May May
2013 2012
Net Unconditional Sales: 659 659
New Listings: 1,428 1,740
Active Listings: 4,783 5,015
Sales are dead on to the number recorded last year. Last year also had the same number of business days, so the sales rate is precisely the same. New listings are down 18%, and for the second month we are down YoY in terms of inventory.
148 comments:
"Shelley Mann continues her crusade of cautious optimism" -VREB
From the vreb release today:
Buyers remain price sensitive. "Homeowners who are pricing their properties competitively, not expecting the higher sale prices of 2008, are selling their homes," Mann says. "With 4,783 active listings, buyers have plenty to choose from. With higher sales volumes and a reasonable inventory level, Greater Victoria continues to edge towards a balanced market."
Did she just say to price below 2008 levels?
I think I like this new president!
Median and average prices take a dip from last month, too.
http://www.vreb.org/pdf/vrebgap.pdf
Until 2006, there was housing price parity between Canada and the US. We all know that the US housing bubble price run-up peaked in 2006 and then crashed, while Canada experienced a major intervention that same year that caused prices to surge higher instead of correcting. Another intervention followed in 2009, sending prices in Canada even further into bubble territory, perhaps forming one of the biggest housing bubbles in the history of the world.
Most Canadians admit that it is becoming increasingly apparent that Canada’s housing market will be experiencing some degree of correction. Even Canadian banks agree.
Housing bulls argue that Canada is different than the US. They argue that if Canada experiences a housing market correction it will be on a much smaller scale than that experienced in the US. To support this view, they cling to certain myths. One of these myths is that foreclosures will not be a major contributor to lower house prices in Canada as they were in the US. According to that myth, there will not be many foreclosures in Canada at all.
What they forget is that foreclosures (or the equivalent term, depending on the province) have played a big part in housing market busts in Canada in the past. Furthermore, bulls may not be aware that this recently happened again in Alberta, from 2007 to 2011. Of course, Alberta is a non-recourse province and that explains the high mortgage delinquency rate, right? Alberta is a non-recourse province, but that wasn’t the reason behind the high mortgage delinquency rate. It was falling house prices that caused this to spike.
The housing markets in both Edmonton and Calgary peaked in the fall of 2007 and started to decline relatively quickly from that point on until the major intervention of 2009. The correction in Alberta was, by far, the most extreme in Canada. The correction in Alberta started the earliest and prices plunged the deepest of any province. This explains the high mortgage delinquency rate.
You might disagree and insist that the spike in mortgage delinquencies in Alberta was a result of that province being non-recourse. Irrefutable proof that this was not the case is provided by the US housing market crash.
I always laugh when people say that Canada is different. I usually tell them that what they don’t understand is that the US isn’t different. Here’s why.
In the US, there are only 11 states that are non-recourse while 39 states are recourse.
In fact, Florida and Nevada, two recourse states, reached some of the highest mortgage delinquency levels in the US (see chart from the most recent link). Ultimately the housing markets in Florida and Nevada crashed the most of any US states, along with California and Arizona. Recourse mortgages do not prevent housing busts.
The fact that Alberta is a non-recourse province had very little, if anything, to do with the spike in mortgage delinquencies in the province, starting in 2007. Anyone who was aware of the foreclosure situation in Edmonton and Calgary from 2007 until 2011, knows that there were foreclosures everywhere. Some streets had 5 or 6 at a time. Some recently built condos and townhouses in Edmonton and Calgary lost 50% of their value. SFHs lost up to 35%.
Canada is not different. Foreclosures will play a big part in the coming correction/crash in Canada.
Text length is not proportional to persuasiveness.
"Median and average prices take a dip from last month, too."
Pile this on to the stack of proof that Victoria has been in a down market for a long time. It's interesting that there are still some people out there who deny that Victoria's housing market is correcting.
Nothing supports the view that the housing market in Victoria will not crash.
The big price plunges for Victoria are still coming down the pipe. That will start to happen once the correction is apparent in all Canadian cities. National housing bubbles always deflate that way.
There was a place on Rogers Way that seems to have sold, I don't remember the exact address but it was for sale a 1-2 weeks back. Does anyone know what it went for?
but there were also substantial gain in average in Feb and April, demonstrating what a "jumpy" metric averages can be in a market like Victoria's that is relatively small and have an extremely diverse real estate market.
Interested to see Leo's rolling median graph updated.
Leo - can you do this between boxes?
I wonder if the magnitude of "jumpiness" in a RE sale price can be an indicator of underlying instability that is a precursor to a fall?
Woudl be neat to correct sales, listings ect for Victoria population each year. Would be a more telling picture of what is happening.
Leo?
How can you tell I am doing statistical analyses today?
Info
Don't get too excited about one month's data. Even the medians (let alone the averages) jump around month to month.
"It's interesting that there are still some people out there who deny that Victoria's housing market is correcting."
No one on this blog claims that Victoria prices haven't declined. But most are wise enough to know that one month's data adds little new evidence of anything. Let's say the median had bumped up instead of down in May by 17 K. Would that refute that Victoria RE prices are declining? Hardly!
Highly anecdotal, but I noticed six different properties that I regularly bike by, all of which had been on the market FOREVER finally sprouted "SOLD" signs in May.
My anecdotal take is that at least some sellers are belatedly adjusting to the "new reality" (and maybe trying to sell into the seasonal strength of spring?)
Woudl be neat to correct sales, listings ect for Victoria population each year. Would be a more telling picture of what is happening.
Yes. If you get me the data for the greater victoria population from 1990 onwards I'll put it together. leo.hhv@gmail.com
I wonder if the magnitude of "jumpiness" in a RE sale price can be an indicator of underlying instability that is a precursor to a fall?
It has been unusually volatile lately...
I wonder if the magnitude of "jumpiness" in a RE sale price can be an indicator of underlying instability that is a precursor to a fall?
In analogy with the stock markets, maybe we need a VIX like index for Victoria RE volatility.
We'll put that on Leo's to-do list, right up there with newly acquired home maintenance duties.
"Nothing supports the view that the housing market in Victoria will not crash"
Except that it hasn't...for over five years since the crises started.
It seems that people are still willing to pay a high price for real estate. The difference though is that buyers want a lot more quality.
They want the top floor corner suite. The new house. The better location. At a price that was being paid for mediocre properties last year.
If your home is not one of these properties the reaction you get from a buyer is as if you've just farted in church.
Lowering the price isn't going to make the property sell. The buyer today is willing to pay big bucks but the property has to be near perfect.
I wonder - is this what the last rung in the property ladder looks like?
This is an over generalization of the marketplace. There are exceptions. There always will be. This is just the flavor that I'm getting from the current marketplace.
They want the top floor corner suite. The new house. The better location.
The granite countertops... Have to admit I feel kinda dirty about those. :)
Leo - be one of the first to downgrade - get some laminate put in and sell the granite back to the stone dealers. The laminate is easier on kids heads when they invariably run into then (get rounded corners)and it is more hygenic.
sorry for the typo - was hurried by child looking for food.
Recourse mortgages do not prevent housing busts.
Ireland is also recourse. BK is difficult in Ireland, so many Irish who have defaulted on their mortgages are moving to the UK so they can declare BK there.
In Spain, mortgage debt is not even discharged in bankruptcy. Death pledge indeed.
Life insurance for the mortgage. What do you think?
Marko, could you please post the residential inventory for April and May?
Thanks.
Get separate insurance that way it's not tied to your mortgage. Usually the ones the bank give you shrink and die with the mortgage.... It sucks to pay for life insurance but you have a family. Unless your wife has some kicking skills and a solid career herself I'd do it. Friends of Friends lost the dad and there was no insurance. Long term house wife. Bad news....
Leo - buy life insurance instead. The payout is constant for a constant payment, whereas with mortgage insurance the payout is smaller every month while the payment stays constant.
Buy it as soon as you can as it only gets more expensive as you wait.
I just bought a new policy myself in the past month.
Residental Inventory
April - 3,702
May - 3,898
Thx
It's been said before but I'll say it again, Leo, thank you for all the amazing work you do. It's obvious that you put a lot of effort into this and we all appreciate your time. Thank you good sir.
Yes, Leo - the new graphs are terrific - very much appreciated as always.
Anecdote time!
When we sold our Sooke house in 2010 and started renting in Victoria, I had hoped that prices would decline enough in 3 years to make buying here worthwhile.
When three years was up, we still hadn't seen any places for sale that met our needs at a price we liked. However, my spouse hadn't been thrilled about our rental, so we considered buying anyway based on location and renovating.
Before we did, we came across a very attractive rental for the same price as our current place. This lets us wait out the market longer without needing to stay somewhere we weren't completely happy.
When we let our current landlord know would be ending our tenancy, the owners, who owns multiple Victoria properties, decided to sell this one. They let us out of the lease in order to catch the end of the spring market, rather than wait for us to vacate in the fall. It's now on the market for about 24 times annual rent, about $40K over assessment -- still less than another comparable property nearby.
So for now we continue to watch the Victoria market from an outsider's perch.
We would still like to buy when the right place emerges so we'd have the freedom to redecorate wildly or raise a pack of slavering hounds. However, we know we'll be moving out of Victoria in 10 years and at some point it will stop making sense to buy -- there will be too few years left in our window.
However, we know we'll be moving out of Victoria in 10 years
This is an interesting dilemma. Out of curiosity, what's the plan to move in 10 years? Retiring?
My wife and I can work from anywhere, so the main thing keeping us in Victoria is that we like our daughter's school (which is K-12). She graduates in 10 years, at which point, we will encourage her to try a different town for university, and we will probably move to somewhere more rural, like the Gulf Islands or Sooke again.
Now, 10 years is a long time. Maybe my wife gets elected premier and we have to stay in town. Maybe no one goes to university any more and everyone just earns Mozilla Badges instead. Maybe the convenience of driverless Google Boats pushes the cost of Gulf Island properties out of reach.
But right now, the possibility of leaving the core in 2023 (!) seems like something we should keep in mind.
I just bought a new policy myself in the past month.
Just curious: how old are you? May I also ask what your policy looks like and how much it costs?
I've been putting off life insurance for a while but need to get going on it...
Introvert - good health, middle age, about $14.66 per $100,000 coverage, monthly.
Nurse came to my place, assessed height weight, urine. Took blood, which was assessed for all the standard parameters (liver function, cholesterol, kidney function, ect). Extensive health questionnaire - very extensive. Took about four weeks of processing to get policy. Very glad I did as my wife and kids will be well taken care of if something should happen to me - puts me at peace as I had a bit of a scare last year and one of the overriding emotions I had at that time was taking care of my brood financially when I am gone.
If you’re going to get life insurance get a 20 year term instead of a 10 year. It is a little more expensive but it is worth it(if you have any health problems in the next 10 years or gain weight, you may not be able to get renew the 10 year term). Life insurance companies love 10 year terms because they get to re-qualify you every 10 years and make sure your worth insuring. Also if you can afford it, pay on an annual basis (they charge you 7% to pay on a monthly basis).
Thanks for the specifics, simple man. Are you certain that your insurer won't carry out post-claim underwriting?
Not worried about that as I went through many hoops and they did all the checking with urinalysis, serum analyses, extensive questionnaires and even getting copies of medical records from my physicians etc (which is why it took a month to be accepted).
I gave complete, full details of every single injury or illness I have ever had, so there was not way for them to find anything post-claim.
My policy is directly with the underwriter - a major Canadian insurer.
and yes - at least a 20 yr term seems the best choice - was for me.
Very clever scam.
Woman loses $6,000 in Vancouver rental scam
Now that is an interesting scam story. Brutal....
Cost of Living Calculator posted by a fellow redditor on /r/victoriabc
Our family income is $95,000 - 2 kids - 2 adults - 1 car - we rent and I found our scenario results very close. If we are lucky we spend $5,000 a month on expenses. The rest goes to taxes, student loans and savings. We are in our early 30's
In 2010 the average family income was $77,820 for Victoria. When I see my peers enjoying new cars, homes, and luxury recreation it makes me wonder - where's the hidden money tree?
We have managed to saved $50,000 for a down payment + other savings. Pre-approved back in September of 2009 for a $650,000 mortgage (with suite). We opted to pass and find a cheap place to rent until the market wasn't so "toppy" as my financial advisor phrased it. It was VERY difficult to persuade my wife to wait and I think she is finally convinced it was the right thing to do - we'll see.
Yes we live in a basement suite, in a very nice neighbourhood with an amazing view. We enjoy all the amenities that our neighbours do without the big mortgage and without home expenses. I believe we also enjoy more time with our young children that we would probably be spending on the house. Rent is very affordable and fixed so it's easy to budget. With all these advantages I still feel like people often look down at you if choose to rent. That's what I find frustrating at times.
I also get a little irked when people use the term "bitter basement dwellers". There are many people that *choose* to rent. Some of my best friends have purchased homes in the past 3 years and we are finding out that it doesn't mean they were financially astute, far from it. Most jumped in without any research and with a lot of emotion.
I believe that within the next 2 years I'll be getting much more value when I choose to buy a home as compared to my peers who have purchased in the last 3 years.
I gave complete, full details of every single injury or illness I have ever had, so there was not way for them to find anything post-claim.
My policy is directly with the underwriter - a major Canadian insurer.
It sounds like you've done your due diligence.
It's crucial to have pre-claim underwriting; otherwise, an incorrect date here or a neglected-to-mention case of the chicken pox there can result in a denial of payout.
Generally speaking, insurance companies are some of the most evil of all companies.
I believe that within the next 2 years I'll be getting much more value when I choose to buy a home as compared to my peers who have purchased in the last 3 years.
You'll also be 5 years older versus buying three years ago.
Is there any point in getting life insurance if you have no kids?
You know the old joke: "I don't want any happy people at my funeral".
In your case I would think you're far from dying broke anyway.
I believe that within the next 2 years I'll be getting much more value when I choose to buy a home as compared to my peers who have purchased in the last 3 years.
Almost certainly.
You'll also be 5 years older versus buying three years ago.
What does that matter?
The property ladder is busted. People that opted to go that route will find they are still on the first rung years from now.
Is there any point in getting life insurance if you have no kids?
A friend of mine committed suicide (at 27, way too young). He has insurance on his house and because he had the insurance for more than 2 years it paid off his condo. His parents were devastated and ended up taking a year off of work to recover. Because he had the insurance they were able to do this. Similar if you are married, if you die unexpectedly people will mourn, life insurance gives them ability to do this.
I think if you are single with no kids then life insurance isn't necessary. If you have a partner then it might be (depending on your partner's financial situation).
I personally only got it after having my kid. She's 20 now, and when it next comes up for renewal I won't bother. My partner is more than capable of taking care of himself financially, so no worries there.
Mortgage broker recommended the following: accept the mortgage insurance at the bank to start. It's overpriced but you get it with no medical test, only answering one question (you have had no tests showing problems with heart, circulation, blood pressure, AIDS, etc).
Then you go shopping for life insurance. When they do the tests, in case something came up and they don't take you, you still have insurance. Because if they do the medical and they don't take you, then you can't get the bank insurance anymore since you would have to answer that you have taken a test which showed problems.
If you do get the alternate insurance, cancel the bank one in 30 days with no penalty.
You'll also be 5 years older versus buying three years ago.
"What does that matter?"
Well if you actually really want to be a home owner it means you have given up five years of a time-limited opportunity to own your own house.
If you are perfectly happy renting and enjoy the flexibility then you are giving up very little by waiting two more years and probably making a wise financial decision since it's hard to imagine the market doing better than treading water over the next two years and who knows it could even turn crashy.
Sounds like a plan. If you are in reasonable condition you will be approved. Non smoking non alcoholic is the key. A little THC and a glass of wine and a beer here and there is ok though....
Well if you actually really want to be a home owner it means you have given up five years of a time-limited opportunity to own your own house.
Time limited? Sure, I guess technically you'll only have 50 years of home ownership rather than 55. You make it sound like you might only have some fleeting years if you wait.
If your rental sucks, then it's probably a good idea to move to a nicer one. No point being unhappy about where you live. Lots of good ones out there.
Nevermind that as prices decline you will have that mortgage paid off much faster than those who bought earlier. So they may have "owned" longer, but you will actually be mortgage free earlier.
The best thing about buying is that now I can feel smug no matter what happens. If prices don't decline much, we will have the house earlier, and if they crash I can say I told you the market was overvalued. :)
Leo S - it can take more than 30 days to do all of the work necessary to get a life insurance package.
Initial appointment, then a week or two to get the nurse visit, then 2-3 weeks for them to do blood/urine analysis and get all information from your doctors (time consuming step), then another meeting with you to go over results and sign. Can easily take a month and a half from start to finish.
The bank insurance - you can say you have no problems, but anything in your medical history that is suggestive of any problem that premeditated an event can void your insurance when it is needed. Believe me, given your medical records it can be pretty easy to link things together if you know medicine.
Canadian homes among most overvalued in the world
I just checked my duration - from the initial visit to the signing of the policy it was 55 days.
or 4,752,000 seconds
A flood of new listings in OB and a lot of prices reductions.
Anyone else seeing the same in other areas?
Oak bay sellers beginning to accept that prices are not going to rebound and will get progressivly more desparate to sell in the next 2 months. Listings on the rise combined with a more selective, less desparate group of remaining buyers will put downward pressure on prices. I think it would be wise to wait till Aug 1 then re-evaluate the decision to purchase.
"You make it sound like you might only have some fleeting years if you wait."
The opportunity cost of waiting five (or even ten) years to buy isn't really that great if you are in your 20's or 30's. If you've already waited till your 40's it might loom a bit larger.
I wasn't really arguing that someone should buy just because life is slip slip slippin' away just pointing out that for someone who really wants to own rather than rent (i.e the two things don't provide the same utility to that individual) there is an opportunity cost to waiting.
Yeah good thing to think about. How many thousands would you pay annually to own vs rent the same place. Then plug the numbers into the rent vs buy calculator and decide.
>> Canadian homes among most overvalued in the world
They seem to be using the same methodology as the economist (comparing to long run averages) which I have some problems with, but perhaps they are more open about their source data. Anyone can find more details about the actual report?
Maybe a better unit of comparison of how over valued a country's real estate market is to use a beer scale. How many pints of beer does it cost in each country to buy a home. Using the same currency in house and beer prices.
Victoria would be say 100,000 pints.
In case anyone would like to understand indicies like the Case Shiller, Teranet, or HPI and is into some light reading this afternoon: Handbook on Residential Property Price Indicies
I'm selling my house, and planning to use a realtor. What are typical commissions I should pay to the realtor? The house is around $1m in Oak Bay.
And, yes, I know that houses haven't been selling that well in that range.
I like the BEER Index! Plus it would give a whole new meaning to "liquidating" your real estate assets.
Also after 100,000 beers you won't have to worry about life insurance.
OECD says we are 64% overvalued compared to long run price/rent, and 30% overvalued compared to long run price/income. Rank 3 of 36.
They also say we spend 22% of income on housing, rank 24 of 36.
What other country spends 22% on housing? Japan. Hmm, but they are supposedly over 35% undervalued compared to both rents and incomes.
That shows the problem with these overvaluation measures compared to long run averages. In Canada they're probably comparing to ratios in the 90s where housing was arguably undervalued, while in Japan they're comparing to ratios during a massive bubble. The assumption that the previous ratios represent a normal market are fundamentally flawed.
Yep, useless....
Ideally you would compile a graphic based on logical data that relates to each country in an equal and straight forward way....
I'm selling my house, and planning to use a realtor. What are typical commissions I should pay to the realtor? The house is around $1m in Oak Bay.
Lots of different options out there and you can choose different levels of service. I've tried to explain some of the different options on my website
http://markojuras.com/seller-frequently-asked-questions/
Not saying it's useless, but without details of their methodology it's impossible to tell whether it means anything.
Sorry, you are right. Meaningless not useless.
It’s official!! Cameron Muir says, “I’m calling this a transition year. I think we’re about to embark on another upswing.” Nanaimo sets sales records on “seasonally adjusted” prices.
Tell me this isn’t so, and I’ve missed the boat???
Meanwhile up island
"another upswing"
Just another brief mogul down the slope of hope. Our boat is not due to depart again until this time 2016. One only need follow Hongcouver.
81-86 rent (US$ strengthens)
86-96 own (US$ weakens)
96-01 rent (US$ strengthens)
01-11 own (US$ weakens)
11-16 rent (US$ strengthens)
Own 10, rent 5, rinse, repeat.
I checked the VIREB site May numbers and it only makes sense to compare the median price (bottom right) for the whole board. There are simply not enough sales in any particular region for any regional validity.
The median price for the whole board (island, north of malahat) are as follows:
May 2010 = $351,000
May 2011 = $340,000
May 2012 = $339,000
May 2013 = $322,000
So, the median Van Isle property has fallen 8.26% in the last 3 years.
Another upswing.... LOL
IN MY OPINION
I have no empirical data, just a cursory observation on my part of what I see happening with some sales.
Vendors that bought their homes prior to 2001 seem to be accepting offers at twice their original purchase price. Doesn't seem to matter if they bought in 1994 or 2001 it's still double. Those are the properties that are selling today.
My observation, my opinion and I know that someone knows someone who sold their property differently.
This is just something that makes me go hmmmmmm. Maybe some of you involved with the stock market have seen or know of a similar thing that happens in the stock market.
Is there something psychological about doubling your investment?
Still being swamped by listings and price drops in OB - what is going on?
"what is going on"
Sell now or be priced in forever!!
I'm seeing around 115 houses for sale in Oak Bay. Last month 25 sold and 53 were listed.
There were 3 "quick" sales in the last 30 days. ie listed and sold in under 30 days. All three had extensive renovations completed, hence they sold between 5 to 12 percent above assessed value.
However, homes in Oak Bay have typically been selling between 98 to 102 percent of their BC assessment.
Months of Inventory at 4.6 A sales to new listings ratio at 0.47. Seems to be well within balance.
Don't get me wrong. Relative to the rest of the marketplace -and probably the known universe, Oak Bay prices are nuts. In my opinion, the buyers are atempting to secure their wealth by buying in what most people call the "best" neighborhoods. In the hopes that Oak Bay prices will not decline as much as other hoods. It's an idotic assumption on their part. But if real estate is all they know - they're not going to chance anything else. It's always the last purchase that you lose almost everything gained by playing the property ladder game.
You have to know when to leave the Casino. Buying in Oak Bay today means you're still at the roulette table - you haven't learned.
There are at least 10 new listings in OB under $1M so far this week, which seems a fair bit more than usual.
Talk about an upswing. Take a look at this.
Is it feasible that low mortgage rates can artificially support house prices indefinitely even though we're clearly in bubble territory? I'm not sure if there has been a housing bubble in Canada or elsewhere when interest rates have been this low. This may be uncharted territory.
>> Talk about an upswing. Take a look at this.
What. The. Frack.
Typo? Looks like your typical oak bay "character" house. Sure it's big, but on a standard lot. I would have pegged that at between one and two million, not 8.
You'll also be 5 years older versus buying three years ago.
What does that matter?
The obvious implication is that if you're a renter you don't have a life. Well I do, and it's just as good as when I owned.
St. Anne house is $859K. Typo on MLS.
@ a simple man
Yes, I was also wondering why there are a lot more new listings coming on in Oak Bay at the moment - you would have thought they would have been keen to have them listed earlier in the selling season.
just pointing out that for someone who really wants to own rather than rent (i.e the two things don't provide the same utility to that individual) there is an opportunity cost to waiting.
That's not an opportunity cost, that's an intangible benefit to owning. By its very nature it's completely subjective.
An opportunity cost is the return you could get from putting your capital into some other investment than RE. That is, it's a cost of owning RE, not a cost of not owning.
Oof, the same movers who brought us from Sooke to Victoria in 2011 just delivered their quote for a 3 km mid-month move within the city: double the cost, despite having downsized our stuff.
The difference between spring and summer moves perhaps. Or maybe they realized what a great deal they were last time.
I see a U-Haul in my future.
Any recommendations for Victoria (Saanich) movers?
I always move myself - in the end it is done better, far, far cheaper and no creepy people casing my stuff.
I make sure to downsize every time before the move.
A Brewing Canadian Crisis, and What Americans Learned About Bubbles
patriotz - the concept of opportunity cost specifically includes non-monetary benefits. Look up any common definition. (e.g. https://en.wikipedia.org/wiki/Opportunity_cost)
In very simple terms the opportunity cost of choosing to enjoy the benefits of renting is NOT enjoying the benefits of owning. Conversely the oppotunity cost of buying is not enjoying the benefits of renting. Any and every choice in life has an opportunity cost.
You are correct that one part of the opportunity cost of buying a house is the inability to use that money to invest in something else. Similarly if I invest all my money in the stock market there is an opportunity cost that would be the foregone opportunity to invest in something else like real estate, precious metals or baseball cards.
The point is that intangibles are subjective and unquantifiable, therefore they cannot be used for an objective valuation of owning versus renting or anything else.
If someone claims that owning makes him feel good and that's worth $1000/month (or whatever) to him, that's irrelevant to anyone else.
I also think the "feel good" factor has a lot more to do with rising prices, than owning per se. It went away pretty fast in the US once prices started falling.
Just turn it into a "how much extra would I pay" question and its easy to quantify.
Why the heck do they even ask economists about how many jobs will be created? You'll do better asking that groundhog that predicts the weather
BC and Victoria are out of luck though "Regionally, Ontario, Quebec and Alberta accounted for almost all of the gains, as four of the other seven provinces reported job losses last month"
Ben & Ben on Why are home prices so high and when will they fall?
^ Trying to forecast something like this is almost next to impossible.
I don't think Info would agree.
When I look at forecasts I consider the assumptions and how reasonable are the expectations of future events. To me, that makes a good forecast.
I also understand that others may look at a forecast as a fait accompli. Those forecasters that are right are to be hailed as gods and the next real estate Guru. Those that get them wrong are to be dismissed as crack pots.
I dismiss most forecasts that are couched in terms of certainty and inevitability (unless they are forecasting astronomical events).
Probabilistic forecasts with reasonable assumptions are much more credible. Agree with JJ that hailing someone has a guru because they get one big thing right is dangerous
The point is that intangibles are subjective and unquantifiable, therefore they cannot be used for an objective valuation of owning versus renting or anything else.
Some of the "intangibles" are pretty tangible actually.
The cost of reduced flexibility for owners for instance.
Or the cost of being forced to move at an inconvenient time for renters.
In any case the idea that intangibles shouldn't enter your decision making is ludicrous. The whole point of making money is to enable choices beyond bare financial necessity/survival.
"The move is a reaction to increases in the bond market, where the banks have seen their borrowing costs tick higher of late. Increasing consumer lending rates is the bank's way of passing those costs on to consumers."
Royal Bank nudges mortgage rates higher
"I also think the "feel good" factor has a lot more to do with rising prices, than owning per se. It went away pretty fast in the US once prices started falling."
True.
"Or the cost of being forced to move at an inconvenient time for renters."
You hear this a lot from housing bulls. The fact of the matter is that it rarely happens. The vast majority of renters do not experience this.
Renters have complete freedom. They can move at the drop of a hat to find work in another city if the need arises. Many Victoria mortgage holders simply do not have this as an option without declaring bankruptcy. Renters don't have to worry about replacing that roof of having to deal with that flooded basement or the mold that's been growing in the walls.
Buying a house in an affordable housing market makes sense. By affordable, of course, I mean that the overall housing market is in the affordable range in terms of the price to income ratio.
Currently the housing market in Victoria is considered to be extremely unaffordable with a price to income ratio higher than 8. Anything above 3.0 is considered to be unaffordable.
By affordable, of course, I mean that the overall housing market is in the affordable range in terms of the price to income ratio.
The last (and only) time since 1976 that Victoria had a ratio below 3.0 (the affordable range, as defined by Demographia), was back in 1985 when the going rate for a 5 year fixed was about 12%. I know you don't like to think about interest rates, but they do matter.
from cbc.ca:
Canada's largest lender has raised its residential mortgage rates by a few basis points.
Starting Monday, many of Royal Bank's fixed-rate mortgages will be higher. The bank is hiking its special four-year closed rate offer higher by 10 basis points, to 3.09. The standard one-year closed will increase by 14 basis points to 3.14, the two-year closed will also be 3.14 per cent (up 10 basis points in that case) and the three-year closed fixed rate mortgage will increase by 10 basis points to 3.65.
Most significantly, the bank's benchmark five-year fixed-rate mortgage rate will increase by 0.2 percentage points, to 3.29 per cent.
This is a fairly good depiction of how interest rates seem to cycle. Many theories on the causal factors. Rates should peak again in the early 2040s. With almost 90,000 fulltime jobs created last month in Ontario, another reason I would guess we've already started a new cycle. Unfortunately BC lost around 15,000 full time so hopefully for BC families things turn around soon. At least BC gained most back with part-time in May.
Congrat's Leo. I think you got in at a great point on interest rates.
"No disappointments here."
I'm already disappointed... with the price.
13300272
I know you don't like to think about interest rates, but they do matter.
The last (and only) time since 1976 that Victoria had a [price to income] ratio below 3.0 (the affordable range, as defined by Demographia), was back in 1985 when the going rate for a 5 year fixed was about 12%.
We bought around 1976, which may explain why, when I look at a property I could purchase for cash and I think what would be the right price, the right price always seems to be about half the asking.
Some people would explain this as due to an age-related incapacity to adapt. But I think there is another factor, which is that having accumulated the means sufficient, I hope, to support myself during the final lap, I have a greater appreciation than some young buyers of what it takes for ordinary folks without the Midas touch to accumulate a million dollars or even half that (which is what, in effect, they have undertaken to do when the put down a minimal payment on an average priced Victoria home).
The ready availability and cheapness of credit has, it seems to me, blinded some to the enormous capital repayment to which they are committing themselves when they take on a huge mortgage during a period of stable or even declining prices.
Have to move out of the home I am house sitting in a month....will be looking at two bedroom condos for rent downtown next week....should be interesting.
Marko - why aren't you living in your 834 condo?
Congrat's Leo. I think you got in at a great point on interest rates.
It's much better to get in with high rates and a low price than low rates and a high price.
The reason is that rates change but the price you paid doesn't.
Marko - why aren't you living in your 834 condo?
I was house sitting for 4 months and leased the 834 condo to an awesome tenant. I want to rent something a bit bigger for a year or so as I don't want to tie up my finances for a building lot. Hoping to eventually find a decent building lot in Fernwood/Oaklands in the mid 300s. I figure it will take a long time to find the right lot but not in a hurry.
It's much better to get in with high rates and a low price than low rates and a high price.
If only that were an option.
“It's much better to get in with high rates and a low price…”
That didn’t work out so well for my cousin buying in 1981 at record 15% interest, who thought he was getting in at a decent price ;) Tough to ever find high rates with low prices, since high rates are inherently a sign of high inflation & high prices. What you should buy in high rate situations, are fixed-income securities. You want to be the one indirectly lending to my cousin in 1981, collecting that 15% return.
“It's much better to get in with high rates and a low price…”
I ran the math on that a while back and the benefit of low rates at the beginning of the mortgage were not insignificant. Plus, a bird in hand is worth two in the bush....
If only that were an option.
+1
I ran the math on that a while back and the benefit of low rates at the beginning of the mortgage were not insignificant.
Well I would certainly prefer the higher rates and lower prices because we're paying off the mortgage early, but it's a low-rate environment so what can you do.
Depends on how long the rates are high for. Lower prices are better but mostly if you have cash....
any info on why this development went belly up? Poor planning? Was this a case of a misinformed realtor wading into the unchartered development arena or was this a grassroots/owner initiated project?
http://www.cbre.ca/o/vancouver/AssetLibrary/3584WishartRoad_021213.pdf
That didn’t work out so well for my cousin buying in 1981 at record 15% interest, who thought he was getting in at a decent price ;)
He got in a the top of a bubble, i.e. at a historically high price. Not a terribly good rebuttal to my argument. Your cousin could and should have bought in the mid 1980's, a time of high rates and low prices. Which leads us to:
Tough to ever find high rates with low prices, since high rates are inherently a sign of high inflation & high prices.
Complete nonsense, the lesson of the last decades is that lower inflation has been associated with higher house prices. And higher inflation will be associated with lower prices going forward.
Town ready to bring down the hammer on derelict homes
Wasn't Cowichan Lake a big RE hot spot around 5 years ago? What happened to those plans to redevelop Youbou?
"Complete nonsense, the lesson of the last decades is that lower inflation has been associated with higher house prices. And higher inflation will be associated with lower prices going forward." Isn't this just another form of recency bias? Who knows what will happen in the next decades? So much is so different now.
"Your cousin could and should have bought in the mid 1980's, a time of high rates and low prices."
Lol, in the mid 1980's, interest rates had just been cut in half. Everyone I knew considered them to be low rates. But you're right, we bought a home then at low rates and low prices, and it worked out.
"Complete nonsense, the lesson of the last decades is that lower inflation has been associated with higher house prices. And higher inflation will be associated with lower prices going forward."
Wow, I'm surprised how confused you are about the link between inflation and real estate prices. Higher inflation will always be associated with HIGHER (nominal) prices. Even my granny knew that inflation and real estate are best friends.
You are correct there are many times "that lower inflation has been associated with higher house prices", but those speculative episodes never last. Take this island for example. We've fallen for 3 years, at the same time CPI inflation has been plummeting. Low inflation eventually leads to low prices, after govts exhaust our tax dollars (that's another story).
The S/D economics behind it are as follows:
Retiring boomers (high supply of assets & $) + Shrinking youth (low demand for assets & credit$) = Low cost of money & credit (Low interest rates)
Low interest rates -> Builders speculate with cheap money and overbuild + Buyer demand is pulled forward from future. Exacerbates the already precarious situation of coming boomer supply and dwindling youth.
And higher inflation will be associated with lower prices going forward.
I just don't see any high inflation anytime soon. As the housing market deflates around the country the economy will continue to stumble along as it has been doing.
The only wildcard I could see is the result of the Japanese experiment. If they see good results with their money printing, other nations around the world might adopt the same and toss out austerity.
I'm not making a prediction of higher inflation, I'm saying that if inflation picks up that will result in higher interest rates, which will greatly reduce affordability at present prices, which means prices will have to go down.
And that higher inflation might not even have to be in Canada. We will likely track US rates going up just as we tracked them going down.
"Canada Mortgage and Housing Corp., the country’s national housing agency, is finally on the path to being operated like a significant financial player which it has morphed into during the past decade."
With a regulated CMHC, things might look a little different.
The secret plan to break up the CMHC
It may not be necessary to wait for inflation to drive prices down. At the top end, they're already collapsing.
We will likely track US rates going up just as we tracked them going down.
This will be interesting. If the US recovery continues, while Canada's market declines, I wonder what will happen. Anyone have examples where our economies diverged like that? What happened to bond yields?
CMHC is the other wildcard in this game.
My guess on what is coming next: increased premiums for CMHC.
Monday, June 10, 2013 8:00am
MTD June
2013 2012
Net Unconditional Sales: 173 637
New Listings: 418 1,449
Active Listings: 4,809 5,189
Please Note
Left Column: stats so far this month
Right Column: stats for the entire month from last year
A period of high inflation in Canada would crush housing prices the way it did in the 80s.
We must keep in mind that the official numbers for any housing market correction always look much better than the reality faced by people on the front lines - specifically sellers. In 2008-2009, many sellers in Edmonton and Calgary had to take losses of 50% or more on recently built townhouses and condos and up to 33% on houses. The official price drop in Edmonton was 15-20% while Calgary experienced a drop of about 20%
In Toronto in the early 90s, the official price drop for that city was about 25%. However, there were plenty of sellers who sold for 50% less than what they had recently paid for their houses.
Recently in Seattle, many houses sold for at least 62% below peak value. The official price decline for that city was about 33%.
The list goes on.
The housing crash in the 80s in Canada was much worse than what most people think. If you are looking at price charts from that time, you do not have the tools to understand or appreciate how devastating the crash was.
The current housing bubble in Canada is, by far, the biggest that Canada has experienced to date. It is, arguably, one of the biggest in the history of the world.
A period of high inflation would cause interest rates to skyrocket and would bring housing prices in Canada down fast. Things would play out much the same way they did in the 80s. Sellers would be forced to sell at huge losses the same way sellers in the 80s had to. Canada cannot inflate its way out of this debt problem. This debt problem took 30 years to form and will take more than a couple of years to correct.
A period of severe deflation would also crush house prices. Japan is a good example of this. Their housing market crashed despite emergency level interest rates.
Canada's housing market will crash/correct without inflation or deflation. All national housing bubbles do.
Put lipstick on a pig and well.....
Financial lipstick
A period of high inflation in Canada would crush housing prices the way it did in the 80s.
Inflation was higher in the 70s than in the 80s yet house prices climbed (in nominal terms). What crushed housing in the early/mid 80s was not inflation but the twin effects of recession and high interest rates
Builders are doing what they do best: building. Thinking is not their forte.
“A period of high inflation in Canada would crush housing prices the way it did in the 80s.”
It’s frustrating how confused people are about RE in the 80’s. Falling inflation is what crushed home prices in the early 80’s. Rising inflation is what doubled prices from 79-81. One can google an inflation graph and put right in front of people, and still they will argue with you.
Fanatical, some of the beliefs about RE. Other favorites “RE always goes up“ or “Prices could never fall when rates are falling.”
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