Tuesday, July 2, 2013

June wrap up

The VREB is up to it's usual optimistic antics with June's report, saying that real estate has rebounded in the second quarter.   A truly amazing 65% more activity in the second quarter than the first.  I can't wait for the 3rd quarter when they report that sales activity has collapsed compared to the second quarter.

As is every month, June was a balanced market in their eyes.  Despite their convoluted active-listings-to-sales-ratio, this time they may have a point, since the residential MOI at 6 is on the tall side of balanced, and 14% lower than last year.

Here's a tower of graphs for you.

How's the decline from peak looking?   Little rebound this spring, but expect it to keep dropping in the following months.

Despite the VREB's hyperventilating (it is hot out there), 2013 is still the slowest year for sales in almost 15 years.

MOI seems to have peaked, at least for the time being.   Before anyone gets too excited though, the MOI in Seattle peaked as well, and the market kept declining for 3 years.  What do you think, are we past peak inventory?


Anton said...

From The Times Colonist today. Villa Madrona is changing hands. Original asking price 18.5 M. Selling price 6.6 M. Unrealstic pricing or collapsing high end market?

koozdra said...

How long before we see a sold sign on one of these?


Probably a very long time at these prices.

Just Jack said...

For those that have been looking to buy a waterview town home and are concerned about price then Koozdra' town homes are not for them. Obviously over priced for the price conscious and knowledgeable buyer.

But with only 4 units the developer can hold out for the "right buyer" A buyer that accepts that on any re-sale the property may fetch 25% less. Assuming market prices remain stable.

Because lenders can no longer get these properties insured by CMHC, these properties should be professionally assessed for risk and in this case a 50% down payment may be warranted.

Years ago, the saying was that people over pay for housing every day - but lenders never over lend.

I wonder if that will ever be true again.

a simple man said...

1.5 million for a townhouse facing Ogden point - with all the buses, floatplanes and marine traffic?

1.5 million can buy a lot of house in Victoria, especially now.

Just Jack said...

Very true. However, I don't expect the buyer who is looking to purchase a detached home would also consider a town home and vice versa.

The developer is looking at a small, small market segment. A buyer who doesn't care if they overpay - just as long as they get what they want.

So what is Market Value then!?

What the person pays or what the property would sell for, assuming a knowledgeable buyer acting in their best interests.

Podoloski advani said...

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Robert Reynolds - HMR Insurance said...

5 year bond yields (and therefore mortgages) are up 50 base points in the last 2 months. 10 year yields are up 80 points.


I have long held the belief that only the monthly payment matters. While rates are still incredibly low I think that people will see these rate increases in an exaggerated light and as far more negative then they perhaps are. These rate increases will scare away buyers.

Unless rates drop back down, I think this is a significant event in the decline of the Canadian housing market.

Robert Reynolds - HMR Insurance said...

Also if your downpayment/RRSP is heavily invested in Bonds, you may want to look at adjusting your investment mix. It is my opinion that the "Bond Bubble" is going to hurt a lot of people over the next year or two.

StalJ said...

Dallas Rd. townhouses
-helijet flight path, diesel fumes from summer ships, harbour plane flight path, idiot drivers at 3am careening past doorstep, 4am bumping sessions from across the street while blaring Gaga.
OK, that last one is actually a selling feature :P

koozdra said...

No more sewage plant in Esquimalt.

Maybe they'll put in Oak Bay?

No... that would be ridiculous. We can only put it where poor people live.

caveat emptor said...

If you are saving for a down payment that you expect to make in 3 years or less I'd argue you shouldn't be investing in stocks or bonds at all but rather GICs despite the pathetic interest rates. Looking at historical data the probability of losing money in the markets is much greater for shorter holding periods. And that's from the historical data. Today with near record high bond prices and somewhat elevated stock market valuations the probability of short term market
losses has to be greater than average.

StalJ said...

From TC article
"In May 2011, the price rose to $19.25 million, but by early this year, it had dropped to $6.998 million."

Holy wealth deflation batman! If not for the greed, to think they might have got 16ish instead of 6. I remember my fairfielder neighbours then too, dreaming their shacks were worth bazillions. Hard to fathom the thinking two years ago. Save developers, I am noticing some egos reentering earth orbit. We certainly had our head up our...ahem, up above the clouds.

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

The median and average prices are both affected by the sales mix, although the median to a lesser degree. If a higher proportion of high end homes sell in a particular month (or group of months), then the average and median prices will be skewed higher. This is what happened in June 2013.

Let's compare June 2013 to June 2012. In June 2013, the SFH median for greater Victoria was unchanged from June 2012. It should have gone down over this time period as the Teranet index clearly indicates a declining market since June 2012. However, a higher proportion of high end homes sold in June 2013 compared to June 2012, skewing the median higher.

Consider the following:

Group A: Victoria, Oak Bay, Saanich East, Highlands and Waterfront properties.

Group B: Esquimalt, View Royal, Sidney, Colwood, Langford and Sooke.

Group A yields a much higher median and average each month as these areas are more affluent than the areas in Group B.

In June 2013, Group A comprised 47% of all Greater Victoria SFH sales, up from only 40% in June 2012.

In June 2013, Group B comprised only 33% of all Greater Victoria SFH sales, down from 38% in June 2012.

Without the sales mix skewing the median data higher, the median for June 2013 would have been lower than the median for June 2012.

I suspect that this was also the case for May, although I have not done the math. This would also skew the 3-month median data which explains the temporary bounce in Leo's chart.

Skewing can only be temporary, however, and once it ends, the median price will plunge dramatically, quickly making up for any lost ground.

caveat emptor said...

Skewing can only be temporary, however

The change in sales mix you mention would definitely have an effect on the median.

But what is actually the typical sales mix between your group A and B? Without knowing that you can't say if it is "skewed" high in 2013 or "skewed" low in 2012.

In order to "correct" the skew you identify either sales in Group A need to slow down or sales in Group B need to increase. Either of those could well happen, but it's equally possible that the sales mix will continue to favour group A.

StalJ said...

5 years out, I think the outlying Group B will comprise the majority of sales for a time period, as price nears investor value first… maybe 40% off peak or thereabouts (accounts for increased rates).

So in 5 years, the skew will be flipped… prices will seem worse than they really are. The opposite of now, where ave/med prices seem to be holding better than they really are.

subprime11 said...

Does anyone know what 1463 St.Patrick sold for recently.

Unknown said...

^ $720,000

Mrs. W. said...

Koozdra - those certainly do seem over-priced particularly in light of the small lot subdivision in the 1400 block of Dallas with waterview, 2500sqft houses on 3000sqft lots for just shy of 1.4M....

info said...

@ caveat

No normal is necessary when comparing one month to another such as June 2013 to June 2012.

The June 2013 median would have been lower than the June 2012 median if the sakes mix had not skewed the data.

koozdra said...

Article is a bit dated but I missed it last year...

"The $400-million in mortgage fraud represents only a sliver of the roughly $1-trillion in total residential mortgage credit outstanding at the moment in Canada. But it rose sharply in 2011 from 2010 in dollar terms, increasing 150%, Equifax data suggest."

Mortgage fraud on the rise

caveat emptor said...

The June 2013 median would have been lower than the June 2012 median if the sales mix had not skewed the data.

Agreed. But you also suggested this skew MUST correct. That "correction" will only happen if and when the sales mix reverts back to what it was in 2012. (or as one poster suggested it could just as easily skew the other way) Knowing the normal sales mix is kind of essential to that discussion.

info said...

@ caveat

As I said I have not done the math yet but I am guessing that the median has been skewed for more than one month this spring.

Read my original post again it is all there and correctly stated.

koozdra said...

Finally after years of guaranteeing mortgages the CMHC has decided to institute some prudent measures. Booooooo OSFI.

Stricter Debt Ratio Standards on the Way

dasmo said...

It all looks pretty normal to me. Then again I've never experience the shady side of lending....

koozdra said...

Second rent-to-own fraud story in two days.

Family pays for 2 homes as sale to rent-to-own firm fails

koozdra said...

He promised a 32% return on investment, yearly. Haha.

Some people didn't have the money on hand to invest so they remortgaged their houses to get the money.

After all, this is the infallible Canadian real estate market. What could go wrong?


koozdra said...

Total cost of ownership is now an abstract concept that is not important when making that all important purchasing decision. Only monthly payments are important.

Will they stay low?

Survey says........

One third of new owners believe interest rates will be stable for 5 years

koozdra said...

"The hottest new Canadian housing-market niche isn’t stacked urban townhouses or suburban condo towers, but homes of any kind priced just shy of $1-million, since federal government rules began favouring homebuyers paying in the six-figure range over bidders that break the million-dollar mark."

Time to lower the upper end of the CMHC limit again. Jimmy over to you.

Ottawa’s new rules creating ‘red hot’ market for homes under $999,999

Just Jack said...

The house costs you $999,999. But the "key" to the front door is another $100,000.

Just Jack said...

Why would they poll new home owners on what they think will happen to interest rates? You're preaching to the choir on this one boys.

You should be canvassing prospective purchasers.

Leo S said...

"But fewer buyers in the marketplace for homes at $1-million-plus, means an opportunity for those who can come up with a big enough down payment that they don’t need default insurance to qualify for a mortgage. “There’s a deal to be had,” said Mr. Gaetano. “You see all these homes selling in the $900,000s and [sellers] are sitting there with a home listed for $1,050,000 and wondering what is going on."

What kind of bizarro land is this where paying more is a deal?

I can see that if you're in the market for a 2 million dollar house you will be handsomely rewarded for waiting. Without easy credit, the market doesn't exist.

Just Jack said...

And if you are now pricing your Mansion for under a million to get offers what will that do to homes in the $900,000 and $800,000 range.

How can they compete with a substantially superior product at nearly the same price?

koozdra said...

"TD, which is expecting a loss of 10,000 jobs, says the weakness in the job market will likely come from a reduction in the number of students entering the job force and surveys suggesting businesses are less likely to hire new employees."

The buyers of tomorrow.

Economists predict disappointing jobs report for June

caveat emptor said...

fewer buyers in the marketplace for homes at $1-million-plus

it's comforting to know that I can snatch up a few million $ plus homes without having to compete with the CMHC insured riff raff

dasmo said...

I'm glad those CBC articles published that sleazebag's name. At least they are providing that service if not finding actual news. If someone googles him then his character might be more to the surface than it was before. It's too bad lawsuit documents don't come up with plain google searches. I had a recent run in with a real smooth character on a commercial deal. My lawyer saved my ass buy simply bringing up his legal sheet. Two pages of lawsuits against the fellow. He was a shark and this fish was happy he had a lawyer on his side... He was relentless, smooth, likeable and pure predator. The signs are more obvious in retrospect. Anyone that drives around with their lawyer has got to be trouble....

subprime11 said...

Wow, a south oak bay home is nice condition actually sold under assessed. 2237 Windsor Rd is a sign of things to come this fall.


dasmo said...

Yep... $705,000, 1% under assessed! OB is definitely crashing....

subprime11 said...

oops 1812 St. Anne dropping and will likely sell below assessed...2770 just reduced to assessed..2050 McNeil sold below assessed....oak bay is crashing!!

subprime11 said...

2770 Heron Street that is

dasmo said...

$849,000... $789,000... $639,000... a crash does not make...

Marko said...

oak bay is crashing!!

Yes, lots will be 300k in no time :) yea right.

Just Jack said...

How much are lots now?

subprime11 said...

2345 Oak Bay dropped to $589....craaaaash!!

Marko said...

2717 Victor St in a bidding war $21,000 over asking. Market is recovering :)

Marko said...

Getting my head chewed off on a realtor forum after suggesting that buying might not always be the best options.

Realtor #1

"Reality is that sooner or later rents will reflect real costs....one cannot rent what one cannot afford to buy...carrying costs...does Marko not understand the basic laws of economics. I also looked at his chart and I believe it is one sided for the rental aspect. I have seen rents move up and he did not include the costs to relocate once again to something you can afford...nor the reality that landlords cannot afford to rent for a loss. Perhaps his market is different from the rest of Canada...yet basic economics remain the same."

Realtor #2

"Agreed Annette. While I think Marko is probably correct that Canadian housing is in risky territory, I don't think the risks are significant enough in most markets to put off buying.

One of the flaws with the calculator Marko presented is that it is short term, 2 years. This presents two problems. The first is that trying to time the best time to buy is a guessing game. All our guesses are just that, guesses, and if we guess wrong we are two years behind. If we guess right that renting is better than buying for 2 years, the benefits are modest and not worth the risk of putting off home ownership.
The second is that one must go through the initial two years sooner or later. The sooner one goes through it, the more years one benefits from the financial advantages of ownership. The more years one benefits from home ownership, the more one can put that money to work elsewhere.

A third intangible benefit of home ownership is human nature. If we rent, we are not likely to save money for a house. A trip to Vegas just always seems to get in the way. Secondly when we own we tend to sacrifice those trips to Vegas because we don't want to default on our mortgage."

Chris said...

"Market is recovering :)"

Realize you're just trolling but I must say the market is in no way recovering. It's setting up for a big leg down this Fall. The interest rate blitz has merely lured the fence-sitters with their 90day rate-holds. Next comes the knife, or some would say pin.

Canadian mortgage holders wince as US rates drive ours up
Globe and Mail-Jul 5, 2013
“Stronger-than-expected U.S. employment numbers are good news on a number of fronts, but could prove to be a knife in the back for Canadian

Chris said...

Link to mortgage rates.

Homes and gold crashed in the 80s too when real yields soared. Climbed 5.55% on Friday alone, and that was on the back of a very weak Canadian jobs report. Higher monthly payments, less ability to pay. Outcome, obvious.

I'd say ^^realtor #1 & #2 need to brush up on their basic economics of calculating rent vs. own.

Jack and Cate said...

Marko said...

- 2717 Victor St in a bidding war $21,000 over asking. Market is recovering :)


Alas a Fool and their money are soon parted.....

Leo S said...

"Reality is that sooner or later rents will reflect real costs

Well that part is true..

one cannot rent what one cannot afford to buy

This is somewhat debatable depending on what definition of "afford" you use. If you are reasonable you might agree with it, but if you ask the bank, you can afford million dollar house.

the reality that landlords cannot afford to rent for a loss

Interesting how many do. It is amazing how long you can carry an investment at a loss if you just don't understand it. I've heard so many landlords talk about how they are losing money every month, but it's ok because it's an investment.

If we guess right that renting is better than buying for 2 years, the benefits are modest and not worth the risk of putting off home ownership.

I wonder how many buyers in the US thought that their losses were modest?

The second is that one must go through the initial two years sooner or later. The sooner one goes through it, the more years one benefits from the financial advantages of ownership. The more years one benefits from home ownership, the more one can put that money to work elsewhere.

See, it's not that those realtors are scumbags when they tell you to buy now. They really and truly just don't understand what they're talking about.

Leo S said...

Garage is tidy, basement is funfinished

Funfinished? That sounds awesome!

Seth Perry said...

"See, it's not that those realtors are scumbags when they tell you to buy now. They really and truly just don't understand what they're talking about."

Obviously there are plenty of intelligent and respectful real estate agents but for the ones that I didn't respect before, this statement makes them more human and understandable to me.

Thanks Leo

patriotz said...

one cannot rent what one cannot afford to buy

Well that sets the tone for the rest of the spiel. Never mind theory, that is massively at odds with the present reality in major Canadian cities. Huge numbers of households are doing just that - probably most renters of condos or houses in Vancouver alone.

n.y.k. said...

one cannot rent what one cannot afford to buy

I'm embarrassed for someone who would say this. Realtor #1 drops the ball, then Realtor #2 trips over it and does a faceplant with:

the reality that landlords cannot afford to rent for a loss

Realtor #2 seems to be under the impression that all landlords are profiting or they wouldn't be landlords in the first place. The "reality" is that many recent investors are subsidizing their tenants, allowing them to rent what they cannot afford to buy.

A third intangible benefit of home ownership is human nature. If we rent, we are not likely to save money for a house.

Most Canadians are owners, and they got to be owners by saving while they rented, just like Realtor #2 did when they were a renter. Has this real estate agent never worked with a first time buyer before? Do they think everyone gets a free down payment from their parents?

Realtor #2 seems to understand that the math isn't on their side, but they can't admit it so they make a "renters are bad with money, intangible benefits" argument. It's just another way of saying "I'm right even if I'm wrong because the math doesn't matter".

Just Jack said...

Buying in Fernwood/Oaklands is a mistake these days. The prices are over inflated not because of the location, but because of basement suites.

Low interest rates coupled with another $1000 a month from a suite has conned most of these young buyers into believing they should pay prices similar to neighbourhoods where the underlying land values are $100,000to $200,000 more.

Now that the vacancy rate has increased, the City should close down these illegal suites. Ironically, that would drop the price of these homes and make homes "affordable" once again.

subprime11 said...

Quiz: oak bay sfh under 1 million What further % decline to the bottom?

Just Jack said...

In past real estate recessions the percentage of income that prospective buyers commit to home payments drops to around 25% and these purchaser also want to pay off the mortgage in 15 years.

If you want to guess where prices could possibly bottom then use a debt service ratio of 25% and an amortization period of 15 years.

Leo S said...

In past real estate recessions the percentage of income that prospective buyers commit to home payments drops to around 25% and these purchaser also want to pay off the mortgage in 15 years.

How do you figure?

subprime11 said...

re: Oak Bay SFH % decline. My guess is 23% decline from current. The decline will not be drawn out longer than 24 months.

Marko said...

To see 23% drop I really think we would need to see the 5-year fixed pushing 4% or higher.

subprime11 said...

5year rate already 3.69% and soon to reach 4%

Marko said...

Most of my clients are stilling getting 3.24% or 3.29% right now.

"soon to reach 4%"

We'll see.

Leo S said...

I'd say we need closer to 5% to get 25% drop in Oak bay SFH. 5 year fixed is probably around 3.25 for most people today.

Mayfair Man said...

Just reread "The Big Short" by Michael Lewis. Best quote in the book: A Home Without Equity Is Just a Rental With Debt - Barry Beck

koozdra said...

Will 899 sell this foreclosure?

"With a 2013 tax assessed value of $1,129,000, this foreclosure property offers you great value at $899,000"

Where are the investors?

"The property is being sold 'as is, where is', with no occupancy permit or home warranty coverage currently in place. Taxes not included."


koozdra said...

“We have to be careful before saying ‘the sky is falling,’” says Diana McMeekin of real estate marketing firm Artemis. “What we’re seeing in the market today is a response to the shift from speculators to long-term investors. The kinds of people that are buying now are owner-occupiers as opposed to ‘flippers.’”

A good source to question about the health of the market.

Can the market survive without people frothing at the mouth high on credit? No.

Who wants a 'free' car?

“Well, they could always sleep in it after losing their shirt on the real estate market.”

Leo S said...

Rich Dad, Poor Dad - your home is a liability, not an asset

koozdra said...

"Don't tell me how to run my business that you insure." -Genworth

Genworth Takes its Own Tack on Debt Ratio Policies

totoro victoria said...

Rich dad poor dad: "Your house is not an asset. But a house can be an asset—if it cash flows."

I would qualify that further: your house can be an asset if it would cash flow if you rented it out.

I would also add that if your mortgage is cheaper than rent and you plan on staying put for more than five years this is a hedge against market conditions.

Marko said...

Monday, July 8, 2013 8:00am

MTD July
2013 2012
Net Unconditional Sales: 120 523
New Listings: 315 1,242
Active Listings: 4,762 5,178

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

koozdra said...

"The Canadian government’s latest moves to prevent a housing bubble may have knocked up to 10 per cent of potential homebuyers out of the market, Bank of Nova Scotia says in a new report that, like others, suggests a soft landing for the industry."

TADA! soft landing achieved.

But wait, what's the deal with all the new regulations? I thought all our insured lenders were doing a great job and being nice and prudent.

Rule changes may have knocked 10% of homebuyers out of market

Seth Perry said...

Thanks Marko for the market update stats!

FINALLY sold - 1600 Keating Cross Road - MLS 322975. Do you know what it went for?

$939900 / 4br - 1600 Keating Cross Road - MLS 322975 - RE/MAX Camosun -Central Saanich (1600 Keating Cross Road - MLS 322975 - R)


Renter said...


Those folks live down the road from us. Sold the other day for $89,000.

It's only been for sale for a couple of months. That's quite a short time considering how long a lot of those acreages have been for sale - over a year, in many cases.

Renter said...

Whoops, dropped a 0. $890,000.

Seth Perry said...

Thanks Renter. You are right, it was listed at the beginning of May. Just over two months exactly. Feels longer for some reason. Thanks for the sold price. I guess $50,000 below asking takes it.