Sunday, October 13, 2013

Boxes in the sky

CS asks:  "have condo sales increased relative to house sales since 2008?"

Here are the SFH and condo sales back to 2007.

At first glance it's hard to tell if there has been any shift, so let's plot the ratio of SFH sales to condos.


Now here's something interesting.  This year there has been a massive shift towards SFHs.   At the same time cheap the skew factor tells us that within SFHs sales are more concentrated on the higher end.   The bottom may have dropped out of the market and no one noticed because it was disguised behind higher sales and flat prices.

As boring as this market currently is, there is something brewing and I think many people could be surprised (including myself).

Edit:  Some perspective:

I'm quite mystified..   There seems to be some alignment to the market but maybe it's all just random.

34 comments:

poobserv said...

Maybe the Victoria market for condos is different than the market for single family houses. How much construction is there of each? How much supply is there of each?

info said...
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info said...

@ Leo

"The bottom may have dropped out of the market and no one noticed because it was disguised behind higher sales and flat prices."

This is incorrect.

So far this year, the total number of SFH sales in Greater Victoria is only slightly ahead of 2012's pace. However, 2012's SFH sales total was the lowest since 1982.

With population adjustment, the numbers would look much worse.

At this rate, total SFH sales in 2013 will be the second lowest since 1982.

It would be helpful, Leo, if you would put together a bar chart showing the (population adjusted) total SFH sales (exclusively) from the time the VREB started reporting this data. I realize that you put this data on another chart some time ago, but it would be more helpful if you could put together another chart that doesn't include other data.


info said...

@ Marko

"and as far as I remember Leo S was pretty clear as to what was to be predicted. I don't remember the "skewing factor" being part of our predictions."

Predictions will be compared at the end of December.

My predictions may have already come true.

The effect of upward skewing on the median and average so far this year is important to understand if one desires to fully understand Victoria's housing market.

Once this extreme skewing disappears, the median and average numbers will plummet.

Leo S said...

"The bottom may have dropped out of the market and no one noticed because it was disguised behind higher sales and flat prices."

This is incorrect.

So far this year, the total number of SFH sales in Greater Victoria is only slightly ahead of 2012's pace


"slightly ahead of 2012". In other words higher, like I said.

With population adjustment, the numbers would look much worse.

Population adjust this year to last year and sales are still up.

And prices (the ones everyone sees, averages and medians) are flat YoY so no, it is not incorrect.

total SFH sales (exclusively) from the time the VREB started reporting this data. I realize that you put this data on another chart some time ago, but it would be more helpful if you could put together another chart that doesn't include other data.

Yeah I can take a look at the yearly data..

Leo S said...

My predictions may have already come true.


As I recall we never did get any solid predictions out of you.

Once this extreme skewing disappears, the median and average numbers will plummet.

We will know soon enough. The next few months will show the effect of interest rates being a bit higher, and likely the sales mix will settle back down a bit as well.

info said...

""slightly ahead of 2012". In other words higher, like I said."

When compared to yearly totals since 1982, the projected SFH total for 2013 would be the second lowest since 1982.

The projected SFH sales total for 2013 needs to be put into perspective and not compared only to 2012. That is a tactic used by the VREB.

I don't think you approve of the house pumping tactics used by the VREB.

info said...

"As I recall we never did get any solid predictions out of you."

I posted my predictions a day or two after most others did.

My predictions are based on comparisons to the peak price or peak assessment of properties.

I chose not to base my predictions on numbers that could easily be manipulated by bankers and real estate boards (realtors).

CS said...

Good graphs, Leo. They seem to answer the question about the change composition of sales over time, which has not been as I had postulated.

Phil said...

How much supply is there of each?

Supply-side, we have the highest vacancy rate in 20 years in addition to thousands of new condos and houses being built (these are some of the 4+ story bldgs). To top it off, three rental-built alone are about to add just under another 400 units; Hudson mews, the Q, and Heron's Landing. Also take note how many homes are sitting vacant, the next time you are surfing MLS.
Demand-wise we’re still losing jobs (Friday's Stat Can release), rates have pulled forward residual buyers, tougher mortgage rules, and many who used to buy second homes here are now buying elsewhere.

info said...

"Yeah I can take a look at the yearly data.."

Much appreciated.

hopsleviathan said...

This looks like the right place to find strong opinions....

We are shopping for a detached home in Victoria and during the process I have been eliminating all "bare land strata" listings from consideration. The wife asked me why I was doing that and I realised I had no rational argument, it was an intuitive dislike of paying a huge amount of money for something which I perceived as having strings attached.

Could some more rational soul make a case for or against strata-titled detached homes?

V小瘋_ said...

for strata-title detached homes, let me try,

the stata fee will always go up every single year.

it's your money, do whatever you like.

totoro victoria said...

Strata can impose special assessments. Strata rules can be a pita. Strata fees are in excess of what you can expect to pay for self managing.

Marko said...

Could some more rational soul make a case for or against strata-titled detached homes?

1. the stata fee will always go up every single year.

Incorrect. The majority of bare land strata’s rarely increase fees. I've seen some where the fees have been constant for 10+ years.

2. Strata can impose special assessments. Strata rules can be a pita. Strata fees are in excess of what you can expect to pay for self managing.

Correct, but rare to date on bare land stratas. Mostly incorrect, bare land stratas rarely have rules that affect the use of your property. When they do it is usually no worse than a Broadmead covenant on title for example. Incorrect, the vast majority of bare land stratas are actually self managed.

Is freehold better? Yes. I wouldn't take lightly to buying into a bare land strata for other rational reasons (who pays down the road when services need servicing underneath the strata corporation owned lane?, etc...)

However, reality is most brand new developments in the core are going to be bare land strata going forward (For example, Cadboro Heights is bare land strata). When you build a bare land strata the access to the development does not have to comply to city road widths; therefore, you can get more lots in. In most situations it is not feasible anymore for developers to incur the cost of a proper city road into the development as it would eat up lots.

nan said...

this is pretty cool:

http://www.cbc.ca/news/world/nobel-in-economics-to-eugene-fama-lars-peter-hansen-robert-shiller-1.2053711

totoro victoria said...

Hi Marko,

1. Special assessments probably are less common on bare land strata. Special assessments have not been rare on condos in Victoria. Special assessments DO happen on bare land strata, especially in relation to sewer/water: http://www.canada.com/victoriatimescolonist/homes/story.html?id=3f2e4ca2-7f2b-4919-8e0f-a00f3d0dc1e5
This blog had a good article on this:
http://househuntvictoria.blogspot.ca/2007/04/bare-land-strata.html

2. I have reviewed strata fees when running my RE analyzer. I also own. I can tell you from experience that strata fees that I have reviewed are more than my fees to self-manage my properties.

If you are frugal and do a lot of DIY it is going to be cheaper to own. Might be different for bare land strata - don't know, but probably not different for anything with shared improvements (townhouses/condos).

3. I personally dislike having a strata board deciding what I can and cannot do with my home. Stratas can and usually do have rules about the use of your home ie. renting out, exterior colours/improvements, RV or boat parking, fencing, landscaping... often more restrictive than applicable city bylaws.

Marko said...

1. Special assessments probably are less common on bare land strata. Special assessments have not been rare on condos in Victoria. Special assessments DO happen on bare land strata, especially in relation to sewer/water: http://www.canada.com/victoriatimescolonist/homes/story.html?id=3f2e4ca2-7f2b-4919-8e0f-a00f3d0dc1e5

Condos are not very relevant to this discussion as the person who posted the comment is looking for a detached home. The story in the TC is in regards to a special assessment issued 6+ years ago in the Okanagan.....to date, special assessments have been rare on bare land stratas; however, that might change in the future.

If you are frugal and do a lot of DIY it is going to be cheaper to own. Might be different for bare land strata - don't know

It is different. Bare land stratas have budgets that are only a few lines long. The majority of the bare land strata assessment usually goes to insurance and than you have a couple of smaller items such as hydro for common lighting, snow removal, etc.

Stratas can and usually do have rules about the use of your home ie. renting out, exterior colours/improvements, RV or boat parking, fencing, landscaping... often more restrictive than applicable city bylaws.

As I said, usually no worse than your standard Broadmead, Sunnymead, Dean Park or etc. restrictive covenant.

Renter said...

Re: Bare land stratas

In the experience of one of my best friends, you still have all the bullshit of dealing with a strata. Someone still has to collect fees, make decisions, get things done, deal with the people who want more flowers in the "public" flowerbeds, figure out who is going to get the road cleared if it snows, determine how often the public sprinklers are run, and find out that the builder's house at the end of the lane has been charging the water he uses in his big ass fountain to the strata... etc. Good times. Less work than a condo strata, but definitely had my friend saying "Never again".

Gary said...

Nobel prize winner warns of ‘bubbly’ home prices in the world caused by the feds policies.

http://www.cnbc.com/id/101111684

Marko said...

Tuesday, October 15, 2013 8:15am

MTD October
2013 2012

Net Unconditional Sales: 214 373New Listings: 444 1,068
Active Listings: 4,390 4,876

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

info said...
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caveat emptor said...

Teranet HPI up slightly again in Victoria m-o-m. http://www.housepriceindex.ca/Default.aspx.

Clearly info's HHV and greaterfool post's have not been frequent or strident enough to keep the market down.

Introvert said...

A new series from the Tyee comparing Vancouver with San Francisco:

Generation Rent: Two Cities, Two Directions

Fascinating infographic.

Phil said...

Prices were down from a year earlier for a seventh consecutive month in Victoria (0.5 per cent)
http://www.calgaryherald.com/business/real-estate/Calgary+house+price+growth+tops+national+average/9037136/story.html

Phil said...

More condos, coming soon. Who says they aren't making more land -- 6.2 prime acres.

http://www.timescolonist.com/entertainment/province-puts-james-bay-block-across-from-legislature-on-the-market-1.660945

info said...

"Clearly info's HHV and greaterfool post's have not been frequent or strident enough to keep the market down."

The bankers doing the calculations for the Teranet HPI claim that house prices in Victoria have increased by 4.3% since May 2013.

Obviously their methodology breaks down in an environment of extreme upward skewing.

Upward skewing is also causing the SFH median to give the false impression that SFH prices have increased since May 2013 as that value is up about 1.4%.

However, it isn't difficult to prove that prices have actually decreased since May (by removing some of the skewing).

Consider the following 3 groups of areas of Greater Victoria:

Expensive (Oak Bay, Saanich East and North Saanich)

Less expensive (Esquimalt, Sidney, Colwood, Langford and Sooke)

All other areas (Victoria, Vic West, View Royal, Saanich West, Central Saanich, Highlands, Metchosin and Waterfront

The SFH 3-month median for each of these 3 groups has declined since the end of May (I will present the exact numbers in another post).

Severe upwqard skewing started to rear its ugly head around April of this year. Since then it has been giving the false impression that house prices in Victoria have been increasing. However, I have shown that, once enough of the skewing is removed, it becomes obvious that prices have actually declined since May.

Introvert said...

However, I have shown that, once enough of the skewing is removed, it becomes obvious that prices have actually declined since May.

info's tip: remove numbers until you like what you see.

caveat emptor said...

"Obviously their methodology breaks down in an environment of extreme upward skewing."

Repeat sales index should be fairly robust to changes in the sales mix

reasonfirst said...

"Repeat sales index should be fairly robust to changes in the sales mix"

Genuine question - how does this work if the repeat sales are generally more higher end than normal? Wouldn't the results be over-weighted to the higher end?

info said...

@ Introvert

No numbers were removed.

You don't understand what I did. Try again.

info said...

I should add that the expensive group experienced, by far, the biggest price drop.

Leo S said...

Repeat sales indicies are not as susceptible to the sales mix change. If higher end places are selling it is still the relative change in their price, not their actual price that matters.

The only time it matters is if certain segments of the market are behaving markedly different than other segments. So info, if you claim that high end places have dropped the most, and currently more high end places are selling, then that would mean the Teranet is actually biased downwards, and the actual market is stronger than it suggests.
We can't actually conclude that (way too many variables here) but playing devil's advocate.

info said...

@ Leo

Clearly I've shown that the Teranet is biased upwards and the market is much weaker than it appears from their numbers.

There are hundreds if ways that they could create an upward bias. I would have to see their raw sales data and precisely what they do to it to be able to understand this fully.