Monday, July 22, 2013

July 21 Market Update

MLS numbers update courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.


July 2013July 2012 
Wk 1Wk 2Wk 3Wk 4
Unconditional Sales120
256
381
523
New Listings315622919
1242
Active Listings476248174855
 5178
Sales to New Listings
38%
41%41%
 42%
Sales Projection552588584

Months of Inventory
9.9

The third week of last July was the first week when sales started to seriously slow, dropping to 113 for the week from rates of 138 and 120.  This was most likely due to the mortgage rule changes starting to hit, and continued to make up the worst late summer, fall, and winter in well over 10 years.

No major mortgage changes yet this year (aside from the lenders becoming more and more nervous), and there is also no matching slowdown in sales, with last week hitting 125 (after 136 and 120 the weeks before).  Of course as the selling season winds down, sales will naturally start slowing regardless of the mortgage market.  Surprisingly enough, listings are up over last year by about 7%, hence our sales/list coming in a bit under.

99 comments:

Seth Perry said...

Hi Leo, please excuse me if this has been asked / answered before but how are the Sales Projections calculated in your weekly market updates?

Obviously it's not a simple division by recorded weeks and then multiplication by the total weeks in a month.

e.g.
Week 3 = 381 sales
381 / 3 weeks recorded = 127 sales average per week
127 average sales per week * 4 weeks = 508 projected sales for July.

Big thanks again for Marko and Leo for organizing and posting weekly updates.

Leo S said...

It's using week days. So 381/15 week days (I'm disregarding holidays for now), times 23 weekdays this month.

381/15*23 = 584

Leo S said...

Your week method will also work, but there are 4.428 weeks in July, so that would be 127*4.428 = 562 sales by that method.

Alexandrahere said...

The stats are certainly different within my criteria of SFH in Vic,OB,ESQ,SE&SW with a min of 3 beds and 2 baths and priced between $375K and $775K:

19 -26 July 2010
Sold: 23
Avg selling price: $553K

18-24July 2011
Sold: 28
Avg selling price: $545K

16-22 July 2012
Sold: 19
Avg selling price: $553K
Med selling price: $543K

15-21 July 2013
Sold: 26
Avg selling price: $565K
Med selling price: $562K

Leo S said...

I used to track average selling price of the sales from my PCS accounts. But given that the bounds are determined by price, I don't think it is actually meaningful. If prices are declining you will see more cheaper places being excluded form your criteria (and previously more expensive places being included), so your average price won't necessarily go down.

Marko said...

This month has 4 weeks plus a Monday-Wednesday. Everyone Monday approximately 30-35 sales go unconditional. An extra Monday makes a difference in terms of total sales numbers for the month.

subprime11 said...

Still only 3 sales in OB between $500-900K this month. Heard of another OB deal collapsing today due to financing. At 9.9 weeks of inventory in Victoria there will be downward pressure on prices over the next few months.

Alexandrahere said...

Leo: I agree...and that is why I think the truer "peak" was in the early months of 2008 and not 2010.

Leo S said...

>> At 9.9 weeks of inventory in Victoria

That was last July. This year will likely come in around 8.5

info said...

"and that is why I think the truer "peak" was in the early months of 2008 and not 2010."

Completely false. 2010 was the price peak and this is backed by both the Teranet data and VREB's numbers.

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

"Still only 3 sales in OB between $500-900K this month. Heard of another OB deal collapsing today due to financing. At 9.9 weeks of inventory in Victoria there will be downward pressure on prices over the next few months.

Note to Oak Bay sellers:

You have two choices here. One - you can keep your asking price too high for another (x) months as house prices in OB continue to decline and lose even more money. Taking your house off the market and relisting at a later date at the same price will get you the same result. Two - you can lower your asking price to the point where the house is attractive to buyers. That amount will not be insignificant. Lowering your price enough to sell now will result in a higher selling price compared to selling down the road at a much lower price.

Stubborn sellers always lose in major housing market corrections.

koozdra said...

Home ownership is going the way of car ownership. That's alright. The boomers will just trade between themselves.

info said...

"Home ownership is going the way of car ownership. That's alright. The boomers will just trade between themselves."

I agree. After the mortgage rule changes last summer/fall, the average and median for Greater Victoria have been skewed upward as a result of this. I've gone through the numbers since 2007. Recently, sales in the more affluent areas have incrased significantly in comparison to the sales in the less affluent areas of Greater Victoria.

In January 2013, the SFH median for Greater Victoria was $489 K. There was less skewing that month, in my opinion. If anything, the median and average would have been skewed down slightly, however, not to the same extent that the months surrounding January were skewed upward. Since then, the Teranet shows that prices in Greater Victoria have fallen 4-5%. The median and average have been skewed higher each month since January.

The peak SFH median for Greater Victoria was about $585 K. In my opinion, the current median is about $480 K. I think the months ahead will prove that I'm correct.

info said...

To be more precise, the SFH median would be, in my opinion, at about $480 K if the ratio between the number of sales in the affluent areas compared to the number of sales in the less affluent areas was restored to the long term average.

I calculated the total number of SFH sales in a group of affluent areas and compared this total to the number of sales in a group of less affluent areas for each month going back to 2007.

The results for 2012 were shocking. Up to the end of July, the ratio of affluent sales to less affluent sales was slightly above the long term average. However, from August to December that ratio went off the charts. This was a clear signal that the average and median were being skewed upward significantly.

As I mentioned, January 2013 was the only month since July 2012 where the ratio was even close to the long term average. That month the SFH median for Greater Victoria was $489 K. It seemed somewhat out of place at the time, however, I will argue that it actually represented the reality of the market at that time.

The new mortgage rules have dramatically affected the sales mix in Greater Victoria and skewed the median and average significantly higher.

Leo S said...

Info this sounds very interesting. Would you e willing to write an article and present your data/charts? I'll post it and/or help if you want

Fiduciary said...

Yeah, info, I really like the argument you present in that last post, I think that defends your position well. Props given when it's due.

StalJ said...

Ditto, Info. Your last post is brilliant for explaining the skew that has been occurring in the market. I would love to have the data lately for affluent versus less affluent areas.

Alexandrahere said...

Infor: Read my stats that I posted earlier. By looking at those, you would assume that avg prices in those areas are better for last week than they were in 2010,2011,&2012....but for the reasons that Leo stated,....they really aren't.

caveat emptor said...

"if the ratio between the number of sales in the affluent areas compared to the number of sales in the less affluent areas was restored to the long term average."

Info - I don't dispute that changes in the sales mix will push the averages and medians in one direction or the other.

However if I understand you correctly the "long term average" sales ratio you looked at was 2007 to now. How do we know that the sales ratio during the peak years of the "bubble" (say 2007-2011) are representative of the long term average?

I don't know the answer, but I'd be curious what the sales ratio between the affluent and less affluent areas was before the price run up

caveat emptor said...

^ Although at some level it doesn't matter since it is equivalent to say that the 2010 medians were skewed low by "too many" sales in the cheaper areas as it is to say that today's medians are skewed high by "too few" sales in the cheaper areas

info said...

@ Leo

I can give you the data but probably not until next week as I am very busy at this time. You could put it in graphs to illustrate the skewing that has taken place. Comparisons to the average, median and the Teranet data could be made.

info said...

@ caveat

I included data from the beginning of 2007. There have been up and down years since then. The ratio for each year seems to fall within a surprisingly tight range. I could go back further that wouldn't be a problem. We would also need to account for population growth somewhat for some areas. Doing so would make the recent results even more dramatic.

info said...

Only the years since 2007 are useful for calculating the long term average for the ratio since we are interested in comparing the current mean and average to the peak taking into account skewing. I will argue that data much earlier than 2007 would not be useful for this purpose.

Marko said...

2013 Jan - July 22nd, Sales $1 million or higher = 117

2012 Jan - July 22nd, Sales $ million or higher = 146

2013 Jan - July 22nd, Sales 800k-1000k = 149

2012 Jan - July 22nd, Sales 800k-1000k = 153

Renter said...

Hey all,
Looks like we may have to move. I remember someone posting an awesome site for finding rentals, but I don't remember what it was? Anyone have suggestions besides Craigslist and Used Vic?

Thanks!

info said...

Sakes over 1 million are less frequent this year since prices have fallen and cmhc no longer covers properties over $1 M. Many sellers are listing just under a million now. As well with sakes down across the board it makes sense that there have been less sales over a million compared to last year.

Marko said...

Single Family Home Sales 300k-500k 2013 Jan - July 22nd = 865

Single Home Sales 300-500k 2012 Jan - July 22nd = 768

Leo S said...

>> I can give you the data but probably not until next week as I am very busy at this time.

Ok. Do you have it more refined than Koozdra's regional data?

If not I can probably just use that. What are your affluent areas and non-affluent areas?

info said...

I don't have the exact numbers in front of me right now, however I do know that the number of sales in the affluent group of areas compared to the number of sales in the less affluent areas has increased to a significant degree since August 2012.

The average and median have been skewed higher for a whole year.

info said...

I will let you know later Leo I don't have that data with me. I will be excluding view royal from the less affluent group. I have Langford, Sooke, Colwood and Esquimskt in that group. The other group has Vic, OB, north Saanich Saanich east and there might be one more. Ideas on this?

Seth Perry said...

Tough times for Real Estate Agents? This guy apparently didn't pay his photographer / web guy.. oops!

Check this out:
brianschiebel.ca

Seth Perry said...

@ Leo, thank you for explaining the projections. That makes sense to me now.

koozdra said...

@Renter

Have you tried padmapper?

koozdra said...

@Seth

Sweet sweet revenge.

info said...

@ Leo

My aim was to use the top third and bottom third when choosing groups. I left out some of the areas with fewer sales but they could be used.

As for the graph I was thinking of presenting the 3 month median and average as well as Teranet in line firm ion the top. On the bottom I thought of having the ratio data in bar form. Monthly ratios reduced to 1:1.25, for example, would indicate that for every one sake in the less affluent group there was 1.25 sales in the affluent group. You could present this with a line representing the average of the ratio over time with green bars on top for upward skewing and red bars below for downward skewing.
A ratio of 0.95 would be red by a small amount, for example.

Renter said...

Thanks Koozdra! That's the link I saw posted before but couldn't remember. Much appreciated.

koozdra said...

"According to J.D. Power & Associates, 63 per cent of car buyers in 2013 who borrow to finance their new vehicle purchases are taking out loans of six years or longer — a huge increase from just 14 per cent six years ago."

Yikes.

Finance minister Jim Flaherty keeps close eye on long-term car financing

koozdra said...

"The “securitization” of mortgages that many economists blame for the housing collapse and subsequent financial crisis in the U.S. is now a runaway problem in Canada, says a new study that also casts doubt on whether Canadians can trust the house price information they are seeing."

Everybody's gaming EMILI, she's easy.


Canada's High House Prices Held Up By Phony Appraisals -- Taxpayers On Hook, Report Says

Seth Perry said...

@koozdra Thanks for sharing.

from the article...

It [securitization of government-backed mortgages] boomed again in 2009, when the Insured Mortgage Purchase Program (IMPP) came into effect in the midst of the recession. That program saw the CMHC, the government-run mortgage insurer, start buying securitized mortgages from banks — the same mortgages it insured.

“Why the federal government would assume all the credit risk of a mortgage and then buy it at a healthy premium as a ‘riskless’ asset is an interesting question,” the report states, hinting that the whole process may just be a scam designed to hold up the housing market artificially.

The result, the report said, is that the proportion of government-insured mortgages in Canada went from 30 per cent in 1988 to 75 per cent in 2013. In other words, taxpayers are on the hook for three-quarters of Canadian mortgages, should something go wrong in the market.

---

Can someone explain why I have a shortness of breath and an increased heart rate right now?

Just Jack said...

EMILI is a gift to those involved in mortgage fraud.

Years ago, one had to find a corrupt or an incompetent appraiser. And if the broker or banker was really lucky - the appraiser would be both.

That isn't necessary anymore. In the case of EMILI the appraiser is eliminated and with Appraisal Management Companies (AMC's) it's almost a guarantee that you'll get an appraiser that is both.

CS said...

“Why the federal government would assume all the credit risk of a mortgage and then buy it at a healthy premium as a ‘riskless’ asset is an interesting question,” the report states, hinting that the whole process may just be a scam designed to hold up the housing market artificially."

Can someone explain why I have a shortness of breath and an increased heart rate right now?


I can suggest why, in 2009, the Feds assumed 75% of Canada's mortgage credit risk:

Harper wanted a majority government, which he got two years later, an inconceivable outcome without the post-2008 revival in RE prices, which sustained the construction industry, in particular, and consumer spending in general.

info said...

Group A: (more expensive)

Victoria, OB, Saanich East, North Saanich

Group B: (less expensive)

Esquimalt, View Royal (to be excluded), Sidney, Colwood, Langford, Sooke

DavidL said...

@info

Which group is "Saanich West"?

Just Jack said...

How about a price for a standard home in each area. The most common type of home in the Greater Victoria area ranges from 1,600 to 2,600 finished square feet and located on a 6,000 to 9,000 square foot. For those needing a mental picture of that typical home it would be a Gordon Head box with 2,100 finished square feet on both the main and lower floors. The home resting on a 7,500 square foot non water view lot.

Sooke is the cheapest in our CMA comming in at $407,500. Of course Oak Bay clocks in at the highest at $685,000. A premium of 68 percent is paid for a similar home but in different locations. Or put another way, an Oak Bay buyer is willing to spend an additional $1,350 a month to live in Oak Bay rather than Sooke.

Here they are ranked from lowest to highest with price and mortgage premiums in relation to Oak Bay.

$407,500 (68%) $1,350/month SOOKE
$460,500 (49%) $1,120/mnth COLWOOD
$462,500 (48%) $1,100/mnth LANGFORD
$490,000 (40) $975/mnth ESQUIMALT
$495,500 (38) $950/mnth SAANICH W.
$550,000 (25) $675/mnth SAANICH E.
$576,000 (19) $545/mnth VICTORIA
$685,000 (0) 0/mnth OAK BAY

Most of this makes sense. The farther you travel from downtown Victoria the lower the price you pay for a home. And within the core districts, prices are quite similar.

The odd ball district for single family homes being Oak Bay.

info said...

I didn't include Saanich West in either group. I selected two groups on either side of the middle third which I considered average for Greater Victoria.

I did include North Saanich in the expensive group. Just Jack's input confirms that my groups are representative of the most expensive areas and least expensive areas. View Royal will be excluded from the expensive group.

info said...

I estimated that the overall ratio from 2007 until present is about 1.2. In other words, for every 1 house that sold in the less expensive group, there were 1.2houses sold in the more expensive group.

2007: 1.15
2008: 1.17
2009: Not complete (approx. 1.2 Jan. through May)
2010: 1.24
2011: Not complete
2012: Jan. - July: 1.19, Aug. -Dec.: 1.74
2013: (through June): 1.31

2013:
Jan.: 0.98, Feb.: 1.35, March: 1.34, April: 1.29, May: 1.39, June: 1.36

Note that with population adjustment, the ratios for 2007, 2008, etc. would be lower.

I did this about a month ago. It was my intention to finish it but that hasn't happened yet.

caveat emptor said...

Marko

Thanks for the numbers. You've given us the 2012 and the 2013 YTD sales numbers for 300-500k, 800K to 1M, and 1M + categories. Any chance you can post the numbers for the remaining category (500-800K) so we can make a pretty graph comparing the two years? Perhaps there is a handful of sub 300 K sales too?

DavidL said...

@Just Jack

Thanks for the numbers ... It is interesting to note that a mortgage in Saanich West costs about $150/month more than a similar home in Langford. If I were considering buying in Langford, I would gladly pay the difference and buy in Saanich West to avoid bumber-to-bumber on the "Colwood crawl" each day (assuming working downtown).

Also, the average daily commute from Saanich East to downtown is close to 10 minutes more than from Saanich West.

CS said...

Marko's numbers show a decline of 20% in Jan 1 to July 22 sales of one-million plus homes this year compared with last year.

Does anyone know if that is that because fewer houses over one million are coming to market or because inventory of one-million plus houses is rising?

In the last week about 11% of new listing were over one million, including relistings such the Dracula mansion. That seems a good supply, and is greater than the new listings between $800K and one million. Is this evidence that the one percent are losing confidence in RE?

Just Jack said...

What I am not capturing in the benchmark home, that I selected, is age and condition. The homes in Langford are likely less than 10 years old as opposed to 50 or 60 years old in Saanich West.

The numbers are not perfect - but nothing is in real estate.

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

It must be rough for realtors in Victoria if you are stiffing your photographer:

http://brianschiebel.ca/

a simple man said...

I now see that realtor's Twitter page is protected so the public can't view - brilliant marketing strategy.

If you do bad in this world, it comes back to haunt you.

a simple man said...

from cbc.ca:

"A new survey commissioned by one of Canada's largest banks suggests more Canadians are in debt this year than last year, and the average amount people are putting towards debt repayment is going down.

According to the results of an online poll conducted by Pollara on behalf of BMO, 83 per cent of those surveyed said they had some form of debt this year. That's up from 74 per cent who had some sort of debt when the same question was asked last year.

The survey also found that the average monthly debt repayment amount has fallen by 13 per cent from $1,138 last year to $986. By region, Albertans had the largest monthly debt repayment, at $1,225, while Quebecers had the smallest — $768."

Fiduciary said...

simple man, I find that last snippet a little misleading, as it's implying that Canadians have more debt than before, and are paying less of it off. Whereas really all that they're saying is that more Canadians have some debt, and on average people are paying less to carry debt. Not that they are paying less on a larger amount of debt, just paying less on debt overall, which could be taken as a good thing. I find the more telling piece to be lower in the article

"Despite the uptick in people with debt, almost half of those surveyed — 44 per cent — said their household debt has decreased in the past five years. That compares with 28 per cent who said it had increased during that period."

Now, you're just referring to their article, so no bad on your part, I just think CBC is presenting things in a bit of an awkward way.

a simple man said...

Well-taken, Fiduciary.

Sales under $1M so far this month are sparse, and of those the majority selling for $48K-$65K below asking.

Interesting market.

subprime11 said...

Only 6 houses in OB sold so far this month between $500-900K. 1151 St.David just sold at $812K 7% less than assessed.

koozdra said...

"The Vendor will not accept any offers to purchase from any individual that is an employee of The Toronto-Dominion Bank or any of its subsidiaries or affiliated corporations."

Another TD hater.

32759001

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

With the volume of sales in the Western Communities and Saanich Peninsula at a dribble, foreclosure sales are representing a larger share of the market.

Most of us have only experienced an orderly market driven by willing buyers and willing sellers. In an orderly market you can have marketing times increase to years and still have stable prices.

A market defined by foreclosures is a market racing to the bottom. The lenders and underwriters usually want these homes sold in under 90 days.

And that means a buyer has an opportunity to buy a home, under foreclosure, at a 10 to 15% discount in the Western Communities and Saanich Peninsula.

Seth Perry said...

@koozdra

"The Vendor will not accept any offers to purchase from any individual that is an employee of The Toronto-Dominion Bank or any of its subsidiaries or affiliated corporations."

Another TD hater.


I don't get it. Why hate TD employees?

@Just Jack

With the volume of sales in the Western Communities and Saanich Peninsula at a dribble, foreclosure sales are representing a larger share of the market.

I'm intrigued. Is there a good place to get stats on foreclosure sales vs normal sales?

Just Jack said...

I haven't found any good source on foreclosures in Victoria. You have to hunt through the listings for phrases like a "Schedule A" to be attached to all offers or no signed disclosure statement.

Best to get yourself an agent that will find them for you. The type of agent depends on your knowledge. If you're new to the game get an experienced agent. If you done this before get a new agent that you can boss around.

I'd get the agent to find out which bank and branch holds the mortgage? How much money is outstanding?. Is the mortgage insured? Where are the owners now? Past sales history?

I want the house vacant and secured. I won't bid on any property that hasn't been up for sale for a least 60 days. I'm going in with my best and only offer likely to be financed from the bank and branch that has the property. I might even offer to move some of my other accounts to that branch in the future. I would also have the property appraised. I wouldn't use the bank's appraiser - but my own. With special instructions to show the range in value and not just one number.

If the property has a slight smell of cigarettes, cats or dogs or the grass two feet high - great - that's an opportunity. Basically, I want to see a property that most people will discard from their list of homes on their first visit. A property that is now stale to the market.

If you are first to offer - it is still possible that you will get the home - even if your offer isn't the highest bid.

Just Jack said...

The are not TD haters.

This is a foreclosure and the owner of the property is now the TD Bank. They just don't want a perceived conflict of interest.

Just Jack said...

An interesting property to take a look at.

The Aloha property was originally purchased in June 2006 for $620,000. And now it's listed at $465,000 or 76% of its Assessed Value.

My opinion is the 2006 priced paid was just someone buying a home that had just dropped some Brown Acid.

But, I think the current asking price is low to entice offers.

Go out take a look at the property. If you love the place, put a full price offer in on it. And have a sealed offer at $515,000 ready come the court date.

koozdra said...

I was watching that Aloha property for a while now. I didn't recognize it because they changed all but one picture in the current listing.

They originally came to the market at 619. Over the course of a year or so they lowered their price to 515. It dropped off MLS so I thought it sold.

Time for a different strategy.

Seth Perry said...

Thanks for clearing that up JJ!

I'm intrigued about the numbers / stats not foreclosed houses at this time but you've provided some excellent advice. Thank you.

koozdra said...

1127 norma cout

Rent: $2600.00

Assessed: $652,000

So let's just say you buy at assessed and you can scrounge up $32,600 for a down payment to become a five percenter.

At a %3 mortgage you payments would be $3,086 per month. You also have to pay property tax and maintenance.

Also, if you can afford the rent for this place wouldn't you have bought in at this point?

Just Jack said...

When you go back and look at the sales of water view properties along Aloha Avenue it's obvious that this 45 year old home wasn't worth $620,000 in 2006. Especially when the neighbours new 3,000 square foot home with the same view sold at $655,000.

Chalk this one up to EMILI? A hundred maybe two hundred thousand dollars gone. And someone has to pay for that loss through higher bank fees. The banks were so sloppy in their loan approvals back then.

Makes me want to close my TD account.

Alexandrahere said...

JJ: What do you think is the better house/value...MLS32588 on Aloha at $465K or MLS 324901 on Matilda currently at $495K?

koozdra said...

The absolute worst listing on craigslist.

$1500 / 1br - $1500 / 1br - 500ft² - furnished 1bed/1bath new condo

I contacted the gentleman and inquired as to why the rent is so expensive for a such a small space. Apparently there is "ten thou" of furniture in there.

According to padmapper it's 87% above a comparable unit.

I like the black walls. Very "executive".

You know what? maybe I'm jumping to conclusions here. Maybe this person did a thorough market analysis which yielded a gap in the market place. Perhaps there are people looking to rent high end furnished condos outside the core. Yeah, that could be it.

Marko said...

^Just out of curiosity, you spend your time contacting people on craigslist asking them to justify the amount they are asking for rent?

koozdra said...

I was curious.

Leo S said...

Hey, the consumer loans on those morden glass tables and new matrasses don't pay themselves.

koozdra said...

Chuck Norris’ Walker, Texas Ranger mansion on the market for $1.2-million (probably a dollar for every roundhouse kick that took place there)

The same price as a Vancouver tear down. I guess that's a high price for a third world country like the US.

Leo S said...

Our houses are twice as expensive, but net worth is only 5% more than the americans.

Seth Perry said...

Hi Marko, the media is buzzing with doomsday stories (bubble, debt, mortgage rules, over supply) but also neigh sayers at all levels of the professional spectrum.

Most real estate agents and mortgage brokers will be wearing a smile and emitting a positive attitude but when you look past that what do you see? What's the general mood out there?

We know that your business model is unique and so we understand that you are doing well, I'm more interested in the general mood among local real estate professionals, putting your success aside.

Thanks for contributing to this blog.

Marko said...

As I've said before, the market truth is somewhere in the middle between Garth Turner and REALTORS® :)

Many professionals don't accept personally how poor the market it, or understand many of the statistical metrics. I've tried auguring median prices, MOI, teranet index, etc., etc. during negotiations when representing my buyers but 95% of the time it has no impact on the negotiations. Sometimes lack of understanding, sometimes lack of motivation on the part of the seller.

There is a big misconception amongst the public that REALTORS® have some sort of special insight into the market which doesn't hold in real life. When I look at re-sales (owned by REALTORS®) some of them overpaid big time and bought right at the peak.

If you are a successful REALTOR® it is likely difficult not to get caught up in the market hype when things are good.

Mood out there is okay I guess. Biggest issue REALTORS® are facing right now is having to put in more work than usual. An enormous amount of deals are collapsing on either financing, inspection, or insurance.

Financing: obvious
Inspection: slow market, buyers are walking away from bad inspections
insurance: I've seen a few deals collapse on this condition recently. Use to be a non-factor. Knob & tube, older oil tanks (even above ground), non-CSA approved stove, etc., etc. are actually make this condition not as easy as it used to be. I've seen companies refuse to insure a home they insured three years earlier.

Marko said...

Personally, I don't have a strong opinion or mood. The market is poor but I also don't see a massive drop coming. I educate my buyers on the risks and let them decide for themselves.

Plus life is too short to worry about where the market is going (unless you overextend yourself which unfortunately many people do but that has to do with lack of financial discipline more so than the market). Right now I am renting a high-end condo and I feel it is worth a $1,000 extra per month over a basement suite in terms of utility derived.

Also I am looking to buy a building lot in the core when the right one comes up. Once again, the right building lot is more important to me than timing the market (within reason, +/- 10%). If the right one comes up tomorrow I'll buy it. If it takes a year I'll but it then. I am not letting the doom and gloom influence my decision, primarily because what I plan on doing will be well within my means, it will have suite making it even more within my means, and it will be something for 20+ years.

a simple man said...

Patience is key in this market, and you have that Marko. Good for you.

Leo S said...

I've seen companies refuse to insure a home they insured three years earlier.

No problem getting the insurance, but the aluminum wiring put us into a non-prime materials classification which bumped up the price by about $50/year.

Leo S said...

The average consumer also has no idea of the state of the market, and is wildly influenced by whether they've seen places sell nearby. At a BBQ yesterday, and one guy thought the market was red-hot because he had seen two places sell on his street. I've heard variations on this many times.

Just Jack said...

In response to Alexandrahere. Which is the better deal?

Six of these and half a dozen of those. One has a bigger lot, the other a bigger house.

If you put any trust into the BC Assessment, then Aloha listed at 76 percent of its assessed value would be the better deal as opposed to Mildred which is at 104%.

Personally, I believe that in a market that is or will be declining you should be looking at the improvements and not the land. If the improvements constitute less that 25% of the total value of the property, in my opinion, its a bad bet for the future. That includes waterfront, acreage and those little old shacks in Oak Bay.

Any home with a suite is overpriced today and I expect those homes to take a bigger hit in price relative to those without a suite, in the weaker market to come.

Having said all that, you still have to look at each scenario differently. For example, I would have considered the 235 acres on Salt Spring that just sold for 1.9 million.

caveat emptor said...

I think a growing number of people are grasping that the market is going nowhere fast.

But I still talk to people who seem to think the current market is just a pause before real estate continues it's 10% per year upward "trend".

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

Thanks Marko, it's nice to have some insight into the REALTORS® circle.

The downward motion appears to come from a multitude of pressure points but the one that sticks out is financing. People buy what the banks will allow them to and they are now feeling "tapped out". Paycheques only go so far.

I also agree with you in that lots got excited during the red hot periods and perhaps sided with emotion vs logic. During those years you looked poor or stupid of you didn't jump in.

For those that did buy at peak it might be a long road back to the top, for others it might be a chance to start all over again.

DavidL said...

@Seth Perry
I don't get it. Why hate TD employees?

Summarizing from this CMT article:
TD Mortgages To Become Collateral Charges

In October 2010, TD modified their mortgages terms so that all new mortgages became a "collateral charge" rather than a "registered document". This allowed TD to change the interest rate and/or loan more money to qualified borrowers after closing (without involving a lawyer) - making it easier for the owner to withdraw equity from their home.

The downside comes at renewal. For consumers who want to keep their options open at maturity, this is an unfriendly change. That’s because TD customers will now have to pay legal fees to switch lenders.


I have heard that having a mortgage registered as a "collateral charge" can be very difficult if the payments are in arrears, as the lending institution can impose various financial penalties, etc. that are not possible with a "regular" mortgage.

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

I would think that collateral loans for homes were what Canadians had before the Bank Act standardized mortgages in Canada?

Also, the interest rate on mortgages are calculated differently than for collateral loans such as cars and boats, etc.

I wonder if TD is @^%$ing around with that too. Which means that a 3.69% interest rate at TD is NOT the same as a 3.69% rate at Scotiabank. Your effective interest rate at TD would be higher than 3.69%

If that's true, then OSFI should take the CEO of the TD bank put him in Medieval wood stocks, in front of the Parliament buildings, and we should pelt this wanker banker with rotten tomatoes.

Alexandrahere said...

JJ: Thanks. Just wanted your opinion. Some friends I know are looking in that area. They want a view. Not much to choose from really.

subprime11 said...

I agree we should pelt his wanker!!

koozdra said...

"The seller would be interested in renting back from the new owner."

Good guy seller.

Sells you his rapidly depreciating asset, rents it from you.

12848486

DavidL said...

From the thirties grind: Absurd Vancouver Property: $700K in 4 Metro Vancouver neighbourhoods

DavidL said...

@koozdra

The new owner of 12848486 is going to be able to "build equity" while the renter is just going to be "throwing" their money away! ;-)

Just Jack said...

Say that $465,000 Bear Mountain town home had a market rent of $1,800 per month. It would be to the vendors benefit to rent the town home back at $3,000 per month with a one year lease. - If they raised the asking price and sold the home for $525,000.

The over market rent is the hook. The person buying the home gets a positive cash flow immediately that covers the mortgage and expenses. The Vendors get an additional $60,000 tax free.

This scheme works on the greed principle where a buyer thinks they are getting something for nothing. There is a problem with this scheme, but that's not going to show up until next year.

koozdra said...

"2% annual price increases"

Haha, oh Brad.

Bank of Canada and Finance Minister telling more lies

kabloona said...

Koozdra, I just forwarded that link to Garth.

Classic example of Bradley J. Lamb talking through the spare hole in his hat.....

:-)

Marko said...

Monday, July 29, 2013 8:00am

MTD July
2013 2012
Net Unconditional Sales: 513 523
New Listings: 1,123 1,242
Active Listings: 4,836 5,178

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

DavidL said...

Last year, sales completely bombed after the new mortgage rules were introduced on July 9th, 2012. With only a couple more days left for sales, the July total will likely be less than 550 for this year. I hope that VREB will avoid spinning this as "sales volume up 5% over 2012" ...