Saturday, August 24, 2013

(Almost) the weakest market in the country for over 5 years

Easy to forget when you're stuck in our sleepy real estate market, but the rest of Canada has been going gangbusters while we were stuck being boring.  The little upward blip in July saved us from last place (that honor going to Edmonton), but over there the market is pretty hot with 3.3 months of inventory in July, while we sit at 8.2.


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.


August 2013August
 2012 
Wk 1Wk 2Wk 3Wk 4
Unconditional Sales181
305
440
462
New Listings337568778
1025
Active Listings466146634643
 5034
Sales to New Listings
54%
54%57%
 45%
Sales Projection568559569

Months of Inventory
10.9

*Week 1 being 7 weekdays

122 comments:

koozdra said...

Quebec??

A friend in Winnipeg bought four years ago in a so-so area of Winnipeg for 180. She is planning on moving soon and contacted a realtor to see what she could get. She was disappointed to learn that she could only sell the house for 250.

People all over this great nation have lost touch with reality. "Real estate is cyclical but that won't affect us here, will it?" Everyone Everywhere

caveat emptor said...

Interesting that Edmonton and Calgary, two of the cities with the strongest economies, have seen among the least price growth over that period. (mind you they did see rapid price growth pre 2008)

In an earlier thread I hypothesized that the rapid pace of new home building in both those cities might be exerting a moderating influence on resale prices in Edmonton and Calgary. That theory was shot down by quite a few here.

What other factors could be moderating house price increases there?

Then there's Victoria. Even if you think the economy is "weak" here it is hardly uniquely weak in Canada.

patriotz said...
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patriotz said...
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patriotz said...

What other factors could be moderating house price increases there?

I don't think you really need any more explanation than the crash of 2007-9, which was about 20% in both cities. Kind of deflates the "RE always goes up" maxim.

The price recovery since then has actually been quite strong, compared to BC markets (e.g. Kelowna) which have taken a similar hit. But of course, the Alberta cities do have an economy besides RE.

Chris said...

http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/manuf12-eng.htm

For new house prices since 2007, Regina would be the winner up 54%.

Chris said...

Developers are feeling bullish on Cowtown, etc.

Permits pulled in May of this year:
Alberta:
Residential 846M
Non-resid. 543M

BC:
Residential 589M
Non-Resid 231M
Surprising when consider pop'n difference of provinces.

Marko said...

Monday, August 26, 2013 9:00am

MTD August
2013 2012
Net Unconditional Sales: 440 462
New Listings: 778 1,025
Active Listings: 4,643 5,034

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

Marko said...

Looks like we'll end the month at around 550 sales.

koozdra said...

Consumer debt rising but delinquency rate improving

Will we ever see a shrinking of personal debt rate here? Not before it's too late.

koozdra said...

Oops, wrong link..

Consumer debt rising but delinquency rate improving

Alexandrahere said...

Here are my stats for last week and for previous years.
SFH in Vic,OB,ESQ,SE&SW with a min 2 beds and 2 baths, priced between $375K and $775K:

19-25 Aug 2013
Sold: 27
Avg selling price: $590K
Med selling price: $575K
Inventory: 351

20-26 Aug 2012
Sold: 18
Avg selling price: $555K
Med selling price: $$540K
Inventory: 427

Same week in 2011: Not tracked

Aug 23-29 2011
Sold: 17
Avg selling price: $599K

Last week within my criteria 9 out of the 27 homes went for below BC Assessment & 10 had confirmed secondary suites. Six homes sold in the SE areas of Mt Doug, Gordon Head and Lambrick Park having an average selling price of $595K.

Marko said...

SFH median MTD running at $535k....could this market be any more boring?

Marko said...

Calgary Real Estate Sales BOOMING In August
Calgary home sales are on pace for the highest August total since 2005 and the second highest on record for the month, says a Calgary realtor. Mike Fotiou, associate broker of First Place Realty, said month-to-date between August 1-21 there have been 1,462 MLS sales in the city, up 32.4 per cent from last year.
http://www.calgaryherald.com/business/Calgary+sales+August+pace+highest+ever/8825461/story.html

Robert Reynolds - HMR Insurance said...

As someone who is licensed to sell investments. This should be illegal.

http://i.imgur.com/tfnRcEb.jpg

koozdra said...

That's the same Sandy and Pat that were trying to convince us that Youbou's economy was about to really take off.

Marko said...

As someone who is licensed to sell investments. This should be illegal.

Wow that is bad....

Phil said...

If Sandy and Pat replaced "double your money" with "halve your money" it would be more believable.

Marko said...

3770 Quadra St, the lot on Quadra next to a gas station that a blogger noted last as being listed under $300k ($299,900) went in a bidding war for $340k.

Phil said...

caveatemptor
What other factors could be moderating house price increases there?

I think AB’s population growth swooned in 09/10 as people came back to BC. Now BC has been swooning since 2011 as they leave for AB.

BC Local News
Published: June 19, 2013 3:00 PM
VICTORIA – More people continue to move from B.C. to other provinces than migrate west, according to the latest Statistics Canada estimates.
Quarterly Statistics Canada figures show a net loss of 1,611 people from B.C. to other provinces from January to March this year. That is the seventh straight quarter of net out-migration from B.C., with the last net increase of 73 people recorded in the April-June quarter of 2011.
In 2012, while B.C. was a net loser of about 7,000 in interprovincial movements, Alberta gained about 43,000 and Saskatchewan gained about 2,500 people.

Mayfair Man said...

I heard a great a quote “We visit quite a lot of people around the country. Everyone thinks that there is something special about their housing market and that it can’t go down. Ottawa has government, Quebec City is cheaper than Toronto, Toronto has immigration, Vancouver has mountains, weather and Asians, Alberta has Oil, Saskatchewan has Potash and farming.” I guess we are not the only ones that think we have a desirable market for people to live. Hugo Lavallee - Portfolio Manager - Fidelity

Just Jack said...

There does seem to be a pattern for those bidding wars.

It's usually a marginal property that if you were to market it at a higher asking price you would have long time to find a buyer and go through several price reductions.

Or - you can underlist the property and get two developers duking it out and have an accepted offer in less than a week.

But I don't think you can jump to the conclusion that this "bidding war" is a signal of a strong market. That the property didn't sell for more is likely indicative of a soft market in that $340,000 was the best the agent could get. You're only paying 10 to 15 percent more for a lot that is double the size of a standard busy street lot.

info said...

Teranet Index year over year price changes:

Calgary: +5.88%
Edmonton: +3.45%

Victoria: -4.01%

Alberta's economy isn't as strong right now as some people might think, but it is strong compared to Victoria's economy. As I've said, many young Victorians are moving to Edmonton and Calgary in search of work and this is having a negative impact on Victoria's economy and a positive impact on Alberta's economy.

Victoria's situation is weak all the way around, including its housing market and economy.

Victoria's economy will get much worse as the housing market cools further as the degree of government intervention (through CMHC, Genworth, etc.) is throttled back.

Phil said...

This is worth a couple minutes if you haven’t heard about it from the TC.

http://landlordrescue.ca/times-columnist-accepting-fairy-tales-fact/

Here are a couple snippets:
$250 million dollars of old retired people’s money has vanished, been squandered or gone missing.

Note To Times Columnist
“Slowest Construction Project on Earth” or “White Elephant Towers Grinds To a Halt… AGAIN” would be a more appropriate title for your article.
I’d be glad to share information with you, such as how League encouraged investors to make use of Home Equity Lines of Credit to invest with. Or how they promised original investors 15% ROI. Or their fascinating “Investment Guarantee” and “Liquidity Agreement”.

info said...

@ Just Jack

You are probably very busy so I wouldn't expect you to do this, but I do have a favour to ask.

Could you post the 2013 month to month price (average) percentage gains/losses (relative to assessment) for SFHs in the core areas for Jan. - Feb., Feb. - March,... It would be much appreciated if you could round these numbers off to 2 decimal places.

Jan. - Feb. =
Feb. - March =
March - April =
April - May =
May - June =
June - July =

This information could be put on a graph. We could do this for other years as well.

Thanks in advance.

Renter said...

Marco
Re: the bidding war lot. If I remember correctly the posting mentioned that the 2 neighbouring lots (which were listed at a higher price) could also be picked up. Did you happen to notice whether those lots got picked up too?

It seemed to me that that lot was bait to sell all three, and I'm curious as to whether that tactic worked.

DavidL said...

@Phil

I didn't know about the work stoppage at Capital City Centre project... I remember reading through the League marketing material in 2006/7 and thinking that the offered returns were "too good to be true".

Marko said...

But I don't think you can jump to the conclusion that this "bidding war" is a signal of a strong market.

Didn't jump to that conclusion. Was just replying to a blogger that asked about that property last week.

koozdra said...

The League Marketing has taken that blogger to court of defamatory comments. I hope VIREB doesn't get any ideas.

koozdra said...

Consumer debt rising fastest among seniors

"Canadian households have returned to their free-spending ways and seniors have joined the party lately by borrowing to finance their post-retirement lifestyles, a new report says."

Lets be young and hip and borrow a bunch of money, all the kids are doing it.

At least delinquency rates are extremely low. Go low rates! I'm so glad they'll never equalize.

koozdra said...

"If the housing market corrects [people's] extremely low equity will evaporate"

Where's Totoro? This sure sounds like a theory on how the savings of the middle class will be wiped out.

"That sounds scary" -Interviewer

Indeed it does.

DavidL said...

@koozdra
The League Marketing has taken that blogger to court of defamatory comments.

Expressing an opinion is not the same as making a defamatory remark. According to Wikipedia: "Under common law, to constitute defamation, a claim must generally be false and have been made to someone other than the person defamed."

I think it is pretty clear that HHV consists of a lively discussion of opinions!

Jack and Cate said...

Don't you think that the increased spending of boomers is due in part to the criminal and unethical fallout of market and mortgage manipulation?

Leaving most no other way to pay their bills then to use their real estate as an ATM - of sorts. As the Real estate market continues to fall they will be victims of financial mismanagement once again

koozdra said...

$1700 / 2br - 1200ft² - GREAT LOCATION!

"Our home is on the backside of the building surrounded by windows and trees that make it surprisingly peaceful, serene and quiet. It will be perfect for the executive, grad students or academic on sabbatical needing to nourish their creative side."

Executive? The only thing executive about this rental is the price.

dasmo said...

A very interesting read indeed.
http://landlordrescue.ca
Now that is news!

koozdra said...

Owning a home becoming less affordable

"As well, Wright points out that the bank will likely only start a monetary policy tightening phase once the economy starts improving, so the higher rates might be offset by an improvement in employment and in incomes, which could offset the negative impact on household finances."

Oh good, I was getting worried. The recovery is scheduled for next year. By that time we can predict how the BOC will behave.

This year it's a problem to raise the rates because it would be disastrous. Next year, no problem.

Economic predictions are easy.

info said...

"As well, Wright points out that the bank will likely only start a monetary policy tightening phase once the economy starts improving, so the higher rates might be offset by an improvement in employment and in incomes, which could offset the negative impact on household finances."

This is a clear admission that the Canadian economy is weak and has been since the GFC. What they don't say in this article is that Canada's economy has been under the influence of an unprecedented amount of stimulus spending since 2009 and has benefited from an unprecedented 4 years of emergency interest rates.

Obviously Canada's economy would be much worse off if it wasn't for all of that sustained stimulus.

Most Canadians don't understand the amount of stimulus that has been thrown at the Canadian economy since 2009. As well, most Canadians don't understand how much future damage to the economy has been done by trying to fix a debt problem with more and more debt.

This will not end well.

info said...

"Leaving most no other way to pay their bills then to use their real estate as an ATM - of sorts. As the Real estate market continues to fall they will be victims of financial mismanagement once again."

That this will happen in Canada is guaranteed. It has happened in every country that has experienced a housing bubble and bust in recent years, including the US.

Creating a housing market boom to stimulate an economy that is weak can only mask the true problems of the economy for a limited amount of time before the real problems begin to show again, magnified as a result of trying to fix an economy by throwing tons of debt at it.

At the mortgage holder level, things were fine again after 2009 as house prices went higher as a result of the stimulus that was thrown at the housing market. If their income couldn't cover their mortgage and other bills, no problem, all they had to do was dip into the home equity well. By doing so, they were setting themselves up for future money problems. The saving rate in BC is -8% and BC residents have the most debt, by far, in Canada.

Once house prices in Canada start to fall, there will be money problems on every level and the consequences of trying to fix a debt problem with more debt will be apparent.

The Canadian economy has been much too dependent on the housing market, especially since the mid 2000s.

This will not end well.

Tweev said...

For the person who is making the charts - check out this if you want to make them really sharp:

http://timelyportfolio.github.io/rCharts_dimple/dimple_timeseries.html#slide-2

If you send me the data, i could even do it for you if you would like.

Marko said...

Oil at $110 will be a negative on the CND economy as well I guess?

koozdra said...

We've been hearing all this doom and gloom about the housing market. How about a more unbiased take on the situation. What does Genworth have to say about this?

"But Wednesday’s report, which was done for mortgage insurer Genworth Canada, argues that the market will not sink too low, and will be propped up in part by population growth and modest employment gains."
...
"It also says that “weak pricing will help affordability.” It predicts that principal and interest payments will drop in at least five major cities this year, led by a 2.5 per cent decline in Victoria."

A rosy picture. Even if prices slide. Will the youngens want to buy into a deflating market? Will they ignore their friends that can't get rid of their shitty condos that they can't rent without losing money?

"The report predicts that all cities will see some price growth, ranging from 1.4 to 3.6 per cent, in 2014."

Oh good.

No ugly downturn for condo market, even in Toronto: report

koozdra said...

We love our low rates!! Debt accumulation is becoming a national pastime.

dasmo said...

Talked with the Nickle Brothers owner who crunches and moves homes. Also says it's getting busier. He also had some horror stories about some rich Albertans snapping up the soft upper market properties. A 1930's home in Saanich where a well known artist lived, katharine hepburn had stayed, wonderful mansion....crunched. They are going to sit on the property because they got it for 3 million instead of 6. Probably subdivide after they level it and remove all the trees.

Beware of rich Alberta money moving in, this wont end good...

StalJ said...

"even in Toronto: report"

The sheer number of Toronto condos could be felt across the country. Twice the number being built as New York which is three times the size....and New York has a better economy.

StalJ said...

"Oil at $110 will be a negative on the CND economy as well I guess?"

Parts, yes. The last time oil went from $100 to $150 in summer of 2008 everything seemed to fall shortly thereafter...
If it remains up here at $110, then BC, ON, QC may start losing more people to the oil-rich provinces. It is probably best if it returns to the $90 range where it has hovered for 3 years now after the Syria thing is over.

Marko said...

2100 Trident Pl, Lands End just sold for $654,000. Purchased in 1991 for $410,000. Bubble?

Alexandrahere said...

Marko: That is a pretty nice home on Trident Pl. Built in 1990, over 300 sq ft,ocean front on 3/4 acre. Asking $725, selling for $654K. Makes me happy that I sold my Esquimalt home for $700K in 2008.

info said...

"Beware of rich Alberta money moving in, this wont end good..."

One or two stories of Albertans buying Victoria homes doesn't make it an epidemic. No group of people from outside of Victoria will prevent Victoria's housing market from correcting/crashing from its current bubble prices.

info said...

@ Leo

I have an idea for a graph.

Find the total amount of (taxpayer backed) mortgage insurance added each year through CMHC, Genworth, etc., since 2000. Then find the total amount of (taxpayer backed) mortgage insurance added each year in the US through Fannie Mae and Freddie Mac. The totals for Canada will have to be population adjusted (x 10) to be able to be compared to the US totals.

Put together a (quarterly) line graph comparing US and Canadian housing prices in general and various cities in each country since 2000. Put the yearly totals of mortgage insurance added for each country at the bottom of the graph in separate bars (red for Canada, blue for the US).

This graph will show that there has been much more interference in the Canadian housing market compared to the US housing market. It will explain why the Canadian housing market hasn't corrected yet. It will dispel the myth that the Canadian housing market is "strong" or "resilient" by showing that housing prices in Canada have been completely dependent on the (extreme) amount of taxpayer backed mortgage insurance that has been added each year.

info said...

"Oil at $110 will be a negative on the CND economy as well I guess?"

In 2007, house prices in Edmonton and Calgary began to correct. By early 2009 both cities had experienced housing market corrections of about 20%. Many SFHs in nice areas of these cities were selling for 35% below peak values. Most of this happened while the price of oil was above $100.

Note that the Canadian housing market received an unprecedented, emergency intervention in 2009 to stop the correction. Otherwise, house prices in Calgary and Edmonton would have continued to decline.

The Canadian oil and gas industry employs a lot less people than you think.

If $100 oil wasn't able to prevent the bubble housing markets of Calgary and Edmonton from bursting and correcting/crashing in 07-09, then $100 oil will certainly not prevent the bubble housing market in Victoria (or any other Canadian city) from correcting/crashing now.

patriotz said...

2100 Trident Pl, Lands End just sold for $654,000. Purchased in 1991 for $410,000. Bubble?

I will finish that second sentence for you.

Bubble collapses start on the periphery and move inward.

info said...

"Bubble collapses start on the periphery and move inward."

Examples: Vancouver, Calgary, Edmonton (1980s) and recently in Miami, Phoenix, Las Vegas, Los Angeles, etc..

info said...

Netherlands Real Estate Bubble Bursts - BBC.

All real estate bubbles burst and correct/crash back to where fundamentals (incomes, rents) are once again able to support house prices.

dasmo said...

$654,000 for waterfront is pretty good even if it is beside a loud busy ferry terminal.

DavidL said...

Globe and Mail : Rising mortgages: The phantom menace of Canadian consumer debt

Marko said...

Canada mortgage arrears rate continues to decline....

http://ca.finance.yahoo.com/news/canada-mortgage-arrears-rate-continues-decline-135550076--finance.html

Jack and Cate said...

"$654,000 for waterfront is pretty good even if it is beside a loud busy ferry terminal. "
--------
.....and diesel scum on the water, and tourist garbage and heavy traffic and ..... Pretty good??

dasmo said...

Exactly...it's a pretty good price to get! You've been trolled!

koozdra said...

From DavidL's GM link above:

"The pace of growth has been spectacular: Canadians had $815-billion of mortgage debt with the chartered banks in January of 2012, $518.5-billion in January of 2011, and just $459-billion in January, 2010.

Take into account mortgages from lenders other than the chartered banks, and the figure now easily tops $1.1-trillion. The total amount of mortgage debt outstanding roughly doubled between 2002 and 2010."

A fire that burns twice as bright burns for half as long.

Seth Perry said...

Watch out flippers. Here comes the tax man.

CRA targeting house ‘flippers’ in Toronto, Vancouver: Lawyer

"Toronto tax lawyer William Howse is warning realtors in a two-page bulletin that Canada Revenue Agency auditors have been targeting the Toronto and Vancouver real estate markets, looking primarily for people who bought condos before they were built, intending to flip them for a profit as soon as the project is complete."

"Some folks have received tax bills on the full gains. About 250 buyers in Toronto and Vancouver have been asked to refund GST and HST rebates on homes that auditors have deemed aren’t being used as primary residences."

"This is a full frontal attack on everybody out there who has bought and sold a property because values have gone up so much as a result of the real estate boom,” said Howse, corporate counsel to The Taxperts Group, a private tax-law firm, and a speaker to the real estate industry on tax issues."

Seth Perry said...

Barbara Yaffe: B.C.’s housing market unaffordable? Our debt rising? What a surprise

Our debt and home addiction / speculation is so ridiculous.

The numbers show housing across the country became less affordable in the second quarter of 2013 and people took on more debt."

But the bigger story may be in how much worse off B.C. consumers and homebuyers are, particularly in Vancouver.

The situation is not just much worse. It’s out of whack, extreme, shocking, eyeball-popping.

On Wednesday, Burlington-based TransUnion Canada advised, Canadians’ average non-mortgage debt is up 3.4 per cent over a year ago, to $27,131.

But in B.C., the average consumer debt tally, up by nearly three per cent, totalled $38,672.

That means the amount we carry on credit cards, bank loans, lines of credits and car loans is 42.5 per cent higher than our fellow Canadians.

And that’s probably because, after paying for housing, we’re unable to find cash for other things that normally are part of a middle-class lifestyle.

caveat emptor said...

Interesting I noticed that Garth seems to be backing off his earlier prediction of BoC raising rates soon:

Really? This projection is based on a Bank of Canada increase of a full 1%, which will happen, but not starting (thanks to a crappy economy) until a year or so from now. When they come, the hikes will be in careful, bite-size, digestible chunks – which means the current 3% prime might not hit 4% until 2014. After that, all bets are off.

His bottom line conclusion which i would agree with:
"The bottom line is predictable. If you use your turn signal in parking garages and always put the seat down, then lock in. Otherwise, be variable. You only live once, baby."

Most of the time variable is better than fixed. But a few months ago (i.e. when Leo bought) was definitely a good time to choose fixed.

Seth Perry said...

@Marko RE: Canada mortgage arrears rate continues to decline

From the article:
"Arrears rate had declined to 0.32 percent as of the end of June, down from 0.35 percent both at the end of 2012 and at the end of March."

Get out the magnifying glass...

Seems like a very small decrease to me. The good news is that it's not going up.

So that's a 0.03% decrease of mortgage arrears measured by the number of Canadians who are 90 days or more past due on their payments compared to March 2013 and the end of 2012. (Insert Party Horn Honk Sound here)

The bigger picture

The number of Residential Mortgages in Arrears in BC = 0.45% as reported in May of 2013

Back in 2009 it was 0.25% so we've almost doubled arrears rates within 5 years. Again that's almost twice the amount of people in BC who are 90 days or more past due on their payments.

* Includes data from BMO, CIBC, HSBC Bank Canada, National Bank of Canada, RBC Royal Bank, Scotiabank, and TD Canada Trust.

* Mortgage arrears is three or more months


References

Canada mortgage arrears rate continues to decline

Mortgage Arrears Definition

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/mortgage-arrears.html

A mortgage is in "arrears" when the borrower is behind on one or more payments.

In Canada, arrears statistics typically measure the number of Canadians who are 90 days or more past due on their payments.

Mortgages in Arrears as of May 2013

Just Jack said...

Info asked for the median Sales to Assessment ratios for each month in 2013 for detached homes in the core. I can only round to the best of my data and that is to the first whole number. But here are the ratios:

95% Januaary
98% February
101% March
102% April
100% May
102% June
100% July
101% August

I think?? This method of showing month to month price increases beats the heck out of the resale method used by Teranet. As there was never a month that there wasn't at least 70 sales. With May having a tad over 200 sales.

This does show that our market has been as flat as a Halibut? for at least six months. It also shows that home prices are a few percent cheaper in the Winter Months.

Alexandrahere said...

ew...didn't realise the house on Trident was next to the ferry terminal!!

Leo S said...

>>. This method of showing month to month price increases beats the heck out of the resale method used by Teranet.

Not even close. Sale/assessment does not tell you anything about price increases or decreases as it is highly affected by the sales mix. Comparing sales/assessment in January to the same in July and concluding that prices increased by 5 percent is definitely not correct

patriotz said...

Canada mortgage arrears rate continues to decline

They also continued to decline in the US for about a year after the price peak.

Mortgage arrears are a lagging indicator of price declines.

info said...

@ Just Jack

I appreciate the effort.

Based on these numbers there has been no price change since March. However, January through March shows a 6% increase which, I think, can only be explained by the sales mix. During that time, sales were very weak, the average and median were slumping and even the Teranet Index showed price declines.

I do, however, think that this data can be very useful. Sales have been stronger since March and the average and median have moved higher and the Teranet shows a 1.8%increase since then. Your numbers show that SFH prices have been flat in the core, where a higher than normal percentage of total sales has been taking place since March.

Overall, I think your numbers help to prove that house prices in Greater Victoria have not moved higher since March, as the Teranet, median and average seem to suggest.

Just Jack said...

How do you figure that the sales mix has any effect at all? I am comparing the sale price of every home to what it is assessed for.

What difference is it going to make if there are 5 sales under $400,000 and the rest above $700,000. And the following month there are 5 sales over $700,000 and the rest under $400,000.

The sales mix doesn't matter. In fact the sales mix likely has zero effect.

But if you can explain how that ratio is affected - go ahead and try. But I don't think you can.

info said...

@ Seth Perry

Your contributions to this blog are very informative.

Just Jack said...

Sure sales were weak during January and February. But it doesn't change the fact that during those months, the typical home was selling at 3 to 5 percent below its assessed value. And in June that median moved to where the typical home was now selling at 2 percent above its assessed value.

Just Jack said...

I went back and looked at what the typical home was that sold in January. That home in the core had 2,121 finished square feet and was located on a 7,174 square foot lot. And it sold at 95% of its 2012 assessed value.

In June, the typcial property had 2,172 finished square feet and was situated on a 7,575 square foot lot. And it sold at 102 percent of its 2012 assessed value.

Very minor change in the physical characteristics of the home. People hadn't changed their preference in what they were buying. The only thing that seem to change was that they were paying more relative to the home's assessed value.

koozdra said...

"I am reminded of what a colleague of mine once said. He had previously been with Canada Mortgage and Housing Corp. (CMHC) and was of the opinion that contrary to the stated goal of making home ownership more affordable or accessible, the actual outcome of CMHC’s policies only was to make housing more expensive. The continued liberalization of lending policy has taken the housing market to a point where price is a function of the amount of debt Canadians can take on."
...
"This excess money supply has floated the buyers’ market to extraordinary heights with very few real winners. Recent homebuyers may be able to afford their mortgage payments – providing interest rates remain low during the amortization term. But some amortization terms in the past decade have reached 40 years and it’s unreasonable to expect interest rates to remain low three to four decades down the road."

This guy gets it.

Canadians’ capacity for debt the key driver of housing prices

info said...

"But if you can explain how that ratio is affected - go ahead and try. But I don't think you can."

I think it can be explained.

Sales since March have been dominated by the move-up crowd within the core areas. In the second quarter of 2013, the household debt to income ratio in Canada increased dramatically among the boomers and most of that was due to real estate. I think that the vast majority of SFH sales in the core areas since March have been recently renovated/well maintained houses. In my opinion, entry level houses in the core areas are not generally as well maintained. The entry level crowd has had to deal with tighter lending requirements since the mortgage rule changes. It's likely that sales in the core were not dominated by the move-up crowd as much in January and February as they were from March until now.

Recently renovated/well maintainted homes generally sell higher in relation to the assessed value than do homes that are not as well maintained. The core has been dominated by boomers moving up, selling their recently renovated/well maintained homes and buying recently renovated/well maintained homes. This explains how the sales mix has pushed the price/assessment ratio higher in the core areas since March.

Seth Perry said...

@koozdra RE: Canadians’ capacity for debt the key driver of housing prices

The whole buying market was floated on an ever-increasing sea of money.

"Buyers were faced with a dilemma. If you entered the housing market during the past decade and in one of the growth cities you faced strong competition from other buyers, all of whom were supported by a growing mortgage money supply. The whole buying market was floated on an ever-increasing sea of money. More aggressive buyers supported by an ever-increasing ability to borrow would outbid a cautious buyer. No longer did price or the amount of a down payment matter – it became a place where the only factor was the level of debt borrowers could take on."

Families imprisoned by the double-income trap

"when lending rules were liberalized to take into account two incomes in a household it in effect imprisoned families to needing two incomes to afford a house. This did not help families, but rather increased the price of housing, with the outcome that young families are hard pressed not to farm out their children to daycare or grandparents. Single-income households need a really high single income or they face very limited housing options. As individuals, families and a society we’re not any better off, and the outcome only has been higher prices."


Upvoted. This man has figured it out.

info said...

The total (staggering) amount of mortgage insurance added each year through CMHC, Genworth, etc. since 2000 is the only reason that house prices in Canada are where they are today. Remove enough of that stimulus and the housing market in Canada crashes to depths that nobody could have predicted.

Per capita, the total amount of taxpayer backed mortgage insurance added each year since 2000 in Canada is much more than that added in the US over the same period of time. The US housing bubble reached its peak in 2006 and Canada's housing market was in a similar sized bubble that same year. Since then Canada's bubble has grown much bigger as a result of even more market interference through CMHC, Genworth, etc.., while the US housing market crashed.

There is absolutely nothing that points to Canada's correction/crash being anything less than what the US went through.

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

"The pace of growth has been spectacular: Canadians had $815-billion of mortgage debt with the chartered banks in January of 2012, $518.5-billion in January of 2011, and just $459-billion in January, 2010."

I suspect that this spectacular pace of growth in mortgage debt continued to increase through 2012 and through the first 8 months of 2013. No wonder the Canadian housing market hasn't started to correct/crash yet. The new mortgage rules have not done the job.

Does anyone know the total amount of taxpayer backed mortgage insurance added through CMHC, Genworth, etc. over the first 6 months of 2013? I suspect that this has not decreased when compared to the first half of 2012. Taxpayer backed housing market interference was supposed to be cut back starting last summer.

Unknown said...
This comment has been removed by the author.
Marko said...

Single-income households need a really high single income or they face very limited housing options. As individuals, families and a society we’re not any better off, and the outcome only has been higher prices.

You mean as a society in the bubble of North America?

What we consider "limited" housing options in North America are the norm or above the norm in the vast majority of the world.

Jack and Cate said...

Exactly...it's a pretty good price to get! You've been trolled!
_______________

.....meh

koozdra said...

12 signs you’re definitely still a renter

Renter and saver are oxymorons. If you want to "save" get in the game. Prices only go up, don't you know.

Leo S said...

>> How do you figure that the sales mix has any effect at all?

Very simple. One month 5 fixer uppers sell. Average sale price is far below assessment. Next month five nicer than average places or recently renod places sell. Now sale/assessment is very high.
Prices haven't budged but the ratio has changed.

I've seen this every year since I've watched the ratio. It goes up in the spring/summer and down in the fall/winter. Yes price movement will also affect the ratio but good luck factoring out the natural movement due to sales mix changes by season. The ready to move in places sell in the spring and the shitboxes linger until the fall or winter before they sell.

Just Jack said...

Now, I just have to figure out how to measure what you've said. I don't think I can plot condition or quality as it is so subjective. What's good to you maybe just above average to me. I know that there isn't any significant difference in house and lot size in what people buy between the periods. And I had assumed the same would be for condition.

I think maybe, I'll just look at re-sales and see if the change in the ratio consistently follows their price increase or decrease between the two time periods.

koozdra said...

GDP, consumer spending grew in 2nd quarter

Consumers opening their wallets have put the economy in the black. Business investment down. Does Canada's economy really need sustainable growth if we have available credit? nah.

info said...

Boomers have been very active property buyers in Canada in 2013, despite the fact that a recent study shows that Canadian baby boomers significantly short on retirement savings: BMO

Several Canadian banks have recently said that house prices in Canada will decline and stay down for a decade. Boomers have chosen to ignore the results of their studies and have decided to take on more mortgage debt immediately before retirement. I guess they think that house prices can only go higher. Apparently they were not paying attention when house prices in Vancouver, Calgary and Edmonton crashed in the 80s, or when Toronto house prices crashed in the 90s, or when the US housing market crashed recently, etc..

Here in Victoria boomers have been on a real estate buying spree which has resulted in a much higher than normal number of SFHs being bought and sold in the most expensive areas. This has caused the median, average and Teranet HPI to give the false impression that prices have been rising since spring in Greater Victoria.

info said...

"Consumers opening their wallets have put the economy in the black. Business investment down. Does Canada's economy really need sustainable growth if we have available credit? nah."

This has been the case in Canada, generally, since 2000 when lax lending standards were brought in to stimulate the weak Canadian economy. As a result, we now have a massive credit bubble and a massive real estate bubble in this country.

Canada's housing bubble will burst soon and millions of debt addicts will be forced to face the consequences of their actions. The housing market correction/crash will cause many Canadians financial hardship for many years.

patriotz said...

What we consider "limited" housing options in North America are the norm or above the norm in the vast majority of the world.

Rather odd to use "we" to refer to North America when housing prices in the US are 1/2 those of Canada, across the board.

CS said...

No wonder the Canadian housing market hasn't started to correct/crash yet. The new mortgage rules have not done the job.

Of course the new mortgage rules have not done the job. You think Flackety could get away with destroying Harper's chances in the upcoming election?

Unless the Feds seriously screw up, there will be no substantial correction before the election. But watch out afterwards.

patriotz said...

Cowichan RE bust

HT to "then it burst" at VCI.

Seth Perry said...

One of my home builder clients says over the past month sales have picked up substantially. He said it has been extremely slow over the past year. "Half of the guys (sub contractors / builders) I know have headed for greener pastures. Up north they can make 11 to 15 G a month".

This seems to tie in with the spike in real estate activity over the last two months. Perhaps it's those 90 day expiration dates on pre-approved mortgages coming up.

Jump in while the rates are still rock bottom!

On the other hand, I talked to two food vendors at the Saanich fair who said sales are 1/2 of their harvest from last year. "People are bringing their own food this year". Both seemed genuinely surprised and a little deflated.

I guess it's save $20 here and spend a half mil over there.

Hearsay? Yes, but sometimes those micro metrics tell a bigger story.

Renter said...

Speaking of the fair, we were out there on Sunday, and the lines for the rides were considerably shorter than the Sunday of last year.

dasmo said...

That's because the Greek fest was so busy! holy cow. Went to the pool at commonwealth place for a swim with the kid and there was almost no parking.

Seth Perry said...

Marko you made Reddit today...

http://www.reddit.com/r/VictoriaBC/comments/1lm8ra/seems_legit/

also, HHV, I noticed you just got recommended to the sidebar links, increase traffic in 3... 2... 1.

http://www.reddit.com/r/VictoriaBC/comments/1lm4dm/mod_overhauling_links_in_the_sidebar_and_need_the/

Renter said...

What is the story behind the "Not Haunted" house, Marko?

Marko said...

Hope everyone had a great labour day weekend. I finally managed to get a full day off!

Aug Aug
2013 2012
Net Unconditional Sales: 540 462
New Listings: 935 1,025
Active Listings: 4,593 5,034

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

Marko said...

What is the story behind the "Not Haunted" house, Marko?

No story whatsoever. It's on a busy corner and I wanted to draw some attention to it. Nice character home with a suite, "affordable" entry point.

Marko said...

Medians and averages to follow later today....

Mayfair Man said...

A couple of thoughts.

1: If a person were to buy a house for $500,000 and put $100,000 into it. If they then sell it for $550,000 that would show an increases in house price of $50,000. If people keep updating houses, house prices could keep going up as they are worth more.

2: I have read Garths blog before and some of his calculations don't add up. He uses an alternative rate of return of 7%(vs realestate). This is too high, if a person is planning on buying a house in the short term they should be keeping their money in savings/cashable term deposits, not invested in the stocks market looking for long term returns.

Marko said...

If they then sell it for $550,000 that would show an increases in house price of $50,000. If people keep updating houses, house prices could keep going up as they are worth more.

I sold a bungalow earlier this year on Saxe Point area for $460,000. In 1992 it went for $185,000; however, since 1992 it had a ton of work done to it including a fully finished basement.

The 1992 $185,000 bungalow would probably only have gone for $400,000 or so...

The average home in most areas has significantly more finished sq/ft than 15-20 years ago.

caveat emptor said...

He uses an alternative rate of return of 7%(vs realestate). This is too high...

Investing in 100% equities for the long term 7% is not an unreasonable target. But as a short term (<5 years) strategy for waiting for the housing market to decline it is a totally flawed number.

1) If Canadian housing crashes hard it is a stretch that the stock market would not fall at least somewhat.

2) Over holding periods shorter than 5 years historical data shows a small but significant possibility of losing money in the stock market - not exactly what you want with your down payment. It's only over periods of 10-20 years that stock market investments become nearly a sure thing

Jack and Cate said...

Aug Aug
2013 2012
Net Unconditional Sales: 540 462
New Listings: 935 1,025
Active Listings: 4,593 5,034

_____________________

Uh-oh - market on fire!! Better buy now before you're priced out forever, or rates rise, or you lose your job or .......

Jack and Cate said...

P.S. - looks like 1 sale per 3 realtors if they only sold one unit...bet their bill collectors are at the door.

koozdra said...

Regulator eyes tighter mortgage rules

OSFI noooooooooooooo!!!

Don't they understand we need credit growth to support the massive ponzi scheme?

Unknown said...
This comment has been removed by the author.
Marko said...

P.S. - looks like 1 sale per 3 realtors if they only sold one unit...bet their bill collectors are at the door.

There are two realtors involved in 90% plus of transactions; therefore, around 1,000 realtor transactions for the month and 1220 realtors.

Phil said...

It's only over periods of 10-20 years that stock market investments become nearly a sure thing

Unless you pick the wrong 15-20 years. As examples 1929-49 or 1966-82.
With real estate you can pick the wrong 60 years to be born a Trump wannabe 1890-1950, 1770-1830.

info said...

The number of sales is, as predicted, stronger than it should be due to uninformed buyers rushing to get a deal done before their cheapo 3% rate holds expire. The sales boosting effect of the (soon to be underwater) rate hold crowd will taper off before the end of September, then sales will tank.

caveat emptor said...

"Unless you pick the wrong 15-20 years."

That's why I said "nearly". No 100% sure things in the stock market.

I believe Garth's 7% was a nominal return not a real return like your chart. Also your chart just shows the price level of the index. Over the long term approximately 1/2 the stock market returns are from dividends paid.

Marko said...

The sales boosting effect of the (soon to be underwater) rate hold crowd will taper off before the end of September, then sales will tank.

The odds of sales for the period of September - Dec being lower than last year are very slim in my opinion.

info said...

"Don't they understand we need credit growth to support the massive ponzi scheme?"

Population adjusted, the Canadian housing market has received much more housing market stimulus through CMHC, Genworth, etc. (taxpayer backed mortgage insurance) than the US housing market since 2009, or 2000 for that matter.

This continued, extreme housing market stimulus is the only reason house prices in Canada are twice as high as they are in the US.

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

"The odds of sales for the period of September - Dec being lower than last year are very slim in my opinion."

As a realtor, Marko, please explain why there has been an increase in sales over the last 3 months and why stronger sales will continue through to the end of 2013.

In your explanation, please include important things such as: stagnating incomes, high vacancy rate, young people moving out of Victoria to find work in cities that actually have jobs, 3% mortgage rate holds expiring very soon, etc..

caveat emptor said...

....will taper off before the end of September, then sales will tank.

A testable prediction!

Let's wait and see

info said...

@ Marko

Last year's sales numbers were weak from September through December in comparison (average) to the same period of time in the years 2003-2011.

Sales for the rest of this year will be very weak in comparison to 2003-2011.

info said...

"will taper off before the end of September, then sales will tank."

"A testable prediction!

Let's wait and see"

All of my predictions are testable. I generally make predictions based on stats that the banks and realtors cannot fudge. Sometimes you have to do a little digging in order to determine whether or not my predictions are correct.

Seth Perry said...

Does anyone know where we are at in comparison to last years numbers? Are we doing better or still have some catching up to do?

Oh, and this...

Was Canada's Most Expensive House,
Now Down 66% In 7 Months

Phil said...

A boatload of wouldbe future buyers were baited forward by rate-holds. Mortgage brokers and realtors are great fishermen.
Should make for crickets by Thanksgiving -- “crickets“ meaning Oct, Nov, Dec sales will no doubt come in lower than 2012.

koozdra said...

We should have a poll!

caveat emptor said...

"will taper off before the end of September, then sales will tank."

"Sales for the rest of this year will be very weak in comparison to 2003-2011."

Seems like a bit of a contradiction. We don't really need to "tank" for sales volume to be weak in comparison to 2003-2011. We're kind of there already - VREB optimism notwithstanding.

caveat emptor said...

"Summer-time real estate sales numbers were the best they've been in Greater Victoria in five years. There was a total of 1,787 sales in June, July and August."

The usual optimistic take from VREB
http://www.vreb.org/mls_statistics/current_statistics.html

koozdra said...

Is the market like slow or something?

Over priced? no, no... The right buyer hasn't come along, yeah.. that's it.