Monday, October 7, 2013

Oct 7 Market Update


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


October 2013October
 2012 
Wk 1Wk 2Wk 3Wk 4
Unconditional Sales89



373
New Listings240


1068
Active Listings4408


4876
Sales to New Listings
37%



35%
Sales Projection--



Months of Inventory
13.1

Another month another same old in the Victoria market.   Sorry for the lack of monthly update, it's been a bit insane at work.  Will post it eventually and I also have some thoughts about the state of condo construction in Victoria that I'd like to write up.
Again it is going to be tough for this October to match the miserable lows of last year.   However the last of the ultra low rate holds should be expired by now so let's see what kind of hit sales are going to take.

90 comments:

dasmo said...

Now it will be the threat of rising rates that supports sales. Not that they need much support at these levels...

koozdra said...

.

caveat emptor said...

Now it will be the threat of rising rates that supports sales.

In the short term a small drop in some fixed rates is possible as 5 year yields have retreated a bit (amounting to giving up about 25% of the recent rise). They'll have to hold at this level for a bit before there will be much movement though.

caveat emptor said...
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koozdra said...

Canada’s math, science lag bad for economy, report says

Numbers hard, buy house, it good investment.

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

So far this year, the total number of SFHs sold in Greater Victoria is only slightly ahead of 2012's pace, which was the lowest total since 1982. Adjusting for population would make this look much worse.

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

As for interest rates, again, the days (years) of dramatically falling 5-year mortgage rates are over. This was a crucial factor in keeping house prices in Victoria from correcting dramatically since 2008.

The most likely scenario is that 5-year rates, the rates that buyers must qualify under, will continue rising toward the long-term average (7-8%).

However, prolonged steady rates at current levels will remove the price support that falling rates have provided since 2008, causing house prices to fall dramatically in the coming months/years.

dasmo said...

"Adjusting for population would make this look much worse." Nope, since population adjusting the number of listings would cancel it out... Sales to listings says enough in this regard. It shows how much sold of what's available.

dasmo said...

From 1926 to 1965 the prime rate was under 5%. From 1933 to 1948 it was around 2%. It's entirely feasible we could have another decade of low rates.

http://corporate.morningstar.com/ib/documents/Brochures/2012_US_AndexWallchart_SAMPLE.pdf

patriotz said...

From 1926 to 1965 the prime rate was under 5%. From 1933 to 1948 it was around 2%

Yes but who could borrow? Rates may have been low for those who could, but during the 1930's it was practically impossible for the average person to get a mortgage and as late as 1965 it was much more difficult than today.

The combination of low rates and government guarantees which allows ordinary people to borrow huge sums of money is unprecedented in our history. Think it can last indefinitely? I don't.

dasmo said...

"Think it can last indefinitely" nothing lasts forever. Am I going to take advantage of it in my short existence on this planet? Yes...

koozdra said...

Low interest rates are like turning up the radio in your beater car because the engine is making noise.
Sure you feel better, but in the end you are going to have to deal with the fact that one of your cylinders isn't firing anymore. Ignore it long enough and your engine could come to grinding halt.

The central bankers describe the process that we are in as "navigating uncharted waters". Hey, everybody's doing it. As long as we all do the same thing, move in a coordinated manner, everything should be fine.

Rest assured you are in good hands. These are professional economists after all. The purveyors of the dismal science.

Maybe a woman will do a better job. Bye bye Ben.

LeoM said...

Low interest rate policies were not introduced primarily to stimulate the economy, but as an attempt to prevent deflation.

As long as the possibility of deflation persists then low interest rates will also persist.

The pain will come later when governments are forced to deal with the hangover from 'Stimulus' programs which include massive government debts and in the Americans case, what to do with all those Trillions of new dollars they printed that no one wants.

I've pondered the outcome of this current economic situation but I can't find the point of equilibrium that economic laws predict; perhaps that's because the usual laws of equilibrium won't apply due to government manipulation. Who knows what might happen when the economy improves, when interest rates increase, and when governments are stuck with multi-Trillion dollar debts when interest rates are rising. If you think your mortgage payments will be difficult when interest rates rise, imagine what the government will be paying in debt-servicing costs for Trillions in government debt. But then again... maybe interest rates will stay low for decades.

I think we're just finishing chapter one of this thriller.

Phil said...

"Am I going to take advantage of it in my short existence on this planet? Yes..."

Take advantage of what exactly? Paying a high price simply to get a low payment? And when rates go up and prices go down your payment goes up and you still have the high price.

The winners flipped real estate between about 2003-2010 and then got out. There were very few of them.

caveat emptor said...

"The winners flipped real estate between about 2003-2010 and then got out."

Nope. The winners are those who have a great housing situation, whether rental or owning, that they are content with and can afford without too many compromises.

CS said...

I can't find the point of equilibrium that economic laws predict

Perhaps that's because economics is a pseudoscience and its "laws" are neat bits of math with little relation to economic reality. Certainly, if you look at long-term interest rates you see no evidence of equilibrium or "normal interest rates," just long-term trends up or down.

Who knows what might happen when the economy improves, when interest rates increase, and when governments are stuck with multi-Trillion dollar debts when interest rates are rising.

If the economy improves, we'll be better able to manage higher interest rates. But if higher rates stall a recovery, then rates will surely fall again!

dasmo said...

"And when rates go up and prices go down" You mean IF. My crystal ball says rates will stay low and prices will remain flat until, in real terms, prices have gone down enough for rates to go up...

Also I took advantage of a slow market so I could negotiate 10% less than what the property previously sold for and get a low rate. The low rate at the beginning of the mortgage being the most important since that is where they front end load the interest.

Introvert said...

Maybe a woman will do a better job. Bye bye Ben.

Under the circumstances, Ben has done a great job. Ben is smart and knows that one does not hike interest rates when: a) unemployment is stubbornly high; b) the economy is growing but at too slow a pace; and c) there is no inflation.

By the way, Janet Yellen agrees with Ben.

info said...

"The low rate at the beginning of the mortgage being the most important since that is where they front end load the interest."

That is shortsighted and lacks logic. Buying at near peak prices with historically low interest rates is never a good idea.

House prices will correct/crash significantly, that is guaranteed. Waiting for prices to correct/crash would have saved you much more (and I mean a lot more) money than the amount you will potentially save with a low(er) rate over the first 5 years of your mortgage.

By the time you finish paying off your (25 or 30 year) mortgage, you will have paid at least 2.5 times the original price of the property.

For example, let's say you paid $600 K in 2012 instead of waiting for the price to decline to $480 K. If you had waited, you would have saved $120 K. However, $120 K x 2.5 = $300 K.

I guarantee you that $300 K is significantly more money than the amount you might potentially save with your low(er) rate over the first 5 years of your mortgage.

As well, renters do not pay property taxes, interest, maintenance, etc. and have the ability to invest the downpayment money to earn more money. If you need to sell the property, you will be forced to pay an exorbitant realtor commission and other expenses. All of these things must be factored into any buying decision.


info said...

"Under the circumstances, Ben has done a great job. Ben is smart and knows that one does not hike interest rates when: a) unemployment is stubbornly high; b) the economy is growing but at too slow a pace; and c) there is no inflation."

That was very shortsighted.

Ben's (poor) quick fix decisions over the past number of years have helped put the US in the economically fragile situation that it is in today.

koozdra said...

Exactly Introvert. We could be in a serious recession right now.

What is worse a protracted recession or a temporary fix that will kick the can down the road?

Ben can kicker Bernanke

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

It's funny that we're worrying about debt when our oceans, for example, will soon be unable to support the marine species upon which we have come to rely.

caveat emptor said...

Blaming Ben Bernanke for the current mess in the US is ridiculous. The roots of their crisis go back way before Ben. Better to blame Alan Greenspan, the Ayn Rand disciple. You can probably attach some blame to every administration at least from Reagan on.

There was and is no way that monetary policy alone will "fix" the US economy. That said low interest rates and easy money really is an appropriate response even if it annoys the goldbugs and doomsayers.

Don't expect a radical change from Yellen. If confirmed she will most likely do a good job with the difficult cards she has been dealt.

dasmo said...

"That is shortsighted and lacks logic. Buying at near peak prices with historically low interest rates is never a good idea."

Well... the above is not logic at all, it's prophesy...

My basic logic says I saved 20% off the price of the house I bought now, in reality, not if or when. I'm OK with that.

Chris said...

That’s nothing, I saved 40%!! on the silver coin I bought in 2012 compared to its 2011 price. Unfortunately it’s down another 30% from where I bought it ;(

Introvert said...

What is worse a protracted recession or a temporary fix that will kick the can down the road?

The U.S. isn't in recession.

It's hard to discuss a topic when basic facts aren't known or perhaps acknowledged.

koozdra said...

Bernanke et al. did the only thing there was to do. The question is will it work? I don't think it will.

Low interest rates hide the underlining ugliness of the recession.

Add a some low interest rates, sprinkle a dash of record high consumer confidence and simmer till we have the highest debt levels seen in Canadian history. Let's call it a "recovery".

koozdra said...

"The U.S. isn't in recession."

Using the strict definition, I agree.

Remove QE and raise interest rates and we'll see what is really happening.

koozdra said...

Janet Yellen says U.S. economy needs to be stronger

"A close ally of Bernanke, Yellen has been a key architect of the Fed's efforts to keep interest rates near record lows to support the economy."

Great news.

Introvert said...

Blaming Ben Bernanke for the current mess in the US is ridiculous. The roots of their crisis go back way before Ben. Better to blame Alan Greenspan, the Ayn Rand disciple. You can probably attach some blame to every administration at least from Reagan on.

Indeed. But don't forget to include: Glass-Steagall, a purposely underfunded and toothless SEC, lack of campaign finance reform, rampant gerrymandering, armies of lobbyists, innumerable tax loopholes for the rich, indefensible corporate subsidies, and "too big to fail." And before long we can add Citizens United to this list.

Introvert said...

Remove QE and raise interest rates and we'll see what is really happening.

What is really happening is that unemployment is too high and the economy isn't growing fast enough.

Introvert said...

Desperate renters desperate for higher interest rates.

Only a combination of rereading Atlas Shrugged, reminiscing about the 1980s, and performing breathing exercises can keep them from exploding.

Renter said...

@Introvert
...rereading Atlas Shrugged...

That seems unnecessarily cruel. I wouldn't wish that on anyone.

Introvert said...

Best cartoon I've seen in a while.

koozdra said...

If it makes you feel better, a depression will be great for the environment. We won't be chucking our iphones in the trash ever couple of months.

dasmo said...

"That’s nothing, I saved 40%!! on the silver coin I bought in 2012 compared to its 2011 price. Unfortunately it’s down another 30% from where I bought it ;("

Do you really think house prices are going to plummet over 50%?

Anyway, I'm not speculating. I'm living my life... Would I call someone insane who invested all their money into the capital city center? YES! Would I ever buy a condo pre-build in the hopes of flipping it? No, are you nuts!

Marko said...

For example, let's say you paid $600 K in 2012 instead of waiting for the price to decline to $480 K. If you had waited, you would have saved $120 K. However, $120 K x 2.5 = $300 K.

20% drop....after 6 years of flat doesn't seem all that likely anymore.

Chris said...

“I’m living my life”...by commenting an average of 5 times daily on a housing blog?

“20% drop....doesn’t seem all that likely anymore.”
I could fill a grand cahier of properties that have already dropped that much.

dasmo said...

"“I’m living my life”...by commenting an average of 5 times daily on a housing blog?" True, I admit that posting here is the act of a loser with no life...

CS said...

The U.S. isn't in recession.

It's hard to discuss a topic when basic facts aren't known or perhaps acknowledged


So US median household income is down by more than $4000 since 2007, US workforce participation rate is at a 35-year low, but we, the US at least, are not in a recession? LOL.

Officially, we are not in a recession because GDP adjusted for inflation, but not immigration, is feebly positive. That's after fiddling the numbers by the consumer price index with all those hedonic adjustments because the latest i-phone has more ram or pixels or square inches of screen than the last version.

The reality we are in a recession without foreseeable end as jobs continue to be off-shored to collapsible garment factories in Bangladesh, iphone assembly plants with nets to catch suicidal workers, etc., while other jobs from car plants to supermarket checkouts are eliminated by substituting people with robots.

Under the circumstances a strong housing market is vital. It maintains a labor-intensive construction industry and domestic demand for lumber, cement, steel and drywall.

If Info's predictions about a RE crash prove correct, we're gonna be in real trouble. But one thing we can bet on is that an objective of government policy will be to prove the RE bears wrong.

Leo S said...

"Adjusting for population would make this look much worse." Nope, since population adjusting the number of listings would cancel it out

Sales are near all time lows when you consider population, while listings are in a middle ground and inventory is near top levels.

patriotz said...

Do you really think house prices are going to plummet over 50%?

Not the prices, but household net worth, just as happened in the US. Leverage, you know.

caveat emptor said...

Not the prices, but household net worth

Canadian home owners in aggregate have 70% equity in their homes. I believe that figure includes the 39% that own outright. So as a VERY rough estimate you would need a 35% fall in prices to cause a 50% fall in net worth. This assumes no other source of net worth (no financial assets or savings). Of course some of those financial assets are likely to fall too in a scenario where real estate drops 35%.

info said...

"20% drop....after 6 years of flat doesn't seem all that likely anymore."

A price correction/crash of (a minimum of) 20% is a certainty.

In 2008, 5-year mortgage rates were at 5.89%. Very recently, 5-year rates were at 2.64%.

House prices in Victoria are currently at (approx.) 2008 levels.

In 2008, it was only necessary for rates to be at 5.89% to maintain prices. By 2013, it was necessary for rates to be at (an historically low) 2.64% in orer to maintain the same (2008) price level.

House prices in Victoria have already "crashed". Call it an "invisible crash" if you want. The exact wording doesn't matter.

In effect, the buying power has increased dramatically (doubled?) since 2008 and that should have resulted in much higher house prices. However, that didn't happen. Instead, Victoria's housing market went through an "invisible crash".

With rising (or even steady) 5-year rates going forward, house prices in Victoria will fall dramatically, reflecting the losses of the "invisible crash" that Victoria's housing market has already undergone.

Marko said...

A price correction/crash of (a minimum of) 20% is a certainty.

Really, can you give me a timeline of this certainty?

SJ said...


2228 Tashy Place in Arbutus just sold for $581,000 after its initial listing price of $725,000. It was on the market for 103 days.

That's a 20% drop for that buyer.

patriotz said...

10% off the assessed value of $647,000. Just desserts for listing at 10% above.

Marko said...

2228 Tashy Place in Arbutus just sold for $581,000 after its initial listing price of $725,000. It was on the market for 103 days.

That's a 20% drop for that buyer.


I've never understood this type of argument....if I list my $200,000 condo for $400,000 and eventually it sells for $200,000 did it drop 50%?

totoro victoria said...

Invisible crash... nice. It goes well with "crash" when "imminent" has become patently absurd.

Now you just have to find a way to work in "massive" and "unprecedented".

As for future "certainty", keep saying stuff for years and eventually there will be a downturn. Even a broken clock is right twice a day.

Leo S said...

Invisible crash... nice. It goes well with "crash" when "imminent" has become patently absurd.

The logic is correct though. The buying power of home buyers has increased massively from 2008 to now, and yet prices are lower. Clearly things were quite overvalued back then. The interest rate drop was the only thing that prevented a large downturn in prices. It does not logically follow that prices will now decline if interest rates rise modestly (since income has grown since 2008), but the first part is definitely true.

totoro victoria said...

There is a big difference between calling an "invisible crash" and saying that prices have been flat. Particularly if you have been predicting a huge drop in prices for years which has not materialized.

I agree that the lack of increase in prices is significant in terms of inflation.

It is not; however, a massive unprecedented doomsday US-style crash that has been promulgated with absolute certainty.

Gary said...

Housing experts say progress on Nanaimo’s new conference centre hotel has put the city on the cusp of a real estate revolution.

"the hotel is the next stage in the development of the city, likely doing for us what Expo ’86 did for Vancouver – spread the word about Nanaimo and prompt population growth."

http://www.nanaimobulletin.com/news/227084891.html

Gary said...

I'm not sure how they estimate how this Nanaimo hotel will attract 70,000 new visitors.

If we assume that the hotel has about 180 rooms (average for 21 stories). The occupany rate of Nanaimo hotels is about 55% - so we'll generously give this new one 60%. The average length of stay per guest is about 2 nights. And there is usually 1.5 people per room. That gives me an estimate of about 29,500.

So, these are new tourists that would be coming over to Nanaimo just to visit the new hotel? They wouldn't be tourists that would otherwise be already coming over and staying at other hotels in the area? I really doubt if it would increase tourism by much. New hotels are usually built because of need. There not like magical baseball fields - build them and they will come. Boy, someone is selling City council a bunch of crap.

And as expected, the local realtors are jumping on the building of one hotel as the salvation of an anemic real estate market and it's now going to be the next target of HAM. Buy now or forever be priced out! The yellow helicopters are coming!

Introvert said...

There is a big difference between calling an "invisible crash" and saying that prices have been flat. Particularly if you have been predicting a huge drop in prices for years which has not materialized.

I agree that the lack of increase in prices is significant in terms of inflation.

It is not; however, a massive unprecedented doomsday US-style crash that has been promulgated with absolute certainty.


That was well said, totoro.

Marko said...

The logic is correct though. The buying power of home buyers has increased massively from 2008 to now, and yet prices are lower. Clearly things were quite overvalued back then. The interest rate drop was the only thing that prevented a large downturn in prices. It does not logically follow that prices will now decline if interest rates rise modestly (since income has grown since 2008), but the first part is definitely true.

and we will ignore all the mortgage restrictions introduced in the last 6 years that have had an offsetting effect on lower rates?

Introvert said...

There is almost no credible evidence showing that higher interest rates will soon be upon us.

vawr said...

@totoro

Please identify the promulgator who said that there will be a
"a massive unprecedented doomsday US-style crash" or is that just a rhetorical flourish on your part?

caveat emptor said...

"a massive unprecedented doomsday US-style crash"

Not an unreasonable paraphrasing at the very least.

Personally my real estate holdings are undergoing an invisible boom. Totally invisible. But definitely a boom nonetheless

totoro victoria said...

You can review past comments by scrolling down on the main page.

If you do, you will see that there is no flourishing, and perhaps even some understating. I'm sure there are some frequently used adjectives I have missed.

If you decide continue to follow this board you will draw your own conclusions.

I would guess you have not done so for long or you would not have posted the comment you did.

Introvert said...

vawr, are you playing dumb or are you really?

Jack and Cate said...

Gary and Nanaimo Hotel -

_____________________________________

Gary, Nanaimo had another "planned hotel" fall through last year/early spring in the same location and have been shopping this idea around again.

Nothing to see here - move on....

info said...

"It does not logically follow that prices will now decline if interest rates rise modestly (since income has grown since 2008), but the first part is definitely true."

Incomes have been rising since 2008. Any increase in incomes since 2008 has not had anywhere near as strong of a price boosting effect as the dramatic (2008 - 2013) rate decline. Going forward, the loss of the (very strong and dominant) price boosting effect of the dramatic (2008 - 2013) rate decline will be an overwhelmingly strong downward force on house prices and will simply overpower the effects of any increase in incomes.

That (slightly) rising incomes have not pushed house prices higher since 2008 is more proof that Victoria's housing market has undergone an "invisible crash" over the past 5 years. Victoria's housing market missed out on the expected price gains that should have resulted from rising incomes since 2008.

As well, Victoria house prices should have moved higher since 2008 as a result of inflation, but that didn't happen either. This is even more proof that an "invisible crash" has already happened. Victoria's housing market missed out on the expected price gains that should have resulted from inflation since 2008.

For those of you who are expecting incomes to save Victoria's housing market from dramatic price declines, think again. Incomes in the US are still lower than they were at the beginning of 2008. As the US housing bubble deflated, the economy took a big hit and incomes decreased. The same will happen in Victoria and the rest of Canada once the Canadian housing bubble begins to deflate.

info said...

"Personally my real estate holdings are undergoing an invisible boom. Totally invisible. But definitely a boom nonetheless"

If you own a house in Oak Bay, that house has already lost about 9% since the peak in 2010.

As Just Jack stated, the SFH Oak Bay median for the first 6 months of 2013 was 8% lower than the median for the first 6 months of 2010. This calculation actually missed the peak comparison which would likely be at least 1% more (9%).

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

@ totoro

"a massive unprecedented doomsday US-style crash"

I challenge you to "review past comments by scrolling down on the main page" and find this comment.

What evidence is there that Canada will not go through a "massive unprecedented doomsday US-style crash"?

Comparisons between the current Canadian housing bubble and the 2006 US housing bubble are competely valid. Both bubbles were inflated by the same basic mechanism - excess credit due to lax lending standards.

The Canadian housing bubble is much bigger than the 2006 US housing bubble (much more on that very soon).

The Canadian housing market is certainly set up for a bigger correction/crash than the US housing market was in 2006.

soperj said...

I'm surprised introvert that you can subscribe to the whole global warming apocalypse when there has been no warming for 15 years, but can't subscribe to the real estate apocalypse because of only 5 years of flat lining. Maybe a bit of vested interest?

soperj said...
This comment has been removed by the author.
Leo S said...

and we will ignore all the mortgage restrictions introduced in the last 6 years that have had an offsetting effect on lower rates?

No. Compared to the interest rate changes they have not had as large an effect. See here (last chart on that article).

caveat emptor said...

@info
I do not own a home in Oak Bay. And do not waste your time trying to see the invisible boom. It's invisible. Get it?

caveat emptor said...

The Canadian housing bubble is much bigger than the 2006 US housing bubble (much more on that very soon).

Good idea. I don't think you have posted (pasted) on that topic before

Nathan Stretch said...

There is almost no credible evidence showing that higher interest rates will soon be upon us.

Exactly. The best estimate of future interest rates, as always, is current interest rates. Will they eventually be at a higher level than currently? Most likely, of course. Despite the common wisdom that interest rates only have one way to go though, it is far from a certainty that they will do so at any given time, and in fact there is no guarantee that they won't fall again first.

I agree that it is unlikely real estate will see a large positive spike in the near future. However, it seems to me that a continued relatively flat period while incomes catch up is at least as likely as a significant (20%+) drop from today's levels, particularly since the government will likely do everything it can to make it so. A return to long-term average levels could happen in either manner (among others).

info said...

I have said many times that steady rates will result in falling prices in Victoria. The removal of the price boosting effect of dramatically falling rates will be a downward force on prices that increases in incomes will not be able to match.

totoro victoria said...

I don't know why I engage but okay info, here are some pithy quotes from you picked randomly from the June 3, 2013 blogpost comments:

"I always laugh when people say that Canada is different. I usually tell them that what they don’t understand is that the US isn’t different."

and

"It's interesting that there are still some people out there who deny that Victoria's housing market is correcting."

and

"Nothing supports the view that the housing market in Victoria will not crash."

and

"The big price plunges for Victoria are still coming down the pipe."

and

"Canada's housing market will crash/correct without inflation or deflation. All national housing bubbles do."

Seems to equate with the fact that you have been stating there will be a US-style crash in Canada. Or have you changed your views to an invisible crash now?

vawr said...

@introvert

"vawr, are you playing dumb or are you really?"

Neither, but your insecurity needs attending to.

vawr said...

@totoro

I see you took up info's challenge. Not surprisingly, you only reference 'info' as the promulgator. No where did info say that there will be "a massive unprecedented doomsday US-style crash".

So, a little bit of hyperbole on your part instead of rhetorical flourish?

What is surprising to me is how info has gotten under your skin and upset your normal thoughtful demeanor.

Marko said...

If you own a house in Oak Bay, that house has already lost about 9% since the peak in 2010.

As Just Jack stated, the SFH Oak Bay median for the first 6 months of 2013 was 8% lower than the median for the first 6 months of 2010. This calculation actually missed the peak comparison which would likely be at least 1% more (9%).


What percentage of homes in Oak Bay traded hands in the first 6 months of 2010?

If I buy something, it doubles, then drops 8%, I don't think I am going to sweat it too much. I've had a lot of luck in the stock market but even with huge portfolio gains only 2 out of my 9 holdings are within 8% of all-time highs.

The real estate market, much like the stock market, is not linear.

What happened in the first half of 2010 was a blip and not a sustained peak.

Jack and Cate said...

Dinas Vawr = Anglicized spelling of a fortress of bogus historicity

- enough said....

info said...

@ Marko

You must be ignoring what I've been writing about on this blog for the past week.

Again, house prices in Victoria are currently at (approx.) 2008 levels.

Prices have gone no lower than 2008 levels only because of the massive, dramatic (2008-2013) mortgage rate decline.

The dramatic (2008-2013) rate decline has been the (major) force that has been pushing upward on (level) prices over the past 5 years, preventing them from dropping below 2008 levels.

However, that strong upward force is now gone. The dramatic decline of 5-year rates is over.

Without the incredibly strong upward force of dramatically declining rates keeping prices from dropping below 2008 levels, prices will definitely fall below 2008 levels.

There is no need for 5-year mortgage rates to increase to cause prices to fall below 2008 levels. All that will be necessary is that rates stop declining. Rates have stopped declining.

The most likely scenario for 5-year rates is that they continue their upward journey to the long term average, which is 7-8%. However, again, level rates will be enough to cause prices in Victoria to fall.

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

@ Marko

"What happened in the first half of 2010 was a blip and not a sustained peak."

What happened in the first half of 2010 was that the Victoria housing market peaked. House prices in all areas of Greater Victoria have fallen (and will continue to fall) from the peak.

In 2010 when prices were peaking, Victoria realtors were, no doubt, using the recent rise in prices to talk people into buying now (before they got priced out forever).

And now, Marko, you are trying to minimize the significance of the peak to make the market appear more stable.

Typical realtor BS.

info said...

@ totoro

How dare I say anything that is contrary to your expectations with respect to the future performance of the Victoria housing market (a market that you are heavily invested in).

Robert Shiller, the famous economist who predicted the collapse of the US housing market, had some thoughts on the future of the (bubbly) Canadian housing market:

"I worry that what is happening in Canada is kind of a slow-motion version of what happened in the U.S."

Perhaps I'm not the only one who is predicting a significant correction/crash for housing markets in major Canadian cities.

Marko said...

Typical realtor BS.

Really? This is what I predicted 10 months ago...

VREB Sales for 2013: 5950
6 month SFH average in Dec 2013: $580,000
BoC overnight rate Dec 2013: 1.0%
Average MOI for 2013: 9


1/ Sales will be within +/- 50 of 5950.
2/ 6 month SFH average will be well over $580,000.
3/ BoC overnight rate will be 1.0%
4/ Will be very close.

At the end of the day my BS is a lot more accurate than your BS.

Marko said...

Perhaps I'm not the only one who is predicting a significant correction/crash for housing markets in major Canadian cities.

No, but you are the only one who thinks by posting the same thing over and over again on a local blog will somehow influence the market.

info said...

@ Marko

The average and median would be much lower without extreme skewing. Did you predict that the average and median would be skewed as much as they have been this year? Skewing has produced a false impression about the health of Victoria's housing market.

Marko said...

The average and median would be much lower without extreme skewing. Did you predict that the average and median would be skewed as much as they have been this year? Skewing has produced a false impression about the health of Victoria's housing market.

Okay, if it makes you feel better you keep telling yourself that "extreme skewing" is behind the flat numbers.

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.

CS said...

@Info:

In 2008, 5-year mortgage rates were at 5.89%. Very recently, 5-year rates were at 2.64%.

House prices in Victoria are currently at (approx.) 2008 levels.


So if mortgage rates fell by almost 50% between 2008 and 2013, while supply remained more or less constant, it is evident that affordability is not the sole factor controlling price.

The only variable that seems to explain flat prices with increasing affordability is declining demand. Is this a consequence of the increased supply of condos., which provide a lower-cost alternative to purchasing a house.

It might be instructive to look at the statistics, to which unfortunately, I have no access. In particular: have condo sales increased relative to house sales since 2008, and if so, what are the likely future trajectories of condo and SFH sales?

Just Jack said...

For my two nickels worth, I agree with CS, that this is a demand-driven downturn. Interest rates while important are just one of the many factors affecting value. And I wouldn't put rates at the top of the list either.

Consumer confidence, unemployment, population decrease and vacancy rates I consider to have as great or greater importance than the interest rate.

Last week I spoke to a lady that has 5 rental properties in Sooke. Two are vacant and she hasn't been able to lease them up. She is considering dropping the rents by 15 to 20 percent to get a tenant.

In a city with people that are house rich and income poor, rising vacancy rates and dropping rental rates have the potential of pushing the "handyman" landlord into bankruptcy.