| August 2013 | August 2012 | ||||
| Wk 1* | Wk 2 | Wk 3 | Wk 4 | ||
| Unconditional Sales | 181 |
462
| |||
| New Listings | 337 |
1025
| |||
| Active Listings | 4661 |
5034
| |||
| Sales to New Listings |
54%
|
45%
| |||
| Sales Projection | 568 | ||||
| Months of Inventory |
10.9
| ||||
*Week 1 being 7 weekdays
Strong start to the month with 16 sales/day compared to 13 last year, and fewer listings this year. Looks like the recent mortgage tweaks were necessary to beat down a resurgence in this market. Beginning of month predictor said 477 sales, but it seems the market is up for a late summer hurrah.
268 comments:
1 – 200 of 268 Newer› Newest»Sorry, jumping on the new thread.
Thanks everyone for the valid points. Agreed that idiosyncrasies such as renos and need of major renos will skew the price. With that said, I removed the 5% outliers from each group.
UNLESS there is a better barometer, the ASSESSED VALUE is what most people go as a benchmark for your average house. “Average” will mean different things to different people.
I am not trying to build a better mousetrap but looking for a simple way, albeit not perfect way to succinctly look at the breadth of the market.
Again my findings:
1/ 50%/50% Pending ratio of UNDER OVER Assessment
2/ 33%/50% Sales ratio of UNDER OVER Assessment
3/ the trend is that there is a 17% arithmetic addition in sales UNDER assessment
Going forward here are some observations:
1/ 2014 Assessments are going to be going down in the capital, how much no ones knows
2/ if you are desperate for a property, there are 31 pending reasons averaging 9.3% discount that says you can get them
3/ the real question is if you want to get in the market, which I do, is a 9.3% sufficient or should we wait and rent the 2500/month place in Gonzales?
Just food for thought, but in life: “if you don’t ask, you’ll never get” Thanks BTW for all the thoughtful answers to my question.
Marko,
Here is my data from PENDING SALES, numbers don't lie:
07/08/2013 Pend->$695K 323807 P SF Det 2833 Dufferin Ave OB Estevan $695,000 $952,000 ($257,000) -27.0%
03/08/2013 Pend->$700K 324915 P SF Det 2949 Sea Point Dr SE Ten Mile Point $700,000 $945,000 ($245,000) -25.9%
03/06/2013 Pend->$838K 322240 P SF Det 526 Beach Dr OB South Oak Bay $837,500 $1,004,000 ($166,500) -16.6%
31/07/2013 Pend->$765K 326645 P SF Det 112 Prince Edward Dr OB Gonzales $765,000 $902,600 ($137,600) -15.2%
18/04/2013 Pend->$1,150K 320863 P SF Det 3480 Upper Terrace Rd OB Uplands $1,150,000 $1,354,000 ($204,000) -15.1%
05/08/2013 Pend->$525K 326317 P SF Det 3918 Cadboro Bay Rd SE Cadboro Bay $525,000 $610,000 ($85,000) -13.9%
06/08/2013 Pend->$1,070K 321122 P SF Det 100 King George Terr OB Gonzales $1,070,000 $1,243,000 ($173,000) -13.9%
26/06/2013 Pend->$900K 320070 P SF Det 3275 Norfolk Rd OB Uplands $900,000 $1,035,000 ($135,000) -13.0%
24/07/2013 Pend->$550K 326168 P SF Det 3508 Henderson Rd OB Henderson $550,000 $620,000 ($70,000) -11.3%
17/05/2013 Pend->$649K 323491 P SF Det 170 Bushby St Vi Fairfield West $649,000 $731,000 ($82,000) -11.2%
25/07/2013 Pend->$2,030K 317578 P SF Det 3485 Upper Terrace Rd OB Uplands $2,030,000 $2,265,000 ($235,000) -10.4%
03/08/2013 Pend->$508K 326141 P SF Det 836 Monterey Ave OB South Oak Bay $507,500 $565,100 ($57,600) -10.2%
14/07/2013 Pend->$620K 324236 P SF Det 1050 Pentrelew Pl Vi Rockland $620,000 $690,000 ($70,000) -10.1%
02/08/2013 Pend->$750K 320068 P SF Det 1509 Regents Pl Vi Rockland $750,000 $834,000 ($84,000) -10.1%
31/07/2013 Pend->$645K 325142 P SF Det 3557 Kelsey Pl OB Henderson $645,000 $703,000 ($58,000) -8.3%
09/07/2013 Pend->$885K 324485 P SF Det 2766 Tudor Ave SE Ten Mile Point $885,000 $958,000 ($73,000) -7.6%
24/07/2013 Pend->$812K 322561 P SF Det 1151 St. David St OB South Oak Bay $811,500 $873,000 ($61,500) -7.0%
25/05/2013 Pend->$745K 318765 P SF Det 3560 Redwood Ave OB Henderson $745,000 $796,000 ($51,000) -6.4%
07/08/2013 Pend->$790K 326644 P SF Det 750 Richmond Ave Vi Rockland $790,000 $842,000 ($52,000) -6.2%
07/08/2013 Pend->$676K 326339 C SF Det 3601 Crestview Rd OB Uplands $675,888 $718,000 ($42,112) -5.9%
08/06/2013 Pend->$715K 324597 P SF Det 1225 Hampshire Rd OB South Oak Bay $715,000 $757,000 ($42,000) -5.5%
31/05/2013 Pend->$1,350K 319844 P SF Det 3275 Exeter Rd OB Uplands $1,350,000 $1,429,000 ($79,000) -5.5%
01/08/2013 Pend->$680K 323704 P SF Det 2680 Sea View Rd SE Ten Mile Point $680,000 $718,000 ($38,000) -5.3%
05/06/2013 Pend->$786K 322458 P SF Det 315 Masters Rd Vi Fairfield West $785,888 $817,000 ($31,112) -3.8%
17/07/2013 Pend->$775K 323732 P SF Det 1035 Oliver St OB South Oak Bay $775,000 $803,000 ($28,000) -3.5%
09/08/2013 Pend->$695K 325255 P SF Det 2476 Central Ave OB South Oak Bay $695,000 $717,000 ($22,000) -3.1%
30/07/2013 Pend->$1,050K 325425 P SF Det 2109 Windsor Rd OB South Oak Bay $1,050,000 $1,076,000 ($26,000) -2.4%
05/07/2013 Pend->$705K 323736 P SF Det 2237 Windsor Rd OB South Oak Bay $705,000 $713,000 ($8,000) -1.1%
23/07/2013 Pend->$570K 323471 P SF Det 4096 Dawnview Cres SE Arbutus $570,000 $576,000 ($6,000) -1.0%
07/08/2013 Pend->$1,390K 325497 P SF Det 3145 Ripon Rd OB Uplands $1,390,000 $1,402,000 ($12,000) -0.9%
The difficulty in what you want to do is that its too wide of a measurement. Starter homes and waterfront homes are different markets. Same as condos to detached homes. Its nice to have the broad picture of the marketplace - but its akin to looking at how the average price in Canada is changing and use that to compare to a small area like Oak Bay. It doesn't translate into anything that can be meaningful to base a buying decision on.
What you have to determine is what kind of property you want to track in this marketplace.
Then you would look at the median price of that style and size of home in that specific neighborhood over the last one, two or even three years. At least then you would know if you are buying above or below the typical price for that kind of property.
Then look at how many properties like the one you are interest in are for sale and how many have sold on average for the last 6 months and home many more were listed during the same period. That will give you the Months of Inventory and the Sales to New Listings rate. This will tell you if it is a bull or bear market for your property and if prices are increasing, stable or decreasing. And how long it generally takes to sell a property like the one your looking at.
At this time you can look at the Assessment to Sales Ratio to determine the low, high and average assesment relates to prices. Then relate that to your property's assessment.
Then you might look at the last sale of home that is similar in most aspect to the home you are interested in AND located on the same street. And adjust for the change in prices by looking at the different medians then and now.
And you might also look at the sales history of the property you're interested in buying. And relate that to the change in the median prices between the several time periods.
Bring all that information together represent the information as a price per finished square foot. Account for the effects of diminishing returns and estimate both a range of value depending on buyer and sellers motivation and the most probable selling price.
Easy Peasy Lemon Squeasy.
Or you can just hire a Real Estate Appraiser for two to three hundred bucks to do all this analysis along with presenting at least three recent economic indicators or comparable sales.
The appraiser will give you a written report and you can then determine how you want to make an offer.
And some of those pending sales are of relistings that were previously listed above the indicated original prices (for example 3485 Upper Terrace Rd OB Uplands, which I believe was first offered at around 18% above the sale-pending price).
So if it's the house you want but not at the price you think the place will be worth several years hence, why not offer 15-25% under the asking. True, if it is a relatively good deal in a popular market segment the offer is not likely to be accepted unless the vendor is a pessimist. But if it's in the Uplands, or it needs major renovation, or it's some quirky rural property, or some place with obvious defects or drawbacks, a low-ball offer should now have a real chance.
Here are my stats for last week and for the same week in previous years:
SFH in Vic,OB,Esq,SE&SW, min 3 beds and 2 baths and priced between $375K and $775K.
5-11 Aug 2013
Sold: 20
Avg selling price: $578K
Med selling price: $582K
6-12 Aug 2012
Sold: 20
Avg selling price: $583K
Med selling price: $593K
8-14 Aug 2011
Sold: 22
Avg selling price $529K
9-15 Aug 2010
Sold: 10
Avg selling price $551K
Last week 8 out of the 20 houses sold went for below BC Assessment and 8 had disclosed secondary suites.
Three homes sold within this criteria in the SE areas of Mount Doug, Gordon Head and Lambrick Park. They went for $500K, $565K and $775K.
The original asking price isn't going to help you. In the case of the Oak Bay property, both the agent and the home owner only have a general idea of the property's worth at the begining. They're testing the market to see how much activity they can get. A reduction or two in the asking price and then they should be in the 2 to 3 percent range to start getting offers.
Low ball offers at the beginning or when the home is originally listed are not likely to work. As both the agent and home owner have only just baited the hook. At the begining you toss back the little fish in the hope of getting a better one. At the end of the day, if you haven't gotten a nibble, you might keep the little fish.
That is what the Months of Inventory, Sales to New Listings ratio, and the Days on Market are going to tell you about that type of property. And if its late in the day with no bites then a low ball offer has the best chance of being netted.
That's happening in the outlying areas like Sooke, Shawnigan Lake and the Gulf Islands. But in the central core districts of Victoria, its just the start of the afternoon fishing. Vendors are still looking to reel in the big one.
An interesting article, google:
"with home boom in 9th inning"
Alexandrahere, you realize that if your using price as the parameters your searching for in a home. Then the average and median prices are always going to be about half way in between.
If you leave out price and use the homes square footage as your parameter like say non water view homes that are between 1500 to 2500 square feet you may get a more meaningful median and average price.
Thanks Jack. I am just putting those numbers out from my pcs for general info. When I buy property, of course I look for what I want, be it for myself to live in or for an investment. Location, price, size of lot/house, number of beds and baths, finishings, updates and general conditon are then all considered before I would make an offer.
Or you can just hire a Real Estate Appraiser for two to three hundred bucks to do all this analysis along with presenting at least three recent economic indicators or comparable sales.
And how can they contact you? :)
716 detached homes in the core districts for sale. And on average for the last 6 months we have been selling 177 detached homes every month. At the same time adding on average 310 each month.
4 Months of Inventory
0.57 Sales to New Listings ratio. And an average exposure of 46 Days on the Market. Based on the last 500 sales in the Victoria Core. The median price of a home is $575,000.. Which is slightly down from this time last year when the median was $587,500. The sale activity is down by 20 percent.
20 percent fewer homes are selling, yet prices have only drifted down by 3 percent. If you live in the core districts - you are certainly part of the "chosen people". In this world it rains less, the ice cream tastes better, your children are dressed in Gap and your spouse never farts in bed.
Leo S, what I would do is call those appraisers in the Yellow Pages and ask them questions about MOI, SNL medians etc.
If they have no idea - what the frig you are talking about - don't use them and call someone else.
Eventually, you will hit on the only appraiser in town that does. And I might add that he is damn good looking too. :>)
In Comparision the Western Communities are at the other end of the scale.
8.9 Months of Inventory
0.45 Sales to Listings Ratio
79 Days on Market
Volume unchanged from last year
And the median price is down 6 percent from last year to $437,500.
Where people think cement fibreboard grows on trees. And where the size of a man's truck is in proportion to the size of his plazma TV. Where Jim Carey and Pamela Anderson could easily be your neighbors. Which would just be weird.
Eventually, you will hit on the only appraiser in town that does. And I might add that he is damn good looking too. :>)
Ok who wants to volunteer to ferret out Just Jack's identity? :)
I'm not using this blog as a way to increase business. I prefer the anonymity because it allows me to be informal and more free thinking in what I write. And it has taught me how to explain concepts in unusual ways to people who are not involved in valuation as a day job. Sometimes expressed with humor - most times with out.
I have learnt more from others on this blog than any course(s) that I have ever taken.
That doesn't mean that I am right in what I say- it just means I'm still willing to learn from others be it Tsaur Somerville or Introvert. Because in my mind, both have equal validity.
Statistics Canada ti unveil the final wave of 2011 National Household Survey data on Wednesday.
"The report will be a linchpin in assessing immigration policy, income equity, economic stability, and the future of the housing market"
"senior economist with BMO Capital Markets, will be watching for changes in home ownership (he noted that a higher rate suggests less pent-up demand for housing, which in turn could cool the market) as well as the extent to which low borrowing rates have affected the proportion of vulnerable households (those with a debt-service ratio above 40 per cent)."
“If we find out there’s a sizable proportion of households using a good amount of their family income to service their mortgage and other housing-related costs, that would temper our views going forward — especially with interest rates likely to go up over the next two to three years,” said Guatieri. “Even a modest correction in the housing market can have a slowing effect on the economy.”
"CEO of the Canadian Association of Accredited Mortgage Professionals, said the NHS could also shed light on whether the nation is striking a balance between concern over near-record household debt and the economic importance of the housing sector, which was directly or indirectly responsible for 17 per cent of jobs between 2006 and 2011"
Postmedia (and all major media outlets) will have coverage of the NHS report upon its release Wednesday morning.
Again, sales are temporarily higher and that situation will likely remain until the end of September. The reason is that some uninformed buyers are unaware that buying a property at bubble prices and emergency level interest rates is always a bad idea. Many of these buyers are rushing to get a deal done before their 3 month rate holds expire.
It's a well established fact that Victoria's economy has taken a turn for the worse since the beginning of 2013. Indeed Victoria's economy is the weekest among all major Canadian cities. There seems to be no fundamental reason for higher sales other than the reason I suggested.
It's interesting to note that, despite June 2013 sales numbers increasing, the Teranet index showed that prices remained virtually flat compared to May. The old law of supply and demand always affects housing prices and Victoria remains firmly entrenched in a buyers market, which suggests that the established trend of lower prices will continue.
I think what amazes me most about this market is how stable it is.
Even condominiums in the core districts. The volume of sales almost identical to this same time period last year. And so is the price of the condominium, still around $275,000. MOI 6.6 and SNL of 0.48
The people buying today are die hard pro real estate. There's not many of them - but there are enough to keep prices stable.
For me, this kind of market is utter boredom. On average for the last six months there have been 110 condominiums bought each month.
The volume of sales is in the toilet but no one is flushing. How we can sustain this many builders, painters, landscapers, real estate agents, bankers and appraisers on this small volume is incredible.
And nothing seems to be panicking sellers either. These stable to slightly decreasing prices mean that Vendors just have to wait a little longer to get an accepted offer.
We haven't reached that tipping point yet. Until real fear hits the minds and hearts of the house horny (banks included) I don't think we will see any significant change. Why would it? We still have easy access to cheap credit and an overwhelming sense of security and privilege when it comes to buying a home. It doesn't take much to convince someone to buy a home once you tell them that the bank says 'yes'! Even if it's 5 or 7 times annual income earned for a half million dollar home. After all they are just numbers.
I don't think we will see tighter lending rules until banks start fearing a loss in profits, when the risks outweigh the benefits. The financially inept will continue to buy and fuel the market until they become tapped out. If they do get credit, they will see the foreclosures and price reductions as motivators to buy.
The current standoff between buyer and seller is helping stabilize the market. Stubborn home owners who see a $600K assessment believe that's what their house is worth (and why not). Even the stubborn buyers are happy with a small price reduction, not knowing that they will get a whole lot more if they were to wait.
70% of us own. Some highly leveraged, many with the bulk of their personal wealth in their RE. Talk about a stressful situation. I doesn't matter if you are just starting out or looking towards retirement, when most of all your personal wealth (or debt) is in RE your belief in the success of RE has to be unwavering. At the very most you might consider a 'soft landing'.
Even some fear (which is what we are seeing now with all the recent media bubble talk) is not convincing enough to water down home ownership urges. It's going to be the fear that comes when it's already too late - that "Wile E. Coyote moment".
As for those home owners who are in over their head, they are going to continue to pay their bills for as long as they can by moving their money around and borrow from here to pay there. Selling is the last thing they would do. That would mean they loose everything.
I think it's going to be a slow grind down to the bottom unless something with enough force can tip today's home buyer in favour of logic vs emotion.
I CONCURR with Seth. Accurate assessment. .slow grind to the bottom barring an economic shock bringing us back to reality.....but then again reality is subjective and influenced by the observer...sooooo
"I think it's going to be a slow grind down to the bottom unless something with enough force can tip today's home buyer in favour of logic vs emotion."
The economic shock will be the slowing of the housing market. Slowing will mean joblessness which will create a ripple effect through the economy.
The second last paragraph of that article says it all...
"But we’re also concerned about maintaining the economic contribution of housing. Because in the Canadian economy, if you slow housing down, there’s really nothing else domestically that can take its place."
The reason is that some uninformed buyers are unaware that buying a property at bubble prices and emergency level interest rates is always a bad idea.
I guess uninformed buyers have been buying for the last 6 years at bubble prices?
It's a well established fact that Victoria's economy has taken a turn for the worse since the beginning of 2013.
Right....things are spiralling out of control for the worse. Hard to listen to my neighbour electrician telling me how he is pulling in 100k at the dockyard this year. How will he feed his family?
UNLESS there is a better barometer, the ASSESSED VALUE is what most people go as a benchmark for your average house. “Average” will mean different things to different people.
Actually there is a much better barometer. Get a PCS account, go to a ton of open houses, when you are serious about buying view a number of properties and determine market value from there.
Getting fixated on the assessment is a sure way of getting burned.
Marko,
Here is my data from PENDING SALES, numbers don't lie:
Your interpretation of the numbers is incorrect. You are advising buyers to offer 9.3% below asking price in the previous thread because based on your sample size of 31 homes are selling 9.3% below assessment value. This would only be a logical argument if every property was listed exactly at assessment which is not the case.
Some highly leveraged, many with the bulk of their personal wealth in their RE. Talk about a stressful situation. I doesn't matter if you are just starting out or looking towards retirement, when most of all your personal wealth (or debt) is in RE your belief in the success of RE has to be unwavering. At the very most you might consider a 'soft landing'.
Because having your personal wealth in gold or a mutual fund is the better/safer way to go?
I lose sleep every night over my cash positive rental....I don't think so.
Statistics Canada delays major survey release after uncovering mistake
"OTTAWA – In a highly unusual move, Statistics Canada has delayed the release of a major set of data from the 2011 National Household Survey by a month."
"Data on Canadian income, earnings, housing and shelter costs were to be released Wednesday morning, but instead will now be unveiled by the federal statistical agency on Sept. 11."
ಠ_ಠ
I guess we won't be watching the coverage this Wednesday at the CBC Studio Shark Club. I was going to bring my Special Edition Real Estate Trivia set of OakBay and Fairfield too.
"I guess uninformed buyers have been buying for the last 6 years at bubble prices?"
Now you see the magnitude of the problem.
Because having your personal wealth in gold or a mutual fund is the better/safer way to go?
No one in his right mind would put the majority of his personal wealth into gold, but MANY Canadians 'invest' the majority of their wealth in their RE. So my point is very valid, yours sounds knee-jerk defensive.
I lose sleep every night over my cash positive rental....I don't think so.
Slow... Hand... Clap...
I said "highly leveraged" or "looking forward to retirement", perhaps seeking to cash in their chips or those with borrowed chips. Baby Boomers or perhaps first time property virgins making an average household income of 70K and buying up 550K of overvalued real estate in a sluggish economy.
The point I was trying to make is that if one has so much invested his belief in the success of RE is going to be unwavering. One will want to believe everything is going to be okay and therefore it becomes the truth in many people's mind, regardless of facts.
I highly doubt you would brush off a 20% - 25% drop in your RE purchase. Your response proves my point. You will defend what you believe to be true because you have a large stake to protect.
$100 "cash positive" per month
-$2000 'equity draining' per month
4 'busy' realtor posts in a row, priceless.
Just having some fun. You're still my favorite realtor ;)
"I guess uninformed buyers have been buying for the last 6 years at bubble prices?"
I would say that uninformed buyers have indeed been continuing to buy at bubble prices as interest rates have been essentially halved in that time (5.75% to < 3.00%) in order to allow them to do so, no?
Going where the jobs are
This interactive graph shows you which provinces and cities have been the biggest winners and the biggest losers in this provincial exchange of people.
Victoria had a net gain of 6,115 between 2006 and 2011.
Large numbers of migrants have left eastern provinces like Quebec to look for jobs in British Columbia and Alberta
... and now we buy poutine from them out of their food trucks.
Since 2011 there is only one winner in the provincial exchange. BC is now amongst the biggest losers of people.
http://www.statcan.gc.ca/pub/91-215-x/2012000/ct004-eng.htm
As far as jobs, Victoria lost 600 jobs last month. Peak tourism month too.
BC is now amongst the biggest losers of people.
Considering interprovincial migration only. If you add in international immigration and natural growth BC has fairly middle of the pack pop. growth.
"UNLESS there is a better barometer, the ASSESSED VALUE is what most people go as a benchmark for your average house."
The only thing that the assessment will tell you for sure is how much tax you will be paying relative to your neighbours. Other than that it is a fairly useless house-hunting metric.
Assuming you are getting a "deal" because you are buying at a "discount" to the assessment is dangerous.
The only time I would give significant weight to the assessed value is if it was wildly different (higher or lower) than asking price. Then I'd try to figure out why.
"Getting fixated on the assessment is a sure way of getting burned. "
______
Marko every realtor we have ever dealt with has used the "assessed" value as a bench mark. To the up the value or say look it's under assessed. Are you saying you never have used the assessed value in your sales pitches, ever?
"..BC has fairly middle of the pack pop. Growth."
If you exclude Atlantic Canada, Statistics Canada shows BC last in net population growth Jan 1/12 to Jan 1/13.
At present growth rates, Alberta will be bigger than BC in 8 years time.
Assessed values can be off of market value by $50 000 or more in either direction. Assessed values are someone's best guess at a point in time in the past - by someone who has not viewed the inside of the home and many times not the outside either.
If you really want to know what good value in the current market is you have to do the work imo. As suggested, follow sales prices and attend showings and you will figure it out pretty quickly for a specific area.
"If you exclude Atlantic Canada ..."
If you exclude the last 4 then we are last. If you exclude the first 5 the we are first. In other words middle of the road.
At present growth rates, Alberta will be bigger than BC in 8 years time.
Extrapolating one year's rates into the future is dicey. That said if the energy industry stays strong I believe Alberta will eventually surpass BC in population. Which is just fine with me! I lived in Alberta for 10 years and saw that along with the prosperity there are a lot of problems with rapid growth.
While it is true that our current economic model doesn't seem to work very well with static or declining populations it is also true that population is not a race. Most of the countries that we would recognize as good places to live have growth rates from zero to 1%. Very few desirable countries growing above 1.5% per annum.
100% true that uninformed buyers have bought into a bubble for the past 10 years. We're manipulated through greed to follow the scent of money. It's a bubble of our own making intentionally stimulated by cheap money. The biggest group of victims of such a Ponzi scheme are the last one's to buy in which in the RE bubble are young people who are totally ignorant about asset bubbles and truly uninformed. Most boomers have equity so a 20% decline will not mean bankruptcy but young people will be paying a mortgage for most of their lives as their house value erodes.
Two days ago the very top of /r/canada on reddit featured a link to this article:
Canadians appear to be 'drunk on housing' and approaching a hangover
It was the hottest topic of the day (360 up votes). I found some of the comments very interesting (there are about 400 of them). Perhaps a good cross section of popular thoughts as each comment has its own up vote and down vote.
You can read them for yourself here.
Thanks for the link Seth, nice to get another set of perspectives on everything.
These are getting easier and easier to find. Not a bad deal actually.
$400,000 (assessed: $366,000)
"..great investment or holding property.."
OR
$1600 + Utilities
With a $50,000 down payment your mortgage payments alone would be over two grand.
"Let just rent it for a year and see where the market is then, maybe it'll pick again"
^ Includes a private air show every 8 minutes.
Housing bubbles in Canada and the US started to form in the year 2000. That's when lax lending standards were brought in that began to push housing prices into bubble territory.
In the year 2000, housing prices in Victoria and Austin, TX were almost equal, with the average house in Victoria being about 25% more expensive than in Austin.
Housing prices in Texas didn't increase into bubble territory due to state policy, however, housing prices in that state did increase more than average until 2006 and then reverted back to the long term mean. If there is a state where housing prices are supported by fundamentals, it would have to be Texas.
Where would housing prices in Victoria be if there had been no housing bubble in Canada? I think they would be at about the same level as housing prices in Austin, TX.
To show how ridiculously detached from fundamentals housing prices in Victoria have become since the formation of the bubble, consider the following comparison:
For $850 K, you can buy this (1941) 1400 sq. ft. house in Victoria.
or
For about $810 K (40 K less than the cost of the Victoria house), you can buy the following 5 houses in Austin, TX.:
7021 Thistle Hill Wy (2001), 2500 sq. ft., value: $170 K.
and
8717 Alum Rock Dr. (2007), 1909 sq. ft., value: $170 K.
and
1212 Bradbury Ln (1999), 2756 sq. ft., value: $172 K.
and
5404 Apple Orchard Ln (2007), 2199 sq. ft., value: $155 K.
and
12309 Paloma Blanca Way (2009), 2088 sq. ft., value: $143 K.
Yippee, we're ahead of the newfies : )
An even more scandalous province comparison than our low pop growth is how Alberta has overtaken BC as the place for seniors to retire. Many disbelieve that Alberta is attracting and retaining more seniors than BC. Introverts blood pressure just doubled...
It makes sense once you consider where their kids and grandkids are, and of course retirement costs. Why not? Fishing in summer with the grandkids, soaking up the Arizona sun in winter... and most importantly, having money left over.
Economic outlook, analysis and forecasts | Focus on house prices
House prices differ widely across OECD countries, both with respect to recent changes and to valuation levels. The change in the real price compared to a year earlier is used to tell whether prices are rising or falling. For valuation, if the price-to-rent ratio (a measure of the profitability of owning a house) and the price-to-income ratio (a measure of affordability) are above their long-term averages, house prices are said to be overvalued, and vice-versa.
CHART LINK
Source
Source
@info
Housing bubbles in Canada and the US started to form in the year 2000.
I would argue that in Victoria, the market really started heating up in 2003 - not 2000. Although average assessment values grew approximately 10% between 2001 and 2002, mortgage payments reduced even further as interest rates took a nose dive from close to 6% to 2.5%:
http://www.bankofcanada.ca/wp-content/uploads/2010/09/selected_historical_page1_2_3.pdf
Interesting theory.
I'm not saying I agree, I'm simply posting for discussion. (the following has been copied and pasted from the authors blog - ref. link below)
1) Regional and National MLS system operators present data (for the July 2013 period) in misleading and misrepresentative ways that eluded to the market as being stable or increasing, instead of the actual slow down a statistically relative review of the data showed. (see authors post on August 1st., 2013 for the review).
2) The Government makes decisions relying on data that they should have been told is not reliable for year over year comparisons resulting in the limits to the amount of funding available to individual banks was being enforced by CHMC
3) Government issues unneeded CHMC changes. (August 7th 2013).
4) Market outlook goes from a Slow Down to a Full Correction in the coming months.
www.rosskay.com
@DavidL
2000 or 2003 doesn't matter as the same can be said about the US. Insignificant.
The mortgage changes, as I understand them, weren't because of a rebound in numbers rather the fact that they've already securatized sixty something billion of the allotted 85 billion for the year.
but MANY Canadians 'invest' the majority of their wealth in their RE
It's a lot worse than that, most buyers have much more than their personal wealth in RE because of leverage.
It makes sense once you consider where their kids and grandkids are, and of course retirement costs. Why not? Fishing in summer with the grandkids, soaking up the Arizona sun in winter... and most importantly, having money left over.
Bingo. As amazing as it may seem to Introvert, his mom coming to Victoria likely has more to do with his lovable self than the weather.
How do we know that Introvert is a man?
I have always read Introvert's posts in the voice of Pat (SNL), never really knowing the sex, but slightly leaning towards a women. Perhaps it's because of Introvert's flair for grammar and proper sentence structure.
Am I alone on this one?
@StalJ
the graph you link to is about "seniors" not "retirees". Since 12% of seniors (65 and over) in Canada work, part of the senior migration to Alberta is probably about jobs. Inarguably there is no better place in Canada than Alberta for a senior lacking pension or savings to find decent employment to make ends meet.
The other part of the explanation is most likely as you've described it. Although I question the supposed low cost of living in Alberta. Purchase of housing is glaringly cheaper there than BC but other that that I'd say BC and Alberta are not that different (cheaper for some things more expensive for others)
Rich Albertans do actually occasionally move to BC despite it being a socialist hell hole just for its great climate and recreation opportunities. Think Gwyn Morgan ex CEO Encana.
I am not aware that rich British Columbians move to Alberta solely to enjoy the great amenities (vs living close to their hardworking kids/grandkids).
Bring on the anecdotes to show that I am wrong!
I have always read Introvert's posts in the voice of Pat (SNL), never really knowing the sex, but slightly leaning towards a women. Perhaps it's because of Introvert's flair for grammar and proper sentence structure.
I'm not as nerdy-looking as my grammar pedantry might suggest.
"Purchase of housing is glaringly cheaper there than BC but other that that I'd say BC and Alberta are not that different "
Some of the other cheaper things include no provincial sales tax, cheaper gasoline (~30cents/liter), no health care premiums. Those three alone add up. I would agree with your other point although I think you would be surprised to know some wealthier British Columbians move to Alberta to save on income tax. Alberta has a flat tax of 10% of income, while BC & other provinces are progressive (repressive)...if you are a high earner in BC you pay way more, closer to 20%. I have a rich uncle&anty who moved to Calgary...only partly for money, part arthritis. With Alberta oil royalties there has been talk lately of eliminating income tax completely or they could just keep mailing out the odd royalty cheque. My uncle calls them Ralph bucks.
I think the clean up from the flood might put a stick in the spokes of that plan....
Things I found to be more expensive in Alberta: transportation (yes gas is cheaper, but you end up driving further, the salt and potholes kill your car, transit sucks and year round biking is only for the very hardy few), most utilities, food (very slightly), car insurance (though this varies).
General retail purchases are more expensive here by the 7% PST.
In terms of income tax rates in very general terms BC is better if you make under 100K/year and Alberta is better if you make more. BC is the best place in Canada (tax-wise) to live on a modest dividend income. If you have a massive dividend income then Alberta is better. Marginal tax rates.
In my opinion,
Renters in the Victoria Core districts appear to be more interested in the improvements than location. The reverse might be said for buyers. That may be one reason why our price/rent ratio seems so abnormally high.
It leads me to believe that today's Victoria Core buyers are more interested in appreciation than rental income. This makes most of them unwittingly speculators and not investors.
And that has a chance destabilize the Victoria Core market as investors buy for the long term while speculators being more skittish are quick to sell. That has a potential of turning this demand-driven downturn into a supply-driven rout.
And that has a chance to destabilize ...
-I hate this pissy little screen I have to type in!
Alberta would be foolhardy to get rid of income tax. They have a HUGE decades long infrastructure deficit (ie: have not been maintaining infrastructure such as roads, bridges, hospitals, schools, etc) from even before the floods. And of course the floods have added to it. Lougheed had higher taxes, higher royalties AND managed to put money into the Alberta Heritage Fund, but all the premiers since have been pissing it all away, both by spending the heritage fund (but not on infrastructure), decreasing oil& gas royalties, and lowering taxes.
You can thank Klein for the slashing of spending on infrastructure and the lowering of taxes and royalties. You can thank the latter govt's for sucking up the Heritage fund while running deficits.
>Interesting read
My family became much wealthier moving from Alberta in more ways than money....
Teranet numbers for July are out here. Victoria is up 2.58% month over month, the overall index is up 0.74% month over month.
In light of Victoria's increasing vacancy and unemployment rates, a 2.58 percent increase is a massive amount for prices to rise in just one month.
With the lower volume of quality re-sales to draw upon for their market estimate, I think just the margin of error in their estimate is likely more than 3 percent. Victoria doesn't have the volume of re-sales to make an accurate estimate.
I wish they would say the number of sales that they used and gave the margin of error in their estimates.
JJ, I agree, more data from them would be useful.
Looking at the Toronto numbers is also scary. The slope of that line is mind-boggling. Another 1.33% m/m.
>> I wish they would say the number of sales that they used
They do. Download the data.
Oh yeah, I forgot that was the one other thing they published. Significantly more pairs for the new July stats than any other month in the past 12, interesting.
Up or down a percent or two in teranet is probably noise.
The last 3 months of Teranet is down by 7.5 % from the highest 3 month average. 6.5% down if you compare the highest month to the current month.
Results from the Teranet HPI (bankers) and the MLS HPI (realtors) are almost exactly the same each and every month for all Canadian cities surveyed by both groups.
Consider the sources. Both realtors and bankers have a vested interest in higher housing prices. I don't think either source can be trusted to publish unbiased results.
As I've said, Canada needs a completely indepenedent source to do this type of survey. In the US, the Case-Shiller HPI is completely independent of both bankers and realtors. I think their results can be trusted.
The Teranet HPI is still useful. Obviously house prices in Victoria are declining, however, I think that house prices in Victoria are down more than what the Teranet HPI bankers (and MLS realtors) claim they are.
Info, if you claim that the HPI is biased, it would be great if you could read through their methodology here and tell me where they've introduced their bias. I tend to think that a body that's that open about what they do would be called out fairly quickly if their methodology did indeed have a slant to it.
"Info, if you claim that the HPI is biased, it would be great if you could read through their methodology here and tell me where they've introduced their bias. I tend to think that a body that's that open about what they do would be called out fairly quickly if their methodology did indeed have a slant to it."
Being a math major, I can tell you that there are a thousand ways that their calculations can be manipulated to spit out higher numbers each month. It certainly isn't rocket science, at all.
"There are three kinds of lies: lies, damned lies, and statistics." -Benjamin Disraeli
Flaherty is probably fuming right now. The Canadian housing market can not be controlled. Put too little restrictions and it will continue to grow with a "get in now while you still can" attitude. Put too much restrictions on and well...
Info, I'm not saying it can't be manipulated, I'm saying given that they publish their methodology in what looks to me (a math minor) to be a decent amount of detail, I doubt that it is. And if it is, I think it would have been found by now. You're claiming they have a bias, I'm simply asking you to defend your claim with something more than "They're backed by a bank, therefore they have a reason to be biased, therefore I believe their results are biased."
"In light of Victoria's increasing vacancy and unemployment rates, a 2.58 percent increase is a massive amount for prices to rise in just one month."
Absolutely.
Just Jack always has a good read on housing prices in Victoria and their month to month changes.
It would be intersting to see the average amount above/below assessment for all July sales (or at least a sample). The same could be done for June, May, etc. It would be interesting to compare the results with the those of the Teranet HPI.
Are assessments done in July? If so, July's results would be the most valid and valuable, however, results for May and June, etc. would also be valuable for comparison purposes.
A comparison to the peak could also be done in this manner.
"I'm simply asking you to defend your claim"
I've already said that there are probably a thousand ways to manipulate the methodology. I don't have their raw data. Even if I did, pinpointing where they manipulted the data would be extremely difficult to do.
"Flaherty is probably fuming right now. The Canadian housing market can not be controlled. Put too little restrictions and it will continue to grow with a "get in now while you still can" attitude. Put too much restrictions on and well..."
The question is: was the total amount of mortgage insurance issued (through CMHC, Genworth, etc.) for January through July of 2013 more or less than the total mortgage insurance issued for January through July of 2012?
If the 2013 total was more, then that explains why prices have not fallen across Canada since the new rules were brought in last summer.
Considering the fact that the household debt to income ratio has continued to increase since last summer, I doubt that the CMHC was throttled back enough.
Thanks to info I now understand how to interpret the HPI. Months when it goes down it should be believed. Months when it goes up it should be dismissed as biased.
I would say that MLS and Teranet statistics (largely) agreeing is evidence that they are both reflective of the underlying reality. To others more conspiracy minded it is evidence that the banksters and realtors are colluding to deceive the public.
My own take is that the teranet is an honest but imperfect attempt to track house prices. It may have systematic biases in it, but probably not a stats geek fudging the results every month. Certainly the concept of a re-sale index is superior to just tracking sale price averages or medians which as info and many others have pointed out is subject to biases due to changes in the sales mix.
In any case 2.6% m-o-m increase shouldn't get the bears gnashing their teeth just yet. Unless there is some follow through it could just be random noise. With the relatively small sample size I would expect some month to month variation even if house prices were perfectly static.
Ask and you shall receive.
In June the median Sales to Assessment Ratio for single family homes in the Victoria Core was 101.3%
In July that ratio dropped to 100.3%
And that makes more sense to me, that prices for homes in the core slipped by less than 1 percent. There just isn't any supporting economic reason for prices to have increased by 2.6%.
Thanks Info for the tip on comparing the Sales to Assessment Ratios for different periods. I have to sit down with a bottle of Scotch and try to figure out why it seems to work so well. Given that the sample sizes were so small. About 200 units in each search.
Interestingly, condo prices relative to their assessed values remained unchanged in the core districts from June to July. With the typical condominium selling 4.6% below its assessed value.
Calculations based on property resales (such as the Teranet HPI) are potentially flawed in that they do not include possible renovations and upgrades. Just a few years ago, a flipper might buy for $450K and sell for $600K - indicating a 30% increase. Only if a home has modest maintenance (no improvements or renovations) does the resale values then indicate the market trend.
As we've all discussed, the more properties included in analysis - the more accurate the result. This is why I like Just Jack's approach of looking at the past 500 sales (including new, old, renovated and ready to be demolished). To view the trend, just calculate the cost per square foot. Unfortunately, I don't have this data ...
These guys just link directly to their realtor.ca ad..
$1800 / 4br - 2150ft² - 4bed, 2.5bath house with ocean & mountain views for rent (Sooke)
13288939
I guess it's getting expensive keeping the house vacant and sitting there with no buyers.
These kinds of deals aren't that great for the landlords looking for a dollar per square foot.
It must be very difficult for young Canadians (recent university grads, early 20s, etc.) when they have to live with the extremely weak Canadian economy and extreme bubble house prices.
Put yourself in their shoes. Consider a young Victoria couple and a young Austin, TX couple. Austin is locataed in oil-rich Texas and has jobs. Victoria's economy is very weak and jobs are difficult to find. Houses in Austin can be had for merely a fraction of what they sell for in Victoria.
From yesterday:
For $850 K, you can buy this (1941) 1400 sq. ft. house in Victoria.
or
For about $810 K (40 K less than the cost of the Victoria house), you can buy the following 5 houses in Austin, TX.:
7021 Thistle Hill Wy (2001), 2500 sq. ft., value: $170 K.
and
8717 Alum Rock Dr. (2007), 1909 sq. ft., value: $170 K.
and
1212 Bradbury Ln (1999), 2756 sq. ft., value: $172 K.
and
5404 Apple Orchard Ln (2007), 2199 sq. ft., value: $155 K.
and
12309 Paloma Blanca Way (2009), 2088 sq. ft., value: $143 K.
In 2000, house prices in Austin and Victoria were nearly the same. Texas experienced a much smaller increase in housing prices due to state policy, while Victoria experienced a historic, debt-fueled bubble price run-up and prices remain near the peak to this day.
I'll argue that the total amount of mortgage insurance issued yearly in Canada (through CMHC and private insurers) is what is keeping the bubble inflated more so than emergency interest rates. If this wasn't true, then housing prices in Austin would probably be higher than house prices in Victoria.
Young Canadians are being forced to take on extreme debt in order to finance housing purchases mostly because of the use of mortgage insurance to keep Canadian housing prices in bubble territory.
Back in April it was possible to get a 5-year fixed rate for 2.79% By July the 5-year fixed rate was closer to 3.49%. All those pre-approved buyers wanted to buy before their 90-day rate fixes expired. A number of analysts are suggesting the current momentum will "pull down" sales from this fall. Time will tell ...
@koozdra
These guys just link directly to their realtor.ca ad..
It's rather ironic that the rental ad states "looking for a long-term lease" while the house is up for sale.
Does anyone know what the obligations a new owner might have to an existing renter when buying a house?
And yet you make me think again - which means another trip to the liquor store.
Last July, 2012 - 146 homes were purchased in the Victoria Core. This July there was 185 sales. A 27 percent increase.
Condo sales only increased from 109 to 118 over the same time period.
I'm guessing the rate guarantee did have the effect of pulling demand forward. That definetly could lead to a sharp decrease in sales activity this fall.
@Just Jack
And yet you make me think again - which means another trip to the liquor store.
Ha, ha ... wasn't there talk on HHV last spring about some "regulars" meeting in person at a pub sometime?
Time to revisit my interest rate predictions from January 7th, 2013:
Interest rates:
Variable - up 0.1% on Sept 4th and another 0.15% (to 0.25%) on October 23rd to offset growing inflation.
Fixed - up 0.25% to 0.50% in mid to late 2013 due to investor exit from bonds to stocks (bond yields must go up).
It looks like the fixed rate has already matched my prediction ... let's see what happens with variable rates over the next few months.
By July the 5-year fixed rate was closer to 3.49%.
So far still available in the 3.35 range, though that too could be a thing of the past if 5 year yields start creeping up.
Variable rate mortgages are starting to look appealing again. There seems very little chance that the Fed or the BoC will raise their target rate anytime soon. If variable rates stay low for a couple of years you will save money over a more expensive fixed even if the variable increases in the back half of the term. Obviously if the variable really spikes upward you pay more.
Not much sign of building inflation
^"start creeping up" would actually be "keep creeping up"
Inflation is under control, the cpi is just fine they say.
House prices double in 10 years. Gas sees 50% increase. Oh well, lets just strip out the volatile things no one buys anyway. At least wages have gone up significantly to compensate. Wait.. that's not where the wealth is coming from.
Canadian real estate, the story of paper gains and paper losses.
It's a good thing that prudent Canadians took this time of low rates to pay down their mortgages and not move up or buy up all the rental housing they can. Not like those stupid Americans.
It's hard to get a 5-year fixed rate much lower than 3.39% without restrictions.
Rather that domestic events, I expect financial pressures from south of our border will put pressure on the BOC overnight rate (and thus variable rates mortgages).
I agree with you about variable rates becoming more attractive again, particularly as favourable discounts (0.25% to 0.60% below prime) are now being offered again. A year ago, the fixed rates were more attractive. [I've enjoyed "savings" of 0.60% to 0.80% below prime for the past 11 years.]
@koozdra
Core CPI: The CPI excluding eight of the most volatile components (fruit, vegetables, gasoline, fuel oil, natural gas, mortgage interest, inter-city transportation and tobacco products) as well as the effect of changes in indirect taxes on the remaining components.
Instead, check out the Everyday Price Index:
https://www.aier.org/epi-methodology
https://www.aier.org/article/8175-energy-boosts-everyday-prices
@DavidL
It seems that EPI is only for America.
@koozdra
Yes, but the official CPI in the US and Canada are very similar (with similar exclusions). The EPI is very similar between our two countries - after all; the two most volatile items (food and fuel) are purchased on a global market.
My parents just got back from a trip to the US. They filled up their tank for thirty some dollars. When they got back up here it cost them 63 dollars to fill up.
Have you been to stores in the states? The price of food in Canada is much higher.
How are these things bought on a global market but they cost so much more up here?
I think our epi would be really crazy.
In June the median Sales to Assessment Ratio for single family homes in the Victoria Core was 101.3%
In July that ratio dropped to 100.3%
That doesn't mean prices dropped, it just means a mix of crappier houses sold. This usually happens as we move into the fall. The good stuff got bought in te spring, and the stuff that needs work and has been lingering sells for under assessment
How are these things bought on a global market but they cost so much more up here?
The primary reason for cheaper fuel in the US is due to lower taxes. A recent study showed that wholesale gasoline costs in Surrey, BC versus Blaine, WA are virtually identical. Interestingly, electricity costs quite a bit more (15¢ to 25¢ per KWH) in most US jurisdictions. This is because hydroelectric generation is considerably cheaper than using natural gas of coal.
As for food: meat, eggs and dairy are a lot cheaper in the US - the result of no marketing boards (as in BC) and more generous agricultural subsidies (the worst being subsidies for corn-based ethanol).
The cost of labour is lower in the US. Not surprising when there are millions of illegal immigrants working "under the table". While visiting a cousin in Portland last March, I toured their new high-end custom built house. They paid about 70% of what it would cost to build here (not including the cost of the property). Did I mention that there is also greater poverty in the US?
Here's a rather sobering video:
http://www.youtube.com/watch?v=QPKKQnijnsM&feature=youtube_gdata_player
Globe and Mail: Is that house really affordable? A reality check for first-time buyers
Have we finally passed the "foreseeable future" during which rates were staying low?
Uptrending Rates Aren’t Time to Gamble
Have we finally passed the "foreseeable future" during which rates were staying low?
When I've talked about "rates" staying low I've nearly always been referring to the BoC overnight/Fed funds rate which is the only number that governments/central banks directly control. There is still no sign of those being moved anytime soon and both the Fed and the BoC have consistently overestimated the strength of the recovery and hence underestimated the length of time that low interest rates will be in place.
The recent furor from the Fed was basically them saying that "sometime" they might stop open market bond purchases. That's what has caused the spike in bond yields. Nowhere did the Fed indicate that they are any closer to an interest rate hike.
BoC is unlikely to move in advance of Fed. In fact the ideal situation for BoC would be for the US to raise rates for a while first to get ahead of us. That will lower our currency and probably boost the economy a bit at a time when it still needs it.
All that said I am not sure that bonds (and hence fixed rate mortgages) are going a whole lot higher in the short/medium term either. That will depend in good measure on the strength of the recovery in the US.
Not necessarily does it mean that a lot more crappier homes were purchased. Between 185 to 200 properties exchanged in each of those time periods. It would be extremely improbable that an entire market would shift their buying preferences.
Nevertheless, the time period of 1 month is too restrictive and too arbitrary. 200 sales may be too little. Imagine the inaccuracy of Teranet that uses a dozen or two dozen re-sales for all of Victoria?
>> It would be extremely improbable that an entire market would shift their buying preferences.
Not unlikely at all. They haven't shifted their buying preferences, the renovated places have just been sold and the ones with flaws remain. The same trend of decreasing price/assessment during the summer was also there last year. Tends to peak in the spring and bottom out around December.
From the Canadian Mortgage Trends post
Over the last 10 years, the 5-year government bond yield has averaged 2.94%, more than 100 basis points higher than today.
That would only be about $500 more per month in interest for first time buyers, plus the $300-400 increase since Spring. Not a big deal.
Seen on my PCS:
"OH Dates: 2013/08/17 11:00AM - 2013/08/17 3:00PM
OH Remarks: Champagne Door Prize
So now there are realtors bribing people to attend open houses. I don't think I've ever seen that before.
2446 Evelyn Pl V8N 1E8
MLS #: 327423
I'd post a link but the house isn't up on MLS yet.
Last July, 2012 - 146 homes were purchased in the Victoria Core. This July there was 185 sales. A 27 percent increase.
Condo sales only increased from 109 to 118 over the same time period.
So core sales were up compared with July 2012, whereas overall sales in July were down.
But prices are higher in the core than at the periphery, where sales were down.
So does that not provide the explanation for the m-on-m rise in median price: the skew factor?
Removing all the sales that skew the stats hight so you skew the stats low achieves what? I have said it many times that stats are abstract. They only give a notion of what has happened. Of course the bears cling strong to those numbers if they are going down. Going up? Out come the cries of skewism. IMO +-5% is flat. It takes months to see a trend. Which is only interesting because it WAS the trend. I still won't predict the future. For that your gut is probably just as reliable.
I don't know if it provides an explanation of the skew factor.
In my opinion it just cast doubt on the Teranet numbers.
If you assume the Teranet numbers are incorrect would that alter the skew factor?
There are a lot of people employed in statistical analysis. A lot of people teach probablity. It's used extensively in business. I suppose we could dismiss it entirely and rely on "gut" or the more sophisticated chicken entrails method. Although this does make a messy board room presentation.
"The cost of labour is lower in the US. Not surprising when there are millions of illegal immigrants working "under the table"."
Canada currently has 380,000 temporary foreign workers and that number is increasing quickly. A business can get them in as little as 8 weeks here.
Canada also has its share of illegal foreign workers.
The US housing bubble pushed wages higher relatively quickly compared to the long term wage increases in that country. However, once the bubble burst, that trend reversed quickly. Many jobs were lost. Workers were demoted and the higher paying positions were left vacant to save money, etc.
The same shift is happening now in Victoria and in many other areas of Canada. Once house prices across Canada start to decline this trend reversal will be much more noticeable.
For example, consider a construction site. When house prices are rising many new jobs are created and there are many promotions. A worker who has been on the site for 5 years might be promoted to a supervisor, etc.
However, when house prices start to decline, many workers are let go and those who were promoted are often laid off and have no choice but to go back to the job they had before they were promoted and work for less money.
It is unfair to compare wages in Canada to the US at this time because the US economy is still feeling the effects of a housing bust while Canada is still at the peak of its housing bubble and the economy here is being artificially supported by that.
Netherlands real estate bubble bursts during downturn
http://www.bbc.co.uk/news/business-23708744
@ Just Jack
Do you have the average above/below assessment for SFHs in Langford/Colwood for June and July?
I'd like to see if that went up or down.
It's unfair to compare the cost of labour in the US and Canada right now based on the reasons I outlined earlier.
I don't have the numbers, but if the cost of labour in the US didn't actually decrease after the bubble burst in 2006, then the increase in the cost of labour would have likely been slowed dramatically.
Whatever happened in the US with regard to the cost of labour after the bubble burst will very likely happen in Canada as well.
Part of making a good Gut decision is absorbing knowledge and data and awareness from many sources. It's not just guessing. Otherwise it would be called guessing. Statistical analysis is only one element.
Captain Kirk ran the Enterprise with his gut. Sure he needed Spock but he also needed the rest of his crew to help him make his "gut" decisions.....
I might also add that Jobs did rather well with his gut decisions....
I’m sure you could interview Victorians who would say the exact same thing as in today’s BBC video.
Lady: “In two years time my asking price would come from 200 thousand to now offer of 153, I just don’t understand the government would let this happen…“ Later the reporter: “All this from a country in the past that was quick to criticize others for not living within their means” LMAO! that made my day.
I don't use averages, because some new homes are not assesed. That makes any sale/assessment ratio ridiculous. I only use the median.
For Langford and Colwood
June 2013 there were 68 home sales and the median Sales to Assessment ratio was 98.9
June 2013 68 sales 98.9
July 2013 47 sales 98.5
July 2012 56 sales 101.3
Very little change in the month to month ratio. Prices down about 3 percent year over year based on this small sample size. When you consider that sale prices varied from $300,000 to $900,000 in the month. Just not enough data. Although when I go to six months of data the decrease in price on a year over year bases goes from 2.8% to just under 1%.
Seems that prices are stable to decreasing with only a slight year over year downward drift of between 1 to 3 percent. That's pretty good.
Boring as a Eunuch in a Harem - but pretty good.
@info
It's unfair to compare the cost of labour in the US and Canada right now based on the reasons I outlined earlier.
Then why do you go to great lengths to compare the current asking prices of houses Victoria with those in Austin, TX?
If it is unfair to compare the cost of labour "right now" then it would also be unfair to compare asking prices "right now".
Teranet's 2.6% monthly price spike for Victoria makes no sense at all.
At the end of June, the Teranet index was -8.8% below the peak. According to the bankers that came up with the Teranet numbers for July, it took one month for Victoria's housing market to gain back about 25% of the ground it had lost since the peak.
This happened despite the extreme buyers market that exists in Victoria.
Prices supposedly spiked while Vicitoria's economy has taken a turn for the worse since the beginning of 2013.
This happened despite the high availability of rentals in Victoria.
Suddenly housing prices move upward quickly despite the fact that many young people have been moving away from Victoria for the past year or more in search of work elsewhere.
I call BS.
"Then why do you go to great lengths to compare the current asking prices of houses Victoria with those in Austin, TX?"
Household incomes in Canada and the US are almost equal.
Labour costs weren't much of a factor with the Victoria house that was built in 1941.
"If it is unfair to compare the cost of labour "right now" then it would also be unfair to compare asking prices "right now"."
One house in Victoria costs as much as 5 houses in Austin, TX because labour costs are more in Canada?
At least try to use some logic.
@ DavidL
I deliberately selected an older house in Victoria with small square footage.
All of the Austin houses are much larger and much newer, not to mention brick and well built, etc.
If I had chosen houses in Austin that were built in 1941 with comparable square footage, it might prove that the price of one Victoria house is equal to the cost of 10 Austin houses.
The cost of labour in Canada cannot be used to justify the difference in house prices compared to the US.
It must be very difficult for young Canadians (recent university grads, early 20s, etc.) when they have to live with the extremely weak Canadian economy and extreme bubble house prices.
Plenty of work out there for those who are competent and prepared to work hard.
Extreme bubble for 6 years?
Vancouver July sales up 40% year over year. Victoria only 11.5%.
Hmmm.
"Vancouver July sales up 40% year over year. Victoria only 11.5%."
Rejoice friends, the recovery is at hand. We have weathered the Canadian housing slump.
>> Vancouver July sales up 40% year over year. Victoria only 11.5%.
Nothing out of the ordinary. Victoria has been the weakest major market in the country for years now.
Info, this apartment might interest you. It's just 60 square feet and in 2010 it was valued at about $300,000, or about $7,500 per square foot.
The location? Knightsbridge, London.
What this indicates is that location matters. For whatever reason, a good location in or near Victoria, is valued more than many locations in Dallas or Detroit, but not as much as in London.
It might be interesting to know exactly why such huge differences in valuation exist, but it's not likely that the explanation would tell us much about the future direction of the Victoria market.
Nothing out of the ordinary. Victoria has been the weakest major market in the country for years now.
True....Calgary SFH average approaching that of Victoria.
Even if Calgary SFH average was 25% higher, it would still be more affordable than Victoria.
Even if Calgary SFH average was 25% higher, it would still be more affordable than Victoria.
That has always been the case; however, with Victoria price flat over 6 years give or take and other markets across Canada having continued to ascend the spread in affordability has decreased.
Canadian home prices rise
"We heard that prices were going to go down, but from the neighborhood that we were looking at we just weren't seeing that." -girl from video
The old "real estate is local" theory of housing markets.
"That has always been the case…"
Not always, in 1990 houses were 25% more affordable in Victoria than Calgary.
"…with Victoria price flat over 6 years give or take and other markets across Canada having continued to ascend the spread in affordability has decreased."
No the spread has stayed the same. RBC has the Calgary index going from 45 to 30 (-33%) last 6 years, while Victoria went from 60 to 40 (-33%) last 6 years.
One reason the RE in Calgary (and Edmonton) is cheap compared to Victoria despite wages and the economy being better there is the availability of new land. The combination of ALR plus parks makes it relatively expensive to add new development land here*. There you literally just buy up the next farmer's field. Also developers are being undercharged so existing residents are subsidizing the new developments and the cities are building up a big infrastructure debt.
* just for the record I am not saying we are "running out of land" just saying it is more expensive to add a new building lot here
Then why does land sell for more outskirts of Calgary than Victoria?
Not always, in 1990 houses were 25% more affordable in Victoria than Calgary.
The stats I am looking at show Calgary SFH under $150k through the 1990s and Victoria in the mid 250ks.
Then why does land sell for more outskirts of Calgary than Victoria?
Raw land or ready to build lots? Development costs in Victoria are astronomical so it wouldn't surprise me if raw land was cheaper than Calgary.
The problem with comparing Victoria to another city outside of its geographical market is that prospective purchasers are not chosing one city over the other. Because they have a different set of preferences.
Unlike say the difference between buying in Colwood or Langford. The preferences of buyers is highly similar between the two areas. They would equally choose between a home in Langford and a home in Colwood. But wouldn't consider Austin Texas.
When you're looking at comparing locations or individual properties you have to consider the preferences of your target market.
Comparing a thousand square foot home to a five thousand square foot home is just as disimilar as comparing Victoria to Austin Texas.
That's the fault of averages and medians. They don't account for the different preferences of buyers. So while the market has gone up 10 percent - that doesn't necessarily mean your home has increased by 10 percent too.
The re-sale method used by both Teranet and Case-Shiller isn't much better. The further apart the re-sale date is from the original the more likely that there has been a change in preferences. The highway between Victoria and Langford was substantially upgraded and the sewer system expanded. That changed buyers preferences. And would make any re-sale method inacurate when comparing prices before the highway upgrade in relation to today. The same would be true if a gas station or sky train station had been built beside your home last year.
Although it would be a good way to determine a loss in value - if you were after compensation from the Oil company or City.
"There is danger in complacency. Rates have been at rock bottom for years now, and many young people coming into the housing market for the first time have no idea what it is like to juggle the substantial payments that are required when a mortgage rate is at six or seven per cent or higher. It is inevitable that rates will rise, and some people will not be able to afford their houses when it is time to renew."
Fortunately the time horizon for which the "foreseeable future" is defined in the minds of many does not involved the time when a mortgage has to be renewed. Therefore the reliance on historically low rates is justified.
Flaherty cooled the housing market without dousing it
A quick google look at Victoria shows that there hasn't been any problem getting new residential developments.
It's a misnomer to think that building more homes increases affordability. It doesn't. Building more homes increases economic activity and prices. The same with allowing secondary homes to be built at the back of your lot.
It's great for developers they can sell their projects to their employees. But when economic activity slows down. Those laid off employees leave town or boomarang back into their parents homes and we have a glut of housing. Unfortunately Victoria City is very bad when it comes to the number of people per household. Lots of 2,000 to 3,000 square feet homes have two or less people living in them. And the proliferation of one-bedroom micro condos just makes things worse when a generation of urban professionals boomerang back to their parents or leave to other places for work. That leaves the City with a lot of abandoned properties that are no longer paying taxes. With higher taxes and user fees for those that remain. Which leads to more austerity measures by the Provincial and Municipal governments.
Ironic that the way to fix the problem would be for the government to pay developers to demolish the projects they just built.
It's a misnomer to think that building more homes increases affordability.
Oops time to throw out that whole supply and demand theory!
FWIW these guys certainly think that regulation and land availability affect housing prices. I don't buy their anti-smart growth propaganda, but it is hard to completely dismiss the data they present in terms of housing prices in more and less regulated areas.
Those laid off employees leave town or boomarang back into their parents homes and we have a glut of housing.
Presumably the "glut" would lower prices.... So what is it? Does building cause a glut and lower prices? Or does building have no impact?
A quick google look at Victoria shows that there hasn't been any problem getting new residential developments
Absent the ALR, the cheap way to develop Victoria would have been to pave over the Saanich Peninsula rather than push out onto the West Shore.
@ Marko
There is no meaningful difference in development costs Calgary to here. If anything it costs far more to develop in Calgary. Call up machine operators in Calgary to compare the rates for starters.
@Caveat
"…are building up a big infrastructure debt."
If Calgary developers were able to pass more costs to the city, then bottom line Calgary would be in more red ink per capita than Victoria. Hogwash.
@caveat
"There you literally just buy up the next farmer's field."
Yeah for 3-4 times the price as here!.. where we are supposedly running out of land.
These two parcels are same size, same residential zoning, same distance from core. The main difference is the Calgary parcel is over 3 times more expensive than the Victoria.
As we built more and more homes - did the prices ever go down?
As unemployment and vacancy rates increased - did prices ever go up?
What happens to Supply and Demand when governments stimulate short term economic activity through construction?
People just didn't ask what will happen to supply and demand when this short term economic activity ends. Was it a reasonable assumption to make that construction would continue at the same pace forever?
The first clue should have been back in 2005 when Victoria was constructing more condominiums than people immigrating to the city.
Supply and Demand were not operating under a free market system. Supply and demand was being distorted by government intervention.
Call up machine operators in Calgary to compare the rates for starters
I am sure the rates are the same but there is a bit more worked involved in blasting apart a development like Bear Mountain than building on flat ground.
Supply and demand was being distorted by government intervention.
Right. The taxpayer underwrote mortgage insurance so that young taxpayers could, in exchange for the risk involuntarily assumed, pay more for their houses.
Meantime the BoC keeps the money supply growing to insure that saving cash is a losing proposition, while suppressing bond prices to insure than anyone daft enough to save their money will see it lose value.
Ain't democratic government wonderful.
@ Marko
Yeah cus it is reeally flat there.. lol
Have you heard of the Rocky Mountains? Not only rocks, pipelines, and ice to deal with, they also have to run services deeper.
In the secondary mortgage market. Sub prime buyers pay 8 to 12 percent for their mortgage. CMHC insured mortgages were at 3%.
Why so low? CMHC got a fee up front that could have been say $15,000 on average. Back then, five years later, the home owner would remortgage with 20 percent equity and CMHC would be off the hook.
Easy Money
CMHC could do it again and increase the level that the banks can lend without insurance from 80% to 85%. I wonder if the banks would like that? I wonder if they would then factor in risk and increase the mortgage rates?
Re: Flaherty cooled the housing market without dousing it
The G and M has another piece on housing in the same edition as the editorial containing the above reassuring words. It is entitled Fairy tale 'soft landing' menaced by oversupply.
This is in Report on Business and is not open access.
What it states is that inventory of new homes is:
"at historically elevated levels of nearly 10 month's supply for single family dwellings and more than 12 months for condos. Housing starts, at an average annulized rate of 196,000 is outpacing typical annual household creation by roughly 25,000. TD Bank economist Dina Ignjatovic said in a recent reseearch note that an estimated oversupply of 250,000 new homes -- more than a year's worth of construction -- is expected to hit the market over the next 18 to 24 months. The market [is] destined to be swimming in supply if it maintains anything close to its current pace.
Continued low interest rates have sustained a pace of buying in the housing market, for both residential and investment purposes, that would otherwise be unsustainable. That will become very difficult indeed to justify once rates start to creep upward, likely within the next year to 18 months.
So the ample supply will be met with declining demand ... we're nowhere near the end of this story -- and happily-ever-after doesn't look like the most likely outcome."
This is as I predicted. The deluge is supposed to begin in the immediate aftermath of the next election, giving the Tories a full term to sort out the mess, or more likely, sandbag young Justin and his untried team of economic managers.
"Have you heard of the Rocky Mountains?"
About as much influence on Calgary building costs as the Olympic Mountains have on Victoria building costs.
Dallas Road to Mount Angeles - 45 km
Western Edge of Calgary to Moose Mountain - 45 km
Have you heard of the Rocky Mountains?
Because the Rocky Mountains and Bear Mountain are similar? I don't get it.
Thank goodness for the ALR... Two Langfords would be brutal....
Leo's charts show that, for the past number of months, the sales mix for Greater Victoria has shifted to much more sales activity in the more expensive areas and less sales activity in the less expensive areas. This has resulted in upward skewing of the average and median. Comparing July 2013 to July 2012, July 2011, etc. it is easy to see that the sales mix for July 2013 was dominated by higher end sales.
Skewing within any particular area, for example Saanich East, goes hand in hand with the skewing of the entire area of Greater Victoria. This could be proved by examining the assessed values of sales within any particular area. I'll argue that in the past number of months there has been a shift in the sales mix within Saanich East, for example. It's likely that more higher end houses and less lower end houses have sold recently in that area compared to June and July of past years.
So July 2013 had an unusually high number of expensive area sales as well as an unusually high number of high end sales within each area. I will argue that this caused the level of the Teranet HPI to be much higher than it should have been for the month of July.
Consider that the sales mix for July was dominated by higher end sales within higher end areas. The higher end areas are generally the oldest areas of Greater Victoria. The higher end houses within these older areas are generally renovated and/or well maintained.
So the sales mix for July 2013 was dominated by renovated/well maintained houses in the more expensive areas.
Consider the extreme example that every SFH sale for July 2013 in Greater Victoria took place in Oak Bay and every sale was an older house that had recently undergone extensive renovations. Now let's say that the set of circumstances was the complete opposite in July 2012, July 2011, etc.. In this case, only Oak Bay houses in poor condition would have sold. The Teranet index would compare July 2013 sales to sales in July of previous years. In this example, the index level would be much higher than it should have been and could show a month over month price spike even there had been a month over month price decline. In other words, the accuracy of the Teranet HPI breaks down in extreme circumstances.
The sales mix for July 2013 was quite unusual and certainly leaned toward the extreme set of circumstances outlined above. Thus, I think that the Teranet index level for July 2013 is inaccurate and much higher than it should be.
Just Jack calculated that there was a 1% price decrease from June to July for SFHs in the core areas. I think his numbers more accurately reflect the month over month price change.
"What this indicates is that location matters. For whatever reason, a good location in or near Victoria, is valued more than many locations in Dallas or Detroit, but not as much as in London."
I haven't compared Victoria to Detroit, yet you keep assuming that I have. Austin is a very nice city and a more desirable location than Victoria. It rains for 6 months non-stop in Victoria every year. Austin has great weather and is an affluent city.
If anything I have been nice to Victoria in my choice of comparisons to US cities. Victoria is a small, regional city on an island with only ferry access to the mainland and no jobs.
"The problem with comparing Victoria to another city outside of its geographical market is that prospective purchasers are not chosing one city over the other. Because they have a different set of preferences."
The fact that one old house in Victoria sells for more than the total of 5 much bigger, newer houses in another North American city makes the point that Victoria's housing market is extemely overvalued.
Nothing anyone can say can possibly justify the extreme difference in housing prices between Vicitoria and Austin, TX.
@caveat
"Western Edge of Calgary to Moose Mountain - 45 km"
Calgary IS in Rocky Mountain foothills, which are larger than any of the hills in this region (Mt Tolmie is not a mountain). More sloping lots there than here, I can assure you.
@Marko
Correct, you "don't get it." And by the way affordability takes into account more factors than price.. referring to your "under $150k through the 1990s" comment.
You real estate gurus (who believe development and land costs more here) have still not explained to me why the same land (distance from core, size, and zoning) goes for more than 3 times the price in Calgary. Let me know if you figure it out : )
You real estate gurus (who believe development and land costs more here) have still not explained to me why the same land (distance from core, size, and zoning) goes for more than 3 times the price in Calgary. Let me know if you figure it out : )
There are just so many variables. I worked for a developer for a short time where he bought a piece of property for $1.9 million. The build out cost was over $26 million and the revenue from sales was around $32 million.
If that same raw property was $4.0 million but the build out only cost $23 million it would make sense to pay more for the raw land.
The property you reference in Calgary is flat and a decent rectangle. The property you reference in Victoria is an extremely long and narrow property that needs a huge amount of blasting, engineering, and site prep work to do anything on it.
info, I think you are cherry picking in the extreme. To counter cherry pick, Austin doesn't seem to have a big difference in house prices at all....
example 1
example 2
example 3
example 4
If that same raw property was $4.0 million but the build out only cost $23 million it would make sense to pay more for the raw land.
*Correct. If a different raw property was $4.0 million and easier to build out on but the build out.....
In a rising market I'll pay 5 million for a 4 million property.
And in a falling market I'll sell the land and let someone else take the risk.
Nothing anyone can say can possibly justify the extreme difference in housing prices between Vicitoria and Austin, TX.
No one has to justify the difference. The difference is a market outcome. Prices are not determined by some kind of moral calculus.
You need to construct an economic and sociological model of the market if you want to know where it is going.
The key sociological fact is that housing is a prime marker of social status, which is why people will usually spend about as much as they can possibly borrow for a house. That being the case, price is a function of income, cost of living, interest rates, credit rating and government manipulation of the credit market.
In Canada a rising dollar has kept the cost of living low, while a hot market for commodities has kept employment rates and wages relatively high.
The financial crisis and consequent government intervention in the credit market, plus the Asian savings glut has kept interest rates low.
Altogether these factors have meant high house prices and a construction boom.
The next phase of the market will develop if we have a glut of new construction, a rise in interest rates or unemployment, or a fall in the dollar leading to a rise in the cost of living.
Should such developments cause the beginning of a house price slump, another sociological factor kicks in. Nothing lowers your social status more than losing all your money. So if a falling housing market drives up the personal bankruptcy and divorce rates, then you'll see a revulsion from real estate and a market collapse.
info, I think you are cherry picking in the extreme
That was my conclusion too when I got curious and looked at a few Austin listings.
Quite a bit cheaper than Victoria? Yes.
80% cheaper? No way.
JustJack gets the gold star.
Marko, I can link more Calgary parcels that require just as much or more engineering, blasting, bringing services to property, sitework as the Vic parcel.... priced at, you guessed it, approximately 3 times the Vic list price per hectare.
Bottom line, if developers deemed Victoria to have as much of a future for returns as Calgary, list prices would be as high as Calgary. I would take that as an important sign. But you wont.
Yes, developers have concluded that the Victoria market is going to immediately crash and Calgary will continue marching forward; therefore, prices in Victoria are 33% of those in Calgary for raw land....that is a soft argument in my opinion.
I know several big developers in Victoria and that is just not how things work in terms for predicting future market conditions. Many projects go through multiple real estate cycles from purchase of raw land to the finished product.
I purchased a unit at the 834 Johnson and sold out the remaining units for the developer at the end of the project.
Property was purchased in 2006 in the middle of a quickly rising market. Sales launched in April 2009 in the recession. During the sales period we hit the top of the market (2010) and then I sold the last penthouse unit in 2012 as condo market was significantly cooling.
Developers are typically very intelligent but not intelligent enough to predict the market 3-6 years out.
Calgary IS in Rocky Mountain foothills, which are larger than any of the hills in this region
Downtown Calgary to Paskapoo or Nose Hill is about 200 metres elevation difference, similar in size to some of our smaller topographic features here. (Smaller than Skirt Mountain)
One of the underlying assumptions that we all tend to make is that everyone wants real estate.
That's not true. A small portion of our population wants real estate. About 3 to 4 percent at any given time. The rest already own or are not prepared nor willing to buy. Even this blog is biased in that most of us are prospective buyers.
Because of this our judgement is a bit cloudy. We assume that people will spend the most they can to buy a home and that they always will.
It isn't true. During economic downturns people spend a lot less of their disposable income on housing and don't want to carry long term debt.
Only the prospective buyers at the end of a boom are willing to sacrifice everything to get what they perceive as something that everyone wants.
And we are very competitive about it - even among fellow bloggers.
How many of use would be willing to tell everyone on this blog what we offered on a property we are trying to buy?
None of you. Because you all feel someone would scoop this property from you. Which they probably would do. It's the scorpion on the turtle's back.
So why is real estate expensive in Victoria - probably because we are all still reading this blog. The day you delete this blog from your computer is the day real estate dies.
This is the least talked about elephant in the room until 2015-16
vvv
Fairy tale 'soft landing' menaced by oversupply
Globe and Mail, Aug 16, 2013
The country's inventory of unsold new homes has eased from its highs, but is still running at historically elevated levels of nearly 10 months' supply for single-family dwellings, and more than 12 months for condos. Housing starts, at an average annualized rate of 196,000 units, is outpacing typical annual household creation by roughly 25,000.
Toronto-Dominion Bank economist Dina Ignjatovic said in a recent research note that an estimated oversupply of 250,000 new homes - more than a year's worth of construction - is expected to hit the market over the next 18 to 24 months.
Continued low interest rates have sustained a pace of buying in the housing market, for both residential and investment purposes, that would otherwise be unsustainable. That will become very difficult indeed to justify once rates start to creep upward, likely within the next year to 18 months.
So, the ample supplies will be met with declining demand.
It seems Toronto, Van & Vic are the most mentioned culprits. With so many moving to Sask and Alta for work it could get dicey by 2014 with so many units completing.
There are maybe small zones of "overbuilding" on the island but nothing at a catastrophic scale. Do I have to bring up Spain again?
Gary, Indiana, offering homes for $1 US
I'd buy that for a dollar.
Go right ahead...."about 10,000 houses — are unoccupied and many have fallen prey to vandals and arson."
"Frequently rated one of the ten most dangerous cities in the United States, Gary once boomed with jobs and opportunities but now faces the acute difficulties of America's growing rust belt, with 22 percent of families in the once-great city now lying below the poverty line."
I am sure the rates are the same but there is a bit more worked involved in blasting apart a development like Bear Mountain than building on flat ground.
Doesn't seem to be reflected in the lot price though. I am sure a comparable lot in Calgary would sell for more than this:
Bear Mountain Lot
Maybe Bear Mountain lots sell for less than a comparable lot in Calgary simply because nobody in Victoria is willing to pay as much as someone in Calgary?
Ten most dangerous cities in Canada for crime as rated by Macleans Magazine in 2010 showing their score above the national average
Prince George, B.C. +90%
Victoria, B.C. 81
Regina, Sask. 73
Saskatoon, Sask. 69
Fort McMurray, Alta. 68
Kelowna, B.C. 65
Grande Prairie, Alta. 64
Surrey, B.C. 60
Chilliwack, B.C. 58
Winnipeg, Man. 57
So foreigners are finally viewing Canadians as the risky little debt piggies we are. So much for “rates won’t go up”. The Canadian 5 year rate is now muchos points ahead of the US 5 year.
Foreign investors bailing out of Canadian bonds
Globe and Mail, Aug 16 2013
Foreign investors went on an unprecedented selling spree of Canadian bonds in June, offering further evidence of Canada’s fading international appeal.
A record $19-billion decline in foreign-held bonds, more than double the previous high set a decade ago, slashed what has become a reliable source of investment driven by Canada’s stellar reputation for financial outperformance.
“Those days are over,” said Doug Porter, chief economist at BMO Nesbitt Burns. “I think that’s been one of the stories of 2013. There’s less enthusiasm for Canadian assets among foreign investors these days.”
…
All told, Canadian securities held by foreign investors fell by $15.4-billion, the largest decline since October, 2007.
And when a Vancouver home owner was asked about the 15.4 billion held by foreign investors his reply was...
"15.4 Billion - that's nothing - I have bigger mortgage than that!"
"So foreigners are finally viewing Canadians as the risky little debt piggies we are. So much for “rates won’t go up”. The Canadian 5 year rate is now muchos points ahead of the US 5 year."
In 08-09 the Canadian housing market was tanking. However, the market was turned around by a massive, unprecedented, emergency intervention. The Canadian bank bailout was bigger, per capita, than the US bank bailout. As well, lending standards were relaxed even more. In 2009
the taps were opened wide on CMHC (and Genworth, etc.), which are all backed by the Canadian taxpayer, to allow more high-risk, high-ratio mortgages. This, of course, was done to stimulate the housing economy in order to stimulate the entire Canadian economy.
I always laugh when I hear people describe the Canadian banking system as "conservative" and "sound" and the Canadian housing market as "strong" or "resilient". If CMHC and the private insurers were not taking all of the risk away from the banks, where would Canadian housing prices be? More on that later.
After the bailout and intervention of 2009, foreign investors continued to buy Canadian bonds thinking it was a safe place to put their money. In reality they were trusting their money to a dangerous ponzi scheme - a set of circumstances that they knew virtually nothing about. The truth was hidden.
Finally foreigners are beginning to see the Canadian situation for what it really is.
Foreign investors know that the Canadian housing market will be undergoing a major correction soon and their actions prove it. The rest of the world knows about Canada's extreme housing bubble. Perhaps more Canadians should open their eyes and see what the rest of the world sees.
Ya JJ Victoria is a real slum... You want to see Urban decay at an epic scale. Just fly around Detroit on google earth. It is shocking.
ohhhhhhhhh it saw ful detai.thanks bro.
realestate nepal
In 08-09 the Canadian housing market was tanking. However, the market was turned around by a massive, unprecedented, emergency intervention. The Canadian bank bailout was bigger, per capita, than the US bank bailout. As well, lending standards were relaxed even more. In 2009
the taps were opened wide on CMHC (and Genworth, etc.), which are all backed by the Canadian taxpayer, to allow more high-risk, high-ratio mortgages. This, of course, was done to stimulate the housing economy in order to stimulate the entire Canadian economy.
That's correct. Canadian house prices are determined by the market, but the market is rigged. It has been for decades, although the intervention of 08/09 to resurrect a crashing market was unprecedented in scope and magnitude. Public funds in the hundreds of billions were committed to bailing banks and underwriting mortgages to insure that the public could continue to pay abnormally high prices for houses.
Likewise, money has been printed to prop up the bond market to ensure that Canadians continue to receive less than nothing after inflation and before taxes on their savings, with the result that most Canadians, rather than being savers, are heavily in debt, and profitably too.
Since indebted property owners are the majority in Canada, the Harper government should receive another handy majority in 2015.
Unless the real estate market slides out of control.
Likely the little adjustments being made to the rules about mortgage lending are intended to give the government some scope if prices begin to slump.
That is perhaps why Garth Turner never talks about a crash, only a modest drop, 5% or perhaps a little more: the expectation being that government intervention will keep house prices on a "permanent high plateau," to use the phrase employed by the eminent Princeton economist Irving Fisher to describe stock prices on the eve of the Great Crash.
That is perhaps why Garth Turner never talks about a crash, only a modest drop, 5%
Right....Just like 5 years ago when he never talked about how interest rates would be 7-8-9% in 5 years when it was time to renew....ohhh wait, yes he did in multiple interviews.
http://www.youtube.com/watch?v=1S7OumrfatY
Start watching at the 5:30 mark.
"That is perhaps why Garth Turner never talks about a crash, only a modest drop, 5% or perhaps a little more:"
Incorrect.
Garth predicted a 15% price drop Canada-wide and then a multiple year melt. The total price decline being much more than 15%.
For Vancouver and Victoria, Garth predicted a 30% price decrease followed by a multiple year melt.
The 5% drop he talked about was for areas of Toronto close to downtown.
"Unless the real estate market slides out of control.
Likely the little adjustments being made to the rules about mortgage lending are intended to give the government some scope if prices begin to slump."
The basic thing that the government is intervening to control is the total amount of mortgage insurance issued each year. They do this by tinkering with the mortgage rules based on where 5-year mortgage rates are.
The total amount of taxpayer backed mortgage insurance that has been issued in Canada over the past 13 years is astounding.
This has put the Canadian economy at risk. Foreign investors are starting to understand the situation that Canada is in. Their recent unprecedented exit from Canadian bonds proves it. They understand that the Canadian housing market will begin a major, multi-year correction/crash soon and that it will weaken the Canadian economy for years.
How high will 5-year mortgage rates in Canada increase as a result of this?
Interest rates on 10-year government bonds in Greece, Ireland and Portugal went from about 4-5% in 2010 to 12-17% in 2011.
Housing prices in Greece, Ireland and Portugal are crashing. Spain can also be included in this group.
Looks like the Garth Turner fans can't even agree on what he is predicting.
Older 1970's type condos in the Victoria area have, for the most part dropped in price by at least 30% in the past 4years.
The 5% drop he [GT] talked about was for areas of Toronto
For a resident of TO, TO is the whole world. And anyhow with over 7 million residents in the GTA, TO is much of the country.
Furthermore, prices in TO more inflated than in most parts of the country, so it is reasonable to infer that when GT says:
"Toronto won’t crash as did Phoenix or Miami. That means nobody should expect a 25% decline in the average price. More like 5% in traditional demand areas, 15% in the trendy, high-mortgaged zones and 20% in the glass towers."
we are not headed for a crash across the board, but that some places will adjust more than others, Victoria being high on the list of places due for a significant correction.
One can, incidentally, read Garth Turner without being a "fan." What he has to say can be of interest even if it's wrong. Perhaps because its wrong.
"Looks like the Garth Turner fans can't even agree on what he is predicting."
What Garth predicted is what he predicted, those are facts that can be found on his blog.
I've presented his predictions correctly on this blog.
http://www.icx.ca/propertyDetails.aspx?propertyId=13408990&PidKey=-2101416695
2861 sqft lot in fairfield for 559k? Wow. These will be a litmus test for land values in the core.... With setbacks you can't even build on these lots without getting a variance...
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