| May 2013 | May 2012 | ||||
| Wk 1 | Wk 2 | Wk 3 | Wk 4 | ||
| Uncond. Sales | 96 |
235
|
659
| ||
| New Listings | 277 | 584 |
1740
| ||
| Active Listings | 4568 | 4642
|
5015
| ||
| Sales to New Listings |
35%
| 40%
|
38%
| ||
| Sales Projection | --- | 600
| |||
| Months of Inventory |
7.6
| ||||
Sales are pretty slow but new listings are lagging. "I heard the market is slow out there honey, lets sell next year."
In other news, as already linked by koozdra, OSFI is considering restricting amortizations over 25 years. It sounds like it won't be quite so sudden as Garth announced, that they will ban longer amortizations this week, but they are looking into the issue. The last time regulations were changed there was talk about public consultation as well, but it turned out that their mind was essentially made up and the regulations went through very similar to how they were initially announced.
Personally I think this is a very strange move from the OSFI. Are 30 year mortgages with more than 20% down really a big risk? If this is part of the push to slow housing, it seems like there are so many more effective ways to put the brakes on, like raising down payment requirements by a couple percent, or banning "skip a payment" schemes and pushing on the provinces to bring the credit unions in line with the regulations affecting the national banks.
What this shows is the government's determination to crack down on the housing market. Just like government intervention to loosen credit during the boom wasn't predictable, these interventions to tighten credit availability may continue to come out of thin air. As CMT says: "There’s every reason to suspect that the DoF will keep applying air brakes until the housing plane has no more lift."
96 comments:
It sounds like it won't be quite so sudden as Garth announced
That didn't stop Garth from declaring himself correct. Because as we all know government talking about X = X
Seems like a weird focus for action. Surely the uninsured 20 to 99% down mortgages are less risky than 5% down regardless of amortization period.
I think this is a good move.
Basically the Canadian economy sucks and has for years. The uber low interest rates used to stimulate the economy have done little else but inflate the housing market. All this cheap money going no where but into housing which does very little to stimulate the wider economy.
Raising interest rates across the board would be a bad idea, because, as I said, the economy sucks. This is a step in the right direction to clean up the mess that the conservatives created. Idiots.
"Are 30 year mortgages with more than 20% down really a big risk?"
The previous regulations were effective at quashing the first time buyers. Now house prices are being maintained by move up buyers.
It's not that they are a risk exactly. It's that they are keeping prices at bubble levels.
The government will continue to study how prices are being maintained so high. The will continue to target these factors until prices come down.
The 70% will not be pleased.
More likely it's about an even playing field for all home owners. If you bought a home with less than 20 percent down. Made some improvements and then re-financed at 30 years assuming that those improvements increased the value of your home that you no longer need insurance.
The problem is how the bank or the broker determines that you now have more than 20 percent equity after making the improvements. Use the EMILY computer program and tweak it a bit more to get the desired results or have an appraisal performed and push the appraiser to go higher on their estimate.
You still have the problem with market manipulation by those who profit from higher values.
"Now house prices are being maintained by move up buyers"
I'm not sure I buy that. Everyone can't be "moving up" simultaneously.
Although I am far from a "laissez faire" free marketer I do believe the government should only interfere in the markets when there is an actual problem to be solved.
30-40 year 5% down, government insured mortgages were a government created problem that needed a government solution (banning).
I don't see the problem that needs to be solved with greater than 20% down mortgages.
We went with a 35 year mortgage even though we bought our house with well over 50% down. The flexibility is great. Some years we have packed on the extra payments. The year we took parental leave we just made the very manageable minimum payments. Benefited us at zero risk to the taxpayer or the bank.
Personally I think this is a very strange move from the OSFI. Are 30 year mortgages with more than 20% down really a big risk?
I suspect that there are two reasons that the OSFI is doing this:
[1] Making it clear to the banks that they must "play by the rules" and not attempt to circumvent the the intention of the maximum 25-year amortization rule. With the downgrades by Moody's, warnings from the IMF, and stories about shorting Canadian banks - the government want to tighten things up.
[2] Buy a house for $1.5 million with 20% down still means that you have a $1.2 million mortgage. Larger mortgage amounts and longer terms mean much more exposure when interest rates rise.
I see the maximum 25-year amortization, regardless of down payment - having a significant effect on housing costing six figures or more, minimal impact on more affordable housing.
@caveat emptor
You reasoning for choosing a 35-year mortgage was sensible and carefully though through. Unfortunately, I don't think that most potential buyers apply such due diligence.
....having a significant effect on housing costing six figures or more, minimal impact on more affordable housing.
Can you still buy a house that isn't six figures?
Er ... make that seven figures!
They are not trying to get prices to come down, they are trying to reduce peoples debt load. This is why it's a combination of low rates and regulations limiting amortization periods and equity ratios. Lower payments with more going towards principle. Sprinkle some inflation and wage increases and in five years they can start to edge rates back up. They just need to do this without further inflating prices. That way in five years we will be closer to "fundamentals".
I get your choice ce. That's why I do a 25 year and not a 15 ;-). With extra payments etc you should be fine. The impact is somewhat minimal on the front end loading. perhaps a few k. On a 35 vs a 25 year amortization, without effort to pay extra and cut it down, you will be paying about 100k for the privilege of a slightly lower payment. That is if you calculate with a constant rate. Even I don't think we will have low rates for over twenty years!
mls
craigslist
I'm sure these guys won't have any trouble finding a renter.
"applicants will be required to pre-qualify prior to showing, tenant will be responsible for yard maintenance (or hiring of maintenance personnel) and all utilities"
Here are my stats for the week of 6-12 May 2013: SFH in Vic,OB,ESQ,SE&SW with a min of 2 beds and 2 baths, priced between $375K & $775K
Inventory: 384
Sold:25
Avg selling price: $576K
Med selling price: $571K
Seven of the 25 went for below BC Assessment and 11 had advertised secondary suites.
In the SE areas of Gordon Head, Lambrick Park and Mount Doug, 4 homes sold with an avg selling price of $611K.
For comparison in previous years and within identical criteria:
May 7-13 2012
Inventory: 366
Avg selling price: $598K
Med selling price: $600K
May 9-15, 2011
Avg selling price: $590K
Apartments & Townhouses pretty much in the same areas including downtown, priced between $248K and $550K with a min of 2 beds and 2 baths:
Apts
Sold: 7
Avg selling price: $360K
Med selling price: $340K
Townhomes: Two sold with an average price of $435K
Three of the apartments went for below BC assessment, with the rest of them including the townhomes going for above assessment.
They are not trying to get prices to come down, they are trying to reduce peoples debt load.
They are trying to get prices to come down. Flaherty has specifically said he would like to see moderately lower prices.
I bet this owner doesn’t believe real estate always goes up.
Beautiful lake & golf view near Fort Laud
10/16/1993 Sold $195,600
04/29/2013 Listed for sale $145,500
Almost hard to believe once you factor in 20 years of inflation & maint/renos.
Here’s another that lost more.
OFSI vs honesty. The banks are already receiving correspondence and policy drafted to deal with implementation.
Turner is right, get over it.
Floating test balloons or lying which ever you call it. Get on with it already....
This is what I call confidence.
Assessed: $767,000
Listed: $898,000
I guess they recently renovated now they would like someone to come and pay them for it.
12697092
"First time on the market..."
Built in : 1111
That's how you hold real estate.
12232328
By 2006, Canada and the US had housing bubbles of equal size.
Below are the housing price run-ups of Canadian and American cities up to 2006 (as a multiple of 2000 prices). The US numbers represent peak price gains.
Victoria: (+2.15) (Teranet Index, 2006)
Vancouver: (+1.91)
Calgary: (+2.2)
Edmonton: (+2.37)
San Francisco: (+2.18) (Case Shiller Index at peak)
Phoenix: (+2.28)
Las Vegas (+2.35)
Seattle (+1.90)
Los Angeles (+2.75)
By 2006, several Canadian cities had already experienced extreme price run-ups.
By 2006, Victoria's price run-up had reached a height comparable to the peak of the most bubbly US cities.
It's difficult to understand why the decision was made to further inflate the Canadian housing bubble near the end of 2006.
The 2006 budget brought in zero down payments and 40-year mortgages. It also changed the debt service ratios to allow buyers to qualify for a bigger mortgage.
As Pacifica Partners recently noted:
"This one decision may be remembered in Canadian economic history books as an extremely grievous policy error... Prior to the 2006 loosening of government insured mortgages; the Canadian real estate sector had already experienced a half decade of surging prices."
As a result of these policy changes, house prices in Canada surged even higher until late 2008. Then the market turned around. By early 2009 it was clear that the Canadian housing market was in much trouble. Prices were crashing.
If it is difficult to understand why policy was brought in to further inflated the Canadian housing bubble in 2006, then it is impossible to understand why the decision was made to further inflate the (much bigger) bubble that existed in 2009.
The 2009 housing market intervention was massive and unprecedented. Emergency interest rates have been in effect since that time.
Current house prices in Victoria are not sustainable. The price run-up (since 2000) was a result of lax lending standards that created an environment of excess credit.
Fundamentals do not support current prices in any way. The 10% correction that Victoria has experienced so far is only a fraction of what is yet to come.
I believe he said lower prices were good for Canadians. I don't think he said explicitly that he is trying to get prices to lower. Or did I miss that?
Semantics I guess. He thinks modestly lower prices are good, and he has instituted changes that put pressure on prices.
That's now old news info...
House Prices Rise in 89% of U.S. Cities as Recovery Gains
"The best-performing metro areas were Akron, Ohio, and San Francisco, where prices jumped 33 percent from a year earlier. Prices rose 32 percent in Reno, Nevada, and Silicon Valley, California; 31 percent in Atlanta and 30 percent in Phoenix."
Those early years of double digit increases in home prices skewed and mishaped market values as supply fell behind demand. That caused people that were normally cautious in their investments to make poorly informed decisions.
In the early part of 2000, Baby Boomers in their mid 50's began to move to Victoria. Most wanted a home that would take them through those retirement years. And that home was the no step rancher. Prices shot up as supply fell behind and retirees were paying premium prices in relation to other building styles.
Now that the market has cooled and the crest of Baby Boomers is now subsiding those one-story homes are declining faster than other building styles.
Such as the strata ranch style townhomes in Central Saanich. Purchased in August 2005 fo $356,000. The property resold this week for 12% more or $400,000.
That's 12 percent over eight years.
Just because you bought early, does not guarantee that your property has increased with the rest of the market. Many people believed that buying properties that catered to the retirement market would garnish them big appreciation. Mostly because they were being fed a regular diet by biased parties that retirees were going to come here in larger and larger numbers.
And that is still happening today. You still hear people say that prices will go up - when the retirees start coming to Victoria.
It's difficult to understand why the decision was made to further inflate the Canadian housing bubble near the end of 2006.
Come on! The Tories had just one a minority government. They wanted a majority.
then it is impossible to understand why the decision was made to further inflate the (much bigger) bubble that existed in 2009.
The goal was not to further inflate, but to prevent the crash that was clearly developing. They just over-corrected a bit.
What we'll see is continued effort to bring the market to "a permanent high plateau."
Wish 'em luck with that.
Not "one" but "won"!
Funny, though isn't it, even totally illiterate people understand one another in conversation which provides no clue to spelling. Yet when it's written down, some folks get really exercised about misspelling and wacky punctuation.
Retirees aren't coming to Victoria they are going to Nanaimo...
No they're not, they're going to florida.
Retirees are going where their families live. In most cases that is nowhere.
The y-o-y gains in Vegas, Reno and Phoenix suggest influx of canucks. Can’t blame them. We’ve been looking for places with a pool and amenities nearby for around a 100k, and there are lots to choose from.
Good point Leo. Many will remain in SK & AB near where their children get jobs and buy winter homes or rent stateside. I could see the brain drain head south again too, like the 90s.
12832486
Does the court have unlimited amounts of time to sell these kinds of places?
Someone mentioned that a judge can reject an offer that is "too low".
What if no offers are coming in due to extreme overbuilding in the area?
They've lowered the price a couple of times but seem to have hit some kind of block. Is that what they think the "market value" is?
That court ordered sale might be worth taking a look at. There may be enough timber on the property to sell off to pay for some or all of the needed upgrades.
You can still make money in real estate - you just need to know where to look.
Anyone know the previous sale price/date for 4371 Torrington place. MLS 323356
Thanks.
$319,900 October 2004.
thanks!
Koozdra...this house was a paintball field. The guy that owned it apparently cut down a lot of the trees and apparently there is a fine for doing that. Might not be as much timber as it seems.
could it be, could leo be looking at places with... suites...
@Bitterbear
Yup, looks like Stormin' Normans. I've only been there once before...
could it be, could leo be looking at places with... suites...
Mom in law moving down. A little different than some snotnosed renters in the basement.
From "Uncle" Garth's blog posting this evening....
In the estimation of one analyst (Peter Routledge at National Bank) an astonishing 48% of all outstanding mortgages – insured and uninsured – in the portfolios of the monster banks have amortizations of longer than 25 years. Of all the uninsured loans, at least four in 10 have been financed over 30 years.
It should be interesting to see what the effect of the new rules might be for someone who currently has 25+ years remaining on their mortgage amortization and is coming up for renewal. If 25 years is the new maximum, monthly payments could be going up substantially.
Most likely similar payments just more going to the principle since rates are much lower...
"Mom in law moving down"
Is that code? Or perhaps the start of a ditty?
@dasmo
I'm not so sure about that... Back in 2009-10 I was paying 1.45% (prime - 0.80%) on my variable rate mortgage. I renewed at prime - 0.60% which is currently 2.40%. I guess that it depends on the type of mortgage you have...
I believe 5 year fixed is the most popular. I'm curious if they will be forced to renegotiate the amortization actually...
Down from northern bc I mean
Existing mortgage holders are always grandfathered
Yes, existing mortgage agreements were grandfathered when the last set of mortgage "changes" came into effect in July 2012 - however there is nothing (that I know of) which guarantees this will happen in the future.
I think the huge backlash if they tried to force 25 year amorts on existing mortgage holders would more or less guarantee it.
Can't see it either. If they wanted to engineer a crash there is one simpler way. Raise rates....
You can't raise rates because you want businesses to have access to easy cheap money. That is what the government stimulus is for.
They are getting nervous about too many Canadians being to vulnerable to a rise in rates. The best way to prepare for this inevitable (maybe) outcome is to temper the housing market.
However bubbles are a fickle thing. All you have to do is touch them and they pop.
Not if they are held up by a bubble wand... If you want to pop them, you poke them with your finger. These are all mechanisms to create inflation and force an increase in principle payments on loans, outstanding or otherwise. The combination of which will reduce the impact of Canadian debt. If you are a saver right now, you have made a huge tiny mistake....
The 10% correction that Victoria has experienced so far is only a fraction of what is yet to come.
Ten millionth time a statement to this effect has been uttered on this blog. We need a word stronger than "hollow" to describe it.
We are so very very far away from inflation.....
could it be, could leo be looking at places with... suites...
Leo, you're making a huge mistake. No one should buy a house right now--not until prices take the 50% dive that we all know they will. Besides, renting is paradise compared to owning: no stress, no maintenance, quality of life out the wazoo.
Introvert has caught the sarcasm bug.
We are so very very far away from inflation.....
No, Leo. It's just around the corner! Canada's going to make the Weimar Republic look like child's play! Any minute now... Governments should never ever ever be allowed to print money. Ever.
Introvert has caught the sarcasm bug.
36 consecutive sarcastic posts from now and I'll be just like you, kooz!
"36 consecutive sarcastic posts from now and I'll be just like you, kooz!"
Imitation is the best form of flattery.
"We are so very very far away from inflation....."
Are we really?
LOL on inflation. At 0.5% annual inflation, a loaf of bread will double in 150 years. Weimar here we come!
http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/cpis01k-eng.htm
Oh wait... it says shelter is -0.6% inflation. Is that called inflation when there is a negative in front...or is it called something else what houses are doing?
Just read google news that wiemar Germany reported lowest inflation in 3 years today.
Interesting. My energy bills went up by more than 10% over last year... This index is hogwash. The price of cheese doubled in the last ten years. What I spend on it hasn't because I buy less cheese now...
HoHum.. no energy worries on inflation.
Published: May 14
“The US shale oil will meet most of the demand from across the world in the next five years, even if it goes into ‘recovery motion’…
The forecast is made by the International Energy Agency (IEA) in its closely watched semi-annual report…
The US Government has forecast daily oil production in the country to skyrocket in 2014 to the highest level since 1988.”
http://rt.com/business/us-shale-opec-oil-259/
That's a maybe. A truth is the price of gas has almost doubled over the last ten years....
Interesting. My energy bills went up by more than 10% over last year
I'm interested to hear how you paying more on energy will help you pay down your mortgage. That's not the kind of inflation you're hoping for.
Teranet index marginally down again for April. Now at -3.27% decline YoY.
Why would you think I'm hoping for inflation?
"The Office of Superintendent of Financial Institutions has told banks it is looking at their holdings of non-insured mortgages — those with at least 20 per cent equity — to determine the systemic risk should values plunge."
They won't plunge. Don't be ridiculous OSFI.
Flaherty dismisses fears over housing slowdown
"Teranet index marginally down again for April. Now at -3.27% decline YoY."
The Teranet index decreased for both March and April, yet the average and median both experienced an uptick. Clearly the average to above average houses are changing hands at lower and lower prices.
The move-up crowd (or move-over crowd) seems to be dominating the market right now. We all know that the first-time buyer has pretty much been cut out of the market since last summer (compared to recent years). As well, many first-time buyers have become aware of the falling market in Victoria and have wisely decided to wait for lower prices.
The recent upticks in the average and median appear to be temporary, in my opinion. Afterall, a declining market does have its bumps on the way down.
>>Why would you think I'm hoping for inflation?
You said inflation will reduce the impact of debts. I said inflation is extremely low. You said prices of consumer goods are increasing faster than CPI indicates. I said that kind of inflation doesn't help anyone pay a debt. Clear?
"That's now old news info...
House Prices Rise in 89% of U.S. Cities as Recovery Gains
"The best-performing metro areas were Akron, Ohio, and San Francisco, where prices jumped 33 percent from a year earlier. Prices rose 32 percent in Reno, Nevada, and Silicon Valley, California; 31 percent in Atlanta and 30 percent in Phoenix.""
How, in your mind, Dasmo, does the recent uptick in US housing prices (after a devastating, multi-year crash) have anything to do with the future direction of real estate in Canada?
I think you are confusing hope with observation, a common thing around here. The theory of inflation reducing debt burden is fairly well known. Y'all are the ones who are into "real dollars" not me....
Hoping/expecting whatever. The point is it ain't happening.
It helps illustrate that the depth of the crash was not "supported by fundamentals".... We are not going to have a domino effect of voluntary, forced and involuntary foreclosures sweep the industry. Now that that is over in the states the picture will become clearer to you.
"think you are confusing hope with observation, a common thing around here. The theory of inflation reducing debt burden is fairly well known. Y'all are the ones who are into "real dollars" not me...."
Inflation was a big contributor the real estate crash in the 80s in Canada.
If inflation were to set in at too high of a rate in Canada, it would crush house prices.
Interest rates would skyrocket, causing those tiny (subsidized)monthlies to skyrocket as we would see an abrupt end to emergency interest rates. Many mortgage holders would be handing in the keys, causing house prices to drop.
The sharp rise in interest rates would prevent many potential buyers from qualifying for mortgages, which would also cause house prices to drop.
The price of food, fuel and all necessities would increase dramatically and sharply, having a negative impact on the ability of the average mortgage holder to come up with their monthly mortgage payments. Many mortgage holders are currently stretched to the limit as it is.
All of this would happen in a flash.
There are many other negative consequences that would come with too much inflation. All of them would push house prices much lower and at a fast rate.
....and that is why they "target" a 2% inflation rate.... No one "sets" an inflation rate....
Overshooting is pretty common in corrections. It will happen in Canada too.
What happened down south wasn't simply a correction.
In the short term inflation would most likely be bad for house prices because a major onset of inflation would almost certainly lead to interest rate increases.
In the long term NOMINAL house prices more or less track inflation so inflation is "GOOD" for nominal house prices.
If you believe in coming hyperinflation then holding paid off real estate or real estate financed with long term cheap debt is a good investment.
>> What happened down south wasn't simply a correction.
And?
House prices don't have to track inflation.
Any inflation rate that exists is a provincial or a Canada wide stat - yet we acknowledge that real estate prices are local.
Prices go up and down based on what is happening in the community. Only recently have prices been tied to wider markets. Before that you could have prices rising in Victoria and declining in Vancouver.
I'm just saying - that if you believe that real estate markets are local - how can a BC wide or Canada wide inflation rate provide anything meaningful to how Gordon Head prices would change?
@ Leo And just watch Inside Job
"What happened down south wasn't simply a correction."
That's right, it would not be considered a typical real estate correction. It was the bursting of a massive real estate bubble.
Houses got really expensive and too many people thought that prices only went up. Turns out, no, they go down too. This came as quite a shock to a lot of people.
Just like it will be really shocking when it happens here.
Magic eight ball, will there be a crash?
All signs point to yes.
"Perhaps nothing is as emblematic of the Canadian housing boom of the past decade as the hundreds of high-rise condo towers currently under construction across the country. Indeed, the story of Canada’s decade-long explosion in housing is to a large degree the story of a construction boom in the condo sector. But that boom now appears to be coming apart at the seams leaving many wondering what’s in store for the condo markets in Canada’s largest cities."
What? this guys out of his mind. Hasn't he heard of densification. We need more condos, not less.
Sell now or be priced in.
Is Canada’s condo boom coming apart at the seams?
Yes, we all know you Hope there will be a crash....
Yes, we all know you Hope there will be a crash....
"Yes, we all know you Hope there will be a crash.... "
I would be much more content if the bubble never occurred.
koozdra's desperation reeks almost as strongly as info's.
The more bandwidth Koozdra uses, the better his chances.
>> @ Leo And just watch Inside Job
None of which has anything to do with the fact that corrections and crashes overshoot.
Perhaps nothing is as emblematic of the Canadian housing boom of the past decade as the hundreds of high-rise condo towers..i am loving it alote..
321 Ocean Condo Miami Beach | 321 Ocean Miami Beach
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