, look to Florida.

Older population, no jobs and extremely beautiful.

Introvert said...

It is different here. We have only one very small area in our entire country that has a Mediterranean climate. About 200 km² out of 9976140 km². The US has a much larger ratio of favourable climates.

The bears don't want to hear this. To them, Victoria is no different than any other city in Canada--and it might even be worse!

Question: has a non-Saskatchewanite ever aspired to retire to Saskatoon or Regina?

reasonfirst said...

"It is different here. We have only one very small area in our entire country that has a Mediterranean climate. About 200 km² out of 9976140 km². The US has a much larger ratio of favourable climates."

Mediterranean climate? smirk...Did you get that off a tourism website?

StalJ said...

“The US has a much larger ratio of favourable climates.”

I think that’s why Canadians have now decided to keep their prairie hovels for summertime with the grandchildren, and instead are flocking to the US for the dirt cheap winter digs along the golf links. Why do you think the island, Ok....are the weakest markets in the country?

Leo S said...

We have only one very small area in our entire country that has a Mediterranean climate.

I assume you've never been to the Mediterranean.

dasmo said...

I have, many times... Considering I was carving sand in my bare feet on Gonzo beach this Sunday I was definatly smirking...

Leo S said...

I have, many times

So you should know our summers are nowhere near Mediterranean then.

dasmo said...

The Köppen climate classification has southern Victoria as a "Csb" " Mediterranean" "Mild with dry, warm summer"...

Leo S said...

So it is. I'm gonna guess when people think Mediterranean climate they're thinking hot summer (csa), but fair enough.

Just Jack said...

Other Csb climates include Nanaimo and San Francisco.

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

Nanaimo annual rain fall = 1911mm
Victoria = 608
...

dasmo said...

This micro climate represents about .02% of Canada's land mass and thus illustrates that we are different than the states...

Leo S said...

This micro climate represents about .02% of Canada's land mass and thus illustrates that we are different than the states...

Except that every city has an argument like that. For Victoria it's the climate, for others it's other things.

That's the whole point of the "it's different here" argument. Every city has their own version of it.
"It's different here because we have oil", "It's different here because we have high paying jobs", "It's different here because we have recreation facilities", "It's different here because we have beautiful mountains nearby", "It's different here because we're the next Napa valley", "It's different here because ..."

Every city has positives and negatives. Clearly since we all live here we like Victoria quite well, but assuming that climate has a significant effect on the magnitude of real estate corrections, or even that any correlation exists at all is pretty tenuous.

koozdra said...

I asked my girlfriends mom why Winnipeg was experiencing such a run up in prices.

"I dunno, the Jets?"

Looks like it's different there also.

dasmo said...

I never said it has an effect on magnitude of corrections...I'm simply pointing out that its different here...Our California is very tiny compared to the rest of Canada and that's why it carries a premium. Correction or otherwise.

koozdra said...

Forget Oak bay. The area that's really holding it's value is Witty's.

Priced: $629,000
Assessed: $515,000

When these people list their home I wonder if they are thinking "Why are those other idiots pricing so low?".

http://www.realtor.ca/propertyDetails.aspx?propertyId=12891987&PidKey=-1493479782

Seth Perry said...

"most homeowners would rather eat bugs than take even a small loss" - Garth

He has summed up the Victoria seller perfectly. A quick look on UsedVictoria profiles the type of seller living in Victoria.They want full price for a Mount Washington 6 pack on the last day of the season. Delusional. Imagine what it will take for them to sell their home for anything less than they paid for it. I see sellers holding for a while or for as long as they can. It might be a bug diet for a while.

reasonfirst said...

"that's why it carries a premium"

I don't think anyone disagrees that some nice things about Victoria give it a premium. As such, we don't spend our time comparing absolute Victoria prices to other markets. The discussion is usually centred on trends in other markets or price rent ratios etc. So enough about how different Victoria is - we get it...but it isn't becoming MORE different.

PS - I look at the Koppen map linked above and I see very little kahaki green csb actually on the Mediterranean. So calling Victoria a Mediterranean climate under a technicality of "the less common form of the Mediterranean climate" is a bit misleading.

CS said...

Our California is very tiny compared to the rest of Canada

California? LOL

Average daily minimum in Victoria from December through March is 4 C, which is 5 C lower than San Francisco

No wonder just about everyone in Victoria would like to go south in the winter.

Chris said...

I like dasmo’s comparison to the Mediterranean… oh wait a sec, that red colour is not heat…

Just Jack said...

There is no direct relationship of climate to prices.

Easily proven just by looking at home prices within the same climate band. The climate in Langford and Oak Bay is the same. Yet the prices are vastly different.

CS said...

The climate in Langford and Oak Bay is the same. Yet the prices are vastly different.

What if Langford were five degrees warmer than Oak Bay?

koozdra said...

Prices will remain high in Oak Bay because rental suites are illegal. The nouveau riche of Victoria will not have to be around "those" people. The under class. The basement dwellers.

a simple man said...

As a resident of OB - there are a lot of basement dwellers here - they just are not legal...which makes it all the more creepy.

Leo S said...

I never said it has an effect on magnitude of corrections...

But that's the premise of the discussion. If the difference has no effect then what does it matter if we're different or not.

dasmo said...

Langford average rainfall= 1040 mm(@ langford lake)
Victoria at Gonzales station = 608 mm (close to Oak Bay)

patriotz said...

And the Gulf Islands get so little rainfall they have water shortages.

How's the RE market holding up there?

I could bring up the Okanagan too, but I guess it doesn't count because it's too cold in winter time.

Alexandrahere said...

Rockheights area in Esquimalt is doing fairly well.

707 Rockheights sold $621...chopped up rooms, ugly pinkish stucco and no yard. Hard to heat.

1280 Rockcrest sold $620...nicer street.

Certainly doing better than comparable Saanich East homes. But then Jack would disagree?

Introvert said...

And the Gulf Islands get so little rainfall they have water shortages.

How's the RE market holding up there?


Gulf Islands are a niche market. Not a fair comparison.

Oak Bay vs. Langford: legitimate comparison: Langford is a shitty place to live and Oak Bay isn't.

Just Jack said...

Rockheights is a nice area - why would I disagree?

Now down by the Navy base - that's a different story. Lowest prices in all of the core areas are found there.

I think its the rain.

Introvert said...

JJ: The climate in Langford and Oak Bay is the same.

dasmo: Langford average rainfall= 1040 mm (@ langford lake)

Victoria at Gonzales station = 608 mm (close to Oak Bay)


JJ, doesn't it suck when facts bite you in the ass?

Leo S said...

I guess it doesn't count because it's too cold in winter time.

You've got it. If it isn't exactly like Victoria then it's no good. Also price differences between Victoria municipalities can be explained by measuring rainfall.

totoro victoria said...

I'm way up in the Northeast of BC at the moment. Decent houses are about $400 000 in a town of 5500. They are more expensive than Parksville.

Gonna be -21 tonight. Better plug in the block heater. I'm okay to pay more and live in the Mediterrean.

Introvert said...

price differences between Victoria municipalities can be explained by measuring rainfall.

... and by commute times, ugliness of surroundings, proximity to ocean/beaches, number of parks, quality of parks, proximity to downtown, etc.

Just Jack said...

Rockheights is a nice area - why would I disagree?

Now down by the Navy base - that's a different story. Lowest prices in all of the core areas are found there.

I think its the rain.

Introvert said...

I'm okay to pay more and live in the Mediterrean.

Me too. Heard Calgary had a huge blizzard recently. The trees in Fairfield are beginning to bloom pink.

Just Jack said...

Again Introvert, you have failed to follow the thread of the discussion. Zero marks for comprehension.

caveat emptor said...

Tempest in a teapot

BMO's cut rate mortgage won't spark a housing crisis.
http://www.theglobeandmail.com/report-on-business/top-business-stories/relax-bmos-299-mortgage-wont-spark-a-housing-crisis/article9295385/

Saves you $25.72/mo on a monthly payment (on a 500K mortgage), or qualifies you for an extra few thousand. And in any case mortgages are available at 10 or 20 basis points below BMO's latest offering.

The current rate decline is a minor boon for someone who was going to buy anyhow or someone coming up for renewal. It's not going to cause a stampede of new marginal buyers.

dasmo said...

Such juicy bait...
Golf islands = 1000 mm
Victoria = 608 mm

Maybe it is the rain...Oh wait, there is the insanity of Van.

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

I think its the rain.

...

Again Introvert, you have failed to follow the thread of the discussion. Zero marks for comprehension.


Again, JJ, you have demonstrated that you do not understand the distinction between "it's" and "its." Zero marks for comprehension.

Marko said...

Was going over some Oak Bay documents last night. On one proposed lot in Oak Bay the municipality wants 62k to pull a few things to the lot line!

I thought Victoria was bad enough.

Seems like new homes are going to be for the ultra rich going forward with all the extra costs that have been added in the last 10 years. WCB, Municipalities, Building Code, HPO Office, etc.

koozdra said...

What's the difference how much it costs to build?

If we take into consideration the first axiom of Canadian real estate, prices always rise, then it doesn't really matter how much you spend to build.

By the time you're done, it will be worth more.

Leo S said...

On one proposed lot in Oak Bay the municipality wants 62k to pull a few things to the lot line!

What would you expect it to cost in other municipalities?

Just Jack said...

You got me on that one Introvert.

Give yourself a Troll mark.

koozdra said...

I would suggest anybody buying million dollar homes right now to put them on the market immediately as it's going to take many years to clear the current inventory (including the daily onslaught of new listings in this price range).

koozdra said...

This property popped up as "edited" recently.

This was the edit:
Original Price: $1,100,000
New Price: $1,099,900

You are seeing that correctly. An entire one thousand dollar reduction. Now it'll sell for sure.

btw, this is one of those mls dinosaurs. It's been on there forever.

http://www.realtor.ca/propertyDetails.aspx?propertyId=12722491&PidKey=417565967

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

At those costs, it seems Oak Bay council is telling builders they don't want development in the township. That just means the residents will have to pay more for antiquated infrastructure and increased maintenance like, sewers, pot holes, water mains.

Oak Bay home owners are going to need two illegal suites in their basements just to pay the property taxes to live in Oak Bay. That means more congested streets, deferred house maintenace and a drop in lifestyle. The established trend for wealthy Victorians to build their homes in townships other than Oak Bay will escalate.

My thought is that Oak Bay should PAY developers to build in the township. Encouraging the upgrading of the city's housing stock, infrastructure and stimulate the local enconomy.

patriotz said...

"btw, this is one of those mls dinosaurs. It's been on there forever."

Just looking at that photo gives me vertigo. For a million dollar property couldn't they have taken a photo from farther back with a longer lens (elevated if necessary) or done a composite?

CS said...

Can anyone tell me the price of the house on Cresview, I think it was 3681, that sold a month or so ago?

Also does anyone know what 2847 Dunlevy went for?

Thanks.

soperj said...

@koozdra Pretty sure that's actually only a $100 deduction.

kabloona said...

koozdra.....it's worse than you think. He only dropped asking by ONE HUNDRED DOLLARS!!!

$1,099,900.00 + $100 = $1,100,000.00

It's always that last hundred bucks that breaks the deal...

A-HA-HA-HA-HA!!!

Marko said...

Can anyone tell me the price of the house on Cresview, I think it was 3681, that sold a month or so ago?

Also does anyone know what 2847 Dunlevy went for?

Thanks.


First one went in a bidding war for $1,152,000 and the second one for $850,000 - 21 days on market.

Marko said...

Original Price: $1,100,000
New Price: $1,099,900


I've personally done this with some success before to keep it propped up in the PCS accounts.

There are no rules against doing it so why not.

koozdra said...

Oops, bad math day.

Just Jack said...

Sidney-by-the Sea.

The city is heavily dominated by retired white bobble heads. And prices are doing badly.

Prices for condos are way down, such as the one along third street that just sold for $212,000. It was bought back in August 2007 for $246,000. And it has just been renovated.

And the middle income household market is eroding as well. Like the sale of a home along Beckwith in Saanich that just sold for $526,000. Originally purchased September 2007 at $560,000.

And the listings keep piling on. Over 600 homes just in the core alone. While the number of sales dribble lower and lower like the drool from Grandpa's lip.

What does Victoria and Pamplona Spain have in common - besides a mediteranian climate?

The running of the bulls of course.

CS said...

Marko: Thanks very much for the info. on Crestview and Dunlevy St.

dasmo said...

Nice one bringing it all together JJ.

totoro victoria said...

JJ - property taxes are lower in OB than Saanich, Victoria or Esquimalt.

Mill rates are 3.77 in vic, 3.20 in saanich and 3.00 in ob including a recent increase for a transportation upgrade reserve fund. Esquimalt is 4.5.

OB has the lowest business property tax rate anywhere on the south island - by far.

The ob mill rate could be adjusted to pay for a sewer upgrade, but it seems unlikely there is a reserve fund and at least 10% of tax dollars are retained for future infrastructure upgrades each year.

DavidL said...

@totoro

Oak Bay has the lowest mill rate as they also have the highest average property tax assessments in Greater Victoria. I would think that homeowners and businesses in Oak Bay care more about the actual property taxes due - not the mill rate.

Leo S said...

Yep. Mill rates are set to hit revenue targets. Hence they will increase as prices decline.

dasmo said...

OB is also nicely situated to minimize its overhead. No bridges to maintain, street people to help etc. when their sewer kicks the bucket perhaps the A word might be brought up...

totoro victoria said...

The reason OB has higher average assessments is because it has much higher average house prices because of the significant number of multi-million dollar mansion properties in Uplands, waterfront etc.

Some of these places pay upwards of $50 000 a year in property taxes.

I personally care more about the mill rate than I do the average taxes as I don't own a multi-million dollar mansion. I enjoy all the OB amenities at a relatively low cost.

If you own a very expensive home in a very expensive area you may care about mill rates and appreciate they are lower, but I personally would look to long-term appreciation potential more.

OB does have a replacement reserve fund for sewer upgrades. This will not be an "oops our sewer needs upgrading" situation so lets raise taxes. The money should be there for that as far as I understand.

totoro victoria said...

And Leo is correct, if assessments dive down mill rates will likely increase because they are budget based, but this will not result in an increase in what you pay in property taxes. This will just prevent a drop in what you pay.

dasmo said...

Until they actually need to replace the sewer and realise they didn't budget enough...@ 62k to bring some things to a lot line I think it will be an "oops"...

totoro victoria said...

I'm not sure what is happening with development costs in OB. They don't have DCCs, which is unusual, so maybe they charge actual cost?

Leo S said...

I personally care more about the mill rate than I do the average taxes as I don't own a multi-million dollar mansion. I enjoy all the OB amenities at a relatively low cost.

Except pretty much any house in Oak Bay will have a premium. So even if you have a bungalow it will be valued significantly more than the identical house in Esquimalt. Hence DavidL's point. Mill rate is lower, but you're likely paying about the same taxes as the owner of a comparable house in another region with a lower mill rate (obviously approximately depending on price and mill rate differential).

totoro victoria said...

Maybe, but seems unlikely to me. OB has access to low cost 30-year municipal financing for infrastructure projects. There are also provincial grants.

Excess costs are financed and spread over a long period of time in order to prevent hardship to taxpayers and spread the burden equitably (ie. you lived in OB and had to pay for the sewer upgrade and then moved and next owner has no cost - only benefit).

totoro victoria said...

Yes, you will pay more for the same house in OB. If you own a $500 000 home in Victoria you will; however, pay more taxes than if you own a $600 000 home in OB because of the mill rate differential. Lower end homes in OB pay less taxes.

As we have seen, OB holds value longer than other areas as well. Of course, if you have to finance the $100 000 difference this has a cost too.

dasmo said...

Grants are based on city size. That's part of the problem with our fractured domain...

totoro victoria said...

Not necessarily. There are programs specific to smaller communities and larger ones. Some for just rural and some for green energy initiatives. http://www.civicinfo.bc.ca/18.asp

SJ said...

The Million Dollar Flip in Oak Bay. MLS# 320033

The house at 2290 Woodlawn Crescent was bought a year ago for $1,336,000, a shade under the assessed value of the property. Maximilian Huxley has undertaken to complete this renovation, which had already been started by the previous owner. It is now listed for $2,785,000, which is $1,449,000 more than they paid for it. Even if they put in $400,000 to finish renovating it, which I doubt, then they are asking at least $1,000,000 for having undertaken the work. Not bad for a year’s work!

Of course, that’s if they get their price. Woodlawn Crescent may be a nice location, but it’s not waterfront – it’s not even in Uplands.

http://www.cathytravis.ca/properties?id=304437


http://www.julierust.ca/listing_details.php?id=320033


SJ said...

Sorry, I can't seem to get my links to highlight!

Cathy Travis is the "Before" listing and Julie Rust is the "After"

a simple man said...

this is exactly when getting my PhD did not seem so bright after all.

StalJ said...

If any one wants to join me, i am throwing on my speedo and hitting the beach today. The joys of living in a mediteranean climate :) I can't wait carve that warm sand thru my toes.

totoro victoria said...

As I unplugged my block heater in Ft. Nelson I was wishing I was flower counting instead. Speedos hey, that is a personality clue :)

totoro victoria said...

I second that a simple man...

Introvert said...

Leo, we're approaching 200 comments; start preparing the next thread!

dasmo said...

I was bare foot @ Gonzo beach this Sunday...I did have a sweater on though ;-)

subprime11 said...

huxley is trying to make up for his lost attempt on beach at o/b marina. purchase at 1.2m then listed after 400k reno at 2.1m...now can't seem to get 1.5m.

Leo S said...

Leo, we're approaching 200 comments; start preparing the next thread!.

Hey unlike you lot I have to work during the day! :)
But I have some ideas for new posts.

Any suggestions for article topics? Or maybe someone wants to write their own....?

dasmo said...

I nominate JJ with a proof read from introvert...

Just Jack said...

You mean like a hypothetical story on how CMHC could "buy" up some of the high exposure foreclosures and take them off the market?

In that way the marketplace is not swamped with foreclosures and the published foreclosure rate is understated.

I don't think anyone would believe a story like that and I'd just be accused of fear mongering.

Better for Introvert to write something that is grammatically correct and I can add in the substance.

koozdra said...

Very interesting JJ. That definitely sounds like something they would do.

Introvert said...

Better for Introvert to write something that is grammatically correct and I can add in the substance.

LOL

For too long we've lived under the tyranny of content. But with my help, form is making a comeback.

Leo S said...

You mean like a hypothetical story on how CMHC could "buy" up some of the high exposure foreclosures and take them off the market?

Sure why not. Email it to leo.hhv@gmail.com and I'll post it.

DavidL said...

I've updated the data/chart for Eight years of February SFH Sales. It clearly shows how for seven years the trend for the average, six-month average, and median selling price have all nicely followed each other ... until this year.

The chart shows that a larger proportion of expensive homes are selling, while the selling price on the cheaper homes is dropping fast.

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