Monday, December 16, 2013

Dec 16 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.


December 2013December
 2012 
Wk 1Wk 2Wk 3Wk 4
Unconditional Sales94
195


283
New Listings148282

405
Active Listings38293709

3896
Sales to New Listings
64%
69%

70%
Sales Projection---330ish


Months of Inventory
12.3

Again no point in sales projections using days of the month.  It's Christmas time, only a handful have a presents budget of half a million dollars.

238 comments:

1 – 200 of 238   Newer›   Newest»
Johnny-Dollar said...

Seems like we're getting a good idea of how badly government intervention has $%^# up the condo market in every city across Canada.

The government socialized half the market and commoditized the remainder. Estimates are that between 50 to 60 percent of all the condos in Vancouver are not occupied by the owners but are rentals or "other"

Anymore towers being built will not help people buy their first home because the price is not relative to the economics of supply and demand but merely on a person's ability to pay. We socialized the market by allowing everyone equal access to high ratio financing at subsidized rates.


And about 15% of the condos are vacant. That figure is much higher in areas of new condos like Coal Harbour where one out of every four condos is thought to be empty.

Economics would say, build more and prices will get cheaper. And that is simply a crock of shit, as we made it possible for anyone to buy who simply had the ignorance of believing that they would one day be mortgage free in their lifetime.

Once we stop building condos, everything collapses. The jobs are gone, the money is gone and we are left with cities of tens of thousands of empty skyboxes for decades to come.

Zombie cities.

Phil said...

Has anyone else noticed how much tighter vacancies have gotten lately?

Vacancy rate is always the first sign of a reversal. Across BC it's down from 2.7% last autumn, to 2.4% this autumn.

Phil said...

We can use yearly data for 50 years and conclude the trend is strongly up. Does that help us much going forward?

It helps to see the pattern of roughly 10 up, 4 down.
Governments have to continue inflating away their debts and unfunded liabilities. In other words, the pattern will repeat. This 10up will see starter and downsize homes do best, contrary to the last 10up which saw moveup homes fare best.

Leo S said...

What's up with 3877 Holland Ave?

6000 sqft place on 2 acres for under a million?

Leo S said...

Governments have to continue inflating away their debts and unfunded liabilities. In other words, the pattern will repeat. This 10up will see starter and downsize homes do best, contrary to the last 10up which saw moveup homes fare best.

So by that logic we should see at least a doubling in home prices in the next leg up. So starter homes will cost $700,000 and the average 70s gordon head box will set you back over a million by 2024.

Perfectly reasonable, perfectly normal. Who cares about affordability, the key driver of the market is patterns.

koozdra said...

"Zombie cities."

What baffles me is why this isn't obvious?

It's extremely clear that we are building faster than household formation across the country. Every year the excess units compound. At the same time prices continue to go up.

Can someone chime in as how this is sustainable?

koozdra said...
This comment has been removed by the author.
Tren said...

gardiner's green been completed about 8 months now, 22 units, 6 sold..(last one sold was 495k).... ....

Marko said...

gardiner's green been completed about 8 months now, 22 units, 6 sold..(last one sold was 495k)....

Actually 7 of the 22 units are now sold. Good product, good location, Saanich is fixing up the street, developer will be fine. Absorption rate is slow but financing is cheap for the developer too.

koozdra said...

They are probably not selling quickly because of the absurd prices.

Leo S said...

Good location? Sandwiched between two busy roads, next to an empty parking lot on the ass end of a canadian tire. Hmm...

Also their marketing could use some work. Under "features" they have one entry, which is the "appliance package", which links to a spec sheet of various appliances. Amazing. Nothing sells me on a $600,000 townhouse like a microwave whose "Motor exhausts up to 300".

And their photos links to some guy's dropbox account. WTF.

Marko said...

They are probably not selling quickly because of the absurd prices.

Cost of development is very expensive and it is reflected in the prices. I doubt there is more than 10% margin on this particular development. Unfortunately I think the developer overbuilt it a bit. The average townhome buyer just isn't willing to pony up for something like geothermal heating ($$$$).

Marko said...

Good location? Sandwiched between two busy roads, next to an empty parking lot on the ass end of a canadian tire.

Usually townhomes and condos are on busier roads as busier roads are probably the only roads where you have a remote chance of passing the re-zoning process in anti-development, anti-density Victoria.

Is there a brand new townhome development currently in a better location than this one?

patriotz said...

where you have a remote chance of passing the re-zoning process in anti-development, anti-density Victoria.

That development is in Saanich, isn't it?

As for Victoria proper, well there certainly has been a lot of densification happening downtown.

S-J said...


@ Leo
What's up with 3877 Holland Ave?
6000 sqft place on 2 acres for under a million?
________________________________

Probably because of this:

“CMHC insurance will not be available on homes >$1 million, requiring purchasers to put at least 20% down.”

I still don't understand why people who are looking at buying a property near $1 million would need to have CMHC insurance to buy the place - they should be wealthy enough to have lots of lovely lolly!

Renter said...

There is a huge range of houses on acreages between $600,000 to $1,000,000. I've seen houses that were listed over a million sell in the $800,000s. (For example, 6071 Oldfield, which was 5 acres, with lots of outbuildings, or 5997 Oldfield, 3 acres, 3200 sq ft house, suite, equestrian outbuildings.

But smaller acreages with older, smaller homes are selling between $600,000 and $700,000 for the most part. Seems like a huge jump in quality of home between $600,000-700,000 and $800,000.

Leo S said...

Is there a brand new townhome development currently in a better location than this one?

Dunno.. but I doubt potential buyers of this development are only looking at brand new town homes. They would also be looking at starter houses, possibly even large condos, and older town homes. And there are certainly lots in better locations.

Marko said...

I work with a lot of buyers and you just don't get people cross shopping 495k brand new townhomes and 495k single family homes in the same area as the difference is huge in terms of living space quality.

A new home in this area would start at 850k and go from there so I don't think the prices on the townhomes are ridiculous. Really that ratio is similar to that of 70s townhome and 70s single family home.

reasonfirst said...

Vacancy rate is always the first sign of a reversal.

1st - always the first???? Prove it.

2nd - too bad this doesn't include the subject of this blog -Victoria - This report says it went from 2.7 to 2.8.

reasonfirst said...

This report:

http://www.cmhc-schl.gc.ca/odpub/esub/64487/64487_2013_B02.pdf?fr=1387303548101

koozdra said...

"A new home in this area would start at 850k and go from there so I don't think the prices on the townhomes are ridiculous."

If the price wasn't ridiculous, they would sell faster. If something is priced above market value then you have to take a longer time to sell to find the right mark (too bad we can't use the strike through tag here) I mean buyer.

Marko said...

If the price wasn't ridiculous, they would sell faster. If something is priced above market value then you have to take a longer time to sell to find the right mark (too bad we can't use the strike through tag here) I mean buyer.

Or if you sell too fast you probably leave money on the table as the developer.

I've talked to a few developers at length, mostly condo developers, and the common message I've gotten from them is Victoria is not Vancouver. Patience is key as absorption is slow and the investor buyer is almost non-existent.

Johnny-Dollar said...

Why are the prices for new condos not going down despite the amount of new construction?

China is building entire cities that are empty and the prices are not going down either. Because they are a commodity, a reserve currency, a place to store your wealth. That is likely happening all over the world today. In cities like Vancouver and Toronto that could be a substantial percentage of the market where the condos are kept empty and mortgage free. Insurance, for those that need to get access to money outside of their home country.

At the bottom of the scale is how our housing market has been socialized. The price of a new condo is the same in Victoria as it is in Langford as it is in Toronto and in Nelson. The price is not based on physical supply but on financial ability to buy. As long as the property is within a couple of hundred bucks of breaking even, people will keep buying at that price.

If you're not building a complex with this in mind today, then your sales are going to be crap.

Johnny-Dollar said...

I don't see how a townhouse would be appealing to an investor when the condominiums provide a better alternative.

Townhomes mostly appeal to the home occupier. And that's likely only about half of the total strata home market today.

That's the weird thing about this market. We are seeing lots of new construction and buildings selling out at high prices and we then assume that there MUST be demand for homes to own and live in.

Like Henry Ford who made cars that the worker could afford. The developer should be building townhomes his workers can afford. Because the developer has to create his own demand by employing people who can get cheap financing to buy them.

But today, it seems every carpenter owns his own home and has a rental condominium. Why would they then buy a townhome? It's not a detached house and it's not a condo - it's in between.

Johnny-Dollar said...

We see a lot of older age restricted condominiums in choice locations selling very cheap these days.

But it isn't just the age restriction alone that I believe is pushing down these condo prices. Even if the buildings allowed rentals, most investors would not buy into an age restricted building. Because if you rent to someone and they have fruitful loins or adopt a child - you can't turf them out. And the strata council won't allow children.

Any building that imposes an age restriction should be levied with an additional tax. Much like the rain water tax soon to be imposed on us. A tax to support senior activities, we'll call this one the GOB tax. (Grumpy Old Bastard).

Johnny-Dollar said...
This comment has been removed by the author.
info said...

"Why are the prices for new condos not going down despite the amount of new construction?

China is building entire cities that are empty and the prices are not going down either. Because they are a commodity, a reserve currency, a place to store your wealth. That is likely happening all over the world today."

It is not happening all over the world.

New condo prices crashed in the US, Ireland, Spain, etc..

New condo prices in Canada will experience a deep correction/crash as well.

Many new condos have not been sold in Langford (Goldstream) and prices have been slashed in some cases causing much anger among those who bought pre-construction.



Johnny-Dollar said...

A new 2-bedroom and 2-bathroom condo on Sooke Road in Langford just sold for $285,000.

And a new 2-bedroom and 2-bathroom condo just sold on Speed Avenue near Mayfair for $291,000.

Why at nearly the idential price? When the difference in location should be significant.

Because location is a physical aspect of a property. The ability to finance is not. You pay $300,000 for a near identical condos in Langford and Victoria - because you can. That is socializing condos. Since salaries and incomes are generally about the same and it doesn't matter if you are putting 5% or 20% down - we pay about the same for a new condo.

Since the credit crunch experienced by the US, Spain and others it has become more important to spread the risk and money around the globe. Holding that money in US greenbacks or any paper currency is not such a good idea. That only leaves Bitcoins and Condos.

When I speak of money, I'm talking about million dollar plus condos. Vancouver is successful because it has a lot of million dollar condos. Victoria not so much. That's commoditizing the condo market.

That's why you get a Shah of Bahrain buying a 35 million dollar condo in Vancouver. Realistically speaking there is NO condo in all of Vancouver that is worth $35,000,000 as a property - but it is worth that as a reserve currency. A currency not backed by Gold but by real estate. It's a commodity that can be traded. Along with other condos in New York, London, San Francisco or Melbourne. And you don't have to worry about bringing a bag of cash with you into countries with a currency limit. The money is already there in tradeable real estate or exotic cars.

And if you're a drug dealer -even better. No more landing planes in the middle of the night with a steamer trunk full of cash. Transfer a condo instead.

There's a lot of Russian, Chinese and other "Hot Money" that needs to find a home.

info said...

In 2000, before housing bubbles began to form in Canada and the US, the economies of these two countries were struggling.

Housing bubbles were engineered in both countries and, as a result, the economies of both countries were stimulated, masking the true problems of the economies of Canada and the US.

To show how the economies of Canada and the US were stimulated, let's consider the following:

1. Increase in percent of labour force employed in construction (first chart):

Canada: + 43% (2000 to present)
US: + 10% (2000 to peak)

Housing market economies were created in both Canada and the US. However, as the chart shows, Canada's economy has become a lot more dependent on a (temporarily) over-stimulated construction industry than the US was at the peak of the 2006 US housing bubble.

2. Increase in residential construction as a percent of GDP (second chart):

Canada: + 56% (2000 to present)
US: + 38% (2000 to peak)

This chart also shows that Canada's economy has become more dependent on its (temporarily) stimulated construction industry than the US was at the peak of the 2006 US housing bubble.

3. Increase in real estate investment as a percent of GDP (second chart):

Canada: + 63% (2000 to 2012)
US: + 41% (2000 to peak)

Lax lending standards in Canada and the US led to heightened levels of real estate investment in both countries. Canada's level of real estate investment increased more than that in the US at the peak of their housing bubble.

Canada's economy has become dependent on the over-stimulation of its housing market industry. Once house prices in Canada begin to fall, there will be less building and fewer sales, resulting in a substantial decrease in housing market industry activity. The Canadian economy will weaken substantially and the result will be lower house prices. This is how it went down in the US.

Let's consider what happened in the US. The percent of labour force employed in construction peaked in early 06. Residential construction as a percent of GDP peaked in early 06. Real estate investment as a percent of GDP peaked in late 05.

However, the US economy hit the wall in late 08.

By early 08, it was clear that house prices across the US were correcting.

In the US, it was falling house prices that caused the US economy to go into a tailspin in late 08. (continued)

info said...

(continued)

The same will happen in Canada. Once house prices begin to fall across Canada and a correction is in motion, the Canadian economy will weaken substantially. This will lead to a deep price correction as it did in the US.

Many housing bulls point to the weakest mortgage holders in the US as the cause for the deep correction/crash of the US housing market. This is incorrect. House prices in the US simply reached levels where the average family could no longer afford the average home. It might be possible to pinpoint a trigger that caused prices to begin to correct, but, overall, their correction/crash was, ultimately, the result of unsustainable bubble house prices.

The most vulnerable mortgage holders were the first to experience problems as house prices in the US began to fall, however, it was the weakened US economy that was the main reason that house prices in the US corrected 34% in total.

House prices in the US went through two stages of correction.

The first stage was the result of problems created by the most vulnerable mortgage holders (those who probably should not have been given a mortgage). We have plenty of those in Canada as well.

The second stage of correction was the result of a substantially weakened US economy. In this stage many of those who qualified for mortgages under the regular standards were affected.

The Canadian housing bubble will experience a similar unwinding and deflation.

The process that the US went through would not have been unlike that in Japan, Ireland, Greece, Spain, etc..

info said...

@ JJ

"There's a lot of Russian, Chinese and other "Hot Money" that needs to find a home."

So now you think that HAM will come swooping in and rescue Victoria's housing market.

Good luck with that.

info said...

@ JJ

"And if you're a drug dealer -even better. No more landing planes in the middle of the night with a steamer trunk full of cash. Transfer a condo instead."

That's it, drug dealers will rescue Victoria's housing market.

Unlikely.

Besides, the price of BC bud is in free fall.

Johnny-Dollar said...

I'm not sure it was falling house prices that put the US or any country into a tail spin.

I thought is was the inability to get credit. Not just for people to buy homes but businesses to make payrolls or buy machinery and equipment.

We didn't have that here because we had CMHC. The Yanks didn't. Silly buggers believed in the free market system. Unlike Canada that provided funding for the rich to buy as many investment properties as they could without coughing up as much as a hair ball of a down payment. Or little Johnny and Rangit buying their first home backed by nothing more than a student loan and a dream.

As long as the mortgages are backed by the Canadian taxpayer, no one gets refused. And you pay the same rate as everyone else. High risk - low risk - no risk

Beautiful - pass the bucket.

Johnny-Dollar said...

I don't think drug dealers will rescue anyone.

As for BC Bud

They're probably not spending enough on advertising. Perhaps a back of the bus campaign is necessary along the lines of what LifeSavers candies did in the 80's. A pro-ball player handing a joint to an eight year old. Kinda tugs at the heart strings.

caveat emptor said...

The ongoing decriminalization/legalization of marijuana south of the border will be a pretty big deal for BC economy I think. I've seen estimates of the industry contribution ranging from 2 to almost 10% of provincial GDP.

If it is successful in Washington and Colorado, other states won't be able to say no to the new revenue stream and it will spread quickly.

Then the BC growing/smuggling industry is toast

Johnny-Dollar said...

Oh, I wouldn't bet the Harper government is going to be following those states. I believe in 2014, Harper is pulling the plug on private medical grow operations. The government is going to have it grown underground in Saskatchewan and mailed to those who require it. The Senate will be given the job of quality control and your postee will become your drug dealer.

The problem I have with Mary Jane is the delivery system. It stinks. Personally, I don't give a crap if you're a stoner or not. You can drink Drano as far as I'm concerned.

And I think the Olympics should be opened to drug users too. From a standing position, 40 feet over the high bar. The last ten meters the hearts bursts out of their throats and finish the race.

Some sports won't work out too well. Stoned hockey players. Not much happening there - they'd be trying to snort the blue line. Although you could add new sports like Javelin catching for those on speed.

Johnny-Dollar said...

I think the best way to legalize but still control pot in BC would be to outsource the production to China. We wouldn't have the crime associated with the farms and it would be easier to tax at the port of entry.

Imagine a container ship docking at Vancouver loaded with dope from China. Gives a new meaning to the phrase high seas.

kabloona said...

Just Jack, what about the "bunker" beside the Pat Bay Hwy, south of Island View? That sure ain't in Saskatchewan...

Supposed to be a licensed medical marijuana facility, complete with lovely cinder-block construction and decorative barbed-wire fence.....

:-)

Johnny-Dollar said...

Cannabis is probably the best industry to be outsourced to China. You could never compete with their low costs of production.

If Kelloggs finds it more lucrative to make Corn Flakes in China and ship to North America. Imagine how cheap China could make your morning toke. Or how much more taxes the government could levy because of the huge spread.

If your paying 10 bucks a gram and China can deliver at 10 bucks a kilogram that's a windfall in potential taxes. No farms in Canada and no crime associated with the grow operations.

They could even put little prizes and toys in the packages like Kelloggs does. Little "Guitar Heroes" so you can play the air guitar at work.

Johnny-Dollar said...

I suppose we should get back onto real estate. What a buzz kill.


Odd things happen in slow markets. Things that make you go "hmmmmm".

If you've only had a home listed for 17 days at $469,000. Why accept an offer at $400,000? Which is $121,000 under the assessed value.

Of course the home isn't in the city. It's a 2200 square foot home on a 15,000 square foot lot complete with a basement suite near Saanichton. Something that would cost you $200,000 more in Fernwood and you'd only get half the size of lot.

To say that the difference is due to "commuting costs" would really be ludicrous. If you're unlucky enough to have a job in the city, you can still bike from there to your cubicle.

Deals are out there - and you don't have to amortize a home over the lifetime of your grand children.

Why sell so quickly at such a discount? Likely because the owner doesn't care and just wants out. In a way that's a bit spooky as it shows the magnitude owners may be willing to dump a surplus home for, if they have too.

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

"I'm not sure it was falling house prices that put the US or any country into a tail spin.

We didn't have that here because we had CMHC. The Yanks didn't.

As long as the mortgages are backed by the Canadian taxpayer, no one gets refused."

Have you heard of Fannie Mae and Freddie Mac?

They basically play the same role in the US housing market that CMHC does in the Canadian housing market - which is to take the risk away from lenders and transfer that risk to taxpayers.

"The U.S. housing market imploded during the 2007-2009 recession but has turned a corner over the last year, supported by the Federal Reserve's low interest rate policies and by a taxpayer backstop for most of the mortgage market.

Some housing industry leaders and lawmakers have expressed concern that reducing the limits could shut out buyers and impede the housing recovery."

Before the federal takeover of Fannie and Freddie in 2008, the two operated with the knowledge that the government (taxpayers) would bail them out if required and that is exactly what happened.

It isn't different in Canada. Canada's housing market will experience a deep price correction/crash and CMHC will not prevent that from happening.

Victoria's housing market crashed 52% from 1981 to 1986. CMHC existed then and didn't stop the crash.

caveat emptor said...

Victoria's housing market crashed 52% from 1981 to 1986.

20%

Marko said...

Land has appreciated a bit. 1421 FAIRFIELD Rd purchased in 1989 for $199,500 just resold for $1,225,000. 18,518 sq/ft lot with an old house.

koozdra said...

CHMC draws a line under condo bubble fears

“As a consequence of population aging and the increased tendency to live alone, one-person households are expected to show the fastest pace of growth to 2036, making it the single biggest type of household by the 2020s,” CHMC said.

Bravo, bravo

koozdra said...

U.S. Federal Reserve tapers bond-buying to $75B US a month

We don't need to keep interest rates down as much. Americans have deleveraged and are now able to handle higher interest rates.

Can Canada handle higher rates?

Oh sorry, not America's problem.

caveat emptor said...

Can Canada handle higher rates?
Rates actually fell - from your article:
“six-basis-point decline in 10-year treasury yields following the release of the statement"

Plus the Fed is offering forever ZIRP in return for scaling back QExx

DavidL said...

Quoting from Garth Turner's blog post from this evening:

Tapering means the bond-buying will eventually end (by the close of 2014, perhaps), which will see those prices fall and yields increase. So long as the US recovery continues and corporate profits match, stocks should avoid any 2008-style decline (but temporary corrections will certainly occur).

Higher yields in the debt market are lethal for Canadian real estate, because that’s where the bankers fund their fixed-rate mortgages. And what have Canadians done over the past few years in anticipation of this? Right. Over 80% now have fixed-rate home loans, which will be coming up for renewal at enhanced levels over the next few years. Their only defence then will be to go variable-rate and take the risk of higher costs after 2015 – which is a certainty.

Johnny-Dollar said...

That came out of left field. I've never heard that the older we get the more we will live alone.

You retire - you divorce - you buy a condo.

Our entire condominuim craze is supported by Canadians having dysfunctional relationships.

Johnny-Dollar said...

I still can't wrap my mind around the thought of Grampas and Grammas splitting up and buying condos.

Most Grammas may survive but I'm expecting Gramps to die of starvation in a condo filled to the ceiling with unwashed clothes.

Really - how many of you have ever seen your grampa make a meal. Puritan stew does not count.



Leo S said...

Victoria's housing market crashed 52% from 1981 to 1986.

20%


You're both wrong. It's 26% and the bottom was 1985, not 1986.

High inflation then, so in real dollars the decline was 42%

Marko said...

You're both wrong. It's 26% and the bottom was 1985, not 1986.

How many people bought at the absolute peak and sold at the absolute bottom?

Leo S said...

How many people bought at the absolute peak and sold at the absolute bottom?

486?

caveat emptor said...

"You're both wrong. It's 26% and the bottom was 1985, not 1986."

The fall was 20% over the period info quoted, 81-86, though you are correct that the greatest fall was 81-85

caveat emptor said...

It's worth thinking of returns in real (inflation adjusted) returns, but in terms of economic fallout a percentage point of nominal decline is more painful than a percentage point of falling behind inflation.

patriotz said...

How many people bought at the absolute peak and sold at the absolute bottom?

You're missing the big picture, which is that everyone who buys before a decline loses money relative to someone who buys later.

The difference in lifetime finances between someone who bought near the peak in the early 1980's and someone who bought after the crash is massive.

Unknown said...

"The difference in lifetime finances between someone who bought near the peak in the early 1980's and someone who bought after the crash is massive."

Unless, of course, you just held through it all. At the end of the day, if you bought at peak in 1981for $126,000 or bottom in 1985 for $93,000, in 1991 your home was up to $197,000 and, in 2012, to $600,000.

I wouldn't call the $33,000 difference in purchase price massive over a lifetime.

What is massive is the difference between renting and buying over the past 30 years.

patriotz said...

Unless, of course, you just held through it all.

No, not unless. Someone buying the same property a few years later, with the same down payment (I mean in dollars) would be making much lower payments for the entire life of the mortgage.

The present value of all that money today is in the high six figures. But that's fancy finance talk that you're not interested in.

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

You are correct that there is a difference in monthly payments.

1985 - Buy low at $93,000 - $600/month - $127,492.90 interest paid over 30 years @7%. Paid off in 2015.

1981 - Buy high at $127,000 - $836/month - $174,110.00 interest paid of 30 years @7%. Paid off in 2011.

Total difference is $33,000 in purchase price plus $46,000 in interest, or $79,000 over 30 years.

You would have the extra $236 a month to invest. I agree it is possible to turn this into a larger sum over thirty years if you are a diligent investor.

http://www.bankrate.com/calculators/retirement/roi-calculator.aspx

I'm not sure how you have the present value of that money at the high six figures, but maybe you are in a low tax bracket and have experienced good returns.

Leo S said...

It's just another investment. The idea that it doesn't matter much if you buy before or after a 25% decline is obviously not true.
Sure it might to break you, but the people who are financially ahead are the people not in the habit of buying things at the top.
Now I'm not saying anything about how that relates to current valuations in the housing market, but clearly a double digit decline in one of the largest investments most people will ever make is not to be brushed off as irrelevant.

Leo S said...

The buy and holders hung on through the financial crisis and recovered their investment value a few years later.
The smarter or luckier ones bought at the bottom.

koozdra said...

“Debt is enemy number one when it comes to your finances and we have forgotten that. People have become so used to having all this debt,” she said.

“We have heard from almost every level of government, especially the Feds, that we need to lower debt and yet these warnings seem to be getting lost in translation.”

...

"The overall levels of debt that Canadians are carrying “makes them more vulnerable should there be an unexpected shock in the economy,” Ms. Preston added, at which point these debt levels would be a problem."

This shouldn't be a problem. We aren't expecting any shocks.

Canadian consumers to take on record debt levels next year: report

Marko said...

You're missing the big picture, which is that everyone who buys before a decline loses money relative to someone who buys later.

My big picture is what about someone that bought in 1977,1978, 1979? What about someone that bought a house in 1983 and then a rental property in 1985 and sold the rental in 2010?

There was a run up to 1981 then we had a massive interest rate hike and prices still only dropped 26% from absolute peak to absolute bottom. This kind of thing is absolutely impossible to time. The one thing I took away from Jan-March 2009 when prices dropped significantly is very few people actually purchased.

koozdra said...

How do you get people to move into your extremely over priced rental units?

Lower the price? No, that would be crazy.

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Unknown said...

"The present value of all that money today is in the high six figures. But that's fancy finance talk that you're not interested in."

I'm am not interested in fancy finance talk without seeing the calculations to back it up. I don't get to a high six figure (high six figures would be over $600,000 to me) on those facts. Maybe I'm missing something.

caveat emptor said...

You're missing the big picture, which is that everyone who buys before a decline loses money relative to someone who buys later.

1981 was a very unfortunate time to buy for those who had to sell a few years later. But for any long term owners it worked out OK. They were ahead in nominal terms since 1988 and ahead in real terms every year since 1992.

Obviously the individual with great market timing ability (or dumb luck) to always buy at the bottom and sell at the top will come out ahead of the buy and hold investor.

We know now that returns for an investment in Victoria housing will be better for those that bought in 2013 than those who bought in 2010. But it is entirely possible that in the long term 2010 will prove to be a "non-disastrous" or even OK time to have bought.

Leo S said...

The one thing I took away from Jan-March 2009 when prices dropped significantly is very few people actually purchased.\
\
But what is your point? Most people don't make wise investments? Then you would be correct. Most people also didn't buy when stocks were devalued. But why should the fact that most people are not good investors stop you from trying to make good investments. \
The people that saw the bubble in 1981 and delayed their purchase benefitted immensely. People who didn't buy condos and various other property types in 2008 also benefitted. \
\
Especially going forward the idea that real estate always goes up so it doesn't matter when you buy is going to be a problem for many people

Leo S said...

>> Obviously the individual with great market timing ability

Thing about real estate is the markets are glacial. Timing might be getting within a year of the bottom

caveat emptor said...

Timing might be getting within a year of the bottom

Agreed. In fact to miss most of the pain of the 1981 bubble all you had to do was not buy in 1981. Folks buying in 1980 and 1982 had better returns.

Even with stock markets it's slower than a lot of people think. Most of 2007 and 1/2 of 2008 were fine times to be selling stocks. Mar 2009 was a fantastic time to buy stocks, but Mar 2010 was still a pretty good time.

Johnny-Dollar said...

Buying one property and holding for 30 years is a rarity.

The typical home owner holds a property for around 7 years. In hot markets that might be as short as three years and in bad markets you just have to keep paying down the mortgage until you have equity again.

The homes that are selling today have generally been purchased 15 years ago. That's mostly because those that have bought in the last 7 years haven't built up enough equity to make a move up the property ladder.

CS said...

Most people also didn't buy when stocks were devalued.

Really? You mean that, somehow, when stocks are cheap no one owns them?

In fact, for every seller there's a buyer. Same with real estate.

Obviously the individual with great market timing ability

Does anyone have great market timing ability? Didn't someone arguing that market prices embody all available information just win a Nobel Prize in economics?

Of course if you are a visionary like Info and can report on the future as though it happened last week, you might be an exception to the rule.

But for most people, the problem with RE investment is that they can only buy one unit in their lives. Which means that the financial consequences of an unfortunately timed purchase will not be compensated by other more fortunately timed purchases. But that's life. You gotta take some chances.

And anyhow, in your gut you know that purchasing at what looks like the top of the market is nuts. That's why the Nobel Prize committee balanced their award to
Fama of rational expectations fame by giving one also to Shiller of irrational exuberance fame.

The cutback in QE by the US Fed does not look promising for the economy. It was the smallest cut they could make without looking ridiculous. So what is the message? That the economy must be getting better because QE has been cut back. But the cut back in QE is negligible, so clearly it is the message, not the effect on money supply that is important.

That suggests continued low rates for a long time to come as QE is ratcheted down in tiny well-spaced increments.

Continued low rates means continued high RE prices, which may be sustainable as long as folks are anxious about inflation, family size continues to decline and investors think it a good idea to invest in empty condos.

But some day the bottom will surely drop out. But how that will end seems unclear. Could be hyperinflation, in which case those who buy RE now and are able to hang on whatever happens to rates may come out ahead.

Alternatively, we could have depression, war, plague, or my bet, utter doom.

Johnny-Dollar said...

Things are getting really bad out there for real estate.

Dean Park is a beautiful place to live. Yet prices are back to mid 2005 levels. Such as the recent sale on Carmanah at $620,000. That was purchased back in June 2005 at $614,000. 250 days on the market starting at $700,000.

-A 2600 square foot custom built home on a 15,000 square foot lot backing onto Dean Park.

If there was a wave of baby boomers still coming to Victoria - this would have been the place to buy.

koozdra said...

We shouldn't worry. I can't imagine anything happening that will make it impossible for people to get loans for over half a million dollars for buying a house.

Johnny-Dollar said...

Half a dozen or so years ago, as the sewers were being pushed out to Sooke, there were only a handful of condominium developers in Colwood and Langford. Before 2005 there was only one or two 15 year old condominum complexes and they had had water problems at one time.

So it was possible for the developers to get together on monday mornings, up at Bear Mountain, to discuss pricing of their planned developments among themselves.

Their only competition was years away when there complexes began to re-sell.

I suppose there might be one or two people that are the exceptions but I would say that anyone who ever bought a condo from a developer in Langford and Colwood would not be able to sell their condo today for more than they purchased it.

That's something to think about when you're driving through Langford and Colwood and looking up at all of the condos.

info said...

. . . . . .Percentage Price Decline From Peak (MLS HPI). . . . .
. . . . . . . . .Greater Victoria - Single Family Homes. . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .0%. . .*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 0.5%. . . .*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 1.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 1.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 2.0%. . . . . . . . . . . .*. . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 2.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 3.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 3.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 4.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 4.5%. . . . . . .*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 5.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 5.5%. . . . . . . . . . . . . . . . . . . . . . *. . . . . . . . . . . . . . . . .
- 6.0%. . . . . . . . . . . . . . . .*. . . . . . . . . . . . . . . . . . . . . . . .
- 6.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 7.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 7.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 8.0%. . . . . . . . . . . . . . . . . . . . . . . . . . *. . . . . . . . . . . . . .
- 8.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .*. . . . . . . .
- 9.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 9.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-10.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-10.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .* . . . .
-11.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
------------------------------------------------------------------------------------------
. . . . . . . . .10. . . . . . . 11. . . . . . . . 12. . . . . . . . 13. . . . . .


The MLS HPI has been updated to include November data.

The above (6-month) price chart includes two price points per year as well as the peak. It is based on MLS HPI data.

As of the end of November, single family home prices across Greater Victoria have fallen 10.43% from peak.

SFH prices dropped .73% during the month of November.

Knowing that some Canadian real estate boards have recently manipulated the data they've released to the public in an effort to make the numbers look stronger, we can safely assume that the total SFH price decline from peak is at least 10.5%.

Recently, most SFH sales have come from the core/upper end areas of Greater Victoria. No area of Greater Victoria has managed to buck the falling price trend that has been in effect since 2010.

Leo S said...

>> Really? You mean that, somehow, when stocks are cheap no one owns them?

Obviously more sellers than buyers (at the previous price) lead to the decline.

Few people were smart enough to jump in when the market was in full panic mode.

Leo S said...

Just look at trading volumes to see how few...

Phil said...

If there was a wave of baby boomers still coming to Victoria - this would have been the place to buy.

I don't believe the incoming downsizers will want 2600 of house and 15,000 feet of yard in the boonies to take care of.

Here are the 3 “demographic thrusts”, if you are interested, that will drive condo demand.
Firstly, “young people are getting married later, and single women are buying homes at much greater rate than they did in the past – and they prefer condominium-style living.
“Retiring baby boomers … are downsizing and often doing ‘two for one’ as we call it in the industry, where they’re taking a large family home and acquiring a vacation home and a condominium home in the city.
“The immigrant buyer [tends] to buy condominiums at about twice the rate of homebuyers that were born in Canada. And the theory behind this is that many of them came from urban centres in other countries where no one’s living in detached home. It’s like Manhattan or Mumbai, and for that matter, downtown Vancouver. Earth is just too expensive for that. Immigrants have come from these countries, and many of them just naturally think of [the condo] form of living.”

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

@ PD

Why would Canadian retirees buy a bubble-priced condo in cold, wet Victoria when condos in warm, sunny California are available for a fraction of the cost?

This 2 bed, 2 bath, 1300 sq. ft. condo is situated in a private, gated community in a very nice area of Lake Elsinore, California. Built in 2007, it has a 2-car garage and a pool. Its value: $133 K.

A similar condo in Victoria would probably cost $500 K.

Retirees do not generally move away from their children and grandchildren after retirement. It is much more common for Canadian retirees to spend the winter months away from home in an area with a warmer and drier climate. California, Arizona, Nevada and Florida are a lot warmer and drier than Victoria and properties in these areas of the US are a lot cheaper than in Victoria.

Canadian retirees will not be rushing to Victoria to buy condos in the future.

Johnny-Dollar said...

Well PD, there just isn't any evidence to show that those predictions are occuring.

What I'm seeing is the leading edge of the baby boomers (1945-1956) who are now 69 to 58, selling their surplus condos. This surplus is mostly vacant properties, as boomers are chosing to sell rather than find another renter for their investment condo.

All of the things you have mentioned should be showing up in higher sale volumes and higher prices. It just isn't happening anymore. The leading edge were buying condos when they were 44 to55 years old, that was a dozen years ago. And that's why we had the largest construction party in history in the Naughties with the hangover happening in the Teens.

The boomers have gone from consumers to savers. Well - at least the boomers that count have.

Some people like condo living, but most bought a condo in the hope of building equity to buy a detached house in an area of executive of houses - such as Dean Park.

Phil said...

http://www.theglobeandmail.com/globe-investor/personal-finance/home-cents/in-retirement-canadians-plan-to-stay-put/article617937/

But despite all the hype around retiring in warm southern climates, Canadians overwhelmingly prefer to live out their golden years close to home.

Within Canada, Victoria is the undisputed retirement capital of the country, with 15 per cent of baby boomers indicating they would like to retire in the capital of British Columbia.

"Additionally, a good portion of Victoria's population is over 65 years of age and there's a strong health care network in the region; this adds to its appeal for Canadians considering relocating upon retirement."


The report also found that Canadian Boomers prefer to stay close to home, with only a small number considering relocation outside of Canada upon retirement. The top retirement locations outside of Canada included:


-- The United States (five per cent)
-- Europe (two per cent)
-- Mexico, South America and Asia (one per cent respectively)

The BMO survey was filled out online by 791 Canadians, aged 45 or older, in August, 2011. It was put together by Leger Marketing and has a margin of error of 3.5 per cent, 19 times out of 20.

Phil said...

All of the things you have mentioned should be showing up in higher sale volumes and higher prices.

The retirement wave hasn't started yet Jack. It's coming.

caveat emptor said...

"Lake Elsinore"

where 7 out of 10 of the top employers are malls or big box stores. Might go some ways to explaining cheap RE there

caveat emptor said...

"cold, wet Victoria"

The enduring mystery of this blog. Why are people with a moderate to strong dislike of Victoria obsessed with owning RE here?

n.y.k. said...

There are a little over five million Canadians 65 or older right now. Statscan estimates for last year put it at 14.9% of the population.

In Victoria, the latest census reported 18.4% of our residents are over the age of 65. So we're higher than the national average. 18.4% of our 344,615 residents being 65 or older gives us a senior population of 63,409 as opposed to 51,692 seniors that would live in an average city of our size.

So out of five million seniors we've managed to attract about twelve thousand more than average. Or another way of looking at it is Victoria is home to about 1.3% of all seniors, and the other 98.7% live somewhere else.

Why would this change? Are boomers significantly more likely to move here during the last 10-15 years of lives than their parents were? I doubt it.

Johnny-Dollar said...

Anecdotal I know but I was talking to someone at my work about where they are spending Christmas and they are going to their parents house in Arizona. They live in Ontario and winter in Arizona. They bought there five years ago. I just found this interesting.

S2

Unknown said...

One thing I find interesting (and reassuring now that I own a house) :) is that once you buy your first house, assuming someday you would like to upgrade to a larger/nicer/more expensive property, you would rationally hope for the market to drop.

Certainly it would have been better if it dropped before you bought, and I definitely don't agree with the idea that it makes no difference when you buy if you plan to own forever. That said, even after you buy it's more beneficial for the market to go down than up. (Of course, this only applies to the principle residence, and only if you plan to eventually upgrade.)

patriotz said...

1985 - Buy low at $93,000 - $600/month - $127,492.90 interest paid over 30 years @7%. Paid off in 2015.

1981 - Buy high at $127,000 - $836/month - $174,110.00 interest paid of 30 years @7%. Paid off in 2011.


Mortgage rates did not drop to 7% until the late 1990's. In 1981 they ranged from 15% to 21%.

The higher the interest rates, the higher the penalty for buying at a high price.

patriotz said...

That said, even after you buy it's more beneficial for the market to go down than up.

Only if you don't end up with negative equity on the first property, which of course would prevent you from moving up.

koozdra said...

"assuming someday you would like to upgrade to a larger/nicer/more expensive property, you would rationally hope for the market to drop."

Are you joking? You realize that it's not just the value of other homes that goes down. Your home goes down in value also. You lose money.

The thing you should hope for in a decline is that it declines by less than you own. If you become underwater and you want to climb the property ladder, you'll notice that all the rungs in front of you are covered in ice.

koozdra said...

"The retirement wave hasn't started yet Jack. It's coming."

Spoken not like a demographer, but like a marketer. Prosperity is just around the corner.

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

Why a housing bubble is good (but maybe bad for you)

"These booms followed by busts are not a uniquely Canadian phenomenon. Pictures of luxury houses surrounded by weeds are a symbol of the end of the U.S. boom in 2008. More recently, property busts hit Ireland and Spain. The subject has been well studied. As this report from the European Central Bank shows, just about every industrialized economy goes through the cycle."

He didn't take into account the degree of differenceness that we have going for our property market/bubble.

Unknown said...

"That said, even after you buy it's more beneficial for the market to go down than up. (Of course, this only applies to the principle residence, and only if you plan to eventually upgrade.)"

That is an interesting theory. I'd like to see the math behind it.

koozdra said...

It's like being a day trader and constantly losing money. When asked why they keep doing it, they say, "I just like the process of trading".

Leo S said...

>> Within Canada, Victoria is the undisputed retirement capital of the country, with 15 per cent of baby boomers indicating they would like to retire in the capital of British Columbia.

How many times has this article been trotted out on this blog? A dozen at least. Someone saying they want to go somewhere is not evidence that they will end up there. The facts show that it's not happening even though it should. Population of Sidney declining, population of Victoria growing very slowly, 55+ condos doing poorly. Some boomers will come, but because of our high attrition rate we also need a lot more to fill the empty homes as the older population passes on

koozdra said...

http://www.cbc.ca/news/politics/supreme-court-strikes-down-canada-s-prostitution-laws-1.2471572?cmp=rss

Great news for the economy. The greatest employment opportunity for unskilled labour. Maybe with proper regulation prostitution will become the next mcjob.

Marko said...

Especially going forward the idea that real estate always goes up so it doesn't matter when you buy is going to be a problem for many people

Given the last 6 years many have lost the attitude of "real estate always goes up." Give us another 4-5 years of flat and it will change even more attitudes.

I don't think the problem is when you buy but what you buy. People make poor choices on the initial purchase and then they become stuck. In a hot market you can correct a poor decision, in a flat market you often cannot and your stuck.

Unknown said...

"1985 - Buy low at $93,000 - $600/month - $127,492.90 interest paid over 30 years @7%. Paid off in 2015.

1981 - Buy high at $127,000 - $836/month - $174,110.00 interest paid of 30 years @7%. Paid off in 2011.

Mortgage rates did not drop to 7% until the late 1990's. In 1981 they ranged from 15% to 21%.

The higher the interest rates, the higher the penalty for buying at a high price."

Yes, it was an example based on the fact that we are dealing with THIRTY years for the term and you need to average the rate over this term. They would have had substantially lower rates most recently.

My view is a 7% average figure is quite close to the reality of the payments over a thirty year period.

The table of historical interest rates is online. http://www.ratehub.ca/mortgage-rate-history-canada

I still haven't figured out the high six figure difference between buying at peak or not, even if the rates were higher then.

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

Obviously more sellers than buyers (at the previous price) lead to the decline.

The number of sellers and buyers is always the same — at any price.

Phil said...

The facts show that it's not happening even though it should…Some boomers will come, but because of our high attrition rate we also need a lot more to fill the empty homes as the older population passes on.

It should??
If you look at our statscan age structure below, it’s clear to me why it hasn’t happened yet. Quite simply, 95+% of the boomers (born 1946-1966) are still working. Even the leading edge boomers are working a few years longer to make up for losses in the financial crisis.

http://www12.statcan.ca/census-recensement/2011/as-sa/98-311-x/2011003/fig/fig3_2-4-eng.gif

Notice the mountain of fifty year olds. It’s clear to me that the number of people turning 65 over the next 10 years is about to grow very rapidly. Even if only 1% choose to retire in Victoria of the 15% who say they are going to, that’s roughly 100,000 boomers coming soon.

Johnny-Dollar said...

If the boomer retirees are going to be comming they better hurry up as they start to turn 70 next year.

DavidL said...

@totoro
>>> "That said, even after you buy it's more beneficial for the market to go down than up. (Of course, this only applies to the principle residence, and only if you plan to eventually upgrade.)"
>>> That is an interesting theory. I'd like to see the math behind it.

Let's say that you have a house worth $500K that is completely paid off. After commissions and fees (6%), you may net $470K after selling. You are interested in "upgrading" to a house that is selling for $700K (40% more than your current home). Therefore, the total difference if selling the first home and buying the second is $230K. What happens is prices decline by 20%?

Current house:      $500K   $400K
Commisions/fees:-$30K   -$24K
New House:           $700K   $560K
Difference:            -$230K  -$184K

So if all prices drop 20%, a buyer could save $46K when upgrading to a house worth 40% more than their current house. This works out to about two years of mortgage payments.

Unknown said...

Thanks DavidL. I appreciate your efforts there and it is a good example.

I suppose the issue for many people is that they don't own their homes outright and may go into a negative equity position.

In addition, if you are downsizing, you'll get the opposite effect.

Timing the market is pretty tough.

Johnny-Dollar said...

Are strata condos and townhomes becoming the ugly sisters of the real estate family of properties?

The newer condos and town homes still seem to have some sex appeal. But anything built prior to 2004 is a rose that has lost its bloom.

-Cougar Condos.

Johnny-Dollar said...

Simple way to time the market.

If unemployment and vacancy rates are trending upwards - don't buy.

If unemployment and vacancy rates have plateaued after several years of decline and new government infrastructure programs are announced - buy.

reasonfirst said...

Even if only 1%

Said it before and will say it again. That was a favourite mantra of the dot com boom..if only one percent of the widget market come to our website...

Tell me what analysis you used to get 1%...because it's small?

Johnny-Dollar said...

I suppose you chose 65 years because?

The retiree market actually begins at around 55 not 65. That's 25 years into a government job and most companies.

Still young enough to travel without an oxygen tank.

DavidL said...

Although I'm a Gen X-er, I know many boomers who simply cannot afford to retire. I've seen too many cases of squandering retirement savings on massive houses and not preparing for retirement at all.

Freedom 70 or 75 anyone?

caveat emptor said...

average age of retirement:

Public sector - 61
Private sector - 63
Self employed - 66

I question the wave of retirees about to wash up on our shores. I think more likely there will continue to be a slow steady trickle of retirees.

Those Canadians wanting to retire on "cold/miserable and generally awful Vancouver Island" do have cheaper choices than Victoria. Parksville is one example that grew strongly in the last few years.

DavidL said...

@caveat emptor

Interesting data, however in the future I expect that the average retirement age will be going up. Many people will not be able to continue paying off their mortgage when retired, and therefore must stay working - unless they can sell!

I don't foresee a tidal wave of retirement. Rather, I predict an moderate increase in the retirement rate that will persist for the next 10 to 15 years. Postponing retirement makes fewer well-paying jobs available to young people. I witnessed this first-hand in the 1980's.

caveat emptor said...

@DavidL

I agree that the current trend is up. In fact I got those rough numbers from a globe article on the subject of the upward trending retirement age.

koozdra said...

The hard-landing hedge fund: A new way to bet against housing

“The artificial debt creation has misled consumers into extracting equity from their homes, increasing their mortgages, and taking on risky loans to buy houses at inflated prices.”

Nobody could have seen it coming. We were just so busy taking advantage of low interest rates and buying up all the real estate we could.

caveat emptor said...

@koozdra

Hedgies wanting to take a 2 and 20 cut from wealthy clients. I am shocked!

Betting on something with OPM is hardly a statement of conviction...

info said...

@ caveat

""Lake Elsinore"

where 7 out of 10 of the top employers are malls or big box stores. Might go some ways to explaining cheap RE there"

You are implying that Victoria RE is more expensive because it is supported by higher incomes than in Lake Elsinore. However, once again, you provide no support for your claim.

You won't get anywhere with this caveat.

Victoria RE is considered extremely overvalued by several different credible studies.

I doubt that real estate in Lake Elsinore is overvalued by much at all.

This makes the case for buying in Lake Elsinore vs buying in Victoria even stronger.

Remember, overvaluation is not simply price to income ratio. Overvaluation is achieved when the price to income and price to rent ratios of RE in a city or country are much higher than their long term averages.

info said...

@ caveat

""cold, wet Victoria"

The enduring mystery of this blog. Why are people with a moderate to strong dislike of Victoria obsessed with owning RE here?"

You have no numbers to disprove the factual information that I post on this blog. Your reaction seems to be one of frustration.

Your way of dealing with this, most times, is to go with some sort of personal accusation such as the one above.

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

This 2 bed, 2 bath condo in Phoenix is valued at $106 K. It is situated in a private, gated community and has a pool.

A similar condo in Victoria would probably cost $350 K - $400 K.

info said...

This 2 bed, 2 bath condo in Las Vegas was built in 2005 and has a 1-car garage. Its value: $79 K.

A similar condo in Victoria would probably cost $300 K - $350 K.

info said...

This 3 bed, 2.5 bath, 1400 sq. ft. condo in Houston was built in 2006 and has a 2-car garage. It is situated in a private, gated community. Its value: $115 K.

A similar condo (townhouse) in Victoria would probably cost $400 K - $500 K.

info said...

This 3 bed, 2.5 bath, 1600 sq. ft. condo (townhouse) in Clearwater, Florida was built in 2007. It has a 2-car garage and a pool. Its value: 133 K.

A similar condo (townhouse) in cold and wet Victoria would probably cost $400 K - $500 K.

info said...

This 3 bed, 2 bath, 2000 sq. ft. condo (townhouse) in Palm Bay, Florida has a 2-car garage and was built in 2006. Its value: $101 K.

A similar condo (townhouse) in Victoria would probably cost $400 K - $450 K.

info said...

@ totoro

"I am really tired/bored with the endless presentation of future "facts" that have not materialized in three (?) years.

Info has consistently and constantly predicted a doomsday US-style crash as imminent. Three years ago this was going to happen right away."

You claim that I started posting on this site 3 years ago and that I arrived on the scene saying that a US-style crash would be starting immediately. You failed to provide proof that I wrote that.

The fact of the matter is that you fabricated it.

I was correct in saying that house prices in Victoria were extremely overvalued and that a price correction would happen soon.

I also said that Victoria's price correction would be deep.

The price correction is definitely on in Victoria. Based on MLS HPI (realtor) data, SFH prices across Greater Victoria have declined 10.5% from peak (2010). As well, condo and townhouse prices are both down 12.5% from peak.

Knowing that some Canadian real estate boards have recently manipulated the data they have released to the public in an attempt to make the numbers look stronger, we can safely assume that SFH prices have declined at least 10.5% from peak and that townhouse and condo prices have declined at least 12.5% from peak.

The price declines that Victoria has experienced since 2010 are in direct contrast to what has happened in most other Canadian cities where price increases have been the name of the game. This suggests that the overall credit/lending environment in Canada has been favourable to RE price increases since 2010. The fact that Victoria's housing market experienced price decreases in this environment proves that Victoria's housing market is extremely weak and that it is vulnerable to much bigger price declines in the future.

Unknown said...

Meh.

Info you are the one who said you have been here for three years. However long it has been, the broken record has been the same here and on Garth Turner.

"Jan 2013
I feel so bad for our friends who bought in the last 3 or 4 years in Victoria. They are now under water on their mortgages and they are so stressed out as they watch prices go lower. They wish they could be renting right now like we are....

Girls, I know you want that house right now, but renting will also work as prices come down. Guys, I know you want to impress your girl, but there has never been a worse time to buy in Victoria"

"February 2013: ... I’ve learned a lot about the housing market ...and am here to share that information with you...

There have been many housing bubbles around the world in the last decade. Bubbles always burst and this is what has happened recently in Victoria and the rest of Canada. ..

Many of our friends bought houses in Victoria over the last 3 years and are now upset as they have realized that they now owe more on their mortgages than what their houses are worth...

.. Some sellers have listed their houses for up to 36% below assessment. In January 2010, the single family home average price in Victoria was $711 K. Last month, that average was down to $535 K, a drop of 25%. ...

Girls I know what it is like to want that house more than anything in the world. Even though it would be nice to have it now, you have to understand that buying near the peak of this housing bubble will put you in a difficult financial situation for many years. ..it feels great to see house prices declining in Victoria and knowing that the big price decreases are just around the corner.

Guys, the short wait for much lower prices will be well worth it. Renting for now is a no-brainer."

"Sept 2013
Buying a house in Victoria at extreme bubble prices and historically low interest rates is a bad idea. ..

I know many people who bought houses in Victoria near the peak. Many bought with a minimum down payment and are now in a position of negative equity. They know that prices will continue to decline in Victoria. Many of these people tell me they get depressed every time they walk in the front door because it reminds them that their house is worth less than their mortgage.

Girls and guys, do the smart thing and wait for lower prices."

caveat emptor said...

@info
"Your way of dealing with this, most times, is to go with some sort of personal accusation such as the one above"

No - I am honestly mystified that anyone would want to buy RE here that doesn't really, really like it here.

If you are ambivalent about living in Victoria there are MUCH cheaper places to live in Canada with higher incomes to boot.

And a green card is hardly an impossibility for an ambitious educated young Canadian, so the charms of Lake Elsinore could be yours to enjoy if that is what you want.

caveat emptor said...

besides - in what way is "not liking Victoria" a personal accusation?

I like it here, but I have no expectation that others should. And I am by no means blind to Victoria's many flaws.

What I find odd is an obsession with owning RE here combined with an ambivalence towards or even dislike of Victoria

caveat emptor said...


You won't get anywhere with this caveat.

With what? Pointing out that a house in Lake Elsinore is an imperfect substitute for a house in Victoria?

I don't know much about Lake Elsinore except that it seems to have bargain priced RE and lists retailers as seven of its 10 top employers.

Unknown said...

I have figured it out.

Info is also koozdra and he is carrying out a stealth plan to convince the uneducated homebuyers of Victoria that he is a girl, and that home buyers should HOLD OUT.

If they are successful, prices will crash DRAMATICALLY, and infokooz will scoop up their dream home for pennies on the dollar.

Just like they did in the US... the real reason the market crashed.

koozdra said...

I'm not a girl

caveat emptor said...

Teranet Victoria 3 month average peak to latest down 5.3%
MLS HPI Victoria (Single Family) 3 month average peak to latest down 9.7%

Does anyone know enough about the workings of these two indices to say which is "better"?

Back one year ago info claimed:

"The Teranet house price index is much more representative of where prices are in Victoria."

That was Teranet vs the MLS medians, and I'd definitely agree with info that a repeat sales index is in principle better than just comparing medians.

Other than picking the index that shows what you want it to show, is there any basis to choose between the Teranet and MLS HPIs?

Johnny-Dollar said...

What would you consider a fair way of testing the HPI and the Teranet Index?

Come up with a good test and we can give it a try to see which one is better.

The Teranet Index is not strictly a repeat sales method, there is some statistics involved. The HPI is an attempt to fill in the gaps where there isn't enough data. It too relies on stats and human judgement. Niether one can be reproduced by an independent person without knowing the assumptions and procedure the developer has made.

I use medians, averages, repeat sales, historical sales analysis of the property I'm looking at, Sales to Assessment ratios. And then compare all of those results with a mimimum of three recent sales of similar properties and current listings. I use them all. Rarely will I get a consistent answer over all the different methods. That's where experience and human judgement comes in, during the reconcilliation of the various results.

I suppose the first question you'd have to ask is to what purpose do you want to use the Teranet or HPI. If we could answer that question maybe we could develop a test.

Or check it out for yourself. Compare what the index was for your home when you bought to the current index. You should be able to trend that factor to calculate a current value for your home.

Leo S said...

>> The number of sellers and buyers is always the same — at any price.

Nope. If I put my house on the market I am a seller. Whether or not it results in a successful sale is different.

Leo S said...

Well I used to think that the Teranet was quite good but the large increase this summer flies in the face of all other data. Provides some clues that perhaps at low sales volumes the Teranet becomes unstable while the MLS HPI is perhaps a bit more resilient to that

patriotz said...

Yes, it was an example based on the fact that we are dealing with THIRTY years for the term and you need to average the rate over this term.

That is totally wrong, because the interest expense is front loaded toward the early years of the mortgage when almost all of the payment is interest.

Also I don't think you could get a 30 year mortgage back then. At most 25 years.

Let's look at that 1981 buyer paying $127K with 10% down, 25 year amort. To compare with the 1985 buyer we'll assume a 4 year term at 15% (the best rate in 1981).

In 4 years he has already paid $67,972.88
in interest up to the time where the other buyer purchases for $93K.

So the 1981 buyer has thrown away about $75K (the 1984 buyer was paying rent for 4 years). How much would that be worth today if it had been invested in the stock market back then? Over 10 times as much.

patriotz said...

Nope. If I put my house on the market I am a seller. Whether or not it results in a successful sale is different.

Ok, so what's your definition of a buyer? It can't be "someone who buys", because that's not consistent with your definition of a seller.

Unknown said...

"That is totally wrong, because the interest expense is front loaded toward the early years of the mortgage when almost all of the payment is interest.
...
Let's look at that 1981 buyer paying $127K with 10% down, 25 year amort. To compare with the 1985 buyer we'll assume a 4 year term at 15% (the best rate in 1981)."

$127,000 with 10% down @ 15% - $1,424.35/month and $65,893.95 interest cost. Deduct rent paid instead. I don't have any idea for this because I wasn't old enough to remember, but est. $600/month for house? $7,200 x 4 - $28,400?

It seems unlikely that the difference would be invested by the renter given that they are buying a house in a few years, but maybe. And maybe they will hold their investment for 25 years and it will rise by ten times.

If you buy later you then need to add an extra five years of interest payments on at the end. You need to credit the earlier buyer with the full payment amount plus any extra interest earned on this going forward for however long it will be invested.

What this does point out is the interest rate wild card. If you buy now there is a good chance you will get a better rate than buying later. Given the high cost of buying a home, there is a risk you will pay more than the price differential in interest.

Anonymous said...

Looking at vacancy, Kelowna is probably past its bottom. Fatjay, if you are reading here's hoping you picked up a smoking deal in 2013.

"Numbers released Thursday show that the vacancy rate for apartments in this part of the valley were at 1.8 per cent this October, compared to four per cent the year before."
http://www.kelownacapnews.com/news/235622251.html

Leo S said...

>> Ok, so what's your definition of a buyer?

Exactly what is the point of these semantics? Few people buy at market bottoms just look at trading volumes for any given bottom. Whether you want to call people buyers and sellers or prospective buyers and sellers is completely irrelevant.

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

Nope. If I put my house on the market I am a seller.

If you put your house on the market you're a wannabe seller, or an offerer! You're only a seller, in the literal sense, if you make a deal. And it was with the literal sense of the word that this discussion began.

Specifically, the question at issue was whether or not fewer people bought houses or stocks when when prices were at a low.

What is the point of these semantics?

To achieve clarity and precision in communication.

It is possible that there is a general relationship between sales volume and price level, although in the stock market that relationship seems tenuous. In the housing market a similar relationship could exist, although I am unaware of any evidence to show that it exists.

If it does exist, it implies either that people are more reluctant to offer houses for sale when prices are down, or that of houses offered, fewer are actually sold, when prices are down.

If either proposition is correct, then it would be correct to say that prospective house purchasers somehow have negative timing skill, which is to say, they tend to avoid purchasing at the optimum time.

This could be so. I think I have negative timing ability in the stock market, an attribute I am attempting to turn to my advantage by buying what I feel I should sell and selling what I think I should buy. But this is a trading system that is remarkable difficult to follow.

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

If either proposition is correct ...

Probably I should have said only, if the second proposition is correct.

Although it's difficult to be sure what is the correct explanation of low sales at low prices, because one can envisage a variety of scenarios to explain the phenomenon — if it is a real phenomenon.

Leo S said...

>> Specifically, the question at issue was whether or not fewer people bought houses or stocks when when prices were at a low.

Pretty clear to me that that is the case

>> prospective house purchasers somehow have negative timing skill

Also significant evidence that people in general make poor investment decisions.

>> If you put your house on the market you're a wannabe seller, or an offerer! You're only a seller, in the literal sense, if you make a deal.

People offering houses for sale are commonly called sellers and people looking to buy are called buyers. Just read any real estate news or press release.

Jack and Cate said...
This comment has been removed by the author.
Jack and Cate said...

>> prospective house purchasers somehow have negative timing skill

Also significant evidence that people in general make poor investment decisions.

------

In reality most investors are sheeple. They depend on people who make a living off their money to give them strategies to make the investors rich on front end or back end fees. They depend on bank or quick trade sites to give them more front end or back end loaded trade advice.

Then there are the coffee shop and internet sheeple who "heard it" from a good source that this is the hottest investment (insert here)

If it is in the news or social media stream then the real money has already been made. Realtors are no different either. They are paid to give advice, good or bad.

Housing is no different anymore. Once an investment now a commodity, nothing more and nothing less. If you miss the buying or sellng over the next few years, you have no one else to blame, nope, no one.

CS said...

People offering houses for sale are commonly called sellers and people looking to buy are called buyers.

No doubt about that. But the terms are ambiguous, and the ambiguity can lead to misleading or at least confusing arguments.

But more interesting is the contention that people have negative timing skill when purchasing property.

This is surely worth exploring. What is the evidence of a market bottom that people misread?

RE sales in Victoria seem to have picked up this year compared with last. Is that a signal that the market has bottomed?

If not, what kind of slowdown in sales should we expect at a bottom?

Leo S said...

>> RE sales in Victoria seem to have picked up this year compared with last. Is that a signal that the market has bottomed?

It's evidence that last year te regulatory changes took a large percentage of potential buyers out of the market.

>> If not, what kind of slowdown in sales should we expect at a bottom?

I think we will continue to bounce around with mediocre sales like we have now. Would be interesting to see how sales volume behaved in US markets where it did decline more significantly though

koozdra said...

"If not, what kind of slowdown in sales should we expect at a bottom?"

When buying isn't cool anymore, we've hit bottom.

info said...

. . . . . Total Yearly Single Family Home Sales. . . .
. . . . . . . . . . . . . .Greater Victoria. . . . . . . . . . . . . .
. . . . . . (Percentage below 25 Year Average). . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 0%. . . .**. . . . . . . .*. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .**. . . . . . . .* . . . . . . . . . . . . . . . . . . . . . .
- 5%. . . .**. . . . . . . .*. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .**. . . . . . . .*. . . . . . . . . . . . . . . . . . . . . . .
- 10%. . .**. . . . . . . .*. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . **. . . . . . . .*. . . . . . . . . . . . . . . . . . . . . . .
- 15%. . .**. . . . . . . .* . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . **. . . . . . . .* . . . . . . . . . . . . . . . . . . . . . .
- 20%. . .**. . . . *. . . *. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .**. . . . *. . . *. . . *. . . . . . . . . . . . . . . . . . .
- 25%. . .**. . . . *. . . *. . . *. . . *. . . . . . .*. . . . . . . .
. . . . . . . .**. . . . *. . . *. . . *. . . *. . . . . . .* . . . . . . .
- 30%. . .**. . . . *. . . *. . . *. . . *. . . *. . . *. . . . . . .
. . . . . . . .**. . . . *. . . *. . .*. . . *. . ..*. . . *. . . . . . . .
- 35%. . .**. . . . *. . . *. . . *. . . *. . . *. . . *. . . . . . .
-----------------------------------------------------------------
. . . . . 25 yr. . .08. . 09. .10. . 11. . 12. . 13 . . . . . . . .
. . . . . avg . . . . . . . . . . . . . . . . . . . . . . (proj.). . . . . .

info said...

"RE sales in Victoria seem to have picked up this year compared with last. Is that a signal that the market has bottomed?"

As my chart shows, total SFH sales for Greater Victoria will end up being slightly ahead of 2012's total, but far below the 25 year average. If we were to apply population adjustment to the equation, 2013's total would look much worse compared to the 25 year average.

Canada's housing bubble has been inflating for 13 years. The US bubble took 6 years to inflate and about 5 years to hit bottom, once it startetd to deflate.

Once Canada's housing bubble begins to deflate, it will take at least 5 years to hit bottom.

The fact that Victoria's housing market started to deflate before most other Canadian markets does not mean that it will hit bottom first. This certainly was not the rule in the US. In the US, the markets that began to deflate first, in general, experienced the deepest price corrections. This will likely be the case with Victoria's correction.

By the time it reaches bottom, Victoria's housing market correction will be much deeper than the 10-15% that it has corrected so far.

info said...

@ Koozdra

"If not, what kind of slowdown in sales should we expect at a bottom?"

"When buying isn't cool anymore, we've hit bottom."

Absolutely true.

That is exactly what happened in the US.

Even though the US housing market has made some price gains over the last 2 years and houses cost about half as much in the US as they do in Canada, Americans are still a lot more cautious about buying houses than Canadians are. Many Americans view renting as a smart choice, even though their housing market isn't overvalued compared to rents and incomes. Once the Canadian housing market experiences its deep price correction, Canadians will have a similar view about renting.

Canadians will learn the exact same lessons about buying houses that Americans did. Many Americans are shocked at the willingness of Canadians to buy houses at or near the peak of a major housing bubble.

More on this later.

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

Twas the night before the night before Christmas, when all through the blog
Not a doomer was posting, no viewpoints to flog.
Their TFSAs invested with care,
In hopes that a housing slump soon would be there.

Merry Christmas to all!

CS said...

Thanks, Info, for the sales volume data.

Heres are some relevant comments on the question of property valuation in Canada from the Globe and Mail.

And here's the RBC housing affordability index referred to in the G and M article.

What the RBC guide shows is that housing affordability in Victoria as measured by the percent of household income to purchase a home is now at or above (i.e., more affordable) than the long-term average.

True, relatively high affordability reflects low interest rates, but any substantial increase in rates will only occur if there is a pick-up in the economy which should translate to higher household incomes.

Leo S said...

Many Americans view renting as a smart choice, even though their housing market isn't overvalued compared to rents and incomes.

More evidence that people in general make terrible investment decisions. Buy at the top, then sell at the bottom and rent during a once in a lifetime opportunity to get cheap properties. Brilliant plan.

Johnny-Dollar said...

The Malaise of Socialized Housing and Price Compression in Gordon Head.

This year there was a smidge over a hundred non water view houses that sold in Gordon Head.

House prices started at a low of $356,000 for what would be considered a "handyman's house" along busy Shelbourne to $1,020,000 for a decade old 4,100 square foot home on a quarter acre lot along Ash.

The typical family home had nearly 2,300 finished square feet and an 8,200 square foot lot. And sold at $570,000 or about 99.3% of its assessed value. Most homes selling between 85 to 115 percent of their current assessed value. 70 percent of the middle income market fell with a narrow price band from $500,000 to $725,000

But this is what you would expect when we socilized housing to the extent that anyone could buy a home. The base prices universely rises for homes, not because of a its physical aspects but on what a family can finance.

At the other end of the market is the million plus homes. That's where the saver is rewarded over the spender - where the forces of the free market once again return. At the juxtaposition of the socialised and the free markets is where we have price compression. Those that have saved 20 percent as a down payment are rewarded with a huge selection of housing and increasing "house value" for every additional dollar paid. Since CMHC does not insure high ratio financing for homes over a million.

Under a million the saver is at a disadvantage as they have to compete with the masses. Masses with a high tolerance for taking on a mountain of debt. The result is that a buyer gets less "housing value" for each dollar paid.

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

Fannie Mae and Freddie Mac play the same basic role in the US housing market that CMHC plays in the Canadian housing market.

Even before the federal takeover of Fannie and Freddie in 2008, the two operated with the knowledge that they would be bailed out if necessary. This allowed them to operate in a much more reckless manner (like CMHC).

During the formation of the 2006 US housing bubble, Fannie Mae and Freddie Mac allowed high-risk, high-ratio mortgages (at bubble prices) to be given to many of those who were previously unable to qualify at much lower prices.

In the US, many of the most vulnerable mortgage holders (high-risk, high-ratio) were the last ones to enter the housing market and many did so at sky-high prices.

The same thing has been happening in Canada as our bubble continues to inflate.

Last year, the maximum loan size that could be backed by CMHC was decreased to $1 M.

In the US, for the vast majority of mortgages covered by Fannie and Freddie, that limit has been $417 K.

Fannie Mae and Freddie Mac did not prevent the US housing bubble from bursting or the US housing market from crashing.

CMHC will not prevent Canada's housing bubble from bursting. CMHC will not prevent Canada's housing market from experienced a deep price correction.

That correction is well underway in Victoria.

Condos in Esquimalt, Sidney, Langford, Coldwood and Sooke have corrected 18.6% from peak (6-month median).

The mortgages on many of these condos are probably backed by CMHC.

Johnny-Dollar said...

I understand your logic, but the court ordered sales that I'm involved with are rarely first time buyers who have bought in the last couple of years.

Most are people that have owned their homes for the last dozen or more years or builders.

Anyone buying a home in the last few years would have gone through a means test with the banks and brokers to determine if they are capable to make the mortgage payments. That isn't the same with those that have owned their homes for considerable time and had the equity in their homes increase significantly. Through bad luck, bad health or bad money management they had drawn out their equity and could not make the higher payments.

The few builders in foreclosure are generally novices at the game. They misjudged the market, got very poor advice from other professionals and just ran out of money and time to finish the home.

In Canada we have a lot of experience with Crown Corporations. When the states nationalized Fannie Mae, that would have been almost like electing a communist as president. The American (Republicans) people would not accept that taxpayers should pay for some lackey's mortgage.

Once Fannie Mae lost credibility, it was doomed and American bank credit was tighter than Rush Limbaugh's sphincter during a screening of Brokeback Mountain.

The opposite happened in Canada. CMHC was never questioned as not being viable. Backed by the taxpayer with its own accounting standards. CMHC was Canada's busy little whore.

CS said...

Buy at the top, then sell at the bottom and rent during a once in a lifetime opportunity to get cheap properties.

But, in fact, despite some variation from year to year, people go on trading houses year in, year out, which means that overall, neither buyers nor sellers show much skill in market timing.

And indeed it would be strange if they did, since if buyers showed skill in timing it would indicated that vendors had negative timing skill. Conversely, if buyers tended to buy at the lest opportune time, it would mean that vendors have positive timing skill. But since buyers and sellers are from the same population, it's unlikely that one group is more successful in timing than the other.

All of which tends to confirm the view that whether or not you buy at the optimum time is mainly a matter of luck. The alternative to that view is that although some do buy or sell at the optimum time, there is an equal number who buy or sell at the dumbest time, so that the overall market shows little evidence of timing skill by either buyers or sellers.

patriotz said...

Collectively, neither buyers nor sellers of anything can be correct in market timing.

Every sale has a buyer and seller and one of them is right and one of them is wrong.

All of which tends to confirm the view that whether or not you buy at the optimum time is mainly a matter of luck

Don't agree with respect to RE. Market cycles are easy to identify. I wouldn't agree at all with someone claiming that buying in the US in 2005 versus 2011 was just a matter of luck.

What makes RE different from, e.g. stocks is that the market is inherently inefficient due to the inability to short sell and other factors.

Leo S said...

>> But, in fact, despite some variation from year to year, people go on trading houses year in, year out, which means that overall, neither buyers nor sellers show much skill in market timing.

You say in fact but you have presented no facts. Sales volumes are in fact not at all the same during rising and falling markets.
Also if you look at home ownership levels they peaked at the top of the bubble.

CS said...

you have presented no facts.

Info presented facts, which are among facts I referred to. Those facts confirm what I said: "[that]despite some variation from year to year, people go on trading houses year in, year out."

Every sale has a buyer and seller and one of them is right and one of them is wrong.


Well which is it? Are buyers consistently wrong (i.e., mistiming the market) while vendors, who are former buyers, are consistently right (showing timing skill), or is it the other way round?

DavidL said...

@patriotz
Every sale has a buyer and seller and one of them is right and one of them is wrong.

Agreed. When I bought my house in 2002, the previous owner was convinced that they could make better money in the stock market (and this, right after the dot-complete bubble). Hindsight shows that the 10% to 20% annual growth in real estate during the mid 2000's made real estate a better investment.

However, many owners sell because they have to (death, divorce, health, finances, etc.) - not because they want to. Nobody forces a buyer to buy...

DavidL said...

@CS

All of which tends to confirm the view that whether or not you buy at the optimum time is mainly a matter of luck.

It was pretty obvious in 2001 through 2003 that it was a very good time to buy. Prices were just beginning to climb after being flat for ten years (over which time the compound inflation was close to 40%). Interest rates had fallen significantly - making a perfect buyers market. Similarly, it was obvious that in 2010 if you wanted/needed to sell, it was the perfect time to "cash out" at he top of the market. Both these buying and selling opportunities could be seen at those respective times, without having to resort to hindsight.

Johnny-Dollar said...

There is also the assumption that all sellers are willing sellers.

In a real estate recession, duress sales form a large part of the marketplace. Foreclosures, divorce and estates are significant enough to effect prices. Those people are not willfully chosing to sell in a down market. That would make buyers a lot better at timing the market than sellers.

During the drop in real estate prices in the 1980's, the default rate for mortgages reached 0.65%. Less than 1 out of ever 100 mortgages were in default. The under performing economy also lead to an increase in divorce. Estates sales didn't alter that much. That was enough to shift the market in areas such as Vancouver and to a lesser degree Victoria. The marketplace shifted from one of orderly liquidation to one of duress. A duress market in which the seller has abandoned the property or is not acting prudently or in their own interest any longer.

The last home to sell in your neighbourhood set a new price ceiling. The next home to sell would likely sell for less with most agents "trough pricing" new listings.

Leo S said...

despite some variation from year to year, people go on trading houses year in, year out.

So you are saying there are always at least two sales per year. Sure that's correct, but also an empty statement. Of course some people keep buying and selling, but overall there are huge differences in sales volume, from some 8500 in 2007 to 5800 now. And that's with only a minor price decline. In Seattle sales volumes dropped in half before the market turned around.
The masses didn't start buying again until it was clear prices were on the upswing.

Well which is it?

That was patriotz, not me.

The DP said...
This comment has been removed by the author.
Marko said...

Monday, December 30, 2013 8:00am

MTD December

2013 2012
Net Unconditional Sales: 330 283
New Listings: 417 405
Active Listings: 3,579 3,896

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

CS said...

So you are saying there are always at least two sales per year.

No, I didn't say that.

In Seattle sales volumes dropped in half before the market turned around.

So you're saying it's the sellers who are dumb clutzes who sell when they should hang tough?

Anyhow, sales volume is definitely picking up here compared with last year according to the latest stats provided by Marko. So that means prices must being going up as smart buyers have now detected a bottom? Right?

CS said...

It was pretty obvious in 2001 through 2003 that it was a very good time to buy. Prices were just beginning to climb after being flat for ten years (over which time the compound inflation was close to 40%). Interest rates had fallen significantly - making a perfect buyers market.

Sounds like a reasonable argument. So why did sellers sell at the low prices that they accepted? Surely they were not all selling under duress?

I suppose if they were trading up, selling made sense. But what we are interested in is those who were either trading down or exiting the market. This is only a fraction of the total, so it may be difficult to judge from action in the overall market what these people were doing. It would seem, though, that for every smart person entering the market or trading up when it was at a low, there must have been some less smart person exiting the market or trading down, implying that buyers were smarter than sellers.

Maybe that's true, since perhaps the majority of those exiting the market are not smart at all, but deceased.

Marko said...

According to my calculations we need 27 sales between today and tomorrow to break 6,000 for the year.

CS said...

we need 27 sales between today and tomorrow to break 6,000 for the year

Come on folks. Just 27 more dummies!

The masses didn't start buying again until it was clear prices were on the upswing.

And what happened in 2009 when the slump in Victoria turned to a sharp upswing?

Was it clear then that prices were about to turn upward?

Everything's very clear in hindsight. But Nothing's that clear at the time. Who, after all, really believed in 2008 that because of the financial crisis new life was about to be breathed into the Canadian housing market via incredibly low interest rates and looser mortgage regulation?

Not many. That's why the market slumped. And why the turnaround only occurred when, unexpectedly, circumstances changed.

caveat emptor said...

Market cycles are easy to identify.

Especially easy to identify in retrospect!

Even assuming that you correctly identified in 2005, 2006, 2007 or 2008 that the Canadian RE market is overvalued you are still awaiting the "better" buying opportunity 6-9 years later.

I think a key difference between stocks and housing - millions are trying to time the stock market (in aggregate with zero success of course) whereas a relatively trivial number of people try to "time" the housing market.

Most buy when they can afford to and sell when they need to (move, death, divorce, financial circumstances, increase in family size). The current decline in sales volume can be partially attributed to a decline in "discretionary sellers"

Leo S said...

No, I didn't say that.

You said people go on trading houses. They do, but much fewer when prices are declining/down than when they are rising/up.

Anyhow, sales volume is definitely picking up here compared with last year according to the latest stats provided by Marko. So that means prices must being going up as smart buyers have now detected a bottom? Right?

We know why sales were terrible last year. It was because of the credit changes enacted in July 2012. Those changes have now worked their way through the market and sales have recovered to normal levels.

info said...

. . . . . Total Yearly Single Family Home Sales. . . .
. . . . . . . . . . . . . .Greater Victoria. . . . . . . . . . . . . .
. . . . . . (Percentage below 25 Year Average). . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 0%. . . .**. . . . . . . .*. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .**. . . . . . . .* . . . . . . . . . . . . . . . . . . . . . .
- 5%. . . .**. . . . . . . .*. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .**. . . . . . . .*. . . . . . . . . . . . . . . . . . . . . . .
- 10%. . .**. . . . . . . .*. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . **. . . . . . . .*. . . . . . . . . . . . . . . . . . . . . . .
- 15%. . .**. . . . . . . .* . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . **. . . . . . . .* . . . . . . . . . . . . . . . . . . . . . .
- 20%. . .**. . . . *. . . *. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .**. . . . *. . . *. . . *. . . . . . . . . . . . . . . . . . .
- 25%. . .**. . . . *. . . *. . . *. . . *. . . . . . .*. . . . . . . .
. . . . . . . .**. . . . *. . . *. . . *. . . *. . . . . . .* . . . . . . .
- 30%. . .**. . . . *. . . *. . . *. . . *. . . *. . . *. . . . . . .
. . . . . . . .**. . . . *. . . *. . .*. . . *. . ..*. . . *. . . . . . . .
- 35%. . .**. . . . *. . . *. . . *. . . *. . . *. . . *. . . . . . .
-----------------------------------------------------------------
. . . . . 25 yr. . .08. . 09. .10. . 11. . 12. . 13 . . . . . . . .
. . . . . avg . . . . . . . . . . . . . . . . . . . . . . (proj.). . . . . .


Sales in Greater Victoria are not back to normal.

Total SFH sales for 2013 will likely be 25% below the 25 year average.

If we adjust for population growth, 2013's sales total would be significantly lower than 25% below the 25 year average.

info said...

. . . . . .Percentage Price Decline From Peak (MLS HPI). . . .
. . . . . . . . . .Greater Victoria - Condominiums. . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .0%. . .*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 0.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 1.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 1.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 2.0%. . . .*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 2.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 3.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 3.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 4.0%. . . . . . . . . . . . *. . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 4.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 5.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 5.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 6.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 6.5%. . . . . . .*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 7.0%. . . . . . . . . . . . . . . . *. . . . . . . . . . . . . . . . . . . . . . . . .
- 7.5%. . . . . . . . . . . . . . . . . . . . . . *. . . . . . . . . . . . . . . . . .
- 8.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 8.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 9.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 9.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-10.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-10.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-11.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-11.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *. . . . . . . . .
-12.0%. . . . . . . . . . . . . . . . . . . . . . . . . .*. . . . . . . . . . . . . . .
-12.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .*. . . . .
-13.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
------------------------------------------------------------------------------
. . . . . . . . .10. . . . . . . 11. . . . . . . . 12. . . . . . . . 13. . . . . .


This is a 6-month price graph. Each year has two price points - one at the end of June and one at the end of December. The peak is also included. The last price point is for November 2013.

caveat emptor said...

If we adjust for population growth, 2013's sales total would be significantly lower than 25% below the 25 year average.

True, but if you are going to adjust for population perhaps you should also adjust for the shift in the housing mix towards condos. For instance 2012 condo sales were above all years before 2003 and below all years since. Accounting for that shift makes the current SFH sales SLIGHTLY less dismal

Regardless your point remains whether one, both or neither adjustments are made - sales are slow by recent historic experience

Leo S said...

Total SFH sales for 2013 will likely be 25% below the 25 year average.

Total sales though will only be about 14% below that average.

Unknown said...

Sidney sees boom in development proposals

What would prompt them to write about this? PR campaign?

Didn't Sidney have the largest drop in RE values from peak?

The only two quoted were the Mayor and a Councillor.

CS said...

So is this a good time to buy?

Prices in constant dollars are down 25% from peak (quoting Leo S), sales volume of all housing types is below average but above the low (again quoting Leo S), suggesting that the bottom has been passed, and although interest rates are up a little, we know if they go up much more we will be back in a recession, implying that rates really can't go up much more.

The other factor is price to income ratio which is high by historical standards but lower than six years ago when nominal SFH prices were almost exactly where they are today.

Perhaps there has been a historical shift. An OB bungalow purchased in 1974 for $68K is now valued at about $900K, a thirteen-fold increase. But the same money invested in a Dow Jones Index fund would have appreciated about 18-fold, while generating annual dividend income of several percent.

So are houses really so expensive now?

What seems to have happened is that asset prices generally have risen relative to wages. Or maybe, one should say that real wages have fallen substantially over the last forty years.

In that case, we are bound to see either a decline in demand for housing or an increased proportion of household income spent on housing.

In fact, we are seeing some of both. More people buying 800 square foot condos relative to SFHs, and people buying SFH's paying substantially more of their income to finance the purchase.

Will asset prices fall? I don't see why. As more labor is off-shored to the Third World or automated away corporate profits continue to rise, with the result that stocks rise too.

The cost of house construction cannot fall indefinitely below cost, i.e., much below present prices. So the only thing that will bring house prices down is if an even greater number decide to make do with a compact condo rather than a house, or if land prices slump, which could certainly happen.

So price to income ratios may decrease, but there seems no certainly about that.

info said...

"Total sales though will only be about 14% below that average."

Are you referring to the population adjusted average?

info said...
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info said...
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info said...

Condo prices in Esquimalt, Sidney, Langford, Colwood and Sooke have corrected 18.6% from peak (6-month median).

I will post that chart soon.

info said...

"Prices in constant dollars are down 25% from peak (quoting Leo S), sales volume of all housing types is below average but above the low (again quoting Leo S), suggesting that the bottom has been passed"

This does not suggest that the bottom has been reached and is a thing of the past.

Sales totals can increase and decrease in a down market.

Victoria is in a down market after a 10 year debt-induced bubble price run-up. Canada's bubble price run-up has been in effect for 13 years. Once the Canadian housing bubble bursts, it will probably take at least 5 years for the bottom to be reached.

In the US, the housing markets that started to correct first didn't necessarily reach bottom first. However, the US cities that began to correct first generally experienced the biggest price corrections (think Victoria).

Johnny-Dollar said...

What does 6,000 sales mean?


Since it seems all of us are only concerned with the urban core municipalities the sales for last year can be broken down for the core as:


1,743 detached homes
75 half duplexes
1,153 condominiums all types
413 townhomes

3,384 Total

The rest are revenue properties, commercial, westshore, islands, businesses, vacant lot, etc.

As for Sidney and condominiums. Out of 160 condos listed in 2013, 103 sold. That's a 65% Sales to New Listings ratio. Which is a market in favour of buyers.

The typical 1,050 square foot condominium selling at $241,000. And on average selling at the rate of 8.5 a month. With a built condominium taking on average 78 days to find a buyer.

Definetely any condo construction should be an MIC (Mortgage Investment Corporation) insured by CMHC otherwise it's too risky for an investor interested in financing construction. If I were to give a school grade for a condo project in Sidney.

I'd give it a C+

In contrast I would have given Colwood Corners a C- a couple years ago. Today it's an Incomplete

Sidney Township should also demand a BIG FAT bond from the developer to fill in any holes if the project goes sideways.

CS said...

Those stats suggest a sharply rising inventory of condos' and townhomes, which provides those entering the market who are unable to purchase a SFH in the core an alternative to a SFH in one of the outer suburbs or exurbs. That would seem to go quite some way in explaining the soft market that Jack has reported for SFHs in the outer suburbs.

The condo/townhome option means that while price/income ratio for SFH's in the core has risen sharply since 2000, the price/income ratio of the homes people are actually buying, has not increased nearly so much, or perhaps not at all.

Johnny-Dollar said...

Likely half the condos being bought are not for home ownership. The rest are investment properties to rent and to hold.

We don't have a shortage of condos. We have a glut. We have an incentive for developers to keep building even when there is little demand. Because the developer's investors are guaranteed their money from CMHC. And the builder is under no pressure to sell out the units as their is no construction mortgage and no payments due each month. The investors just have to wait to get paid out.

Developers are not building condominiums to sell. Developers are building condos to attract investors to pay them to build.

Leo S said...

In the US, the housing markets that started to correct first didn't necessarily reach bottom first. However, the US cities that began to correct first generally experienced the biggest price corrections (think Victoria).

I don't know of any city in the US that corrected 5 years before the others. I think we can say we're in a different situation.

Leo S said...

The condo/townhome option means that while price/income ratio for SFH's in the core has risen sharply since 2000, the price/income ratio of the homes people are actually buying, has not increased nearly so much, or perhaps not at all.

It has certainly increased substantially. The overall market is what is tracked by demographia, where they say the median multiple was 6.3 in 2012.

End of 2009 it was 7.9.
End of 2006 we were at 6.6, which is the first year we were mentioned in the report. You can extrapolate that at the beginning of the 2000s it was more likely around 3 or 4.

CS said...

It has certainly increased substantially. The overall market is what is tracked by demographia, where they say the median multiple was 6.3 in 2012.

End of 2009 it was 7.9.


Actually, according to the figures you cite, the price to income ratio has been falling since at least 2009, and more rapidly than the decline in SFH price. That is consistent with an increased proportion of condo to SFH sales.

Johnny-Dollar said...
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