Friday, November 1, 2013

The VREB discovers price skewing

You may have noticed that the VREB has a new trick up it's sleeve.  It's the MLS Home Price Index (it's a home silly, not a house like that heartless Teranet index says).

The MLS HPI is a repeat-sales index quite similar to the Teranet index.  However unlike the Teranet, they separate it out into "benchmark" single family homes, townhouses, and condos.  They also have separate data for the various regions, not just greater Victoria as a whole.

With this new information, the VREB has come to accept the skewing of medians and averages that we've talked about here for a few months already.  “Past reporting of averages and medians showed flat pricing across the Board’s trading area but MLS® HPI indicates a moderate decline in prices in many markets over the last year,” says VREB's Shelley Mann.   
So prices continue their slide at a rate of 3-5% a year depending on where you live.

Overall the HPI tells us nothing we don't already know.  Prices on a slow downward slide since 2010.  Victoria the weakest market in the country.  Over 5 years, prices are down 5.6%.



Update:   So how does the new MLS HPI compare to our existing measures of the market?   Pretty similar, but surprisingly the MLS HPI is the most pessimistic of the bunch.  Note that this is the SFH median, while the two indices are comprised of all properties.


Based on the SFH median we are down about 8% from peak.  According to the Teranet we are down 5%, and the MLS HPI says we are down 8% as well.

154 comments:

totoro victoria said...

Here is the link for benchmark home prices in greater Victoria:

http://www.vreb.org/mls_statistics/current_statistics.html

Sidney condos and Gulf Island properties appear to be down the most as JJ has previously pointed out.

Sooke, Langford and Colwood are down more than other areas. View Royal seems to have held its value well.

The benchmark house in Oak Bay was $795,900 three years ago, and is $754,500 today. A benchmark house in Victoria was $593 000 three years ago, and is $563,100 today.

I like how the information is presented.

Leo S said...

>> I like how the information is presented.

Yes I also like information published as inaccessible PDF, with no word lost on accuracy, or even sales pair counts that the index is based on, and no way to verify the information. I also enjoy month to month comparisons, and unclear graphs. A great step forward.

So View Royal seems to have held it's value well you say? Amazing how they have been able to determine that in a region with typically 10 SFH sales a month, 3 condos, and another 3 townhouses. In many months there is only 1 condo or townhouse sold.
So from that data they are weeding out the outliers (after all, we want the benchmark properties) and then coming up with an index value and a benchmark price. All that is printed as if it has any value whatsoever with not even the smallest footnote explaining that the value could be based on a single datapoint. But dress up the pig enough and it all looks very good.

koozdra said...

"Yes I also like information published as inaccessible PDF"

Would you find the raw data useful?

totoro victoria said...

You seem quite angry this morning.

I like the chart that shows changes in the benchmark price over a three-year period. If the benchmark methodology is more accurate than median/averages as claimed, I think this chart is easy to read and provides a better insight into the market.

As for accuracy, maybe it is not accurate, but there is a statement that the methodology used has been endorsed by Statistics Canada, Canada Mortgage and Housing Corporation, the Bank of Canada, Finance Canada and Central 1 Credit Union

I agree that a link to the base data would be helpful for verifying whether the methodology is sound. As that is not my field, I'll wait for others who are more qualified to weigh in.

It seems like the underlying stats are not being provided publicly as the release states to contact a realtor for more information. Maybe Marko knows.

In any event, I'm surprised by how much prices have risen in other markets, including Vancouver.

Leo S said...

Some raw data is available at homepriceindex.ca

I don't see much value in the regional HPI data over and above what we already have (prices). Would require a long range of reports to fill in all the monthly data.

totoro victoria said...

Thanks - this is the methodology:

http://homepriceindex.ca/docs/ref/HPI_Methodology.pdf#View=FitV

koozdra said...

In appendix C of the methodology document they define property types. However suites are never mentioned.

What is a house with two kitchens and two separate entrances?

Apartment units:
"Apartment units are characterized by being part of a multi-unit building. Occupants of apartment units
may or may not have direct access to the lot from their units. There are also no parts of the lot whereby
access is reserved for only one of the co-owners or apartment occupants. Several type of homes within
this category had originally been duplexes and triplexes and are now treated as condos or apartments
according to a formal declaration of co-property.
This category includes Property Styles submitted by Participating Boards labeled as: Single Level
Apartment, Multi-Level Apartment, Loft, Penthouse, Duplex, Triplex and Studio Suite. "

In appendix B there is a link to a xls. Doesn't really clear anything up though.

Leo S said...

In any event, I'm surprised by how much prices have risen in other markets, including Vancouver.

I'm not.

Leo S said...

>> You seem quite angry this morning.

Not at all, I just find it funny how you are very happy to accept without question these numbers if they are published by the VREB, despite the fact that the regional numbers for regions with so few sales are at best extremely poor, and at worst completely useless.
Surely you agree that an index based on only a couple sales is of no or very limited value. Hence the reason why I left those regions out when looking at prices.

totoro victoria said...

I said I liked how the information was presented.

I made no claim as to its accuracy or validity or whether there was enough data to be meaningful. I have no idea about that.

I'm not sure if View Royal stats are accurate. If there are 120 sales per year for SFHs and you are comparing year over year over a five year period based on a "benchmark home" maybe that is a more accurate measure than medians.

Is 120 sales per year too little data to be useful to determine what is happening for prices for SFHs in a sub-area based on medians or benchmark? Again, I don't know.

poobserv said...

It is possible that the direction of the market will be determined by supply and demand. According to the stats just released (naively taken at face value), listings dropped by about 1000 from Nov. 1, 2012 to Feb 1, 2013 when listings hit a low point for the year. Is this performance likely to be repeated? Can anyone give an educated guess as to what the listing count is likely to be Feb 1?

Thanks.

Just Jack said...

I began reading about the derivation of the HPI, then started to scan through the document quickly. Boredom set in.

A lot of the mumbo jumbo is simply common sense expressed in mathematical terms. And ways to improve the quality of data when there isn't enough sales in an area during a month.

I think some of the assumptions made are questionable. Attached and detached homes in my experience behave differently and shouldn't be lumped together.

A two-storey home is a composite of a basement entry home that may or may not have a suite AND a home where the bedrooms are above the main living floor. Those again, in my experience, are two different markets that don't act in unison. Quality of construction or if the home is a starter, middle income or upper income property isn't accounted for.

There is some selection made of data to scrub anomalies. Along with other things that make it impossible for a third party to independently verify the data.

But the HPI will work to show a direction in market value. Its reliability as a predictor of the value of your home in relation to when you bought and another date may not be relevant or valid.

This isn't the way I would do it. But the real estate board is constrained to show monthly data increases and decreases by specific neighborhoods and that's why there is so much math. If the data was grouped not by month but by blocks of the last 250 or 500 properties that sold - most of this math would not be needed. Also, the neighborhood borders are a bit arbitrary. The physical composition of the house is more important than if it is situated in Mount Tolmie or Mount Doug.

As for the markets for one-storey and two storey being different. If the real estate board would provide the main floor area and the total area and not just finished area - that would greatly improve the data when expressed as a price per square foot.

The HPI is a statistician's wet dream. And for the guy on the street, the results are easy to understand and the graphs are nice looking. I think the HPI will be good to show the velocity of the market. If it is speeding up or slowing down.

Anyone wanting to do a qualitive analysis of the market would have to do their own analysis with access to the raw data. Data that can be reproduced and verified by a third party.

Just Jack said...

There are seasonal cycles to real estate. The seasons generally follow a pattern unless there is some kind of intervention or shock in the marketplace.

The month of February is the Winter market and it's characterised by low sale volumes and low inventory.

One of the tricky things to do is project what prices will be 90 days from now. It isn't just current supply and demand but the durration of how long the market has been increasing, declining or remaining stable.

Looking at Months of Inventory or its inverse the Sales to Active listings ratio along with the Sales to New Listings ratio and the velocity of the change in prices during the last four quarters, and accounting for past seasonal differences would give you a solid estimate. But then the government drops interest rates by a quarter percent and everything you've done becomes shite.

Leo S said...

I'm not sure if View Royal stats are accurate. If there are 120 sales per year for SFHs and you are comparing year over year over a five year period based on a "benchmark home" maybe that is a more accurate measure than medians.

Except that the index is calculated monthly. So unless it is using all of last year's data (which, given how responsive it is to short term changes we can be pretty sure it isn't) it is being based largely on the sales of that month.

You can't overcome the quality of the data. Calculating a "benchmark condo" price for micro regions with one or two data points is pointless.

Leo S said...

The HPI itself is fine, just another index to confirm what we already know (and this one seems a bit more pessimistic than Teranet). Just don't expect anything useful when you process a handful of sales from the smaller regions. There still aren't enough to come to any conclusion.

info said...

@ Leo

I have different results than you for the MLS HPI total decline from peak.

The decline from peak for the composite HPI is -9.92% and the decline from peak for the single family HPI is -9.67%.

Marko said...

View Royal hasn't held value any better relative to other areas. I showed a home listed at $650,000 in View Royal the other day and it was purchased a few years age for $747,000. Had clients buy a townhome in View Royal last month for $430,000. Purchase for $529,900 in 2011.

info said...

@ totoro

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

Info: August 29, 2013 at 3:46 PM"

"Except that it hasn't crashed like in the US and we have a number of key differences such as our lending system. We'll see."

Canada's housing bubble is much larger in comparison to the 2006 US housing bubble. I will do a complete presentation for you (and others) soon.

The exact mechanism as to how a housing bubble is created is irrelevant, a bubble is a bubble and there has never been a national housing bubble that has not burst and corrected/crashed significantly. The deflation of every housing bubble in history has caused extreme financial distress to the economy and to those who bought at the wrong time.

Canada's housing bubble will burst and the deflation of the bubble will be no different, in general, than it was in the US, Spain, Ireland, etc..

Upper end SFH prices in Victoria are down over 10% already and lower end SFH prices are down almost 15%. Victoria's correction/crash will likely be the worst of any Canadian city.

info said...

@ caveat

"You are missing the point about the bearish real estate predictions of Canadian banks. It doesn't matter whether or not their timing was correct, all that matters is that Canadian banks are bearish on Canadian real estate."

"And you are missing the point that posting already wrong predictions does nothing to bolster your credibility.

TD predicted something would happen in a given time frame. It did not happen. That means their prediction was wrong. It is NOT a difficult concept."


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

"A reasonable person would interpret "then sales will tank" as meaning sales would quickly decrease.

But now we hear that "the sales boosting effect of the rate hikes will taper off in a gradual manner."

So a question for you info. Does "tanking" and "tapering off gradually" mean the same thing to you or did you change your prediction?"

You keep going on about one of my predictions that you think is wrong. It was simply a matter of semantics. Even if you could pin an incorrect prediction on me, it couldn't possibly be enough to lessen my credibility.

Relax. You are probably upset because I revealed that SFH prices in the upper end of the market are down over 10%.

Just Jack said...

If there isn't enough data in View Royal that month, then the person developing the HPI can use sales in other neighborhoods that have acted similar manner to what View Royal has done in the past.

You'll never find one neighborhood acting completely independent of adjacent hoods.

I think the HPI number will be good supportive evidence of market conditions. And reliable to show how quickly prices are acelerating or decelerating. However, I doubt that the HPI would be reliable to show how a specific home has performed in the marketplace.

If your home is for example 20 percent larger in house and lot size than the typical or a new home in an area of character homes, or a renovated home, then the HPI may not be that reliable.

The HPI should be tested using re-sales of the same home when they occur. That would provide a quality control.

I wouldn't throw away the use of medians and averages just yet. They have there place, especially if you are looking at a specific property and how the market for that style, age and size of home has changed through time.

caveat emptor said...

"and the MLS HPI says we are down 8% as well."

Looks more like 10% from your graph

koozdra said...

What is the point of a depreciation report? Why is the government stepping in and legislating that stratas must plan for future repairs?

The point is that condo owners cannot be trusted to have savings when the time comes for a special assessment. Just like their land based compatriots they require a forced savings plan.

As a libertarian Marko vehemently denounces higher strata fees. I'll just have the money when the time comes. Trust me, he says.

Yet we live in a reality where credit is increasing and savings rates are decreasing.

In our real estate fiasco people see their property as the only savings vehicle they need.

She: "can we really afford to pay this much for a condo?"

He: "don't worry about the price. interest rates are low and when we sell we'll make all the money we need for our dream home."

Hell, I've even heard sentiment that paying down a mortgage is becoming fruitless. What's the point? When you sell you are going to make big bucks.

The lesson here is that fiscally conservative Markos are few and far between. Special assessments will mean big trouble for the pillars of our economy, the middle class spender.

PD said...

The part I don’t like about the depreciation reports is the engineers doing the reports are usually the same people who remediate buildings. For instance RDH Building Engineering has remediated tons of buildings in the lower mainland and island and now they get to tell stratas in detailed costly reports that, you guessed it, the stratas are going to need their services yet again! Who would have guessed. No conflict of interest there.

PD said...

On the topic of condos, the most entertaining misconception I hear over and over again from my neighbours & family “I would never buy a condo cause they have them strata fees”. I always tell them “A house has maintenance fees too, it’s just that most house owners never consider or budget for them, never account for their time & labour, and make themselves believe they love cutting lawns and repairing roofs.”

The ‘economies of scale’ of maintaining a condo will always beat a house over the long run. In other words, the ‘strata’ fees of houses are higher than condos. Example: Joe Shmoe reshingles his house for $5000. Candice Cando’s roof costs $100,000, but she only pays $2500 since there’s 40 units in her building.

Just Jack said...

What you'll end up with is condominium complexes with fat contingency funds situated on expensive multi-family zoned land. Properties not being bought for home occupation but investors looking to collapse the strata, rob the contingency fund and sell off or redevelop the land.

Strata corp raiders.

The land value that these 1970's James Bay and Fairfield delapitated condo complexes are sitting is close to what you might pay for all of the condos combined. If I were a developer I would offer a swap to the owner's of these older condos for a new unit of equal value that I just built.

Then run the 1970's condo complex as a rental and pocket the contingency fund.

Just Jack said...

On the other hand, why is it necessary for the strata council to build up such massive contingency fund for future replacements.

If the government instead legislated that the Strata Council could get bank finiancing and the lender would be paid back through a lien on the monthly strata fees. Then the Strata council could amortize any repairs as they became necessary over the next 30 years.

Isn't that how an owner of a 1970's apartment building pays for repairs?

totoro victoria said...

Janion microcondos 80% sold yesterday - 100 people lined up at a time...

http://www.timescolonist.com/victoria-s-downtown-boom-population-7-170-and-growing-1.682942

patriotz said...

The ‘economies of scale’ of maintaining a condo will always beat a house over the long run

The rebuttal to this post is your own previous post. An individual condo owner is not in control of maintenance issues or expenses and is unable to avoid conflict of interest issues or sweetheart deals.

An individual home owner is. That some homeowners may not properly account for expenses or maintain properly is beside the point. I am not "some homeowner".

PD said...

Great points Jack!

Re: Janion, my guess is 2013 will be looked back upon as our bottom. Past bottoming cycles have taken 5 years; 81 to 86, 93 to 98, US 06 to late 11, Alberta 07 to 12. I have our de facto blowoff top as 08, thus it wouldn’t surprise me if this year turns out to be our bottom. Some segments got hit hard this cycle, some didn’t. To Torontonians/Calgarians & many immigrants, much of Victoria is a steal. I’ve also noticed more Americans looking, as they’re up 20+% this past year.

Heck, even Nanaimo & Comox Valley prices are up 7-8% over last Oct, and sales are up 30+% across the island.

koozdra said...

"Janion, my guess is 2013 will be looked back upon as our bottom."

Haha, good one. While the rest of the country is sky rocketing in price our market continues stagnate. Let's wait to see what happens when the other markets start to stagnate. This "bottom" will seem like the last hurrah.

The janion is selling because it is cheap and it is real estate. Combine those with a blind faith in real estate and you have profits for the developer.

Just Jack said...

80% sold in one day. Compare that to the adjoining property the Swiftsure where condos take on average 43 days to sell and the success rate is at 50% with only 7 of the 14 condos listed for sale in the building selling in the last 12 months.

So how did this miracle happen that 80 micro condos could sell so quickly in the dowtown area. An area that has typically sold 20 condominums per month for the last six months. A downtown area that has almost 6.5 months of unsold condominium inventory available?

A downtown area where other micro condos are being foreclosed on and taking 3 months to sell at $166,000 or about $368 a finished square foot.

Yet one single building comes close to matching all of the condominium sales for all of last month in the combined areas of Victoria, Vic West, Oak Bay, View Royal, Saanich East and Saanich West.

We will never know - because there is no way you or I can find out. We have to believe what we are told.

Feel like a mushroom?

Marko said...

We will never know - because there is no way you or I can find out. We have to believe what we are told.

I personally know many people that bought into the Janion. If you visit VV there is a blogger who purchased two and his parents one.

I don't have a reason to suspect the numbers. At least 10 people have asked me about the $110,000 plastered on the Janion.

Good idea, clever marketing, and affordable entry point = sales.

Value? Up for debate. Not cheap per sq/ft. Not sure if it was worth sleeping on the street for.

patriotz said...

If you visit VV there is a blogger who purchased two and his parents one.

Well of course nobody has actually purchased anything. They have made a commitment to buy in the future, which means they don't have to deal with inconveniences like mortgages (today, that is). Clearly the goal for many is flipping the pre-sale.

It seems to me that the developer has come up with a "kiddy-pack" version of condos for small time flippers.

Marko said...

^ same person said

My plan is to keep one for personal and friend use and rent the other. I don't think trying to buy a unit for 130 and selling it for 140kish minus 6 per cent is worth anyone's time.

CS said...

Re: "investors looking to collapse the strata"

How's this done. Is it just a majority vote, or what?

CS said...

Re: "investors looking to collapse the strata"

How's this done. Is it just a majority vote, or what?

caveat emptor said...

@info
Even if you could pin an incorrect prediction on me, it couldn't possibly be enough to lessen my credibility.

:-)

caveat emptor said...

Interesting that the metric produced by the realtors (often accused of fudging the data) is actually the most pessimistic of the three measures. That said the difference is slight (once the medians are smoothed) and all have the same pattern. Either flattish since early 2008 or crashing since mid 2010 depending on your timeframe.

I'm curious about the recent divergence between the Teranet and MLS HPIs. The current difference between the two is close to its maximum in the short history of the two.

Just Jack said...

Dissolve would have been the more accurate word than collapse. A special resolution to pay out the strata holders using the units upon destruction schedule in the strata documents.

An investor can approach the strata with a condominium swap, cash or combination of both. Or any other imaginative offer that presents itself. If the investor is successful and has enough strata votes he can pass a special resolution to dissolve the strata corporation.

The building can be used as a rental building with minimal converting or demolished for a new high rise of micro condos.

What makes these older complexes interesting is that the suites tend to be large. One suite equivalent to 3 or 4 micro condos, the builing sites are large as some have surface parking, and the properties have some of the best locations in the city.

Marko said...

Monday, November 4, 2013 8:00am

MTD November
2013 2012
Net Unconditional Sales: 37 366
New Listings: 68 706
Active Listings: 4,140 4,488

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

koozdra said...

50% off anyone? It's Ron, so probably a foreclosure. I guess Marko sees less foreclosures because he deals with a more sophisticated crowd, city folk.

Priced for immediate sale far below recent appraisal of 1.25M to reflect need for some finishing, cosmetic repairs and landscaping.

CS said...

Dissolve would have been the more accurate word ...

Thanks for the info.

Re: "a special resolution to dissolve the strata corporation."

Does this require only 50% plus 1 to pass?

Just Jack said...

You have to read the strata corporations documents. There is no standard number of votes required.

Just Jack said...

I doubt if the agent selling the property has any logical rational for a value of $599,000. Except that it is low enought to entice offers.

The $599,000 isn't necessary what the property is worth, nor if you offered full price would you get the home.

koozdra said...

The Condo Game

"The first startling revelation for many people will be how very much the condo market is focused on investor profit, not affordable housing."

Yes, "startling".

Leo S said...

The Janion... Maybe I'm being too harsh but I think a lot of the logic behind buying is "cool a condo so cheap I can pick one up and hold it as an investment". In Victoria, a condo for less than $150,000 falls into "impulse buy" territory. How many people have calculated whether that investment makes sense?

One thing we do know, the developer seems to have made a good investment!

Just Jack said...

Are we building condominiums for home occupation or are we building condominiums for investors for rentals or as a vehicle to get money out of some countries.

We get suckered into believing that because a building sells out in one day, that means there is a demand for home occupation. So we build more and more and more.

Yet a sizeable number of these purchasers are bought and remain vacant. They have become a vehicle to get money out of a country or launder money from illegal sources.

There are no records that can easily be obtained to show how many empty condominiums there are. BC Hydro once estimated that in the City of Vancouver there were over 18,000 condominiums that were only generating enough electrictiy each month to turn over a refrigerator. A report that was never repeated again.

So how do those 18,000 condominiums improve affordability or create housing? They don't.

And if its 18,000 in Vancouver. I't likely 1800 in a city one-tenth's Vancouver's size. Like in a city the size of Victoria.

It really can %$^& up a city when you are building suites that very few home occupiers want. We are left with a legacy of hundreds of empty micro condos for the next 50 years.

Now with the time change, it might be worth a gander to go downtown at dinner time and count the suites without lights on. Surely not all of these people are eating in restaurants on a Monday night.

info said...

"With this new information, the VREB has come to accept the skewing of medians and averages that we've talked about here for a few months already."

I'm not trying to take anything away from Leo's sales skew factor graph, but most readers of this blog know that I came up with the idea.

As well, I've been the only regular on this blog who has consistently included skewing as part of my posts since April, when skewing started to become, arguably, one of the biggest stories of the year with respect to real estate in Victoria.

Leo S said...

I'm not trying to take anything away from Leo's sales skew factor graph, but most readers of this blog know that I came up with the idea.

I think it is accurate that we've been talking about it. The effect of sales mix on median and average prices (which is the skew factor) has been a topic here for years. Identifying that it has increased lately was your piece and I did credit that on the article I wrote on the subject.

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

"Identifying that it has increased lately was your piece and I did credit that on the article I wrote on the subject."

True and I wasn't pointing a finger at you.

Lately, certain regulars of this blog have been attempting to attack my credibility. The intent of that post was to point out some of my contributions to this blog.

info said...

According to the MLS HPI (realtor generated), SFH prices across Greater Victoria have fallen 10% from peak.

Why should we trust sales and price data from realtors?

Most readers of this blog know that realtors have a vested interest in keeping house prices high.

Therefore, if anything, the MLS HPI data is upward biased. All we can conclude from the MLS HPI data is that SFH prices across Greater Vicitoria have fallen at least 10% from peak.

This is supported by the results of the 3-month median data for the upper (-10.6%) and lower (-13.3%) ends of the Greater Victoria SFH market.

koozdra said...

Oh stratas..

Former strata member to be sentenced in East Van condo fraud

Fiduciary said...

Most readers of this blog know that realtors have a vested interest in keeping house prices high.

Therefore, if anything, the MLS HPI data is upward biased.


False. A complete logical fallacy. A does not imply B. Please demonstrate how B is true.

Note that I am not disputing A, nor the possibility that B is true, just saying that your argument is fallacious.

CS said...

What is the point of a depreciation report? Why is the government stepping in and legislating that stratas must plan for future repairs?

A depreciation report is not mandatory, but if you don't want one you need to pass a resolution to that effect at a general meeting of the strata corporation.

Since depreciation reports have to be renewed every three years, it might be wise to pass on a report this year, when the people you'd hire to prepare the report are going to be extra busy. Next year the cost of a report, if you really want one, might be less.

CS said...

Does anyone know what a "benchmark" house is? I thought every piece of real estate was unique, but Vreb has apparently commodified housing. How has this been done?

koozdra said...

"A depreciation report is not mandatory"

Where'd you hear that?

Fiduciary said...

I should add to my piece that I don't mean to simply attack, info I appreciate that you post some good information and analysis sometimes, it's just when I see an argument made that doesn't make logical sense I feel the need to point it out.

koozdra said...

Deadline for submitting strata depreciation reports in B.C. comes in six weeks

Owen explained that depreciation reports provide a more equitable system. “So somebody can’t buy into a new strata and [say] ‘We’re going to wait for 10 or 12 years, and as the major costs start coming up, we’ll sell and buy into another new one,’ ” he said by phone. “They’re paying for that depreciation before it gets to the time that it needs a major repair or replacement.”

caveat emptor said...

They make it tough to get out of the depreciation report.

However, stratas can opt out of the requirement annually with a 75-percent vote. Those with fewer than five units are exempt.

I think the reports themselves aren't a bad idea but I question whether they need to be re-done every 3 years. Every five years would seem more reasonable.

I also don't like the idea of using the report as justification to build up a massive contingency fund that will be (mis)managed by the Strata council. Better to have a modest contingency and special assessments from time to time but telegraphed well in advance.

After all for most single family homes every repair that you can't do your self is a "special assessment". I don't know many SFH owners that have a special "contingency fund" for home repairs and maintenance.

Just Jack said...

Unfortunately we don't know what a benchmark house is. But we know the benchmark house will be different for different neighborhoods.

You won't be able to compare one hood to another if the stock of housing is disimilar. Say Esquimalt and Oak Bay.

There's lots of math to compensate for low sale volumes and some personal input by the person(s) developing the HPI each month for each hood. In fact there is a lot of wiggle room in deriving this index.

It's not the same benchmark homes that CMHC uses. They actually define the physical characteristics of the home by style, condition, quality, house and lot size.

Except for the general market overview, I can't see much use that I could make of the HPI. Possibly a cross check. On one hand it is too general and on the other too narrow that the numbers need a lot of fiddling. And it would be impossible to verify its acuracy without knowing specifically each month what data was used and how it was evaluated by the HPI program.

I suppose you could track re-sales in the neighborhood and compare that to the HPI. But that re-sale might not be a good representation of the benchmark home. Too expensive, too cheap, too big, too small.

If you were to look up the phrase Blind Faith, you would find the HPI just underneath God.

Just Jack said...

It isn't just engineers that can do these depreciation reports. Many professionals are allowed to do this work. BUT - All must have Errors and Ommission insurance. That is a must and the number one item the government identifies for anyone interested in doing this for a living.

But E & O insurance doesn't last forevever. An engineer is not on the hook for their report 10 years from now. For most professionals the rule is 5 years. If a law suit is not brought against you in the first five years - you are off the hook. That's why the government wants them done every 3 years they want to make sure that there is always someone with deep pockets to sue. And what happens when one report contradicts another report?

Gonna get messy.

I think most reports are going to suggest that the strata council double the strata fees. Which I think is bogus along with how the person doing this report comes to this conclusion. It's basically all guess work and reliance on manufacturers claims on life expectancy of the components.

This could be a BIG money maker for insurance companies. Let the Insurance company do the depreciation report and come up with an insurance plan for "shock" repairs to the complex. The strata still pays for maintenance but it doesn't have to raise millions in strata fees to replace the entire exterior of the building in case it might have to be replaced in 25 or 50 years- that's nonsense.

koozdra said...

Better off renting? The new economics for young adults

Blasphemy. Who is going to buy all those new condos? Young people don't listen and for the the love of god don't think.

patriotz said...

I don't know many SFH owners that have a special "contingency fund" for home repairs and maintenance.

That's because there is only one level of ownership for a SFH and the home maintenance expenditures come out of the same pocket as all the other expenses of the owner. The home owner's decisions and planning don't affect anyone else.

The strata and the condo owners are distinct entities with distinct interests and responsibilities, and it's nonsensical to assume what works for a SFH is going to work for a strata.

caveat emptor said...

and it's nonsensical to assume what works for a SFH is going to work for a strata.

That's why the strata act gives the strata corporations such powerful tools to make sure the owners pay their regular fees and special assessments.

Nonsensical to me would be owners agreeing to the strata council managing multimillion dollar sums of money over multiple years on their behalf. Way outside the sphere of competence of most strata councils. If it becomes widespread the next condo scandal won't be leaky buildings it will be badly invested contingency funds.

This very issue is coming up soon for vote at a condo of which I am 25% owner. It will be interesting to how it goes. I am hopeful that the majority of owners will share my views that it makes more sense to pay bills as they come due rather than 10 years in advance

Just Jack said...

Absolutely, it's ridiculous to have that huge of a reserve for repairs. Look at the Janion building an extra two hundred a month on 100 units for a contingency reserve will be millions in 25 years.

Investors will be buying them for their contingency fund not for home occupation. That becomes a barrier to entry for the person wanting a home as the investors keep the price high.

CS said...

"A depreciation report is not mandatory"

Where'd you hear that?


I just attended a strata corporation (commercial) meeting at which we voted not to have a depreciation report. But I have mislaid the meeting agenda, so I cannot give you any specifics.

CS said...

"Unfortunately we don't know what a benchmark house is."

Benchmarking houses sounds like squaring the circle. Impossible.

Just Jack said...

Bank regulations are made in the head offices of Toronto. I can see the bank heads alter policy to only lend on residential condominiums that have a recent depreciation report.

As it is now, banks like Scotia require the loans officer to review the minutes to see if there is any upcoming "special assessments" and the appraiser to call the property manager to ask about any upcoming assessments for water problems. They don't lend on leaky condos.

Just Jack said...

The HPI is both a science and an art. I just feel that if a third party can not duplicate the results the HPI while accurate may not be credible.

koozdra said...

FACTS FROM THE CONDO GAME

"There are now almost ¼ million condo units in metro Toronto (including Etobicoke and Scarborough) and many experts think at least half are owned as investments."

koozdra said...

Condos and Cake?

Let's really dumb it down. Because frankly that's what's required for the investors in this futures market.

Leo S said...

Haha I guess he really got burned on his condo. So much anger in that video.

info said...

@ Fiduciary

"Most readers of this blog know that realtors have a vested interest in keeping house prices high.

Therefore, if anything, the MLS HPI data is upward biased."

"False. A complete logical fallacy. A does not imply B. Please demonstrate how B is true.

Note that I am not disputing A, nor the possibility that B is true, just saying that your argument is fallacious."

It seems this is a matter of changing a few words in that post, an exercise that will not result in anything being taken away from my original point.

I don't mind going deeper into this issue. It can only result in pointing out more known examples of data manipulation by real estate boards. A subject that hasn't been talked about much on this blog.

Fiduciary said...

Info, I agree it's a matter of phrasing mostly, but the reason why I have an issue with your phrasing is that it's hyperbolic, which in my mind is misleading. You say things like "this is fact" when it's opinion, and "extreme upward skewing" when it seems to be something akin to 5-20% skewing. I would call an impact of 75% or more "extreme skewing", and we're not seeing that. We're seeing some skewing.

Anyways, if you would just tone down the rhetoric a little I think it would improve your credibility here. As it is, I for one see the hyperbole and it makes me doubt the data you present, just as you doubt data from the HPI because of their vested interest.

info said...

Some Canadian real estate boards have recently released false sales data to the public in their monthly reports.

This Huffington Post article covered the story.

Quoting:

"How can one claim credibility when in one example (there are many others in August alone), Edmonton, the Chart used in the release for Residential Sales Activity shows over 1750 sales yet the actual number reported in the same report now shows 1490 residential sales in August?"

In this example, the number of sales in August 2013 was falsely increased in an attempt to create the illusion of a stronger market.

The Huff Post article "MLS Phantom Listings Distorting House Prices: Consultant" (September 20, 2013) outlines another way in which some Canadian real estate boards have manipulated data.


Most readers of this blog know that realtors have a vested interest in keeping house prices high.

Some Canadian real estate boards have intentionally manipulated sales data. In all cases it has resulted in creating the illusion of a stronger housing market. A stronger housing market allows realtors to make more money.

Now let's look at the MLS HPI. It is doubtful that the realtors who put this together would exaggerate Victoria's price decline from peak. As I have explained, all examples of number fudging by real estate boards have resulted in stronger numbers, not weaker.

Is it possible that the MLS HPI data is not manipulated at all? Their methodology has some very subjective components to it. Enough said.

By far the most likely scenario would be that the MLS HPI data understates Victoria's total SFH price decline from peak. This is the only possibility that is in line with all known examples of data manipulation by Canadian real estate boards.

The MLS HPI data suggests that SFH prices across Greater Victoria have declined 10% from peak.

Considering the recent (sales boosting) data manipulation by some Canadian real estate boards, the likelihood of a total SFH price decline of more than 10% seems far more likely the possiblity of a price decline of less than 10%.

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

@ Fiduciary

"Info, I agree it's a matter of phrasing mostly, but the reason why I have an issue with your phrasing is that it's hyperbolic, which in my mind is misleading. You say things like "this is fact" when it's opinion, and "extreme upward skewing" when it seems to be something akin to 5-20% skewing. I would call an impact of 75% or more "extreme skewing", and we're not seeing that. We're seeing some skewing."

Since April, the amount of upward skewing is extreme in comparison to any other period of time on Leo's chart.

I'd like to know what you think 5-20% skewing really means.

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

@ Fiduciary

"Anyways, if you would just tone down the rhetoric a little I think it would improve your credibility here. As it is, I for one see the hyperbole and it makes me doubt the data you present, just as you doubt data from the HPI because of their vested interest."

What data, in particular, do you doubt. In any case, I would be willing to explain the math to you if you would like to verify the results yourself.

You seem determined to discredit me on this blog.

Canadian real estate boards chose to manipulate data and these actions were exposed resulting in a loss of credibility.

All of the data that I have presented on this blog is verifiable.

It is unfair of you to compare my actions to the actions of the real estate boards that manipulated data.

Again, if you have any particular concerns as to the accuracy of any data that I have presented on this blog, I would be willing to explain the math behind it so that you can check it yourself.

Until you find that I have intentionally misled any readers of this blog, my credibility remains untouched.

Just Jack said...

It spooks me to think that the number of investment condos is that high.

I remember the leaky condo crisis in Victoria back in the mid 1990's when demand went to zero for these suites and prices fell to $25,000 to $50,000 for near new one and two bedroom condos.

And it can happen again.

I'd like to know the percentage of how many BC assessment notices for Victoria condominiums are sent to a different addresses than the actual condo.

This would explain why the demand for condos that are just a few years old is miserable but the Janion sells out.

Look out - its a long way to the bottom for condos.

CS said...

Here's the resolution on the depreciation report.

In accordance with the Strata property Act, by resolution this Strata waives the requirement to create a depreciation report.

Needs to be passed at a general meeting with a quorum present and approval of 3/4 of unit owners. the resolution is passed in accordance with the requirements of Section 93 of the Strata Property Act, and Section 6.1(2) of the Regulations of the Act.

totoro victoria said...

"my credibility remains untouched"

It is great that you get to control your credibility. It is magical, like Rob Ford thinking.

koozdra said...

@CS Thanks for looking that up.

Would be interesting to know how many stratas chose not do the report.

If I was buying a condo I would be wondering what the strata was hiding in terms of upcoming costs.

Rest assured I'm not buying. I'm saving my property virginity for the right price.

Just Jack said...

After watching the condos and cake video the thing that came to mind, of course, was let them eat cake. Anyone else? LOL

S2 (JJ's wife)

SJ said...



Does anyone know what "Buyer Agent see M2M Notes" mean? I have been seeing this posted on a few properties recently.



Marko said...

M2M has notes for a realtor in terms of lockbox, tenants, or other info.

Fiduciary said...

Info, when I say 5-20% I mean the percentages Leo gave on that graph. Apart from the two months around the end of 2012, the "skew factor" has been between 5%-20%. Those two months I would maybe describe as "increased skewing", but looking at the six year history it's not unprecedented. There was a -30% skew for a month in 2007. Therefore, I don't consider it extreme. Also the highest upward skewing was was a burst, and then it came down to a more normal magnitude. The real story is that the upward skewing has continued for longer than it normally has. I'd call this "prolonged skewing", ie a qualifier on the duration, not the magnitude. The way you say things would be appropriate if the skew factor was up around, say, 50% for a long time, which it just isn't.

Anyways, I think I'm going to leave this little discussion. I thank you for keeping things civil and allowing for reasonable disagreement on the internet, which is too rare these days.

PD said...

Look out - its a long way to the bottom for condos.

I would say condos that are already 1/3 off are much closer to their bottom than any houses. Much of the reason - ten million Zoomers are on the cusp of downsizing - less upkeep, less stairs, closer to amenities, fatter bank accounts. I could see the demand for larger condos in good locations surging over the next decade. Price may only pace inflation, depending on new-builds, but I’m certain there will be lots of demand. Besides, it’s now cheaper to own many condos than rent them.

koozdra said...

"Much of the reason - ten million Zoomers are on the cusp of downsizing - less upkeep, less stairs, closer to amenities, fatter bank accounts."

Who is going to buy their over valued houses to facilitate this down size?

PD said...

I think Stefane has the best answer to your question.

Stefane Marion, chief economist and strategist at Montreal-based National Bank, was recently ranked among the top 20 forecasters in the world by U.S.-based Bloomberg Markets magazine. He’s the only Canadian to make that prestigious list.
In Marion’s view, those who insist that Canada’s house prices are “bubbly” — as Britian’s Economist magazine recently argued, and as The Globe and Mail dutifully reported — simply don’t understand what drives housing in the first place.
It’s simple demographics, he says. Canada’s population grew by 1.2 per cent in 2012, versus just 0.8 per cent in the U.S., and 0.2 per cent in the eurozone. Japan’s population, on the other hand, has shrunk for six straight years.
The big reason? Immigration. Newcomers accounted for fully 60 per cent of Canada’s population growth last year, he says, far more than the U.S. or Europe.
What’s more, 55 per cent of those newcomers are between the ages of 20 and 44, when many are launching careers, getting married, starting families, and yes, buying new homes.


http://islandhousesellersvictoria.blogspot.ca/2013/09/edmonton-if-ive-read-one-story-about.html

koozdra said...

"Stefane Marion, chief economist and strategist at Montreal-based National Bank"

Oh, I didn't know that there was a professional economist that said that there is no bubble in Canada.

"While local economies may experience significant price imbalances, a national severe price distortion seems most unlikely in the United States, given its size and diversity." -Alan Greenspan (October 19, 2004)

caveat emptor said...

"While local economies may experience significant price imbalances, a national severe price distortion seems most unlikely in the United States, given its size and diversity." -Alan Greenspan (October 19, 2004)

Only in retrospect is it obvious that Greenspan would say anything required to justify his anti-regulatory agenda.

For someone like Greenspan admitting there was a bubble would be admitting that free markets aren't perfect when obviously unregulated free markets ARE perfect.

koozdra said...

Imagine a bank economist submitting a report that there is a bubble in the Canadian housing market. The publishing department would laugh in their face. The message coming from the banks is tightly controlled.

To admit that there is a bubble would be to admit incompetence in their lending practice and standards. Even mentioning it akin to blasphemy.

I would lend to anyone and everyone too if my buddy told she'd cover my losses.

info said...

@ Ficuciary

"Info, when I say 5-20% I mean the percentages Leo gave on that graph. Apart from the two months around the end of 2012, the "skew factor" has been between 5%-20%."

Obviously you got it from Leo's graph, where else?

So tell me, Fiduciary, if, for example, a particular month had a skew factor of 10, how would that number have been calculated? Please show me an example calculation.

Obviously I know what I'm talking about as I came up with this whole concept in the first place.

koozdra said...

"That said, there can be little doubt that exceptionally low interest rates on ten-year Treasury notes, and hence on home mortgages, have been a major factor in the recent surge of homebuilding and home turnover, and especially in the steep climb in home prices. Although a 'bubble' in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels." -Greenspan on June 9, 2005


It just sounds so familiar.

info said...

Canada's debt-induced housing bubble has no income support - an important characteristic of all housing bubbles.

Quoting:

"Canadian incomes are stagnating. In fact, the median total income in Canada in 2011 was equivalent to the 1980 level -$57,000 (adjusted for inflation). During the same span, real home prices in Canada rose by 97%. Are you still pondering whether there is a housing bubble in Canada?"


PD said...

The part you may want to ponder Koozdra ranked among the top 20 forecasters in the world by U.S.-based Bloomberg Markets magazine. He’s the only Canadian to make that prestigious list.

More here:
http://online.wsj.com/article/PR-CO-20130830-909975.html

I don’t believe people reach those levels of accuracy by being biased. Even if he does carry some bias, I think I’ll regard his forecast over yours or mine. Though I will still consider your reasoning.

info said...

Canada's housing bubble is much bigger than the 2006 US housing bubble (the US chart is second and Canada's chart is last).

A comparison of overall (countrywide) price increases from 2000 to the peak in each country makes this clear.

In the US, house prices increased 41% from 2000 to 2006, the peak of their housing bubble.

In Canada, house prices increased 87% from 2000 through Q3 2012 (and even higher since then).

The overall price increase across Canada is more than double the overall price increase across the US during the formation of the 2006 US housing bubble.

koozdra said...

"ranked among the top 20 forecasters in the world by U.S.-based Bloomberg Markets magazine. He’s the only Canadian to make that prestigious list."

Oh, appeal to authority. right.

Q. Why do economists exist?
A. In order to make weather forecasters look good.

patriotz said...

Much of the reason - ten million Zoomers are on the cusp of downsizing

As JJ has pointed out incessantly, the 55+ segment is the weakest in Victoria, which itself is the weakest major market in Canada.

Looking at smaller markets, up-Island and the Okanagan, which are the most retirement-oriented in Canada, are weaker still.

So what makes you think retired boomers are suddenly going to start heading west with wads of money?

I should also note that your argument is also being used to push condos everywhere else in Canada.

koozdra said...

When Albert Einstein died, he met three New Zealanders in the queue outside the Pearly Gates. To pass the time, he asked what were their IQs. The first replied 190. "Wonderful," exclaimed Einstein. "We can discuss the contribution made by Ernest Rutherford to atomic physics and my theory of general relativity". The second answered 150. "Good," said Einstein. "I look forward to discussing the role of New Zealand's nuclear-free legislation in the quest for world peace". The third New Zealander mumbled 50. Einstein paused, and then asked, "So what is your forecast for the budget deficit next year?"

info said...

Many respected economists denied the existence of the US housing bubble as it formed from 2000 to 2006. It should be no surprise that Canadian economists are denying the existence of the Canadian housing bubble.

Alan Reynolds, Senior Fellow, Cato Institute (January 8, 2005), "No Housing Bubble Trouble" (Washington Times):

Quoting:

"In short we are asked to worry about something that has never happened for reasons still to be coherently explained. 'Housing bubble' worrywarts, have long been hopelessly confused. It would have been financially foolhardy to listen to them in 2002, it still is."


It is important to consider the source of the information and understand the motivation behind what is said. Credentials aren't everything.

PD said...

As JJ has pointed out incessantly, the 55+ segment is the weakest in Victoria, which itself is the weakest major market in Canada.

Looking at smaller markets, up-Island and the Okanagan, which are the most retirement-oriented in Canada, are weaker still.

So what makes you think retired boomers are suddenly going to start heading west with wads of money?



You’re looking at the past while I’m looking to the future. No wads of money required now that the Island is cheaper than where we’re coming from (AB, ON, Vanc). The primary reason the Island and OK’agan condos got hit so hard is predominantly to do with Alberta & the US. Now that those two have started hopping again the wave is returning. Too, with US prices having climbed 20+% per year, it’s no longer as enticing.
The rest is BBB arithmetic. The very peak of the bulbous bunion bulge of us Boomers are presently age 54. If you don’t think we’re considering retiring and cashing in some house chips for an easier lifestyle - well, then, that’s ok with me.

Just Jack said...

We are now on the downside of the Boomer retirement curve. Each year from now there will be fewer retirees coming to Victoria. Its age 55 that they tend to re-locate to a new city - not 65.

After WWI there was a Baby Boom that caused the mid 1970's property retirement boom when it collided with the WWII Boomers entering into the market. That Boom was over by 1982. The WWII Baby Boomers began turning 55 in 2000 and that matched with the WWII Boomers kids buying a home and that Boom was over in 2007.

There hasn't been a significant Baby Boom since WWII.

The house and city you're living in at age 65 will likely be the last you'll ever own before your kids send you off to Happy Acres retirement home.

Still don't believe me. Look at the adds for housing. No more pictures of happy retirees on the Billboards, the marketing is now towards "urban professionals". Whatever that is.

koozdra said...

"If you don’t think we’re considering retiring and cashing in some house chips for an easier lifestyle - well, then, that’s ok with me."

Boomers can try to cash in your chips. The question is going to be how much the house is going to give them in return. Probably less than they expect. The kids are broke as shit grandpa, to use the parlance of our times.

koozdra said...

Beijing goes hunting for overseas real estate bought with dirty money

"Australian regulators approved $4 billion in real estate purchases by Chinese investors in the 2011/12 fiscal year (pdf, pg. 30), the most recent figures available. Canada keeps no hard data about foreign investors in real estate, but Chinese buyers in one year outnumbered local buyers in Vancouver by a three to one margin."

Probably just a coincidence.

“The government wants to make them hopeless,” Liao said. The message is “You can’t just steal money from China and then enjoy life in Canada.”

koozdra said...

Housing affordability not as cut-and-dried as it seems

"But, he said, the conventional affordability measures don’t suit the new reality and need to be changed to reflect what homeowners are actually accepting and coping with."

The new new normal. Higher than the old new normal.

PD said...

I hate to point out the obvious but even if only 1% of Boomers, presently aged 48-67, decide to move to Victoria upon retirement, that’s nearly 100,000 people. Need more high-rises?

The study also examined the factors motivating Boomers to relocate upon retirement... Victoria, B.C. remains the retirement capital of the country with 15% of boomers indicating they would like to retire there. Residents of Alberta, Manitoba and Saskatchewan are most likely to relocate for retirement.
http://ca.finance.yahoo.com/news/BMO-Retirement-Institute-ccn-2526677294.html

Leo S said...

I hate to point out the obvious but even if only 1% of Boomers, presently aged 48-67, decide to move to Victoria upon retirement, that’s nearly 100,000 people. Need more high-rises?

And what if 0.001% of the Chinese buy in Victoria? We'll have another 130,000 residents! Everyone buy 10 micro condos the market he is going to explode when they all arrive!

Leo S said...

What’s more, 55 per cent of those newcomers are between the ages of 20 and 44, when many are launching careers, getting married, starting families, and yes, buying new homes.

Ah, so there is demand he says. Well that explains it then. As I recall the basics of price determination is demand and nothing else.

Leo S said...

And of course it is well known that immigrants only started coming to Canada in the 2000s, therefore causing the explosion in house prices.

PD said...

0.001%

(-: I think that might only be another 13,000 residents, but yeh, that would fill another hundred Janion buildings.

PD said...

And of course it is well known that immigrants only started coming to Canada in the 2000s, therefore causing the explosion in house prices.

Just to clarify, it was Stefane the Nostradam of chief economists that was forecasting the immigration rates. I’m more interested in what percent of the 15% of current Canadian Boomers that say they plan on retiring here, actually end up retiring here. Even if it’s only 1%, that’s an incredible additional influx into our city over the next 15-20 years. Some will choose to rent, but most will own.

Leo S said...

Whoops. Math is hard.

Leo S said...

I’m more interested in what percent of the 15% of current Canadian Boomers that say they plan on retiring here, actually end up retiring here. Even if it’s only 1%, that’s an incredible additional influx into our city over the next 15-20 years

I don't think it's a sound assumption that anywhere close to 1% will come here. We have no way of knowing how many will come. I'd say given the fact that so far they haven't come, and in fact retirement communities that are far cheaper than Victoria are seeing declining populations, I'd say it's more likely that they will die off just about as fast as they arrive and the net effect will be minimal in the short term, and negative in the long term.

caveat emptor said...

"retirement communities that are far cheaper than Victoria are seeing declining populations"

A lot of the Okanagan saw strong growth 2006-2011, so did many communities up island. Parksville, with the oldest demographic in BC, saw growth.

So I am not necessarily challenging your assertion - just wondering what communities you are referring to?

caveat emptor said...

Those lucky Australians - they get their own Wikipedia page http://en.wikipedia.org/wiki/Australian_property_bubble.

No wikipedia entry for us :-(

koozdra said...

"So I am not necessarily challenging your assertion - just wondering what communities you are referring to?"

Arbutus Ridge Golf course. I hesitate to mention Nanoose bay because it's not cheaper. Both retirement communities with terrible sales.

Just Jack said...

You do remember the housing market skyrocketing in the early 2000's. When a house in Oak Bay went from $275,000 to $650,000. And all that new construction in the Westshore. When there were 1,750 real estate agents and now we're down to around 1,250.

Well - that WAS the Boomers coming here. That wave of Boomers peaked in 2007 and while Boomers are still coming to Victoria to retire they are comming in fewer numbers each year now.

While 15% of Boomers may want to retire here. The reality is that few can afford to live here now that the first half of the Boomers (circa 1945- 1955) have pushed prices too high.

Just Jack said...

Boomers that do come to retire in Victoria when they are about 55 years old have a reason such as they grew up here or have relatives here. Some of the Boomers that I know are now talking leaving Victoria. Mostly because they want to cash in on house prices and move somewhere less expensive or back to where they grew up.

None have done that yet though. But first comes the talk - then comes the walk.

PD said...

You do remember the housing market skyrocketing in the early 2000's… Well - that WAS the Boomers coming here.

I believe the very oldest Boomer was only 54 in the year 2000, with the bulk of them age 40. If it was a few of the very oldest Boomers retiring early and coming here, the question then becomes why did North Battleford and Fort Nelson prices double too? Wasn’t the 2000’s a widespread phenomena?
The math doesn’t quite add up for me. Retirement age is around 65, granted healthy Boomers are deciding to stretch that further. The oldest Boomer was born in 1946 - soldiers returned mid-45, then add 9 or more months. Hence the very oldest Boomer only reached retirement age in 2011 - that is, if they actually retire at 65. Give them a year or two to get bored of Kitchener or Sudbury in retirement and it’s “Sweetie, why don’t we cash in our million and live where we always dreamed of?”
I’m only trying to wrap my pea brain around this. I must be missing something. It wouldn’t be the first time.

Just Jack said...

I listened to one Canadian statician who explained that looking at the graphs, the baby boom really began in 1939.

Because, you could be deferred a year from military service if your wife was pregnant.

Not everyone wanted to go to Europe and possibly die. And you're mistaken if you believe that it was regiments of returning soldiers with hardons impregnating the first women they saw when they got off the boat in Halifax or the train in Vancouver.

The war caused economic stimulus. By the early 40's the industrial plants were making truck loads of cash. Everyone had a job and while a lot of young men went to Europe, there was still enough penises left to start a baby boom here.

Or did you really believe people stopped fu*%ing for 6 years.

koozdra said...

2br - 6555 East Sooke Road

"Ideal for Executive smaller family."

Man, that term gets thrown around a lot.

koozdra said...

Jim Flaherty says interest rates are heading higher regardless of central bank actions

“The pressure on interest rates is clearly on the upside,” he added. “The period we’ve had of very low interest rates is an anomaly.”

But, but, "affordability" is so good right now. He's such a downer. Oh well, at least low interest addicts have a friend at the the bank of Canada.

koozdra said...

"we'll be fortunate to see any rises in home prices in the next 5 to ten years" -Doug Porter

"house prices are extremely sensitive to interest rates"

Caption obvious is now Chief obvious.

Leo S said...

So I am not necessarily challenging your assertion - just wondering what communities you are referring to?

Sidney is one.

Leo S said...

Baby boom

Leo S said...

Whatever happened to freedom 55? Well the average retirement age in Canada in 2011 was 62.3 so let's use that.
Depending on how you want to define the baby boom, the oldest baby boomers are around 67, and the youngest are about 48, with the peak around 52. So we have certainly not hit peak retirement rates, in fact we're just getting started.
So why is it that Victoria, supposedly the retirement capital of Canada has also done the worst for real estate just as the boomer retirement wave is ramping up?

Just Jack said...

House prices are only extremely sensitive to interest rates when buyers are maxed out in affordability. It would be a strong indicator of peak prices.

When the market is in a trough droping the interest rate has little to no affect on prices.

SJ said...

I 'll go with because we haven't started yet. That and the States stole some of our thunder over the last two years. It wouldn’t surprise me if Victoria turns into the hottest market in the country 5 years from now.

Just Jack said...

You're just stuck on the number 65 - now 67 for people to uproot from their life long family and friends to move to a different city.

That's a pretty bold move to make at 65 - now 67. Especially as their income will drop significantly and they will be faced with higher housing and living costs moving to Victoria.

Better to have done it, 10 years ago when you were younger, prices were cheaper and you could get a company transfer here. If you're looking to do that move today you are SOL.

Prices went up everywhere because of the low interest rates and easy credit. But you have forgotten Victoria went up faster and higher than most cities in Canada. So we had a little bit of a head start and an extra push by the Baby Boomers starting to retire here in 2000.

That the boomer wave has crested and is a good reason why our market has been flat lined since 2007. We don't attract youngsters here and the number of retirees have leveled off.

And I strongly suspect that the numbers for Victoria will soon show our population decreasing as the youngsters find work elsewhere.


caveat emptor said...

And I strongly suspect that the numbers for Victoria will soon show our population decreasing as the youngsters find work elsewhere.

Well there's one trend we can all fight. Start Procreating More!

reasonfirst said...

...if only 1 percent...

That was was a lot during the dot-com bubble....

reasonfirst said...

was was = was said

Just Jack said...

Leo-S, that must be the graph the statician was talking about. You can see shortly before war is declared in 1939 people started making babies to get a deferment from service with the baby boom coming to an end with the wide spread use of the birth control pill.

The dip in births in the 1970's was likely due to teenagers no longer needing to get their parents permission to use the pill either that or the introduction of bucket seats in cars.

Just Jack said...

http://www.youtube.com/watch?feature=player_embedded&v=JN1Nihl64O8

Take it for what it is. Sensationalistic journalisim. Yet there may be some points of interest.

koozdra said...

Soaring farmland prices a crisis in the making

I thought land prices were only going up in the cities. Why are they going up so much on farms?

Oh speculators.. "it turns out to be the best kind of hedge.."

Haha, no bubble here folks.

koozdra said...

Norwegian Housing Bubble Seen by Shiller

"Norway’s housing market, which Nobel Laureate Robert J. Shiller described in 2012 as being in a bubble, is now deflating faster than even the central bank had predicted after regulators introduced a slate of measures to cool demand. After home prices doubled over the past decade, fueled by low interest rates and surging oil wealth, they’ve slid for two consecutive months raising concern that real estate could be in for a hard landing amid record household debt."
...
"When it comes to residential property, Norway is among countries such as Canada, Australia and Switzerland considered “high-flyers” in the past few years, according to Goldman Sachs Group Inc."

It's totally different here. People have real wealth here. Unlike those other idiot markets that had a housing boom based on low rates.

Marko said...

Tuesday, November 12, 2013 9:30am

MTD November
2013 2012
Net Unconditional Sales: 140 366
New Listings: 276 706
Active Listings: 4,118 4,488

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

PD said...

"According to StatsCan data, about 50 per cent of our land assets will be transferred in the next five years. And of the retiring farmers, 75 per cent of them don't have successors. It's a transition we've never seen before in agriculture.

“Rich retiring farmers - Welcome to Victoria! We’re having an up to 50% off sale, while you have doubled your wealth since 2008. (12 per cent a year since 2008)

koozdra said...

"Rich retiring farmers - Welcome to Victoria!.. "

You didn't understand the point of the article. The farmers land is unsalable at the inflated prices. It is only because of land speculation that farmland is being propped up. That's sustainable, right?

PD said...

“The farmers land is unsalable at the inflated prices. It is only because of land speculation that farmland is being propped up.”

I’m certain the numbers are based on ‘sales’ price. From your article:
Nationally, Canadian farmland from coast to coast has risen by an average of 12 per cent a year since 2008.
…he scoffs at the idea that funds like his are responsible for the land boom. He says that while farmers buy and sell some $15 billion worth of land each year in Canada, third-party investors like his company trade a mere $100 million worth.

koozdra said...

"he scoffs at the idea that funds like his are responsible for the land boom"

That's his opinion. Those kinds of stats aren't kept by real estate boards. We can only speculate on the number of speculators there are out there. As long as the economy is humming along it's not a mystery the government is intent to solve.

PD said...

http://www.cbc.ca/news/business/price-of-canada-s-farmland-rising-on-strong-demand-short-supply-1.1700679

Highest prices were $60,000 per acre.

Between 2006 and 2011, the average size of Canadian farms increased 6.9% from 728 acres to 778 acres. The 2011 Census of Agriculture counted 205,730 census farms.

That’s a multitude of multi-millionaire farmers about to cash in their chips and retire.

Just Jack said...
This comment has been removed by the author.
Just Jack said...

It was hard enough getting a parking spot downtown. Where the hell are they going to park their tractors?

Can you imagine a Saskatchewan wheat farmer raised on 640 acres of land with his nearest neighbor 5 miles away living in a micro condo. Every morning he'd have to open his window and his neighbor's window just to piss in the toilet.

Marko said...

Just Jack, is it common practice for an apprasier to ask a listing realtor what the accepted offer amount is?

Just Jack said...

Not only is it common practice, it is a requirement that all appraisers discuss the offer to purchase in the body of the report along with the sales history of the property going back no less than 3 years.

Failure to do so, without reason, would put the appraiser in violation of professional practices and subject to a fine and/or reprimand from the Appraisal Instiute of Canada.

If the appraiser asks for the amount of the offer - you do not have to give it to her. But, the appraiser will note who she asked and why she was denied that information in the report.

Depending on the test of the "reasonable appraiser" the appraiser might also have to be supplied with a copy of the offer to purchase. However, in Victoria, that is not normal practice. This invokes a hypothetical clause in the report that having not seen the offer to purchase the appraiser has assumed that there is nothing in the offer that would affect the value of the property.

Like a car, costly appliances or special financing.

The job of the "mortgage appraiser" is not to guess what your clients have agreed to in price. The mortgage appraiser,on a "sale", is testing to find if what your clients have agreed on is a reasonable price for the property.

People over pay everyday for homes - and that is their choice.

It's the job of the mortgage appraiser to see that banks do not over lend.

Fiduciary said...

Teranet index for October is available. m/m -0.56%, y/y -0.54% for Victoria. Nationally m/m 0.14% and y/y 3.07%.

koozdra said...

I was getting worried. After a brief slow down it has bounced back and is now doing well again.

Housing? no, consumer credit growth.

Debt loads increase 2.19% from last year

Don't worry though, one of the trailing indicators of debt problems, delinquency rates, is still low. Just like our good friend interest rates.

Just Jack said...

We are now into the Winter market that typically experiences lower inventory and lower sales activity.

Historically, prices paid for real estate are at their lowest levels for the year during the winter - but so is the selection to chose from.

For example, Sooke is now down from 250 to 177 houses for sale. But so are the number of sales too. There down to about 16 a month now or about 11 months of inventory.

There have been some massive slashes in the asking prices of homes in Sooke - but that isn't stimulating sales.

To me, this screams "bubble". Little to no demand at any price. As demand for real estate becomes relatively inelastic. Something that most people under 35 years have never experienced in their adult lives.

The homes that sell are those that meet the needs of today's buyer with price of little consideration. You'll find a newer home on a Sooke city lot sell for the same as a newer home on 5 acres at the edge of the town.

Most bankers don't understand this, they believe that there is always a buyer at the right price. That's not true. It wasn't in Tulip bulbs and it isn't true in Sooke real estate. You have to wait for the right buyer.

Just Jack said...

To the chagrin of some regular readers I tend to put emphasize on the Sooke market.

Clearly Sooke is the outlying area of our marketplace. Being a town of 10,000 or so where a goodly number regularily commute into Victoria City for work. Prices in the city have an effect on Sooke and so does the opposite. It's like a "slinky" toy, what happens at one end reverberates to the other end.

And Sooke is in trouble. Some might consider what is happening in Sooke as simply a tooth ache in the health of the market, for others it's a cancer. Benign right now but should be watched carefully.

And that's why I watch the outlying areas as they can be the precursors of things to come. The longer the market wallows in the doldrums, the more likely for the urban core to develop a sickness like Sooke.

Dave said...

Other risk assets suggest the bottom is in, although RE often lags a bit.
http://i.cubeupload.com/9xL032.png
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