Tuesday, May 14, 2013

Final nail: will the Dippers kill the market?

Polls just closed. I'm calling a NDP majority government, probably by 15-plus seats.

Everyone Knows that Dippers are bad for business, bad for the economy and especially bad for housing. I have it on good authority that their first order of business is to pass a law that gives common-law property rights to any basement suite dwelling tenants who stay put for longer than 6 months.

They plan to unionize realtors. It's true. They're not satisfied with the economic-rent seeking monopolies of the past. Uh uh. Commision sales people deserve a living wage after all. Especially in high rent markets like Vancouver.

To pay for it all, the property transfer tax is going up--after all, everyone knows only people earning more than $150,000 per year and corporations can afford to sell homes to buy new ones today. This won't effect you and me and the rest of joe middle class public because we're selling our homes to co-op associations and staying put regardless... no tax implications there, just unicorns, ponies, free money and low rents.

Besides that, us degreed folks are going to head back into Skills Training Programs so that we can have lucrative skilled trades careers working in "public relations" for the Ministry of Information helping people understand why it's important that government mandates be changed from 4 year terms to lifetime terms because short terms lead to bad decisions for "the people."

All kidding aside--surely some folk in BC feel the need for comic interlude regardless of election outcome--I'm curious to know what people in Victoria think: will the outcome of today's election have an effect on tomorrow's home prices? 

221 comments:

1 – 200 of 221   Newer›   Newest»
koozdra said...

NDP will win and be blamed for the
housing decline.

"The Canadian housing finance system is very different from the one that prevailed in the United States in the years before the U.S. housing bubble burst—but that might not be enough to avoid a major housing and mortgage crash in Canada."

Full Recourse Loans Won't Save Canada's Housing Market


"Prices dropped from April 2012 by 3.3% in Victoria and by 2.9% in Vancouver, which were among the hottest Canadian markets prior to the slowdown."

Canadian house prices edge higher in April

Leo S said...

Surprisingly enough the Liberals are looking very strong as of 8:55.
Leading in 46 ridings..

HouseHuntVictoria said...

Crazy. If the Dippers lose and the Libs win, I credit/blame this blog post.

StalJ said...

NDP win = bad for BC business & real estate
Libs win = bad for Victoria business & real estate as govt jobs cut...great for rest of province, in the long run.

koozdra said...

Huh, did not see that coming.

I guess people will vote to whomever can say the word economy the most times.

totoro victoria said...

My riding is green... I thought Jane would get in in Victoria but no go. Andrew Weaver is going to have to be team green.

As for the predictions, I've been banking on a liberal win ever since I heard the debates. Christy has done a good job in the past couple of weeks and had a surprising turnaround. That memo backdating and how he responded to it really hurt him.

Before those debates I would have said she had no chance... Glad I'm not in politics.

totoro victoria said...

Leo, you might get lucky - won't have to work about basement dwellers rights. Don't tell your MIL.

totoro victoria said...

should be "worry about" damn u autocorrect... or in this case my, my... fingers.

totoro victoria said...

I think we can credit/blame this blog for most of the major happenings in BC.

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

Well if we're lucky they'll bring the HST back too.

totoro victoria said...

That would be awesome. HST was my favorite. Really.

koozdra said...

In Canada’s housing market, the other shoe has already dropped

Marko said...

Well if we're lucky they'll bring the HST back too.

That would be awesome.

dasmo said...

I guarantee they will bring it back in a different way ;-)

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

I guess there weren't enough people hoping for a crash....

totoro victoria said...

HST doesn't work well in a different way - we have that now. Get HST back - the HHV blog can probably make that happen.

koozdra said...

Don't worry, the liberals have a "plan".

Has house price deflation begun in Canada?

Christy Clark faces slow growth, B.C. housing market ‘knee-deep’ in correction

dasmo said...

Totoro, I mean as in a different method of bringing back the HST. Expect more "public consultation" the next time around.

totoro victoria said...

Doubt it.

Ernie Fallows said...

2.89 5 year fixed versus
2.65 5 year variable

Not a heckuv a lot of difference between the two payment wise, with more peace of mind on the 2.89 if rates start to climb again. A good friend of mine swears by the variable.

Thoughts?

totoro victoria said...

Rates are so low now that imo the chance of a rate hike is more likely within the next five years. I went ten.

The thing about variable is you can lock in if rates go up but will likely be higher than 2.89 for five years if they do.

Historically variable has been better, but not sure about that now.

Ernie Fallows said...

Yah those were my thoughts as well. I didn't want to go 10 though, not planning on staying here past 5 years.

caveat emptor said...

Re the election:

Apparently predictions are hard, especially about the future.

Fortunately info doesn't have that problem, because her predictions are "correct" no matter what.

koozdra said...

from VCI;

"The banks are incredibly well protected. Let’s start with mortgages, the banks’ biggest single asset. Between them the big six have more than $960-billion of real estate related lending on their books, of which more than half is covered by default insurance issued by the CMHC, a government entity. The banks get paid, no matter what."
...
"The main concern is around the impact of the CMHC. Critics worry that it’s massive presence in the mortgage market — roughly 62% of home loans in Canada are insured — has helped drive the recent run-up in prices. And given that the CMHC guarantee insulates banks from losses, some analysts say that it may have provided incentive to loosen up on credit standards. If that is indeed the case, then there is a risk that if the housing market goes into a serious correction, the CMHC could be overwhelmed by losses, leaving taxpayers on the hook."

Serious correction? Obnoxious thinking.

Canada’s banks could be on the hook to bail out CMHC if disaster strikes

Just Jack said...

Oak Bay seems to have performed the best of all the core districts this Spring. With 106 current listing and 33 sales accompanied with 47 new listings in the last 30 days.

Months of Inventory being 3.2
Sales to New Listing ratio of 0.7
Average days on market 42
Average Sales/Assessment ratio 0.97
Median Price $750,000 which is up $8,250 from this time last year.

Victoria City has 143 houses for sale with 26 sales in the last month and 71 new listings added in the same time.

MOI 5.5
S/NL 0.37
DOM 38
S/A 108%
Median Price $654,500 which is up $78,250 (small sample error)

All of the Core Districts
750 listings, 200 sales,
371 New listings

MOI 3.75
S/NL 0.53
S/A 102%
DOM 44
Median Price $615,000 which is up $25,050 from this time last year.

Single Family homes in the core districts appear to have gotten through the Spring Market unscathed.

koozdra said...

"Instead of further restrictions on uninsured mortgage products, the government should examine measures to support first-time buyers who have been impacted the most by recent regulatory changes," CAAMP said.

Exactly, we need to increase credit availability so that prices continue to go up. We need more Canadians buying into a vulnerable housing a market. Thanks for fighting for us CAAMP.

Mortgage lenders urge caution as regulator eyes more control

Introvert said...

I guess negative, fact-free campaigns work. Glad Andrew Weaver won in my riding (I voted for him). But I would certainly have traded an Ida Chong victory for an NDP government.

Just Jack said...

The Westshore is a different story.

639 current home listings. 94 sales and 220 new listings.

MOI 6.8
S/NL 0.43
DOM 77
S/A 108%
Median $446,200 down $23,600 from this time last year.

Sooke remains the underperforming area with 241 listings and 22 sales. With 60 more added homes in that same period. The Average days on market is now 113. The average sales to assessment ratio at 117% Median price is $398,700 which is down $30,300 from last year. Again the sample size is low which most often will skew any results.

totoro victoria said...

Yes, I'm glad Andrew Weaver won as well. Has the credentials to ask the tough questions.

Just Jack said...

Comparing the two areas, I can understand why OSFI would like more controls on those buying houses with more that 20 percent down. Those sales would be more concentrated in the more established and wealthier areas of Greater Victoria. As shown, the home prices in these "wealthier" areas of Victoria seem not to be moderating lower.

Which sounds great if you live in these areas. However. the increasing difference between these areas would be destabilizing if allowed to continue. That would mean a "crash" in prices in those wealthier neighborhoods.

You can only stretch an elastic band so far before it breaks.

totoro victoria said...

JJ - that might be partially accurate re. why core areas are holding value.

The other part is that some areas hold their value better separate and apart from CMHC issues.

I don't think this data means a crash in the core is imminent. Just my opinion.

It is interesting that the 30-day numbers are up over last year in the core. Not very crashy.

DavidL said...

@Ernie
2.89 5 year fixed versus
2.65 5 year variable


Variable rates have been the better choice for the past ten years, but I doubt that they will be in the near future. The bubbly US stock market will soon be putting inflationary pressure on the BOC overnight rate, on which the variable rate is based. In other words, I predict variable rates will be going up at least 25 basis points in the next 6 months. Fixed rates probably won't be going any lower, so now is a good time to "lock in". BTW, yesterday a coworker got 2.74% on a five-year fixed rate through ING.

Disclosure: As I've only got two years left to pay off my mortgage, I'm staying with a variable rate (prime - 0.60%).

Introvert said...

The entire Island minus two ridings is NDP/Green. Think Island concerns (especially the South Island) are going to get addressed by this government? Not likely.

New Johnson Street bridge: "How about you go ahead and pay for that yourselves, Victoria."

Malahat upgrades/new highway: *uproarious laughter*

McKenzie & Tillicum overpasses: "Traffic problems? What traffic problems?"

Tweev said...

I'm glad the NDP lost for the only reason that when housing does crash in BC, the NDP won't be blamed for it.

The lack of fiscal responsibility for NDP governments is getting really tired and although there are examples there are just as many for conservative and liberal governments.

That is all.

koozdra said...

"The Bank of Canada should raise interest rates now because five years of low rates are creating distortions in the economy, such as excessive debt and an overheated housing market, a former adviser to central bank Governor Mark Carney said on Wednesday."

Bank of Canada should hike rates to pop bubble -former BoC aide

CS said...

New Johnson Street bridge: "How about you go ahead and pay for that yourselves, Victoria."

I am puzzled by the suggestion that citizens of some other town should pay for it.

Renter said...

Despite everything, it was pretty amazing watching the results come in for North Saanich and the Islands. Three parties, all with approximately 1/3 of the vote, all duking it out with a good chance of winning.

I wonder what the voter turnout numbers were for that riding. I'd lay money that they were one of the highest in the province.

DavidL said...

@CS
New Johnson Street bridge:
I am puzzled by the suggestion that citizens of some other town should pay for it.


Although the replacement bridge will link two parts of the City of Victoria together, it also is a vital transportation corridor between various municipalities (such as Oak Bay and Esquimalt). It has been suggested that surrounding municipalities should contribute $$$ as they would benefit from the new bridge. (This strategy has been unsuccessful.)

Additionally, fuel taxes (about $0.43/litre) are paid on a local basis with the idea that a portion of them will be used to maintain and expand the transportation infrastructure. This is why the federal and provincial governments typically co-contribute to infrastructure projects such as the replacement bridge.

Just Jack said...

I think interest rates play a major role in the stabilizing of Oak Bay prices. For the same type of living space - would you pay another $500, $1,000 or 2,000 more to live in Oak Bay versus Fairfield?

If you can answer that question you can see how far prices between the two areas can diverge as every $500 a month is equivalent to $100,000 in mortgage funds.

But at a certain point, it no longer makes sense to pay a monthly premium in Oak Bay. Perhaps the amount is $1,500 more a month over a similar home in Victoria. At that point people stop buying in Oak Bay and buy in Fairfield instead.

The same is true for the Victoria Core versus the Westshore. If the price difference between the two areas is unreasonable then enough demand will shift and the core will correct.

But it could also happen with an interest rate increase. As that changes the monthly mortgage payment for buyers too.

The price difference today is roughly $150,000 or about $750 a month between living in Oak Bay to that of Victoria.

That's not the same as saying renters will pay $750 more to live in Oak Bay than Victoria. Clearly renters don't see that much of an advantage of living in one area over the other - only home owners do.

DavidL said...

G & M: Hike rates now, economist urges Bank of Canada

koozdra said...

"Like the Bank of Canada, Dr. Masson worries that too many households that would be unable to finance their recently purchased homes at higher interest rates will be in trouble when borrowing costs inevitably rise."

Kind of like the sub primers in the states.

totoro victoria said...

JJ - Fairfield and OB have very similar prices in the 550 000 to 800 000 range.

It was actually cheaper for us to buy in OB when we first bought - we were looking for Fairfield at the time.

If the stats are skewed it may be by the larger area of waterfront in OB or million dollar plus homes in Uplands.

I would pay quite a bit more to live in an area I like.

I also do not believe that the difference is $150 000 for equivalent houses in Victoria or OB. Victoria includes very diverse areas.

I would pay much more for a nice house in OB, Fairfield or bordering areas than the same nice house in Vic West or Burnside/Rock Bay.

I would expect that same nice house to be the same price in Fairfield as in OB.

Just Jack said...

There is a lot of variety in Oak Bay too. But let us take a look at prices in Fairfield and Oak Bay.

Median price for a Fairfield home over the last year.

$677,500

For an Oak Bay home $741,000

I don't think anyone is disagreeing with you that people pay more for an Oak Bay home than a Victoria home.

My point is that if the difference between two neighbourhoods gets too large that will shift demand to the lower priced neighborhood. In years past, there wasn't enough inventory in those less costly neighborhoods and prices increased. This time there is lots of inventory available in those lower priced hoods and that would mean the higher price area will have to decline.

Its the same thing as when you're shopping for groceries. If one brand becomes too expensive you'll switch to another.

Leo S said...

Prices in Gordon Head definitely down based on the places we're looking at this spring vs last fall.

totoro victoria said...

$600,000 @ 6% 3839
$500,000 @ 6% 3199

3490 vs. 2908 at 5%

$100,000 difference at 6% is $640 a month and at 5% is $582.

I would pay $640 a month for a nice area... assuming they both have suites. I would not want to pay $3849 a month though... right now at 3.79 it is almost eight hundred dollars less a month.

I don't think we will see 6% for a while. You can also likely lock in lower rates before they hit 6%.

If you have a house that was $500 0000 at 3.79 you were paying 2573 a month. If prices drop and your mortgage is only $400 000 but at 6% it is 2559 a month.

I do think prices will drop everywhere a bit if we see such a rise in rates. Just depends how much of a down payment you have as to how much immediate benefit you would see from this scenario.

dasmo said...

For a similar house, similar location and surroundings, prices are similar OB vs Fairfield. I don't see a premium in OB just because. There are just more Ocean front modern builds in Oak Bay... Sometimes you need to get off the computer to see what's actually going on. Stats don't paint a realistic picture. It's like Michelangelo vs klee....

caveat emptor said...

^I'd agree with dasmo re OB and FF prices.

When we bought prices were quite similar between similar properties (size, age and decrepitude of house; size of lot; and location of lot relative to amenities like ocean, parks, quiet streets, etc.) Nicest areas of Fairfield compare in price to South Oak Bay. Obviously Oak Bay prices are skewed upward by a large number of very high end properties that have no comparables in Fairfield namely Uplands and waterfront (Fairfield has very few waterfront homes - just a short strip from the end of Dallas Road to the Oak bay border)

totoro victoria said...

Ditto dasmo and cv, as stated above.

OB prices are not what I would call "down" in general. The undesirable places are though - the ones on Cadboro Bay Rd. or Foul Bay are harder sells.

I think prices are down a bit across Foul Bay on the Camosun slope.

totoro victoria said...

Also, Fairfield is in Victoria JJ and homes are not like grocery stores. Value is largely location.

Just Jack said...

I had to go back and check where I wrote houses are like grocery stores and that Fairfield was in Oak Bay.

Nope - never wrote that.

I'm also using medians not averages in samples of 100 and 200 sales for Fairfield and Oak Bay. The few waterfront or Upland sales were not a significant factor.

I'm surprised that so many disagreed with what I wrote. All I've done is paraphrased the theory of substitution in Economics

totoro victoria said...

I think it was stating:

"Its the same thing as when you're shopping for groceries. If one brand becomes too expensive you'll switch to another"

in relationship to pricing of different neighbourhoods. I would rather rent in the neighbourhood I like than buy in the neighbourhood I don't. I would be more likely to rent and buy investment properties in another city than live where I do not want to.

I guess the median is higher for OB because they have a lot more high-end inventory excluding mansions which would affect median.

However, in the up to $800 000 price range I believe it is no different based on my experience in the market.

Leo S said...

I'm surprised that so many disagreed with what I wrote. All I've done is paraphrased the theory of substitution in Economics

One of those things that are unarguably true, but that doesn't stop people from arguing about it.

dasmo said...

Statistical medians are abstractions not truths....

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

True in relation to the discussion about economic substitution, not medians.

dasmo said...

I don't think anyone disagrees with the theory of substitution (one behaviour that affects the reliability of the CPI). It was the Statement "Perhaps the amount is $1,500 more a month over a similar home in Victoria." Which isn't true if you compare actual homes and their features and surroundings of which Fairfield has the closest com parables in Vic.... I don't think the higher price areas would decline along with Langford and Sooke. Not unless those locations absolutely cratered. They just don't have the same qualities as OB and Fairfield. Neighbourhoods like Fairfield will be much more resilient because they are so desirable and unique. Can't build them new in Langford....

Just Jack said...

Rather it is the supply and demand for housing in those areas, not the desirability and uniqueness that sets the price.

Triple or quadruple the number of listings in Oak Bay and their will be an effect on prices. Yet the desirability and uniquess won't have changed.

dasmo said...

All areas of Oak Bay are not equally desirable....

Leo S said...

Dasmo: I don't think anyone disagrees with the theory of substitution

Proceeds to then disagree with the theory of substitution.

Seth Perry said...

http://www.cnbc.com/id/100725735

Is the Canadian Housing Market Falling Apart?

I felt that this was an interesting article and I thought I would share.

Cheers.

Just Jack said...

The Township of Oak Bay has been separated into six neighbourhoods. Not necessarily based on uniqueness and desirability but by natural boundaries and major roads.

The most popular area to purchase has been South Oak Bay. The median price for the last three years has been $788,750 with 37% of the Oak Bay home buyers choosing to purchase there.

South Oak Bay $788,500 (37%)
Henderson at $664,950 (26%)
North Oak Bay at $679,000 (12%)
Uplands at $1,475,000 (10%)
Estevan at $733,500 (10%)
Gonzales at $932,500 (5%)

The most unique neighborhoods would be Uplands with its half acre and larger lots. And also Gonzales with its unobstructed water views.

Fairfield (in Victoria) was by far a more popular area to purchase in relation to any single hood in Oak Bay over the last three years. And had a median price of $685,000.

So it does seem that the neighborhoods of Henderson, North Oak Bay and Fairfield have had similar prices. And Fairfield was chosen by almost 40 percent more people than the combined total of these two hoods in Oak Bay.

So I stand corrected. For those Oak Bayers who live in Henderson or North Oak Bay you pay almost the same price for your homes as those who live in the more popular Fairfield neighbourhood.

dasmo said...

"Proceeds to then disagree with the theory of substitution." Maybe but to just say "Oak Bay" is not enough IMO. Anyway, it would take a lot for lower prices in Langford to affect these "desirable" spots in Fairfield and Oak Bay because they are so desirable. They will have a much higher "buoyancy point". But I can concede that if a 3 bed one bath crapper in Sooke starts going for 180k then the same thing in Oak Bay for 400k might have some downward pressure on it. But, as I've said before, I think the equalization of prices across the region was odd so a return to a larger price spread is more probable than an equal downturn as a result of "Substitution Theory"... IMO.

caveat emptor said...

"I'm also using medians not averages "

Medians reduce the influence of a few high end outliers but they don't eliminate the influence of high end sales especially if one of the two areas has a whole high end segment that doesn't exist in the other.

Inarguably the mean and median house price is higher in Oak Bay than in Fairfield. That statement is not inconsistent with the contention of dasmo, totoro and mine that houses with similar amenities in Oak Bay and Fairfield are priced similarly.

JJ you do understand that the difference in housing stock between OB and Fairfield accounts for some of the difference that shows up in house prices?

I do take back my comment about South Oak Bay. Probably a bit of a premium relative to Fairfield for comparables there. North OB and Estevan are better comparables. Henderson isn't a good Fairfield comparator (different character).

In the category of anecdote = evidence a friend was recently house shopping in Fairfield and ended up buying in Estevan instead, claimed it was a better deal (?).

caveat emptor said...

My grandparents used to live in a house that straddled Oak Bay and Victoria border. They paid a portion of taxes to both municipalities. I wonder if their house (which still stands) gets the Oak Bay premium or the Victoria discount? Or maybe one half is just worth more than the other?

At the time they lived there i was to young and naive to notice that one side of their house was a bit declasse.

dasmo said...

Maybe I need to see the substitution theory formula as it might apply to OakBay house prices against lowering Langford house prices to better understand.

Leo S said...

Just Jack has the right idea. The premium that people are willing to pay is based on the monthly.

So say Totoro is the average Oak Bay resident, and is willing to pay $640/month more to live in Oak Bay than Langford.

Back in 2008 someone might have been paying 5.5% on a 5 year fixed, and for $1500/month they could get a place for $258,000 in Langford. Now they pay their $640/month premium and have $368,000 to spend for an equivalent place in Oak Bay.

These days you get a 5 year for 2.75% and for the same $1500/month you can swing a $342,000 mansion at Kettle Creek Station. Now you add your Oak Bay premium and end up with $488,000 to spend.

So a few years ago that extra $640/month premium got you an extra $110,000 in purchase price. Now that same money lets you go up by $146,000.

Those core areas didn't get any more desirable than they were a few years ago. The cost of money just got cheaper.

caveat emptor said...

"All I've done is paraphrased the theory of substitution in Economics"

Well if prices between otherwise similar properties in Oak Bay and Fairfield diverge infinitely then we'll have disproved that theorem.

Otherwise, assuming a price difference actually exists between similar properties in the two hoods, I don't think the theory of substitution tells us what it should be? Or whether the price difference is a rational response to imperfect substitutes (OB really is better) or an irrational response to an actually perfect substitute.

dasmo said...

"a $342,000 mansion at Kettle Creek Station." Now that is an imperfect substitute.

Just Jack said...

Unlikely that the real estate market in Greater Victoria will disprove 250 years of economic theory.

patriotz said...

My grandparents used to live in a house that straddled Oak Bay and Victoria border... I wonder if their house (which still stands) gets the Oak Bay premium or the Victoria discount?

But is the crime rate in the Oak Bay part lower than in the Victoria part? Any thoughts Totoro? :-)

n.y.k. said...

If houses in the neighbourhoods and towns surrounding yours keep going down in price, chances are that prices in your neighbourhood will go down too.

No need to overthink it.

Leo S said...

>> But is the crime rate in the Oak Bay part lower than in the Victoria part? Any thoughts Totoro? :-)

No but the rainfall is. Don't forget about the rainfall.

Leo S said...

>> Or whether the price difference is a rational response to imperfect substitute

The point is that the relative quality between the hoods hasn't changed during the decline. If prices are going down and stay down in Langford then they will also go down in Oak Bay (based on medians they already have, just not as much, potentially due to people making their decisions based on monthly costs)

koozdra said...

Regulations bad, money good, me get more money, interest rates low.

G&M
Would shorter amortizations make the housing market safer?

caveat emptor said...

Wasn't it the case in the US that prices in a lot of suburbs bubbled higher and then crashed harder than prices in already established, desirable core areas?

If so I see nothing inconsistent with the price gap between outlying areas and core areas in Victoria widening. I have no idea if that is what will happen in Victoria, but there does seem to be precedent.

Also there are secular trends in the desirability of neighbourhoods that can causes certain areas to rise or fall in value relative to other areas. The relative value of neighbourhoods is not an iron law: new infrastructure happens, preferences change, regional economies rise and fall, big employers grow (or decline)

totoro victoria said...

"In the category of anecdote = evidence a friend was recently house shopping in Fairfield and ended up buying in Estevan instead, claimed it was a better deal (?)."

Absolutely. I bought a home in Estevan in 2003 and it was cheaper than anything available in Fairfield of similar size and quality.

Fairfield homes are often more expensive than Estevan homes for the same size/quality. No matter what the medians are, you need to compare desirable features/quality. Only on-the-ground experience will get you an accurate picture here.

Also, I think we have hit on the flaw in the theory of subsitution, or perhaps the additional factor: the indifference curve. Your preferences are influenced to a greater or lesser degree by other values than house prices alone - such as safety, long-term appreciation, commuting costs, tax rates...

People are willing to pay more for a home in an area they like and substitutions are not always acceptable. I will buy oranges rather than apples if apples shoot up in price but I'll rent rather than buy in a neighbourhood I don't want to live in. Or I'll give up cable and take in a homestay student for the right place.

I do agree that monthly cost is related directly to house prices. Low interest rates keep prices high and this may be behind why prices in OB are stable-ish. Raise the rates and people will still want to buy in OB but there is a limit to what they can pay and the market will likely fall.

"But is the crime rate in the Oak Bay part lower than in the Victoria part? Any thoughts Totoro? :-)"

Not the happy face again!!!

Yes, I do have some thoughts.

People relying on stats probably thought the NDP were a shoe-in.

If you talked to average person - even if virtually on a non-political blog, you would have known that people were impacted highly by the memo backdating. You would also have known that Christy Clark's debate was well-received, that the conservatives were done ducks, and that the Greens were gaining respect.

Medians and crime stats are imperfect, just like other stats are. A house in Victoria on the edge of OB will have more in common with OB stats than with a house in Vic West.

Failing to take a common-sense approach and getting real information on-the-ground will generally lead to some distorted conclusions.

When I was first looking for a house I travelled every road and back alley. Our budget was really limited and there was a lot of competition (way more than now).

I knew the neighbourhood and pricing well and narrowed down where we wanted to live. We delivered flyers to these homes stating that if they knew of anyone who wanted to sell in the neighbourhood to please keep us in mind.

No set of stats will ever replace what an individual can understand by interacting with the world. On the other hand, stats are extremely useful when added to this knowledge.

Leo S said...

>> Wasn't it the case in the US that prices in a lot of suburbs bubbled higher and then crashed harder than prices in already established, desirable core areas?

Link? The rest of your argument hinges on this assumption.

Leo S said...

>> People relying on stats probably thought the NDP were a shoe-in. If you talked to average person - even if virtually on a non-political blog, you would have known that people were impacted highly by the memo backdating

Oh please. That is total BS. Those stats are from polls (ie talking to people and asking how they will vote). Claiming now that a liberal victory was obvious because that's what you happened to hear on the street... You are kidding yourself

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

Maybe it is BS Leo. But the polls were clearly wrong - no doubt about that - and my impressions on the ground were that the memo backdating had a huge impact. Personally, this did not have a big impact on me and had no influence on why I voted Green.

I never claimed a liberal victory was obvious, just that you would have guessed that the NDP were not a "shoe-in" if you looked at the commentary in many non-political forums.

As an aside, I helped my son do an assignment on the election last week. He predicted a liberal victory (albeit with fewer seats) and green in OB.

koozdra said...

These people will not be too happy to hear that only Oak Bay will retain it's value. If only they knew the Oak Bay secret when they bought.

13104550

Leo S said...

But the polls were clearly wrong - no doubt about that

Sure, but the polls are the best tools we have for predicting the results.
A prediction based on talking to a few people has as much weight as a prediction based on a coin toss.

axeman said...

As for the predictions, I've been banking on a liberal win ever since I heard the debates. Christy has done a good job in the past couple of weeks and had a surprising turnaround. That memo backdating and how he responded to it really hurt him.

You nailed it totoro... DIX had it in the bag, but blew it... But will Cristy Remain as Premier? Dix will be ousted soon.

caveat emptor said...

"Wasn't it the case in the US that prices in a lot of suburbs bubbled higher and then crashed harder than prices in already established, desirable core areas?"

I first read about this on Calculated Risk blog, IMO one of the most credible and neutral sources on the US housing bubble, bust and incipient recovery. Bill McBride mentioned that topic quite a bit.

Here is an example from LA.

dasmo said...

Here is an example comparison of desirably disparate neighbourhoods.
Mission vs Prescott

Mission dropped roughly 19%
Prescott dropped roughly 55%

Now Mission is up again 20% from bottom so it's up about 5% from peak now. Prescott is up 30% from bottom but still down about 37% from peak. How does substitution theory play into this?

totoro victoria said...

Our opinions differ on this a bit. You can take the polls into consideration, but you could also consider them with:

1. the narrowing of the gap in the polls after the debate
2. the impact on people of the campaigning the week prior to the election
3. the impact on people of the memo backdating

I thought the liberals would win after considering these factors and the responses of many other non-political people. I would have been surprised to see an NDP win, but it was a possibility, just at a lower probability for me.

I believe that my guess was more accurate than the polls partly because of following social commentary closely in the week before the election. Maybe I'm wrong and it is just chance.

In any event, I do not have TV so views were not influenced by this form of media at all. My views were influenced by listening to the debates on CBC and evaluating the commentary on running a red light impact vs. backdating the memo impact and the factors I have already highlighted.

This is just my opinion and you can disagree. I don't mind.

caveat emptor said...

"The rest of your argument hinges on this assumption."

Actually no. The second part of my argument was not related to the US experience. I just pointed to the existence of secular trends in neighbourhood desirability that change the relative value of different neighbourhoods.

I think there is a slight current trend to valuing the amenities of urban living over suburban living more than in the 70s, 80s, 90s.

Do I think that this makes OB or Fairfield or some other epicenter of yuppiedom immune to a correction? Absolutely not. But it does affect what premium is sustained.

totoro victoria said...

As for whether Christy will remain in power, my answer is yes as long as there is no terrible scandal.

There is no way, imo, any subset of the liberals could successfully oust her right now. She has done a very very good job with her campaigning - apart from in her own riding.

As an aside, I know a number of people who have heard Christy speak prior to the election campaign and felt she was not as compelling. I'm not sure what might have changed for her, but if she keeps it up I have to say that I feel good about her ability to get BC behind her.

I really hope the debt is reduced.

Tweev said...

@ Leo

Sure, but the polls are the best tools we have for predicting the results.
A prediction based on talking to a few people has as much weight as a prediction based on a coin toss.


Yeah but when a tool doesn't work it's useless.

Modelling for modelling sake is not the goal, the goal is accurate (and hopefully precise) predictions.

The real issue I have is with the model they used to predict a NDP majority. Prior to the day of the confidence regions were extremely tight (and proved to be wrong) meaning that the data were modelled incorrectly and important assumptions were not addressed.

The issue is not the polling. The polling sucks, that's fine but it's the poor modelling of the polling data is inexcusable. Someone really screwed up here.

koozdra said...

"It’s a nice story. Trouble is, it seems far more likely that Carney’s actions just stored up trouble for the future – a future which looms closer by the day."


How to profit as Canada’s housing bubble pops

koozdra said...

What all these "short Canada" people don't understand is that the banks will be just fine. It's the people that will be screwed.

G&M
Why 'The Great Canadian Short' is a buying opportunity

Chris said...

On a percentage basis, all areas of our CMA will correct about the same by correction’s end (2020). There‘s no mystery, as areas went up roughly the same percent. Sure it collapses inward with long lead times, but substitution plays the main leveller.

"---gosh darn it, it’s different where I live!" ;)

dasmo said...

So my US Example of:
Mission dropped roughly 19%
Prescott dropped roughly 55%

Now Mission is up again 20% from bottom so it's up about 5% from peak now. Prescott is up 30% from bottom but still down about 37% from peak.

Can simply be ignored?
I mean Prescott is simply across the bridge...

Chris said...

Morning paper said the price of lumber is now down over 20% in the past two months. Meh, probably just economic theory ;) At any rate, if you were about to start building your home this month, wait.

a simple man said...

I thought building material prices only went up?

Hmmm.

Just Jack said...

Something to think about is how a change in interest rates could alter the way prices in our CMA are declining. Generally, the single family marketplace is weaker the further we travel from the downtown core. This is likely due to the tightening in our once incredibly lax lending policies that had pushed our home ownership rate up to 70 percent.

If interest rates were to rise 1 or 2 percent that might alter the way our market is declining. High interest rates may make the more costly neighbourhoods lead the decline in prices. And that would lead to a quick dommino effect through the marketplace.

If you want to orchestrate a soft landing in real estate prices then it may be better to slowly strangle the market with tighter lending policies rather than raise interest rates . And one could be more selective in how they tighten those markets that are out of character with the rest of the Nation. Just by limiting the amount of insurance available or reducing the cap on houses that can qualify for high ratio financing from a million down to $600,000.

Home owners seem to prefer the slow death. While prospective purchasers aka renters are hoping for a quick death.

And then there are those that would like to see the goverment kick the chair out from under the home owner, so that the recovery will be sooner.

caveat emptor said...

dasmo

Don't you know - reference to the US crash is only relevant if it supports Canada crashing hard. If it supports a less hard crash in some areas it is obviously irrelevant.

Dave said...

@Dasmo
How does substitution theory play into this?

I'm no expert, but it seems as though the more disparate the substitute good is, the less substitution theory plays into it. I think JJ was talking about Fairfield and Oak Bay in the context of substitution theory because those two goods are more comparable. You're the one who brought up Langford and Sooke vs Oak Bay.

Dave3

Tweev said...

what 'recovery' are you talking about?

The housing market declining by 25% is the recovery.

Just Jack said...

Over the last several decades the amount of lumber than goes into building a home has declined significantly. A drop in 20 percent of the cost of lumber would not translate into a 20 percent drop in new home construction prices.

However, this isn't good news for builder. Rising materal prices affected all builders equally. The home that Joe Builder had just finished could be competitively priced with a home just being started by Bob Builder.

Now that has been reversed. A builder starting a home today can undercut the price of a home that has just been finished.

And the race to the bottom begins.

caveat emptor said...

Home owners seem to prefer the slow death.

Perfectly logical. A correction that takes place primarily through inflation with real prices falling steadily while nominal prices only fall modestly would be the sweet spot for homeowners.

A quick hard crash would fairly obviously cause a deep recession. Something that will hurt many renters and owners.

The first scenario is the one that government will try to engineer. Whether they are successful is another question.

caveat emptor said...

what 'recovery' are you talking about

call it what you like. It is indisputable that US house prices are rising now.

totoro victoria said...

Actuall, JJ stated:

"My point is that if the difference between two neighbourhoods gets too large that will shift demand to the lower priced neighborhood."

This implies that areas outside of OB will be substituted for OB if prices go up to much in OB and go down in other areas.

I do agree with JJ's last post where he says:

1. that if interest rates were to rise 1 or 2 percent that might alter the way our market is declining; and,
2. if you want to orchestrate a soft landing in real estate prices then it may be better to slowly strangle the market with tighter lending policies rather than raise interest rates.

CS said...

I believe that my guess was more accurate than the polls

Seems a reasonable assumption to me.

Polls can be informative only if they are based on random samples and if people give straight answers. But surely I am not the only one who never does polls or surveys, and in that case, the polls are not based on random samples. I don't see how this can be corrected for, since those who happily blab about their political affiliations probably differ in voting habits from those who keep their voting intentions to themselves.

Then there's the problem of those who may give false answers to confound the pollsters.

Leo S said...

Re: Mission VS Prescott.

Tons of variables here. Most importantly foreclosures, which will be more prevalent in the lower priced neighbourhoods. Also from everything I've heard about Zillow, it's a pretty piss poor measure, so I have no idea the validity of their index.

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

Here is an example from LA.

The example shows pretty even declines. As the owner of an asset, you care about how much it declines in dollars. The percentage decline is meaningless.

From that page: High range (over $627,000) declined 22.8%, or $142,000 at that price.

Low range (under $417,000) declined 34.9% or $145,000.

Same decline when you look at what really matters, which is dollars.

Marko said...

A builder starting a home today can undercut the price of a home that has just been finished.

No they can't. New building code = $++ to build, lumber prices have gone up as have some other materials, municipalities are always increasing various fees, HPO is always adding ridiculous amounts of paperwork and bureaucracy.

dasmo said...

"You're the one who brought up Langford and Sooke vs Oak Bay." nope...
JJ: "The same is true for the Victoria Core versus the Westshore. If the price difference between the two areas is unreasonable then enough demand will shift and the core will correct."

dasmo said...

So foreclosures have affected the market down south! I knew it!

Leo S said...

Don't you know - reference to the US crash is only relevant if it supports Canada crashing hard. If it supports a less hard crash in some areas it is obviously irrelevant.

Picking two random regions we know nothing about as an example really has limited value. Like I said, tons of variables, primarily the concentration of foreclosure activity.

Just like it isn't valid when someone says "Phoenix crashed 80% therefore Victoria will", it is equally invalid to say that "Some region in some city didn't crash, so Oak Bay won't"

CS said...

Government policy must be to maintain house prices on "a permanent high plateau" to use Irving Fisher's phraseology with reference to stock prices on the eve of the stock market crash of '29.

Avoiding a house price crash is a prerequisite to reelection of the Federal Tories. Moreover, high home prices are good for both the economy and the environment: they stimulate construction and related domestic industries while causing an increasing proportion of the population to live in condos, rather than suburban villas, which cuts energy use, infrastructure costs and probably the birth rate.

A key question, then, is can the Federal Government's high house price policy fail, and if so, under what circumstances and due to what causes.

Marko said...

Some of the new HPO rules are ridiculous. Let me give you an example.

A house is a built in 2010 by an owner-builder without a warranty (you don't need to buy warranty if building for yourself). If the home is sold in 2015 the seller has to provide a document to the buyer called an "Owner Builder Disclosure Notice," that has to be issued by the HPO.

If the buyer wants to sell in 2020 they also have to provide the "Owner Builder Disclosure Notice" to the new buyer even thought they had nothing to do with building the home originally and there is no warranty, and the home is 10 years old so even if it had a warranty it would have completely expired. If you don't provide it prior to the offer being written you can get fined by the HPO. The HPO, to make things really convenient doesn't provide the "Owner Builder Disclosure Notices" online. You have to call them and leave a message to retrieve it. Then they call you back and ask where they can mail/email it to.

What a waste of resources. Just creates more jobs at the HPO office to field phone calls for paperwork to fulfill a regulation they created, but doesn't have any real life value.

dasmo said...

"Just like it isn't valid when someone says "Phoenix crashed 80% therefore Victoria will", it is equally invalid to say that "Some region in some city didn't crash, so Oak Bay won't"" I believe we have a straw man here....

caveat emptor said...

"Same decline when you look at what really matters, which is dollars"

I call BS on that. You have done lots of posts using percentage changes in house prices so obviously you think that is relevant and important.

If I take your statement at face value a 200K drop in home value would affect the average owner of a 400K home and a 1M home identically - "since the dollars are what really matters". In reality there are differences in the average owners of those two homes that make a 20% loss for one easier to absorb than the 50% loss for the other.

koozdra said...

"Policy hawks have been circling these two economic flagships with increasing anxiety for some time. They feel the time for action is already here, if not already long past. In a new commentary from the C.D. Howe Institute on Wednesday economist Paul R. Masson warns of the “dangers of an extended period of low interest rates” and says the Bank of Canada should immediately begin raising interest rates to head off what he sees as increasing evidence of bubbles in housing and stocks, distortions in corporate behavior and signs of mal-investment."

Terence Corcoran: Canada’s policy makers fixed on doing nothing

caveat emptor said...

Leo

My view is that the core areas might fall less in percentage terms than outlying areas for the reasons I've outlined (US precedent, possible secular change in preferences).

Is your view that they will fall roughly the same in percentage terms (as Chris suggested above) or in dollar terms (which you have stated is the relevant metric)?

If the former then suffering will be shared relatively evenly (all homeowners lose an equal portion of their investment). If the latter then homeowners in lower price areas would suffer disproportionally (greater % of negative equity for instance)

Dave said...

I stand corrected. That doesn't change the point that the substitution theory is less relevant to what we're talking about (house prices) the less comparable the substitute good is to the original good.

You might not expect house prices for similar houses to be all that different between OB and FF. You would probably expect them to be different between OB and Langford. A change in the price of the OB house theoretically has a larger impact on the demand for the FF house than on the Langford house.

I'm speaking very generally for a reason. I don't think the substitution theory can be applied to tell us exactly what percentage change we can expect, just that there should be one.

Dave3

Leo S said...

Is your view that they will fall roughly the same in percentage terms (as Chris suggested above) or in dollar terms (which you have stated is the relevant metric)?

Haven't thought about it enough to really come to a conclusion, but I would say more likely dollars than percentages. However in the article that you linked, they talked about the areas that appreciated the most, also depreciated the most. Someone here said that all areas around Greater Victoria appreciated equally in percentage terms, but I wouldn't take that on face value without seeing the data.

Leo S said...

I call BS on that.

You call BS on the fact that dollars matter, not percentages? Hmm.. Ok I'll believe that when you can pay for a burger with a percent.

You have done lots of posts using percentage changes in house prices so obviously you think that is relevant and important.

It's a convenient way to measure and relate dollar declines to overall valuations. If you were paying attention I specifically pointed out that a 10% decline now is significantly worse than a 10% decline in 1994 because it translates to more dollars.

If I take your statement at face value a 200K drop in home value would affect the average owner of a 400K home and a 1M home identically

Not what I said. Both owners lost $200,000. The fact that the owner of the lower priced house might be less able to absorb a $200,000 loss is a totally separate issue.

Leo S said...

I'm speaking very generally for a reason. I don't think the substitution theory can be applied to tell us exactly what percentage change we can expect, just that there should be one.

Bingo. And it's not unique to houses. It's the same for any good. If butter goes up in price we can expect demand for margerine to increase, but we can't expect exactly by how much, because that depends on how good of a substitute it is.

Dave said...

I knew there was a reason I liked you Leo :)

Dave3

CS said...

"Terence Corcoran: Canada’s policy makers fixed on doing nothing"

But what could they do, other than nothing?

Anything the government might do to force commercial interest rates higher would cause a house price crash. A house price crash would cause banks to raise mortgage rates to reflect the increased risk, which would accelerate the crash.

So the only thing for the government to do is nothing and hope that some factor beyond its control does not upset the state of unstable equilibrium in which the economy presently exists.

Introvert said...

Just a few of the problems/screw-ups that I was hoping the NDP would have had a chance to look into/try to solve:

-BC Hydro's $4.5B debt hidden in deferral accounts (Someone remind me what the Fast Ferries ended up costing...)

-The Basi/Virk $6M legal fee bailout ("Cash for Crooks")

-Worst, or second-worst, child poverty rate (which won't hurt those kids' education or future job prospects at all, I'm sure)

-Handing over environmental review authority to the federal government (a body that really cares about the environment)

Oh, well.

At least we have a balanced budget, jobs for everyone, a debt-free province in 15 years, and a truthful leader who, above all, has a great smile.

CS said...

Just a few of the problems/screw-ups that I was hoping the NDP would have had a chance to look into/try to solve ...

That would have made a compelling platform, but what we mainly heard was a loud anti-development agenda: no pipelines, no tankers.

And the economy is sufficiently bad that many were prepared, quite reasonably, to put development before the environment.

Combine that with a Liberal leader who connects better with your average blue collar worker than Adrian Dix, and the return of the slick if sleezy free enterprise party was inevitable.

Introvert said...

It would also have been nice to see legislation banning union and corporate donations to political parties, a change that the NDP was proposing.

dasmo said...

Three San Francisco neighbourhoods performance from peak.


Looks like neighborhoods do make a difference. While the more desirable hoods lost a bit more money, they lost less in percent and have regained it all back and then some. The less desirable hoods lost way more % wise and have yet to come even halfway back....

Introvert said...

And the economy is sufficiently bad that many were prepared, quite reasonably, to put development before the environment.

I don't find that so reasonable.

The environment can't limitlessly support many of our current forms of development.

The NDP did not campaign hard on creating green jobs, but they should have. The Green Party did. If we are to focus on development, it's high time that we focus on sustainable development, i.e., in renewable energy.

We have to think longer term. And by longer term, I don't mean 15 years (when, by the way, we'll be debt-free!); I mean 30+ years.

dasmo said...

Agree Introvert. Most economists decouple the environment from the economy... A fundamental error.

Introvert said...

Economics aspires to be a science. It is not.

Introvert said...

Agree Introvert. Most economists decouple the environment from the economy... A fundamental error.

Yes. And that decoupling is not accidental; it's deliberate.

"Oops, I forgot to take into account how my actions will negatively affect the conditions under which life on this planet currently exists..."

totoro victoria said...

Short-term thinking is the bane of politics. Decisions are tied to the election cycles.

Introvert said...

If wild salmon could vote, they'd vote Green.

koozdra said...

We might not have to worry about environmental concerns.

Introvert said...

If Earth's atmosphere could vote, it would vote Green.

caveat emptor said...

Leo

Yes i agree that at the end of the day we spend dollars and not percents. However, I still think percentage increase or decrease is a better way to measure the increase or decrease in the price of an asset or the return on investment precisely because it lets you compare across assets of different prices. After all a rounding error on the price of a few Uplands homes will get you a place in Sooke.

Lets say I had a million dollars to invest and you had 50000. I stick my stash in a GIC and get 1.5%. You do great things in the stock market and get a 25% return on the year. We aren't going to say my investments did better than yours even though it is true that I can buy more burgers than you with my first year investment returns. After all if you keep up that pace your wealth will surpass mine in a few years (approx 14).

I would further submit that a 100K loss on a 1M dollar house is NOT twice as bad as a 50K loss on a 500K house even though the dollar amount is twice as great.

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

Rob Carrick: Would you be better off financially renting or buying a home?

Mr Carrick rightly points out that renters are ahead in the long run only if they demonstrate superhuman discipline by aggressively saving and investing for 25 years.

How many superhuman renters do you know?

info said...

"Government policy must be to maintain house prices on "a permanent high plateau" to use Irving Fisher's phraseology with reference to stock prices on the eve of the stock market crash of '29.

Avoiding a house price crash is a prerequisite to reelection of the Federal Tories. Moreover, high home prices are good for both the economy and the environment: they stimulate construction and related domestic industries while causing an increasing proportion of the population to live in condos, rather than suburban villas, which cuts energy use, infrastructure costs and probably the birth rate.

A key question, then, is can the Federal Government's high house price policy fail, and if so, under what circumstances and due to what causes"


There is no way to keep house prices in Canada on a permanently high plateau. Housing bubbles always burst and crash/correct in a big way. As this chart shows, once a national housing bubble reaches its peak, it always corrects back the same amount.

It is clear that there was housing price parity between Canada and the US until 2006. In 2006, the US housing market started to crash while zero-down, 40-year mortgages and many other forms of new stimulus were introduced into the Canadian housing market, pushing prices higher.

What price did Canada pay in order to inflate the bubble even more in 2006?

In 2006, CMHC had insured a total of $100 B in mortgages, by 2012 that total was almost $600 B.

At that rate of increase, CMHC's total would be something like $3.6 T by 2018 (multiplying the total by 6 every 6 years). Total CMHC and private insurance (which is also backed by the taxpayer) is already at an extremely risky level in Canada. There are very serious consequences for the Canadian taxpayer and for Canada as a whole once the Canadian housing market corrects significantly from current bubble prices at the current level of CMHC exposure. Pushing total (CMHC and private) mortgage insurance much higher in an attempt to maintain bubble house prices would obviously result in much worse consequences for Canada once the housing market corrected significantly, since bubbles always burst.

There will be no massive intervention to prevent the Canadian housing market from crashing/correcting like there was in 2009.

There has never been a housing bubble that turned into a permanently high plateau. It is simply impossible. It will not happen in Canada.

Introvert said...

There will be no massive intervention to prevent the Canadian housing market from crashing/correcting like there was in 2009.

I bet you thought massive government intervention wouldn't happen prior to its happening in 2009. And now you're saying that it won't happen again...

Introvert said...

The environment is not some thing that we can afford to protect only when economic times are good.

totoro victoria said...

"As Mr. Tristani scores the results, owning never wins. “Over six years, no one has been able to substantiate buying as creating more wealth over the long term,” he told me in an e-mail."

Ahhh... the call of BS rings out again.

Add in some rental income and see how you do...

Buy low and sell high and see how you do... (of course vice versa)

Marko said...

Speaking of the environment....I listed a cool environmentally friendly home a few days ago that you don't see every day.

http://www.realtor.ca/propertyDetails.aspx?propertyId=13186729&PidKey=-1259399914

info said...

@ caveat

"Yes i agree that at the end of the day we spend dollars and not percents. However, I still think percentage increase or decrease is a better way to measure the increase or decrease in the price of an asset or the return on investment..."

Take an extreme example. A 10% loss on an investment of $10.00 is $1.00.

A 10% loss on an investment of $1 M is $100,000.00.

Total dollar loss is extremely important.

A 10% loss on a real estate investment in Victoria today is a much more serious loss than a 10% loss on a (much less expensive) real estate investment in the 90s.

A potential 10% loss on a house in Victoria today is more than enough to keep the vast majority of recent buyers (those who bought for the first time within the last 4 years) trapped in their houses, unable to sell without declaring bankruptcy. The vast majority of these new buyers were given high-risk, high-ratio mortgages with tiny downpayments.

For new buyers, it can be argued that a 5% correction in today's bubble housing market is worse than a 10% correction in the 90s was. Think zero-down.

Introvert said...

I just read a Tyee article on the election that had this as one of its posted comments:

Surrey and Maple Ridge have lately been the cheapest places in the lower mainland to buy houses, and many people living there pay a large penalty in commuting time for buying a house there.

I wonder how much of the Liberal victories in those areas can be attributed to insecure mortgage holders striving to live up to middle class stereotypes, and becoming irrational worshippers of the gospel of selfish materialism?


Afternoon chuckles.

kabloona said...

Introvert:

I'm a little bit surprised at the election results. I thought - based upon published polls - that Dix would get a slim majority Government of about 45 seats or so. I thought Dix's lead was exaggerated and Cummins' vote would fall apart...so the numbers would tighten.

Several things struck me as odd about the campaign, such as that strange TV ad the Libs ran with the (very) Old People talking up Krusty and saying how bad the NDP were(...for old people, I guess). I wondered who these old geezers were (Krusty's relatives, paid actors, what...?) and why voters should listen to their opinions...?

Then I was at the advance poll and found myself standing in a HUGE lineup of - guess what - old people. I'm no spring chicken but that lineup made me feel like a teenager...

I think the Libs were able to terrify the Oldies into thinking Dix would jack their taxes and cause their property values to fall - and as usual the "Young People" couldn't be bothered to vote....too busy updating their facebook page or tweeting each other, I guess.

Look how well the Libs did in Parksville-Qualicum and the Comox Valley. Shouldn't places like that with a large population of retirees be prime NDP territory...? Well, they weren't...

Okay, so now the young-ish people have Krusty to reign over them for the next four years... enjoy!

;-)

Marko said...

Dix promising to pump $372 million into the public education system over 3 years doesn't exactly help the "oldies"...the money has to come from somewhere.

Marko said...

A potential 10% loss on a house in Victoria today is more than enough to keep the vast majority of recent buyers (those who bought for the first time within the last 4 years) trapped in their houses, unable to sell without declaring bankruptcy. The vast majority of these new buyers were given high-risk, high-ratio mortgages with tiny downpayments.

The percentage of buyers in Victoria financing with a high ratio mortgage (less than 20% down payment) dropped to 22.0% in 2012 from 22.52% in 2011. Those paying cash increased from 22.68% in 2011 to 25.3% in 2012. Both surveys over 1000 sample size.

The percentage of those putting down 5% is actually rather small.

totoro victoria said...

Although I'm sure these types of comments would be well received by the Greater Fool!

caveat emptor said...

Info must be very confident that no one will click the links she provides. Why else does she keep posting a link to a spaghetti chart of 48 different housing valuation peaks all proceeding in very different ways as evidence that "it always corrects back the same amount"

What the chart actually displays (and it's stated right in the text, too) is that on average the valuation (not the price) corrects back the same amount. A rather important distinction since as the chart clearly indicates the lead up and unwinding of valuation peaks can be all over the map.

And as the author of the piece points out, it is possible for the valuation bubble to unwind with modes price declines.

caveat emptor said...

Dix promising to pump $372 million into the public education system over 3 years doesn't exactly help the "oldies"

Education is a cost, but it is also an investment. Good education is one of the prerequisites for a good economy that is going to support the healthcare system those "oldies" need.

It's a fallacy to assume that because you won't use a service you don't benefit from it.

Marko said...

Education is a cost, but it is also an investment. Good education is one of the prerequisites for a good economy that is going to support the healthcare system those "oldies" need.

It's a fallacy to assume that because you won't use a service you don't benefit from it.


There is benefit; however, I don't think the benefit is equally distributed.

Just Jack said...

I don't think those that had just put down 5% are anymore likely to default as those that have continuously pulled equity out of their home. Even if those people originally had bought fully with cash.

It might even be that recent buyers are less likely to default as they have just been approved by someone looking at their income and expenses.

Different than someone using up their home equity line of credit.

Think about it. If a home owner lost their job today. They still could go to the bank and pull out 80 percent of the value of their home in cash.

HELLLOOO VEGAS!

Introvert said...

Info must be very confident that no one will click the links she provides.

I don't really read what info writes anymore, let alone click on any links.

There's no need to read info's posts; they're all the same:

Blah, blah, blah ... massive, unprecedented, temporary intervention ... blah, blah, blah.

CS said...

The environment is not some thing that we can afford to protect only when economic times are good.

Given the choice of a job building pipelines and oil export terminals, or protecting the environment from some ill-defined risk of an oil spill of ill-defined magnitude, most reasonable people would go for the job. In the long-run such thinking may be disastrous, but in the long run, we are all dead, as Maynard Keynes observed.

Anyhow, the anti-development things is mostly humbug. How many Greenies are willing to pay two, three times as much for "renewable" energy instead of using what we have now? And how "renewable" is wind power when it costs so much more than power generated by a gas turbine? After taking into account the embodied energy in the equipment, including backup gas turbines, the supposed environmental benefit is questionable.

If you want to cut carbon emissions to the atmosphere raise the (Liberal Party's) carbon tax. That provides the incentive to reduce emissions in the most economically efficient way.

The NDP's environmental message was elitist claptrap for the Prius owning, holidays in Hawaii, comfy middle class, and crudely anti-blue collar, not to say crassly anti-Alberta. No wonder the workers' party lost the election. Sheer stupidity.

koozdra said...

@Just Jack
"Think about it. If a home owner lost their job today. They still could go to the bank and pull out 80 percent of the value of their home in cash."


"There was an increase of 39,000 among self-employed people that counteracted the decline."
Canada loses 54,500 jobs in March

totoro victoria said...

I have to admit I don't read them. I don't read ads either. They are kind of the same.

As far as HELOCs go, if you lost your job that might tide you over some. If you are a renter you better have some aggressive savings.

info said...

"Info must be very confident that no one will click the links she provides.

I don't really read what info writes anymore, let alone click on any links.

There's no need to read info's posts; they're all the same:"

My posts provide a variety of links that all point to much lower prices in Victoria in the future.

You talk like an angry realtor who hasn't made a sale in a while. Your posts are never worth reading. You lack logic.

There is no information in terms of charts or other stats that support what you have to say because clearly house prices in Victoria are correcting and will continue to do so for years to come.

totoro victoria said...

Okay, just looked at the chart and I strongly agree with the interpretation of the data.

I fully expect we will not see price gains for up to ten years. We are in pinhole deflation imo. As incomes rise and inflation works its way, the values will adjust.

This could change into a crash if interest rates rise or the economy tanks for other reasons.

I should have clicked that link!

koozdra said...

If you were financially prudent surely you would have bought a property by now.

Renting and saving, the new Canadian oxymoron.

info said...

Many "housing market experts" in the US denied the existence of a housing bubble in 2005 and 2006. It's always interesting to read what they had to say back then. In the same way, many Canadian "housing market experts" are currently denying the existence of the Canadian housing bubble.

On July 28, 2005, Neil Barsky, Alson Capital Partners, LLC, was quoted in the Wall Street Journal:

"There is no housing bubble in this country . Our strong housing market is a function of myriad factors with real economic underpinnings: low interest rates, local job growth, the emotional attachment one has for one's home, one's view of one's future earning-power, and parental contributions, all have done their part to contribute to rising home prices...
What we do have is a serious housing shortage and housing affordability crisis."



Introvert said...

Given the choice of a job building pipelines and oil export terminals, or protecting the environment from some ill-defined risk of an oil spill of ill-defined magnitude, most reasonable people would go for the job.

On the contrary, the risks of pipeline leaks and tanker spills are quite defined--as is the magnitude of the devastation they would wreak.

In the long-run such thinking may be disastrous, but in the long run, we are all dead, as Maynard Keynes observed.

Keynes, like his contemporaries, could not have imagined the environmental damage that global industrial development would end up doing. Keynes was a prominent figure in the 1920s and 30s; what were China's and India's greenhouse gas emissions back then? On what scale was oil being transported across oceans? Different world.

Applying that Keynes quotation to today's context is at best unhelpful and at worst pernicious.

info said...

"What the chart actually displays (and it's stated right in the text, too) is that on average the valuation (not the price) corrects back the same amount. A rather important distinction since as the chart clearly indicates the lead up and unwinding of valuation peaks can be all over the map."

Wrong. The peaks all corrected back the same amount in terms of price to income ratio. The same will happen in Canada. Canada has reached a price to income ratio bubble much bigger than what formed in the US at the peak of their bubble.

"And as the author of the piece points out, it is possible for the valuation bubble to unwind with modes price declines."

That is the opinion of the author. It is not factual information. Consider the source. I have been posting the opinions of many US "housing market experts" in 2005 and 2006 and they all denied the existence of the US housing bubble. Most of them talked about how fundamentals supported prices and that there would be no correction or crash. Perhpas you missed these posts.

All housing bubbles burst and correct/crash. There are no exceptions to this. I have been encouraging certain posters on this site to find one (1) example of a housing bubble that did not correct/crash. So far nobody has been able to provide an example of this.

Go ahead and follow the advice of realtors, real estate boards, brokers, the media and other "housing market experts", such as the author in that article, and see where that gets you.

Millions of families in the US are currently in financial peril because they followed the advice of the "experts" in the US and bought houses at bubble prices.

Leo S said...

Question: saanich thinks there's a Garry oak on a property but it doesn't seem to be there anymore. Satellite photos show it likely disappeared between 2009 and 2011.

Implications for buyer?

info said...

On October 5, 2006, Alan Reynolds, Senior Fellow, Cato Institute, wrote an article that appeared on Townhall.com. Quoting:

"When it comes to homes, however, many people have spent the last four years fretting that the "housing bubble" might end. That is, they worried that overpriced homes might become more affordable. That is not quite as nonsensical as worrying the price of oil might fall too much, but it's close."

Another US "housing market expert" with bad advice.

Always consider the source.

Leo S said...

@marko. Cool house!

Leo S said...

By the way, I'm probably the last person to realize this, but the Saanich GIS map service is awesome. Better even than the already very cool CRD atlas.

dasmo said...

Another dasmo desirably disparate neighbourhood home price chart:
Seattle this time

Leo S said...

Lets say I had a million dollars to invest and you had 50000. I stick my stash in a GIC and get 1.5%. You do great things in the stock market and get a 25% return on the year. We aren't going to say my investments did better than yours even though it is true that I can buy more burgers than you with my first year investment returns.

Sure, my investments did better percentage wise than yours, but at the end of the year would you rather have an extra $15,000 or an extra $12,500?
As the owner of the investment, the only thing that matters is how much more or less money you have as a result of owning it.

Leo S said...

The performance of the price tiers on Case shiller is more accurate I think.

Lower priced properties appreciated more, and fell more. That pattern is pretty consistent across US cities.

Introvert said...

By the way, I'm probably the last person to realize this, but the Saanich GIS map service is awesome. Better even than the already very cool CRD atlas.

'Tis!

Marko said...

By the way, I'm probably the last person to realize this, but the Saanich GIS map service is awesome. Better even than the already very cool CRD atlas.

Been using Saanich GIS for a while now....some of the functions are amazing. You can pull up actual engineering drawings for services to each home. A bit complicated thought....I should make a youtube video.

totoro victoria said...

You can look at the bylaw Leo:
http://www.saanich.ca/parkrec/parks/trees/bylaw.html

The only person liable is the person who cut down or caused the tree to be cut down.

Worst case scenario is $500 fine:

Offence & Fines

Tree damaging activities as defined in Section 9(a) of the Tree Preservation Bylaw are ticketing offences and subject to no less than a $100.00 fine for each tree. More serious damages or the removal of protected trees bring penalties of no less than $500.00 per tree for the first offence and $1,000.00 per tree for each subsequent offence.

Leo S said...

@totoro. Thanks. I guess as long as Saanich is made aware that it is no longer there when the property changes hands that should be fine.

totoro victoria said...

Yes.

Sometimes those garry oaks fall down too if they have dry rot or other diseases/damage.

caveat emptor said...

Leo
I guess we'll have to agree to disagree on whether dollars or percentages are the best way to measure investment returns or losses.

caveat emptor said...

"I have been encouraging certain posters on this site to find one (1) example of a housing bubble that did not correct/crash."

Well since bubble seems to be defined in historic terms as "prices went up rapidly and then fell" there will by definition be no examples.

BTW look at your spaghetti chart again. You do understand there is a difference between the AVERAGE behaviour and the behaviour of each and every member of the data set?

patriotz said...

Well since bubble seems to be defined in historic terms as "prices went up rapidly and then fell" there will by definition be no examples.

I don't know what "historic terms" means exactly but there is a simple technical definition which has nothing to do with how fast prices go up or go down:

Investors are prepared to buy houses they will rent out at a loss, just because they think prices will keep rising—the very definition of a financial bubble.

koozdra said...

"That's the largest annual decline in gas prices since October 2009, the data agency said."

Lots of references to 2009 these days. Did something significant happen then?

Cheaper gas pushes down inflation rate to 0.4%

Leo S said...

>>. Leo
I guess we'll have to agree to disagree on whether dollars or percentages are the best way to measure investment returns or losses.

Nope. Obviously if you're comparing investments or looking at historical returns or anything else, percentages are the only way to go.
It's when you translate those returns to your own financial situation, dollars are the only sensible option.

Leo S said...

>> All housing bubbles burst and correct/crash. There are no exceptions to this. I have been encouraging certain posters on this site to find one (1) example of a housing bubble that did not correct/crash. So far nobody has been able to provide an example of this

Actually if you wander over to globalpropertyguide.com there are many examples of countries that have experienced very rapid house price growth and no crash.

Of course you will say they just haven't crashed yet, and that may be true but it certainly means that your assertion isn't really provable.
Or rather, all housing bubbles crash, but it is hard to tell whether any given country is in a bubble. Clearly our dear finance minister thinks Canada is not in one due to his changes

Leo S said...

>> Investors are prepared to buy houses they will rent out at a loss, just because they think prices will keep rising—the very definition of a financial bubble.

But that's not a usable definition. How many investors must do this before the market is in a bubble? 1? 1%. 50%?
Bubbles are really only identifiable in retrospect. For now we can only call it a boom with worrying fundamentals

totoro victoria said...

Patriotz - by that definition we are not in a bubble at all and the "bubble" ended while ago...

People who are prepared to buy now are likely not buying because they think prices will rise.

They likely are not convinced prices will crash and interest rates are low enough that the payments are affordable.

StalJ said...

"As inflation works its way"

It is comical how many are banking on inflation to save their nominal butts. BC annual inflation came out today @ NEGative 0.8%. Things aint going to correct sideways like the nineties, if there aint no inflation.

Just Jack said...

Personally, I don't know of any definition of a bubble.

I consider the market to act irrationally at times such as when market prices increase despite the months of inventory increasing and the sales to new listing ratio decreasing over an extended period of time. That could be in, but not limited to, a specific location, type of ownership or style of home.

And sometimes it's just when "shoeshine boys" talk real estate.

Leo S said...

@caveat
Or more succinctly: if you want to know how an investment has done, use percent. If you want to know how you have done, use dollars.

caveat emptor said...

Leo

I'd agree and add the corollary that if you want to know how much a given $ loss hurts then look at it as a percent of your total assets.

Most of the folks on this blog could lose a wallet with $100 cash and just feel a bit annoyed and stupid. Bur for many that loss would mean a trip to the food bank or worse because that wallet might have contained 100% of their liquid assets.

caveat emptor said...

According to relatives in Switzerland (I have no data to verify this) house prices have gone up quite a bit there recently and have yet to crash.

dasmo said...

Another dasmo desirably disparate neighbourhood home price chart:
LA this time

dasmo said...

And please don't call this cherry picking, it's Halibut fishing...

Alexandrahere said...

Question: A TC article today says the average BC household forks out $418 per month for groceries. That would be almost $140 per month per person for a three member household. Groceries to me means all things purchased from a grocer, i.e. food, household paper products, cleaning supplies and so on.

This number seems on the low side to me. What about all of you? If you agree with the article, then perhaps I am not a smart grocery shopper.

Leo S said...

This number seems on the low side to me. What about all of you? If you agree with the article, then perhaps I am not a smart grocery shopper.

$140/person is way low. We spend double that. Back in my undergrad days through careful couponing and shared shopping with roommates we got it down to $170/month per person.

How do you figure $418/month is for 3 people though?

totoro victoria said...

I think it is low too for the average even for food alone. It is lower than the Dietician's report for BC. http://thetyee.ca/News/2012/02/28/Cost_Of_Food/

dasmo said...

Shoot that is low. No organic milk and Armstrong cheddar....

Leo S said...

Armstrong cheddar is just Saputo now anyway

a simple man said...

My family is easily 4x that amount for groceries.

Alexandrahere said...

The article of the survey may be misleading (something like the political polls).

It said: "...the average monthly food bill for the 3,024 people surveyed last month was $411 per household."

The online survey asked: "On average, how much would you say you spend on groceries/food (not including eating out or going to restaurants) per month?"

In British Columbia, the average was $415 per month.

Most people, I think, do not break down their daily grocery bill into several categories such as food, cleaning supplies, paper products etc. I don't. These all come under one budget item for me.

A family of three (especially if you have a teenage son), would be hard pressed to spend less than $650 per month on groceries.

dasmo said...

"Armstrong cheddar is just Saputo now anyway" Interesting. I also noticed it's different than it used to be. Less firm and not as crystally. It was never Balderson anyway but a solid white cheddar for my sandwiches. (I would never put Balderson in a sandwich!)

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