Also a new measure I'm playing with.. The number of properties that have gone off market in a given month compared to the inventory at the time.
It seems to me that fewer properties are going off market every year. In a strong market that might indicate that the places are selling, but since we know they aren't, my theory is that people are losing confidence that the market will recover. Instead of pulling their properties and waiting for next year, people are hanging on and dropping their prices.
Also low sales and low off market rate == lots of stale listings out there.
Getting closer and closer to my prediction of a 500 median.
ReplyDeletebeklager jeg har ingen kunnskap om hvordan du kan øke hastigheten. Vennligst gi meg beskjed i kort beskrivelse.
ReplyDeleteHuskatalog
and ferdighus
Great charts and analysis, Leo!
ReplyDeleteI also appreciate the "==" ...
We can start doing these for Victoria now.
ReplyDeleteListed: $525,000
Assessed: $633,000
83% of assessed. Surely this is a great deal compared to the assessed value. Surely.
http://www.realtor.ca/propertyDetails.aspx?propertyId=12997170&PidKey=-803176059
"...great future holding property"
ReplyDeleteIs that a thing anymore?
http://www.realtor.ca/propertyDetails.aspx?propertyId=12997188&PidKey=1521215344
@Leo S
ReplyDeleteA quick question about your numbers ... VREB lists the May 2010 SFH mean as $581,250 for all areas, and $594,500 for Greater Victoria ... but you are showing it as $578,667 in your first chart. Why the discrepancy?
Incidentally, according the the BOC the CPI has increased by 6.14% over the past three years - so $578,667 is now worth $614,208.
A quick question about your numbers ... VREB lists the May 2010 SFH mean as $581,250 for all areas, and $594,500 for Greater Victoria ... but you are showing it as $578,667 in your first chart. Why the discrepancy?
ReplyDeleteThere's a 3 month rolling average on that chart to reduce volatility. The monthly medians on their own are too noisy.
i.e. what's marked as May 2010 is actually AVERAGE(MAR2010, APR2010, MAY2010)
ReplyDelete@Leo S
ReplyDeleteThanks for the explanation... I believe that it makes good sense to use a three-month rolling average. Accounting for inflation, the drop in the median SFH since May 2010 is 16.9%.
VREB lists the May 2010 SFH mean as $581,250 for all areas, and $594,500 for Greater Victoria ...
ReplyDeleteNo, that's their median, not the mean (aka average).
Leo is graphing the average (i.e. mean) of 3 monthly medians.
Thanks again Leo. What I'm waiting for is the point where we cross below the bottom in 2009 - it will be interesting to compare the timing with Teranet.
Nice to know that my family has saved over $100,000 by renting since 2010.
ReplyDeleteNo, that's their median, not the mean (aka average).
ReplyDeleteAnd confusingly, although the graph is a 3 month mean of the medians, it has nothing to do with the SFH average.
http://bc.ctvnews.ca/whistler-real-estate-prices-plummet-up-to-68-per-cent-1.1221964
ReplyDelete“Real estate prices at one of B.C.’s most popular getaway spots are sliding downhill, with some properties selling for up to 68 per cent less than a decade ago.”
“Real estate prices at one of B.C.’s most popular getaway spots are sliding downhill, with some properties selling for up to 68 per cent less than a decade ago.”
ReplyDeleteHalf that and get a picture of where Victoria will end up.
Sales in Glanford Area.
ReplyDeleteI have noticed 4 sold signs in my hood, in the last month. Neighbor 3 doors down listed for 3 months, sold to Alberta Family.
With the price reductions and insane interest rates, (2.74 via Island Savings) it must be hard to resist.
Seems to be a slow deflation of this bubble is under way, not an all out crash.
What do the realtors see out there?
I think we are already there by those standards. I've seen some quarter ownership condos at bear mountain go for a fraction of the price compared to what they were at launch time. I'm not such a Halibut on recreational property... maybe a baby bear even.
ReplyDelete@patriotz
ReplyDeleteNo, that's their median, not the mean (aka average).
Yup ... my bad. I knew that it was the "median" but accidentally typed "mean".
@dasmo
ReplyDeleteI'm not such a Halibut on recreational property... maybe a baby bear even/
Evolution? ;-)
Victoria and Langford have fractional ownership condominiums similar to Whistler. And these Victoria/Langford units have been selling at deep discounts from their original purchase/contract price.
ReplyDeleteWith fractional ownership - you are buying a potential income stream from renting the suite. Seasonal factors and efficacy of management play a significant roll in what you pay for these units. The price is mostly dependent on a financial considerations unlike housing that is strongly associated with the physical attributes of the property.
If you are going to buy a fractional ownership condominium you should get the financial statements from the last three years and make your decision on these rather than the sale prices of other fractional ownership condominiums.
Half that and get a picture of where Victoria will end up.
ReplyDeleteHalve.
Full ownership are off 68% too…not just fractional.
ReplyDelete“One 800-square-foot unit at Blackcomb Springs with two bedrooms and two bathrooms, located right on the ski hill, is currently selling for $229,000. In 2004, a similar unit would have cost $579,000.”
That is also 68% off, if you consider it will sell for a little below the $229,000 list.
The amazing part is 68% off 2004 price!! Makes it easy to see 50% off 2010 prices here in Victoria.
"In 2004, a similar unit would have cost $579,000" Do they have evidence of that? $229k for a twenty year old 800 sqft condo on a ski hill is not cheap... Perhaps this is just more marketing to get people to start buying...
ReplyDeletesorry, only half of my brain was working at the moment as I was doing three things at once. Halve it is.
ReplyDeleteStill equals a big drop to come, in my opinion.
Prices up! except the most over priced markets.
ReplyDeletehttp://www.cbc.ca/news/business/story/2013/04/04/royal-lepage-real-estate-survey.html?cmp=rss
By the end of the year Calgary will be pricer than Victoria.
ReplyDeleteI guess there are more high-paying jobs there than here. Pretty beaches only go so far.
ReplyDeleteSeems like the price reductions are gaining speed again.
ReplyDeleteGood news and bad news.
ReplyDeleteHousehold debt grows in February at slowest pace in over a decade: RBC
By the end of the year Calgary will be pricer than Victoria.
ReplyDeleteCool! My--newly retired--mom just sold her house in Calgary. Five days on the market; 98% of asking price.
She's headed to Victoria...
She's headed to Victoria...
ReplyDeleteTell her to buy in now, we're at the bottom. Prices can only go up from here.
This comment has been removed by the author.
ReplyDelete^ Someone hasn't been paying attention. ^
ReplyDeleteTell her to buy in now, we're at the bottom. Prices can only go up from here.
ReplyDeletePrices are probably not at the bottom, but, on the other hand, I don't think they will ever crater.
My mom will probably rent for a while, until she gets a feel for neighbourhoods, prices, and so on.
Introvert - what will you advise her to do in this market, as her loving son?
ReplyDeleteI don't think they will ever crater
ReplyDeleteIntrovert, you would have made a good bear if you didn't join the dark side.
She's headed to Victoria...
ReplyDeleteAsk her to drop in here. We need someone with some clout to keep you in check. :)
Introvert - what will you advise her to do in this market, as her loving son?
ReplyDeleteI'll probably counsel her to take her time and find what's right for her. There's no need to rush; that's for sure.
Introvert, you would have made a good bear if you didn't join the dark side.
ReplyDeleteProbably!
Ask her to drop in here. We need someone with some clout to keep you in check. :)
ReplyDeleteI feel as though I'm already kept well in check by the likes of you ;)
Introvert - this is a great week for us both. So much agreement.
ReplyDeleteIntrovert - this is a great week for us both. So much agreement.
ReplyDeleteI know! It's quite weird.
No worries about Calgary getting ahead of Victoria…confidence just dove as hard there as did canadian stock market :P
ReplyDeletehttp://www.calgaryherald.com/business/Prairies+weakness+weighs+national+consumer+confidence/8158926/story.html
“consumer confidence levels in the Prairies have not been this weak since August 2009.”
“Consumers were asked to give their views on households’ current and expected financial positions, short-term employment outlook and if it’s a good time for making a major purchase.”
mls#321396 went on market yesterday, and is getting offer already today. Nice location and good 0.4 acre lot, solid but a bit small house, asking $689K, $81K below assessment, good value for ten miles point.
ReplyDeleteCrazy how cheap homes are in some US cities. Was looking up Nashville...you can get some solid newer homes in the low 200k range.
ReplyDeletehttp://www.zillow.com/h/3109-Carrington-Ct-Nashville-TN-37218-108753917/
@Al+TOH
ReplyDeleteYou've got me curious... How do you know an offer was made on 3904 Bedford Road (MLS 321396) today? Unless it was you that made the offer!?
@Marco
ReplyDeleteYes, in some parts of the US - it is as if the land is free while the construction cost is only about $100/sq.ft. for a good quality home (about half of what it costs here).
@DavidL,
ReplyDeleteNot us, but one of our friends is very interested, and his Realtor told him that the listing agent was getting an offer yesterday.
"Economists" were expecting a gain of 60,000 jobs, in reality 54,500 were lost, they were a little off.
ReplyDeleteAt least interest rates are low.
http://www.cbc.ca/news/business/story/2013/04/05/business-jobs-canada.html?cmp=rss
@Al + TOH
ReplyDeleteI know the owner... There has been a flurry of activity since the property was listed. There's an open house Saturday from 2 PM to 4 PM.
@Koozdra
ReplyDeleteFrom the CBC article: "Much of the losses came among those in the core working-age group of those between 25 and 54.". Hmmm... same demographic as most mortgage holders.
"“The combination of low mortgage rates and flat home prices, against a background of general economic improvement across the nation, is not something we’ve seen before,” he said. “Typically, one of these variables is moving hard in an opposite direction.”"
ReplyDeleteGeneral economic improvement? What country is he talking about?
http://www.timescolonist.com/business/housing-prices-drop-in-victoria-and-vancouver-bucking-national-trend-1.104497
@DavidL,
ReplyDeleteHmm, maybe someone is trying to avoid open house-> possible multiple offers scenario. In any case, it probably will go fast and hope that our friend will have the change to give it a shot.
New listings appear to be taking off like a rocket. Currently, for every 20 new listings, I'm seeing 10 price reductions and 5 sales in my PCS.
ReplyDelete@koozdra
ReplyDeleteJuxtapose Phil Soper's comment: "general economic improvement across the nation" with this news:
Canada's trade gap widens to $1B
Statistics Canada says the country's merchandise trade deficit with the world rose to $1 billion in February from $746 million in January as exports decreased 0.6 per cent while imports increased marginally.
@Marco
ReplyDeleteMarko.
Bad jobs numbers in both Canada and the U.S. this morning. More real-time evidence that interest rates will not go up any time soon.
ReplyDeleteIf Victoria's housing bubble is going to pop in the near future, interest rates won't be a factor.
"More real-time evidence that interest rates will not go up any time soon."
ReplyDeleteEvidence? Are interest rates proportional to the unemployment rate?
Evidence? Are interest rates proportional to the unemployment rate?
ReplyDeletePretty much. Interest rates don't tend to go up when the economy is slow (until the economy is so bad that bond holders demand more, but we are quite far from that).
"until the economy is so bad that bond holders demand more, but we are quite far from that"
ReplyDeletePerhaps.
Canada has been seen as a safe haven. Need a safe place to park your money? Canada. If (when) our housing market goes belly up and we start seeing economic contractions this will no longer be the case. This can happen very quickly.
Another thing to consider is the US starting it's rise out of recession. If they raise their rates, Canada will do the same.
The US has pretty much stated that their will be no change until 2014. Plus it's at .25 % and has been for years!
ReplyDeleteUS FED:
ReplyDeleteWe'll stop printing billions of dollars per month to keep the interest rates low once the economy recovers.
The recovery is schedule for 2014.
“Employment in BC was down 14,800, off-setting most of the increase in February, but the situation is actually worse; 22,400 full-time positions were lost while 7,500 lower-quality part-time jobs were added.”
ReplyDeletehttp://www.news1130.com/2013/04/05/canada-loses-54500-jobs-in-march-unemployment-rises-to-7-2-per-cent-2/
Speaking to interest rates, the way it was put to me is “ZIRP means checkmate”.
Owning a home is more than an investment. Home ownership is a statement of a person's self.
ReplyDeleteIt's better to be income poor and own a home than to have hundreds of thousands of dollars in a bank account and be a renter.
And that's the case of a lady that I spoke with this morning. She's turned 60 and over the last 30 years has managed to pay off her home at the cost of having no savings, no RRSP and no investments.
Her hours have now been cut back to 4 hours a week and the only other income she has is renting a converted attic suite in her home. Her unemployed 32 year old son lives in the basement and comes up for meals between Nintendo games. She's suffering with the house bills and refuses to increase the rent - as she is worried her long time tenant will leave. And at her age she has fears of a stranger living in her home.
Her house would sell for $650,000. She could sell the home, invest the money and rent a fantastic condominium with the money and never run out of money for the rest of her life. The son could finally get a job. And with her frugality never have money issues again.
Here is a woman that has no life skills, education or outside interests. A person who has spent the last 30 years, after divorcing her husband and getting the home in the settlement, living on part time minimum wages, has only been off the island for a holiday twice in her life. A person that in another society would have been set adrift on an ice flow by now.
But in Victoria, this person has won the lottery in life. She just refuses to redeem the ticket. And there are hundreds of people like her out there.
At times I wonder about these people, who may never had more than a couple of grand in their bank account in their lives. That they have no understanding of money and how $500,000 can completely change their lives. That they have lived a misery lifestyle just to own a stack of rotting timbers and cracked single glazed windows held together by hundred year old nails.
Sounds like my girlfriend's mom. Bought a house in Winnipeg in 2005 for $180,000. It can generate a bidding war if listed at $300,000.
ReplyDeleteTime to sell! These are huge amounts of money.
JJ: Sounds to me if that woman truly has had such a lousy life, (learning all this after speaking with her for only a few minutes), it is probably because her spoiled rotten son brought neither her or her ex any joy after the age of 13.
ReplyDeleteAt least the ex knew what he was doing....took his share, disowned the kid and ran like a bat out of hell.
I would say that the most likely scenario was the husband took the cash ($500K?) and GAVE her the house and kid. He is probably with a blond on a cruise right now lol.
Anyway the spoiled kid is probably the one that won't (allow) her to sell the house. He knows what side of the bread is buttered on....and he wants to eventually inherit that home with the in-law suite.
@alexandrahere - I am hazarding a guess that you are not blonde.
ReplyDeleteI agree that the son needs to get it together, but it seems like apathy runs deep these days.
Interesting, From VRERA:
ReplyDelete“She said the market was dead in Victoria and that it would remain so for a very long time. I asked how she knew. Her answer was fascinating and should scare the pants off the real estate crowd.”
Posted on 2 April 2013 | 8 Comments
“Yesterday two old friends, J & M, from Victoria, mid 50′s, both very bright and mid level bureaucrats at separate provincial government departments came to visit us in the Comox Valley. At one point the topic moved to real estate. I began to say that the market was dead here when J interjected that it is the same in Victoria and that it would remain so for a very long time. I was surprised by her response and asked how she knew this because I know that neither of them reads any of the real estate bear blogs. Their answer was fascinating and should scare the pants off the real estate crowd.
First, both live in Townhouses and J is the head of her strata council (46 units). She said that last year about 7 units sold. This year one of the most desireable units was listed and got no inquiries at all. It was pulled. In addition one of the vendors of a unit last year did want to buy back in but could only do so with a 0/40 mortgage, which is of course no longer available. She had no idea what he had done with the equity from the sale.
Second both pointed out that their incomes have remained largely static for years but that housing prices and strata fees (not to mention special assessments) have increased relentlessly to the point where they felt prices are ridiculous relative to income. J was of the opinion that the townhouse unit in which she lives has about $60K of material in it and yet these units were until recently selling for $300k plus. She felt that the spread between material cost and selling price was indefensible. J also pointed out that despite being mortgage free her strata fees and hydro per month were in excess of $500, the better part of a mortgage payment not that long ago.
Third J said that the price of real estate would be down basically forever because our generation had had few children, overall. As a result who was going to buy our houses when we depart for the great hereafter?
Fourth both believe that the potential sales price of their own units have decreased substantially in the past year and will probably continue to decrease but they intend to stay put. They do not see any point, for example, in selling and then renting despite knowing that prices are inflated vis a vis rent.
Fifth both pointed out that they work at very large institutions and that they, of course, interact with many of their fellow employees. One of the constant topics is real estate and these days the virtual impossibility of finding buyers for the units that their fellow employees have for sale. They report that the view of the majority of their fellow employees is similar to their own – real estate is dead.
Finally, and very ironically, at least for most of us at this site, both get most of their news from CBC and CTV. Their overall impression of reports on both channels was that the real estate market is collapsing.”
It was more like 40 minutes of listening torture.
ReplyDeleteThe husband left when he found out the kid wasn't his a long time ago. The home was only worth a third of what it is today.
But, the point was that people have an extreme difficulty in changing their habits after so many years. That the thought of being "homeless" was more terrifying to her than living in poverty. This person cried with the thought of selling her home. Maybe she can understand a house. She can see it, she can touch it, she can live in it. But half a million dollars cash has very little meaning to her.
Half a million dollars cash to others might mean freedom, change and opportunity. To her, these things might be frightening.
On the other hand, my neighbor is also sixty. She wants to quit the job she hates and has done for the last 20 years, sell the home and move back to a small town just outside of Toronto. After 20 years in BC, the kids are now grown and gone and she hates BC. She travels to Vegas, has a boyfriend and doesn't want the bother of cutting lawns, painting decks and cutting out dry rot. To her a condo and couple hundred grand in a bank account is a good thing. And in her words the worst thing that can happen to you is to die with a hundred grand left in the bank.
"She said the market was dead in Victoria and that it would remain so for a very long time. I asked how she knew. Her answer was fascinating and should scare the pants off the real estate crowd."
ReplyDeleteIt all sounds pretty average these days. Not shocked or scared.
Back to real estate. And a look at some re-sales.
ReplyDelete1,700 square foot rancher on a quarter acre cul-de-sac lot in Colwood sold October 2006 for $380,000.
Listed for the last 280 days at $469,000 sold this week at $410,000
And what can you get for $275,000 these days. How about a 2,200 square foot recently updated home on an acre that backs onto greenspace 40 minutes drive (20 minutes by crotch rocket) from Victoria City. Assessed last year at $393,000.
Of course, for the umpteenth time - these sales are not Victoria. Although the people that bought and lived in them likely commuted to work and shopped at Victoria umpteen times too.
We are approaching 700 house listing just in the core districts. Another 600 in the Western Communities and 200 in Saanich Pen. House sales for the last month drizzled in at around 150, 60 and 35 respectively. House sales are down 10 percent from this time last year.
ReplyDeleteCondos for sale in the core are at 670. The Westshore has about 160 and the Pen has almost 85. Sales are 100, 20 and almost 10 respectively. About a 15% drop from last year.
This year it has taken since November 13, 2012 to amass 500 home sales in the Victoria Core. That makes a median price for city dwellers of $561,500. Which is about a cost of $266 for the area under the average sized waste basket in your home.
The year before, to reach 500 sales by April began on December 10. The median price was $580,000 or about $279 a square foot.
Averaged over the last year, the typcial home lost $1,550 a month in value. So if you're a landlord renting the typical home for $1,550 a month - how much are you making on your investment?
Spring is the time that Robins and Starlings find mates, build a nest and lay their eggs. It seems this season the male Robins and Sparrows are finding work in other provinces and the need for nests are way down. Spring has sprung and the only thing that has laid an egg is the market.
@Just Jack
ReplyDeleteVery interesting statistics ... Thanks for computing and sharing!
Averaged over the last year, the typcial home lost $1,550 a month in value.
ReplyDeletePrices go up; prices go down. It's an imaginary loss until the house is actually sold. Selling is usually optional.
". J was of the opinion that the townhouse unit in which she lives has about $60K of material in it and yet these units were until recently selling for $300k plus. She felt that the spread between material cost and selling price was indefensible."
ReplyDeleteI've seen this time and time again. It's why I like older houses. They were built before the era of branded luxury. Materials just were. To save money you reduced ornamentation...
Yesterday two old friends, J & M, from Victoria, mid 50′s, both very bright and mid level bureaucrats at separate provincial government departments came to visit us in the Comox Valley.
ReplyDeleteJ was of the opinion that the townhouse unit in which she lives has about $60K of material in it and yet these units were until recently selling for $300k plus. She felt that the spread between material cost and selling price was indefensible. J
I had to laugh reading this. Maybe these "very bright" provincial government employees should leave their jobs and go into the development business?
Second both pointed out that their incomes have remained largely static for years but that housing prices and strata fees (not to mention special assessments) have increased relentlessly to the point where they felt prices are ridiculous relative to income.
ReplyDeleteMid-level provincial government bureaucrats feel they are entitled to a house on a single salary? What's new? I guess combining a flex day with a 4 day long weekend to make for a 5 day weekend is not quite enough to realize how lucky one is?
"Mid-level provincial government bureaucrats feel they are entitled to a house on a single salary?"
ReplyDeleteHas such a thing never existed?
Third J said that the price of real estate would be down basically forever because our generation had had few children, overall. As a result who was going to buy our houses when we depart for the great hereafter?
ReplyDeleteI am seeing a different effect. Baby boomers, some already well to do, inheriting a lot of cash as it is not being split up as much via the estate as in previous generations. When the baby boomers kick it they'll be passing their wealth onto even less kids on average.
At the end of the day population is still growing so I don't think we'll have vacant houses kicking around either anytime soon.
"... I don't think we'll have vacant houses kicking around either anytime soon"
ReplyDeleteYou don't have to wait. There are a lot of vacant houses out there right now. "Investments".
All houses eventually sell.
ReplyDeleteYou can't take it with you.
Can anybody actually explain to me why things are more expensive now?
ReplyDeleteHave we lost some kind of right to have single earner families that can buy homes?
All bulls seem to accept that this is a good thing. Why?
Why do houses have to cost so much?
Lets here the justification.
You don't have to wait. There are a lot of vacant houses out there right now.
ReplyDeleteNot really. Homes currently on the market make up a small percentage of housing inventory and of those on the market the majority are occupied. When you multiply two fractions the resulting number tends to be fairly small.
Have we lost some kind of right to have single earner families that can buy homes?
ReplyDeleteAll bulls seem to accept that this is a good thing. Why?
Why do houses have to cost so much?
It is a really bad thing. A strong middle class is what has made Canada a great place to live. I don't think anyone can or would argue that it is a good thing. It isn't, but you know what, reality sucks and you adapt.
Why do houses have to cost so much? In Victoria a lot of it has to do with bureaucracy and environmental concerns and the list of fees is very very long. Were there HPO fees 20 years ago? No. Did it cost 5k-30k to remove asbestos from a tear down 10 years ago? No. Did a simple house design in the City of Victoria require an engineer to review and the plans and inspect it 5 years ago? No. Etc., Etc., Etc.
There has been so much added in the last 10 years it would take a long time to list.
When you have to take a 20k cheque to the City of Victoria to get the paperwork to build a home and to connect a new line to the sewer someone has to pay for it.
I brought it up a month ago but I recently saw a proposal in Oak Bay where the city wanted 61k to hook up sewer to a building lot! That is just the one thing.
ReplyDelete"Al + TOH said...
ReplyDeletemls#321396 went on market yesterday, and is getting offer already today. Nice location and good 0.4 acre lot, solid but a bit small house, asking $689K, $81K below assessment, good value for ten miles point."
Conditionally sold now, but not to our friend :-( On the market for just two short days! So good properties do still go fast.
So bureaucracy fees are responsible for the current prices?
ReplyDeleteWhat if the bureaucracy prices are a function of the cost of houses? Oak Bay can charge anything it wants. You will pay it. You have no choice. People don't scoff at the prices because they are convinced that their "investment" will only go up.
Could it be the result of the biggest debt fuelled speculative buying frenzy this country has seen in it's history?
"On the market for just two short days! So good properties do still go fast"
ReplyDeleteSomeone's payday.
So what you are saying is if the real estate frenzy dies the HPO office will shut down and not collect fees from builders, WCB will go away, and all other essentially fixed costs introduced over the last 10 years will just disappear? The new more expensive building code will revert to the older cheaper one?
ReplyDelete@koozdra said...
ReplyDelete"Someone's payday."
Were you there seeing the property yourself? We were there and know the value and so do others. Unfortunately my friend is not in town so he missed the chance.
"The new more expensive building code will revert to the older cheaper one?"
ReplyDeleteAfter the city of Victoria declares bankruptcy. But don't worry, that won't happen. There no precedent for that type of thing happening after a housing crash.
Baby boomers, some already well to do, inheriting a lot of cash as it is not being split up as much via the estate as in previous generations.
ReplyDeleteThis makes no sense. Given that there are lots of baby boomers, there would be more splitting of wealth, not less.
Also I suspect many baby boomers already inherited their parents' wealth. And given the national statistics on net worth, it seems it didn't do them much good.
This makes no sense. Given that there are lots of baby boomers, there would be more splitting of wealth, not less.
ReplyDeleteSo baby boomer parents had fewer siblings then baby boomers themselves?
Also I suspect many baby boomers already inherited their parents' wealth. And given the national statistics on net worth, it seems it didn't do them much good.
ReplyDeleteA bit of a difference in terms of inheriting a tear down house in Winnipeg or one in Oak Bay.
As in the city of Victoria bankruptcy will trigger the amalgamation talks. Once the new municipal government is established, fees structures will be altered.
ReplyDeleteWhy do houses have to cost so much? In Victoria a lot of it has to do with bureaucracy and environmental concerns and the list of fees is very very long.
ReplyDeleteI'm not sure I buy this. Sure for new houses, but I can't see this having a large effect on the 95% of houses for sale that haven't been built in the last 15 years.
So baby boomer parents had fewer siblings then baby boomers themselves?
ReplyDeleteCorrect.
Baby boomer's parents would have been born around 1920/1930 where the birth rate, around 3.5, was lower than during the baby boom (close to 4)
Not that I am defending the story, but they do state that they are both mid-level bureaucrats. So, two incomes.
ReplyDeleteMaterial costs could go down, as could trade costs. Look at the example yesterday of Nashville.
House prices are too high. People are now becoming aware. Even TC had a vreb statement today that bingalows lost 3.9% since the start of the year.
Houses will soon be much cheaper. Don't catch the knife.
So what you are saying is if the real estate frenzy dies the HPO office will shut down and not collect fees from builders, WCB will go away, and all other essentially fixed costs introduced over the last 10 years will just disappear? The new more expensive building code will revert to the older cheaper one?
ReplyDeleteProbably not entirely, but if construction is really in the tank and the industry is starting to exert political pressure I wouldn't be surprised to see some relaxed restrictions or incentives to stimulate new construction.
Why do houses have to cost so much?
ReplyDeleteThey don't. Houses sell for what buyers are willing to pay for them. That's all there is to it.
The invisible hand looks a lot like Flaherty's paws.
ReplyDeleteAfter the city of Victoria declares bankruptcy. But don't worry, that won't happen. There no precedent for that type of thing happening after a housing crash.
ReplyDeleteIn Canada, no. Not since WWII, anyway.
The laws regulating municipal finance in BC make it virtually impossible for a municipality to get into a position where it would likely go into bankruptcy. Even single industry towns that have lost their primary employer, such as Kimberley.
Baby boomer's parents would have been born around 1920/1930 where the birth rate, around 3.5, was lower than during the baby boom (close to 4)
ReplyDeleteThe last boomers were born in 1965 which means that most younger boomers have parents born from 1930 into early WWII, which had the lowest birthrate ever before the birth control era.
Actually, some babyboomers had babyboomers.
ReplyDeleteSeems to be quite a few new listings and price reductions in the last few days. A flood of listings may happen any time like penguins on the iceberg..just milling around anxiously waiting then one dives in they all follow.
ReplyDeleteMaterial costs could go down, as could trade costs. Look at the example yesterday of Nashville.
ReplyDeleteYou can buy a lot in Nashville for 30k; whereas, in Victoria there is almost nothing under 300k. That is the biggest difference.
I'm not sure I buy this. Sure for new houses, but I can't see this having a large effect on the 95% of houses for sale that haven't been built in the last 15 years.
But it does have an effect. If no new homes aren't being built due to costs the supply of newer homes remains limited. People do cross shop brand new with 10 years old or newer.
SHUT UP, SAVERS!
ReplyDeleteIt seems that nobody is complaining about this here because all of this is masked by our housing bubble. People seeing their "net worth" rising is the same thing as making money. Unfortunately that is blatantly wrong.
You can buy a lot in Nashville for 30k; whereas, in Victoria there is almost nothing under 300k. That is the biggest difference.
ReplyDeleteAnd that's what declines in a correction, the land. The value of the house itself is mostly set by construction costs and fees. Even with zero demand it will still cost you about the same to get a house built. The land has no inherent floor, so that component decreases, and it is by far the largest component.
The "Shut Up, Savers!" article is excellent. Thanks, koozdra. I recommend that everyone here read it.
ReplyDelete@Koozdra, @Introvert
ReplyDeleteThe article is interesting, but I wholeheartedly disagree with the following sentiment:
But, if you look at the U.S. economy, you don’t see any of the signs you’d expect if the Fed were acting recklessly: the money supply is not growing rapidly, and inflation is trivially low.
The inflation rate is masked by how the CPI is calculated. As it excludes the eight most volatile items (including food, heating oil, transportation and interest rates) it does not accurately reflect the "real" inflation rate that affects each of our personal finances.
Times don't seem super inflationary to me. But what the hell do I know?
ReplyDeleteAnd that's what declines in a correction, the land. The value of the house itself is mostly set by construction costs and fees. Even with zero demand it will still cost you about the same to get a house built. The land has no inherent floor, so that component decreases, and it is by far the largest component.
ReplyDeleteBut land in the core is still at 2010 peak prices. There isn't enough inventory for land to correct. The demand is always there from well to do individuals wanting to build brand new.
The demand is always there from well to do individuals wanting to build brand new.
ReplyDeleteUntil it isn't. People were saying the same thing about Seattle.
Well, when someone finds me a 50' wide, 5500 sq/ft or bigger lot in the core for 300k or under I am ready to buy.
ReplyDelete"Well, when someone finds me a 50' wide, 5500 sq/ft or bigger lot in the core for 300k or under I am ready to buy."
ReplyDeleteUnless you over extend yourself on presales before then.
That size lot in Oak Bay is sub $500K now, so it is lowering.
ReplyDeleteexample: 6300 sq ft lot, 2072 Newton St.
ReplyDeleteBut land in the core is still at 2010 peak prices. There isn't enough inventory for land to correct. The demand is always there from well to do individuals wanting to build brand new.
ReplyDeleteI don't know where you would get this information from, but this would be an interesting graph. It would show if land was going down in value or it was natural depreciation of house value that was causing the recent lower prices in the Victoria core.
According my 2013 assessment, the 1939 era building on my property is assessed at 20k...
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteexample: 6300 sq ft lot, 2072 Newton St.
ReplyDelete520k for a lot? (factoring in cost to demolish the home).
I don't know where you would get this information from, but this would be an interesting graph. It would show if land was going down in value or it was natural depreciation of house value that was causing the recent lower prices in the Victoria core.
ReplyDeleteThere are so few building lot sales in the core and I know enough about construction that I can analyze each sale on a case by case basis (lot dimensions, zoning, blasting required, demolish required, etc.).
Lots in the core are at 2010 peak price based on the last few sales such as a 45' wide lot on Ryan Street going for $364,000.
You can't analyze it via a graph too well. There is a huge difference in terms of quality of lot just based on dimensions. A 50' wide 6,000 sq/ft lot is a lot nicer than a 45' wide 6000 sq/ft lot because the offsets are 15' and you can do a lot more with a 35' wide house versus 30' wide house. Many other factors.
But land in the core is still at 2010 peak prices.
ReplyDeleteIf house prices in the core are falling, then land prices in the core are certainly falling, since the value of the improvements is in most cases a minor component of the total value.
Houses sell for what buyers are willing to pay for them.
ReplyDeleteWhich for most first-time buyers seems to be as much as they can possibly borrow.
But that could change if it ever dawns on most first-time buyers that in a falling market the amount they need to borrow will be less if they wait for something that looks like a bottom. Or if they offer now only what they think it would be reasonable to pay in light of the probable future decline in value.
But land in the core is still at 2010 peak prices.
ReplyDeleteLand is everything. The tiny percentage of land that is empty doesn't represent land values.
As CS said, if prices are falling then land value is falling. Empty lots are a different (and tiny) sub-market.
if prices are falling then land value is falling.
ReplyDeleteOr the value of improvements is falling? The average 50'x110' lot in Fernwood had held at approximately 340k+teardown costs for the last 4 years.
If a bungalow falls from 500k to 450k all the value has been lost in the improvements. The market value of the lot itself is still 340k.
since the value of the improvements is in most cases a minor component of the total value.
ReplyDeleteWhen you start looking at tear down homes the improvements are actually a negative component. A tear down home decrease the value of the property by 20k-30k but BC assessments will attribute improvement value at 50k-100k.
We can argue all day about what is falling, land or improvements. I've put the challenge out there.
ReplyDeleteIn 2010 (peak of market) I can find examples of 50' wide lots in Fernwood going for 340k. If someone can find me one for 300k I am ready to buy; however, reality is you would be lucky to find one for 340k let alone 300k.
"single family home"
ReplyDeletehttp://www.realtor.ca/propertyDetails.aspx?propertyId=12846302&PidKey=2071082551
In 2010 (peak of market) I can find examples of 50' wide lots in Fernwood going for 340k. If someone can find me one for 300k I am ready to buy; however, reality is you would be lucky to find one for 340k let alone 300k.
ReplyDeleteBut, $40K at 2.89% over 25 yr amortization is only $187 per month. Are you going to let $187 stand between you and your dreams? It is like a latte a day! Buy now or be priced out forever.
2560 Dunlevy sold for $610,000 ($10,000 over asking). Definitely not worth it.
ReplyDeleteI have to ask (being a long time lurker on this board), what is the problem with land availability on the Island? It seems to me that we are simply constrained land wise by the availability of efficient high speed transportation - given the number of people that live on the Island there should be plenty of land.
ReplyDeletesimplistic view I know but I struggle with any comments about there being no land here.
If a bungalow falls from 500k to 450k all the value has been lost in the improvements. The market value of the lot itself is still 340k.
ReplyDeleteI don't buy that. If a bungalow falls from 500 to 450 the improvements have not depreciated substantially. It's still the same house. To replace it would cost still about the same. What decreased by 50k was the land underneath it.
simplistic view I know but I struggle with any comments about there being no land here.
ReplyDeleteThere is tons of land. The argument that there is no empty land in the core is more or less meaningless. Every city core is exactly like that. The land is on the outskirts, and Langford/Colwood is definitely not running out of land.
The way I look at it is value to live in and cost to remodel vs. value as land plus cost of removal.
ReplyDeleteI would pay more for a bare lot with services than I would for a tear-down.
The value of improvements is negative if you are going to tear down. The problem is you are competing with remodellers who will find value in the improvement.
That said, I'm probably never going to build new. I worry too much about off-gassing and, unlike Marko, am not skilled enough to create enough value through sweat equity/family connections on a new build.
Renos are better ROI for me.
“We can argue all day about what is falling, land or improvements.”
ReplyDeleteMarko, here is one of the best city examples of how far land values could tumble in Brit-toria.
It was posted on VCI recently and is very much comparable in city size, geographical land constraints, economy and government. The article explains how a house resold recently for 80 percent off.
If you think it was the improvements that fell 80%, you`re a mad hatter.
Rates didn’t skyrocket, neither did unemployment, there is a huge percentage of people there who have safe government jobs with pensions. They didn’t build more land and for those who don’t know the geography, Belfast is surrounded by the Irish Sea and an agriculture land reserve where there isn’t sea.
Sentiment just changed and the prices fell and fell. I will also add that my friend was considered a kook when he quoted the rare economist who called for a massive price correction. People just couldn’t conceive of such an outcome.
If you’re interested in the article it’s available here”
@Marko "A tear down home decrease the value of the property by 20k-30k but BC assessments will attribute improvement value at 50k-100k." My "tear down" "building" is assessed at 20k. It's actually worth that since it has been paying for the mortgage while we plan to build. So, I wouldn't say it decreases the value. It actually works out to paying approximately 20k on the principle over the two years it will be rented...
ReplyDeleteIf a bungalow falls from 500 to 450 the improvements have not depreciated substantially. It's still the same house. To replace it would cost still about the same. What decreased by 50k was the land underneath it.
ReplyDeleteWhy haven't tear downs dropped in value if the homes are losing value in the land underneath them?
In Fernwood, almost all homes whether they are worth 400k or 900k have the same 50'x'110' lot worth the same amount; therefore, if a 500k home loses 50k in value due to loss in land value wouldn't the teardown that use to be 340k drop to 290k?
Hasn't happened. Homes have dropped significantly while tear downs and vacant lots are still going for 2010 prices.
The best deal I have seen on a lot/tear down in the last three years has been 2640 Roseberry at $367,000 and ironically they are renting it out. If anyone has seen anything better please feel free to share :)
ReplyDeleteWhy haven't tear downs dropped in value if the homes are losing value in the land underneath them?
ReplyDeleteCould be many reasons. Either there's a floor where buying as rentals still makes sense (many tear downs are not actually torn down, and lower priced properties cash flow better as rentals in Victoria).
Or it's a completely different segment of buyers. Prices are dropping partly because CMHC rules are being tightened, but that wouldn't apply as much to developers that are looking to build. So the people that can still get credit are still buying.
In Fernwood, almost all homes whether they are worth 400k or 900k have the same 50'x'110' lot worth the same amount
How do you figure? Just because the dimensions are the same doesn't mean the lot is worth the same. Proximity to busy street, surrounding amenities, quality of surrounding houses, etc etc. I bet there are huge differences in land value in Fernwood even for the same sizes.
2640 Roseberry at $367,000 and ironically they are renting it out
ReplyDeleteCase in point. A rentable $367,000 place might still make sense to buy in today's market. Higher priced properties make less and less sense to buy as a rental.
How do you figure? Just because the dimensions are the same doesn't mean the lot is worth the same. Proximity to busy street, surrounding amenities, quality of surrounding houses, etc etc. I bet there are huge differences in land value in Fernwood even for the same sizes.
ReplyDeleteMy point is in Fernwood you can have a 400k home next to a 900k home, same lots. I don't buy the argument that a drop in value is due to land. If the market drops 10% the 400k home is dropping 40k and the 900k home is dropping 90k but the lots are worth the same. How does that work?
I think most of the losses have been in the improvements in my opinion.
Case in point. A rentable $367,000 place might still make sense to buy in today's market. Higher priced properties make less and less sense to buy as a rental.
ReplyDeleteA bit more to that story....
Tear downs rarely make sense as rental properties. Most tear downs maybe you can get $1,000 to $1,400? There is property that recently sold on Richmond for $442,000 and it is being rented for $2,400 per month.
Makes a lot more sense to buy something a bit above a tear down for a rental property.
ReplyDeleteSaw four open houses in North OB today - from the great to the less-than-great. One house was busy, the others not so much.
ReplyDeleteSeems to be investment-type people popping through these houses a lot. Rarely do I ever see a family and these are all family homes.
My point is in Fernwood you can have a 400k home next to a 900k home
ReplyDeleteI'd like to see that. Exceedingly rare.
I don't buy the argument that a drop in value is due to land
As I understand it, the "improvements" component of the assessment is supposed to be the actual depreciated value of the improvements, not the market value.
Maybe that's not the case, but if it isn't the distinction is completely arbitrary. If "improvements" doesn't actually refer to the value (ie depreciated replacement costs) of the improvements, but actually some mish-mash the improvements and market value, then it is pretty much meaningless.
If the land was free and there was zero demand, it would still cost you about the same to get a house built. Whether the market is up 50% or down 70% doesn't affect the actual value of improvements much (outside of externalities like cheaper labour, etc).
Simple man, did you make it through 2560 Dunlevy St when they had an open house? Just went 10k over asking.
ReplyDeleteBear Mountain is hurting. A 3,700 sq/ft home on Nicklaus Drive just went for $640,000. Lowest sale price ever for Nicklaus Drive.
ReplyDeleteWhat would I do without this blog at my open houses? :)
ReplyDelete@Marko - yes, saw that house on Dunlevy. Was pretty nice, with an original kitchen that still had a lot of life left in it. Unfinished basement with a seemingly great foundation.
ReplyDeleteToo small for us - and we realized that we need a larger yard for our brood.
IMO they paid too much. But, still went for $33 below assessment.
2560 Dunlevy St went for 10K over asking and 33K below the BC assessment authority valuation. I would say that was land value. Or is someone offering a comparable standard sized lot in OB for less than 650K? I don't think so.
ReplyDelete@Just Jack:
ReplyDeleteAt times I wonder about these people, who may never had more than a couple of grand in their bank account in their lives. That they have no understanding of money and how $500,000 can completely change their lives. That they have lived a misery lifestyle just to own a stack of rotting timbers and cracked single glazed windows held together by hundred year old nails.
But what is one to think of those young people who never had more than a few thousand in their bank account who "have no understanding of money and how $500,000 [in debt] can completely change their lives," debt for the privilege of owning a "stack of rotting timbers and cracked single glazed windows held together by hundred year old nails."
In this market, everyone seems nuts.
Seems to be investment-type people popping through these houses a lot.
ReplyDeleteYeah, the only person I saw attending the open house on our block -- a 1950's bung that could be turned into a museum, everything original, including the turquoise blue vinyl covered corner bench seat in the dining nook -- was a bald guy in shiny black Mecedes only a little shorter than an aircraft carrier.
CS - did he have a pink shirt on and glasses?
ReplyDeleteWas offered a 35 yr mortgage today since I could put more than 20% down. Seemed odd. How times have changed. Or not.
ReplyDelete"In this market, everyone seems nuts."
ReplyDeleteSo true.
This is a new one. My wife got propositioned by a realtor in Cooks Village this afternoon (to buy a condo).
ReplyDeleteI've never seen that before. Things can't be good out there.
A few months ago I got a cold call from a realtor. Not sure how she got my number. When I said I wasn't interested she asked if I knew anybody that wanted to "upgrade" to a condo.
ReplyDeletepsst, wanna buy a condo?
ReplyDeleteCapitalism at it's finest. Maximize profits even if it means Canadian jobs. Good thing the big six are too big to fail.
ReplyDeleteRBC replaces Canadian staff with foreign workers
Patriotz said:
ReplyDelete"The laws regulating municipal finance in BC make it virtually impossible for a municipality to get into a position where it would likely go into bankruptcy. "
Don't bet on it!!! Ever heard of 'Infrastructure Debt'?
Granted a municipality can't run an annual deficit, they can incur debt in other ways. For example,
Mayor Fortin and his socialist party cohorts in Victoria are incurring huge infrastructure debt each year that will need to be suddenly paid by the city taxpayers someday.
Infrastructure debt is incurred whenever the municipality ignores or postpones critical infrastructure repairs or maintenance. For example underground pipes are not being properly maintained or upgraded on a yearly basis where the oldest should be replaced each year, and the annual Autumn tree leaves are not being quickly removed from city streets, so consequently they are being washed into the storm drains and probably slowly clogging the old cracked pipes - just like the clogged perimeter drains around an old house that slowly accumulate soil and debris until the basement floods. Then a non-budgeted emergency drain upgrade is required when the bank account is empty.
Saanich's Mayor Leonard has a very proactive infrastructure maintenance and upgrade schedule which works well to ensure that no infrastructure debt is incurred.
The infrastructure neglect in Victoria could bankrupt the city in 10 to 15 years.
BC municipalities are required by law to levy whatever property tax rate is required to balance the current budget, including debt servicing costs.
ReplyDeleteIf debt servicing costs increase to the extent that property taxes have to double to pay them, that is exactly what will happen. I don't think that will happen, because Victoria's debt is increasing nowhere near that fast.
And don't tell me that Victoria homeowners are going to walk away from their properties just because property taxes go up. Even if they doubled, they would still be quite reasonable by North American standards.
This comment has been removed by the author.
ReplyDeleteCS - did he have a pink shirt on and glasses?
ReplyDeletePlot twist: it was a simple man.
This is a new one. My wife got propositioned by a realtor in Cooks Village this afternoon (to buy a condo).
ReplyDeleteI've never seen that before. Things can't be good out there.
Whaaat?? Total randomly?
Plot twist: it was a simple man.
ReplyDeleteNo, but I saw the bald man with black Mercedes a few times and he had a pink shirt and frameless glasses.
You know how it is. You go out to buy milk and come back with paper towels, cookies, peppers, a few condos...
ReplyDelete@Mark,
ReplyDeleteYes, we were just walking home - I was in front about 10 feet because I had to run into a store and a saw a realtor with a ridiculous amount of signs and he was pacing around the street corner.
When my wife passed him he just came out with: "Can I interest you in a condo"?
Amazing - although anecdotal there sure seems to be a ridiculous amount of for sale signs out there right now.
Re: the guy in the shiny black Merc.
ReplyDeleteSorry, dunno about the shirt. I only glimpsed the sunlight reflected off the top of his head as he drove by.
One thing I've been wondering about is why is it, if stocks are yielding an average of 6 to 7%, that mortgage money is available at only 2.75%?
The answer, it seems is that banks can create money for mortgages out of thin air, but not for their own investment purposes, so why not do the mortgages.
The return on mortgages is not great but there is no risk as that has been assumed by the government.
But even better, mortgages can be rehypothecated in London, i.e., use as collateral for loans which the banks can then invest in stocks or whatever.
So although our banks cannot create money for their own use directly, by creating cheap mortgages guaranteed by the taxpayer, they indirectly raise investment capital for themselves.
Under those circumstances, the pressure to continue ballooning the RE market must be huge.
I'm not sure I have this exactly straight, so I'd be interested in comments or corrections.
Two houses just sold in North OB:
ReplyDelete2697 Lincoln, assessed $830K
2920 Lansdowne, assessed at 1,122K.
Does anyone have the sale prices?
@CS - Lincoln = $820K.
ReplyDeleteLansdowne, I don't know as it is above my watched range.
Lansdowne showing as current.
ReplyDeleteHave a few acquaintances behind amateur flips that are on the market or arriving soon. A day late and a buck short. I think they know that but are still a little deluded on the end result. Any thoughts on what this one is worth?
ReplyDeletehttp://www.realtor.ca/propertyDetails.aspx?propertyId=12963383&PidKey=-252961730
One thing I've been wondering about is why is it, if stocks are yielding an average of 6 to 7%, that mortgage money is available at only 2.75%?
ReplyDeleteBecause the banks are guaranteed to get their money back if they invest it in mortgages but not if they invest it in stocks.
Is that so hard to figure out really?
Stocks aren't yielding that much (on average) in any case. Current yield on the TSX 60 is 2.88%.
This comment has been removed by the author.
ReplyDeleteIt's because investors are putting their money into stocks. That's where the returns are. Bonds, GICs, interest savings and real estate aren't returning much these days...
ReplyDeleteBonds... aren't returning much these days...
ReplyDeleteBond returns have far outpaced stock returns for many years, particularly the last two years.
Corporates, muni's, high-yield and a few other sovereigns have performed even better.
ReplyDeleteIt's because investors are putting their money into stocks.
ReplyDeleteYou have it backwards. If investors are moving their money toward an asset class, it drives prices up and yields down. Likewise if they move money away, it drives prices down and yields up.
What do I have backwards? I didn't say investors are taking their money out of bonds...Whoever they are...central banks?
ReplyDelete"The Canadian economy is highly levered to the real estate market and its derivative industries, such as construction. These housing-related industries account for 27% of the Canadian economy, compared to 24% at the peak of the housing boom for the U.S. In other words, employment in construction and real estate is generally much higher now in Canada than it ever was in the U.S."
ReplyDeleteSigns of a Canadian housing downturn are everywhere
Monday, April 8, 2013 8:00am
ReplyDeleteMTD April
2013 2012
Net Unconditional Sales: 116 586
New Listings: 345 1,470
Active Listings: 4,323 4,638
Please Note
Left Column: stats so far this month
Right Column: stats for the entire month from last year
thanks Marko!
ReplyDelete@koozdra - thanks for that article link. Pretty compelling article.
ReplyDelete@Patriotz
ReplyDeleteStocks aren't yielding that much (on average) in any case. Current yield on the TSX 60 is 2.88%.
Obviously I am referring to total yield which is, as I stated, 6-7%, on Dow, for example.
"Is that so hard to figure out really?"
Re: why, if stocks are yielding an average of 6 to 7%, that mortgage money is available at only 2.75%?
ReplyDelete@ Patriotz:
Because the banks are guaranteed to get their money back if they invest it in mortgages but not if they invest it in stocks.
That was maybe easy to figure out, but it seems to be wrong.
Banks create money for mortgages, but they cannot create money for their own speculative investment in stocks. It would be illegal.
That was my point. And also that having created money from thin air to lend as mortgages, banks can then take the taxpayer-backed mortgages to London, rehypothecate them and use the funds so raised to speculate on stocks or whatever they like -- which is what I understand they do, although those speculative investments are not government guaranteed.
So what I am saying is that banks are doubly subsidized by the taxpayer. They get a government guarantee on mortgages created with money they conjure out of thin air. An activity that presumably generates some profit. Then they get to use those government-guaranteed mortgages as collateral for their own investment purposes.
So that's not so easy to figure out and I may have it wrong. Which is why I invited comment.
"on mortgages created with money they conjure out of thin air" What do you mean by that? Isn't your money in the bank? The bank also borrows money at a lower rate than it lends to you, they also sell the mortgages to investors, (or the CMHC ;-)). Where do you get the notion that the banks just conjure up money?
ReplyDelete"Where do you get the notion that the banks just conjure up money?"
ReplyDeleteNot banks, our "conservative" government is responsible for this.
House prices have doubled nationally over the past 10 years. Where has the money come from? Certainly not salary growth.
Perhaps our economy has doubled in size? No, that's not it.
It's people going into enormous amounts of debt. But the banks can't just give out loans, they are "well regulated".
This is where the, soon to be hated, CMHC comes in. "Don't worry" they say, lend to whomever you wish. Tell them to pay the insurance (even if they have to add it to the mortgage) and you can take that annoying loan liability off your books so you can lend out even more money.
Money appears magically. Houses prices balloon. 70% home ownership rates.
Oh if only Flaherty didn't change the rules. We could have had even more credit expansion.
Maybe one of these months we'll actually see a decrease in the amount of outstanding debts that Canadians own. Haha, not any time soon.
All we can hope for is a decrease in the rate of the increase of debt.
@Al + TOH
ReplyDeleteConditionally sold now, but not to our friend :-( On the market for just two short days! So good properties do still go fast.
Actually, the house at 3904 Bedford Road (MLS 321396) is not "conditionally sold". There is an offer, which is being followed by an inspection and site visit. It is still on the market and open to offers ...
Here are my stats for 1-7 April:
ReplyDeleteSFH in Vic,OB,Esq,SE & SW, with a minimum of 2 beds & 2 baths, priced between $375K and $775K:
Sold: 18
Avg Price: $559K
Med Price: $528K
7 of the 18 homes sold went for below BC Assessment and only 3 had secondary suites.
Two homes sold in the Saanich East areas of Gordon Head, Lambrick Park and Mount Doug. The average price was $617K.
For comparison in the same week last year:
Sold: 23
Avg Price: $591K
Med Price: $615K
Condos last week in pretty much the same areas including downtown with a min of 2 beds & 2 baths and priced between $248K & $550K:
Apts Sold: 11
Avg Price: $341K
Med Price: $336K
Four of the 11 went for below BC assessment.
Townhomes Sold: 5
Avg Price: $425K
Med Price: $438K
The of the 5 went for below BC assessment.
Apartments:
Sold: 1
Sorry the text got mixed up. For the townhomes 3 of the 5 sold went for below BC assessment.
ReplyDelete@Alexandrahere
ReplyDeleteI realize that there can be big variations week-to-week, but there are some very clear downward trends emerging in the areas that you are tracking.
Must be because we didn't have any snow this winter! ;-)
"on mortgages created with money they conjure out of thin air" What do you mean by that? Isn't your money in the bank?
ReplyDeleteBank lending is generally related to deposits, although rules vary from one country to another.
But When a bank creates a loan, that automatically creates a deposit, initially in the account of the borrower, then in the account of whoever the borrower pays the money to. In general, a bank has several weeks to find the deposit to justify the loan it made today.
So taking the banking system as a whole, loans create the deposits that justify the loans. In other words, the banks create money.
And if, in a particular case, a bank is short of deposits, it can borrow funds overnight from other banks or it can borrow from the central bank.
So your mortgage is not based on my saved earnings. It's based on nothing but thin air. And the more mortgages the banks create, the more money there is in circulation. Since exporting the manufacturing economy to China and elsewhere has created a highly deflationary condition in the West, governments in general seem happy for banks to print as much as they like.
That is why in the US private debt equals 250% of GDP, which in turn explains why the financial sector in the US accounts for up to 40% of all corporate profits.
And the enormous profitability of the financial sector in Western countries is why I suggest that there is massive, i.e., irresistible, pressure on governments to allow banks to lend as much as possible, while place the risk on the tax-payer.
In which connection there's an interesting article in the Atlantic: The Quiet Coup.
The net result of our system of private money creation is that young people wanting a house in major urban area must devote their life-time disposable income to that objective, which is truly bizarre, in relation to past times and other places.
For more about debt and money creation, see Steve Keen's Debtwatch.
But I see Koozdra has made essentially the same argument, but more colorfully.
ReplyDeleteThe danger of a debt based economy is panic, debt deflation and depression.
This being the case, the Feds must now be greatly concerned to keep the housing market on the high plateau to which government policy has raised it.
Hence, although 35 year mortgages are gone and 2.74% mortgages are deprecated, that's just to quell the irrational exuberance. And in fact, as Just Jack notes, the 35% mortgage is still around as is the 2.75% mortgage. And both may be more visibly around if the market begins to crumble.
@CS
ReplyDeleteGood article by Simon Johnson (and I like his blog too). Unfortunately it was written 4 years ago and most of the things he called for to curb excessive banking sector power haven't happened.
The chart in the middle of the article is quite striking.
ReplyDeleteThe Economic Story of the Year: The Stock Market vs. the Labor Market
Lansdowne went for 950k.
ReplyDeleteWesthills continues to sell strong.
Marko: Thanks for the price on Lansdowne.
ReplyDelete$950 is more than 15% off the BC assessment valuation. Quite a drop for an interesting house -- Architect, John Wade -- despite the need for some updating.
It suggests developing weakness in OB's mid-range.
And drops on houses like that one on Lansdowne force less impressive houses to drop. I am seeing an unreal range of housing from $700-$850K. Some gems, some lumps of coal.
ReplyDeleteI like the "threat level" on the right.
ReplyDeleteInfographic: Just how overvalued are Canadian homes? It depends who you ask
How did the economist get 78% overvalued? That puts my house value at $114k where it rents for $1550????
ReplyDelete