| January 2014 | January 2013 | ||||
| Wk 1 | Wk 2 | Wk 3 | Wk 4 | ||
| Unconditional Sales | 71 |
294
| |||
| New Listings | 362 |
1080
| |||
| Active Listings | 3295 |
3870
| |||
| Sales to New Listings |
20%
|
27%
| |||
| Sales Projection | --- | ||||
| Months of Inventory |
13.2
| ||||
You can tell it was a blustery rainy weekend by the number of comments and number of mentions of Phoenix. Sales total should be around 360 if current pace continues..
175 comments:
My assessment went up by 4 grand from last year and yet a neighbour's went down by 90K (almost 25%) and this is in Victoria not Sooke or Metchosin. These new assessments are seemingly random. I think it's a mechanism to increase the mill rate and then inch up the values over the coming few years. A sneaky way to increase taxes to pay for the mega projects coming down the pipe....
Wondering if anyone can comment on the new Estevan listing on Thompson Street. It seems to be overpriced searching for 2010 peak price unless I'm missing something. Any suggestions as to it's current value?
You've got it dasmo, that is exactly what will happen. The municipalities cannot "afford" to lower their budget forecasts so they will up the mil rate in order to meet their financial estimates. As the years pass, they will bit by bit increase the property assessments.
It seems to be overpriced searching for 2010 peak price
Could be that the 2010 price still prevails in that area. An 1100 square foot unrenovated 1940s/50s bung of 1100 square feet on Dunleavy went recently for $650,000, and I doubt it would have fetched more in 2010.
In comparison, the Thompson St house offers more than twice the finished area and many attractive features.
"It seems to be overpriced searching for 2010 peak price"
"Could be that the 2010 price still prevails in that area."
Incorrect.
All property types in all areas of Greater Victoria have experienced price declines.
2010 prices are definitely a thing of the past.
The Thompson house is now assessed at $701K which is why is seems a stretch to list at $859K. I'm thinking they will be lucky to close at over $800K.
. . . . . . Percentage Price Decline From Peak. . . . . . . . .
. . . . .Greater Victoria Residential Real Estate. . . . . . . .
. . . . . . . .. .(by area and property type). . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 %. . Greater Vic SFHs (MLS HPI)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 11.0 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .*. . . . - 11.5 %. . Upper end SFHs (3-month median)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 12.0 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .*. . . . - 12.5 %. . Greater Vic condos (MLS HPI) and
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 13.0 %. . Greater Vic townhouses (MLS HPI)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 13.5 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .* . . . . - 14.0 %. . Lower end SFHs (3-month median)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 14.5 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 15.5 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 16.0 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 16.5 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 17.0 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 17.5 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 18.0 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .* . . . . - 18.5 %. . Lower end condos (6-month median)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 19.0 %
----------------------------------------------------------------------------
June 2010. . . . . . . . . . . . . . . . . . . . . . . . Nov./Dec. 2013
A character home in Estevan is one of the most sought after properties. If you want this style and location you're hooped.
It's still a strong sellers market for this style of home in this location. With only 2 Months of Inventory and a Sales to New Listings ratio of 93%You'll have to suck it up and pay close to full asking price.
That's what happens when you follow the pack.
Didn't Buffet say.. find out what everyone is doing and then do the opposite.
The information for the graph I posted can be found here and here.
The upper end of the SFH market is made up of Oak Bay, Saanich East and North Saanich.
The lower end of the SFH market is made up of Sidney, Esquimalt, Sooke, Langford and Colwood.
Victoria's housing market has been a buyer's market for some time and it shows in the price declines of all property types in all areas.
Victoria's housing market has experienced price declines while the rest of Canada, in general, has experienced price gains since 2010.
This market weakness will continue for some time and it will result in more price declines in all areas of Greater Victoria.
I think it's a mechanism to increase the mill rate and then inch up the values over the coming few years.
Looks like it's time for another lesson on BC property taxation.
Assessments are determined by BC Assessment, a Crown corporation. Municipal budgets are determined by municipal councils.
Then the mill rate is determined to raise the required revenue from the assessment base.
There is no plot.
Incorrect.
All property types in all areas of Greater Victoria have experienced price declines.
OK, Info, give us an example of an non-updated 1100 square foot bungalow in the Estevan area, outside of the Uplands, that sold for more than $650K. Ever.
This is a question of fact, now. Not a question that can be answered by mere assertion.
How about them taxes. Using Thompson as a guide here's how the annual taxes have changed for the last dozen or so years.
2001-$2919
2002-2952
2003-3099
2004-3358
2005-3398
2006-3427
2007-3548
2008-3645
2009-3752
2010-3923
2011-4052
2012-4379
2013-$4551
The property has just had a recent renovation, so I would expect that this years taxes are not going to include the upgrades. The taxes will likely be the same as the year before.
But in 2015, the taxes will include the renovations and whiz up to around $5300.
The Thompson house is now assessed at $701K which is why is seems a stretch to list at $859K. I'm thinking they will be lucky to close at over $800K.
It does seem pricey. But if you look at the listing you will see that they have made some improvements. In some cases improvements can make the current assessment essentially meaningless.
For example this property is assessed at around $2.3 million but is on offer for $9.868 million!
It's far easier for municipalities to increase property taxes when prices are rising. More difficult to get the public to cough up more cash when their assessments decline.
Better to charge higher user fees and utility charges or even make up new taxes like the rain water tax to add to the city's revenue.
It seems we're getting to the point that we can't afford our government anymore.
Maybe I'll throw a tea bag from the kayak into Foul Bay this weekend. Sometimes if feels good to be a rebel.
There is no difficulty in getting people to pay property taxes. If you don't pay them you pay interest/penalties and it remains a lien on your home and your home can, eventually, be sold to satisfy the debt.
As far as increasing taxes when assessments decline, I disagree. It is budget based. You can look at the Thompson taxes yoy and see that they do increase each year. Whether your assessment goes up or down just means that the mill rate will be raised or lowered that year.
It is interesting that info is adamant that no home in Victoria could be selling for 2010 prices, although it seems like Thompson is priced at this level - or higher. We'll see what it sells for.
And you have to clear any liens on your property before the bank will refinance.
As strange as it seems, the banks can start foreclosure proceedings, even though you have never missed a mortgage payment, if you leave your property taxes unpaid.
Read your mortgage document.
Of course a good reno will increase the value of a SFH; like Thompson.
Imagine three identical houses, on the same street, located side by side.
The one on the far left and the one on the far right were both built in 1955. The one in the middle was just built last year. The older one on the right is well maintained plus it had a quality reno last year with a full kitchen gut and a new bath, plus new flooring throughout. The older house on the left is in nearly original condition, but well maintained.
It's obvious that the new house will sell for the highest price and the older place in near original condition will sell for about assessed value, and the reno'ed older house will sell for more than the old original house but less than the new house.
If you follow the SFH market in greater Victoria, but limit the houses you track to those that are 95% comparable in quality of neighbourhood, in type of street, finished sq ft and unfinished sq ft, same number of bedrooms and bathrooms, and similar lot size; then you will clearly see these variables in price based on age, condition, and recent reno's.
BTW - "recent reno's" also includes outdoor things like new roof, new storm drains, new sewer line, etc
Using this same tracking technique also makes it obvious that the decline in house prices is much higher than the averages suggest; of course subject to the envy factor that JustJack noted above for highly desirable neighbourhoods.
I think it's a mechanism to increase the mill rate and then inch up the values over the coming few years. A sneaky way to increase taxes to pay for the mega projects coming down the pipe....
Yes dasmo, the market is not declining, it's actually a conspiracy to increase your taxes..
The world does revolve around me after all :-)
Teranet Dec 2013 for Victoria now in.
Index Level 133.92
% change y/y -4.01%
% change m/m -1.69%
Year to date -4.01%
Once again the weakest market in Canada.
I had predicted 133 for June and 128 for Dec. June was about right but there was no further net decline for Teranet in the 2nd half. Now 9% off the 2010 peak.
That's because Summer 2013 will be looked back upon as the de facto bottom.
"That's because Summer 2013 will be looked back upon as the de facto bottom."
Oooh, the big F won't like that.
About 30% of retired Canadians returned to work to pay bills, says ING survey
These guys are dumb. We have it figured out. We'll be selling our houses (to whom is a mystery but..) to fund our retirements.
The Motherload
Great documentary about working mothers. We don't want women taking care of children. We want them working to afford larger mortgages so that housing appreciation can continue without end.
I wonder if we will reach a time when people will stop believing the Canadian housing lie. Buy at all costs. Low interest rates make it super affordable.
You can own a home really cheaply in Greater Victoria. For $47,000 and a pad fee of $300 a month you can own a 720 square foot manufactured home with a water view in Saanichton.
Or a 940 square foot condo in Sidney with strata fees of $232 a months for $134,500.
Or a strata condo in Oak Bay for $170,000.
Yet people will still line up to pay more than $650,000 for a "Grandpa" house in Estevan.
Consumers have hit their limits, bank CEOs say
"Canadians have taken advantage of low interest rates for years, borrowing record amounts, but leaving them vulnerable.
Policy-makers have expressed concern that a sudden rise in interest rates would leave many consumers unable to meet their payments, potentially causing a fallout that ripples through the housing market and consumer spending."
OMG, really?
...
"Scotiabank chief executive Brian Porter said he's comfortable with the credit quality from its customers and doesn't see any major concerns developing in the real estate market either."
Oh, phew. The bank guy says it's all good.
.Percentage price increase / decrease since June 2010 . .
. . . . . . .Victoria vs. Canada (without Victoria). . . . . . . . .
. . . Teranet HPI (composite 11) - All property types. . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 15 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *. . . . + 14 %. . Canada (without Victoria)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 13 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 12 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 11 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +10 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 9 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 8 %
. . . . . . . . . . . . . . . . . .* . . . . . . . . . . . . . . . . . . . + 7 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 6 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 %
*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3 %
. . . . . . . . . . . . . . . . . .*. . . . . . . . . . . . . . . . . . . . - 4 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 5 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 6 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 7 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 8 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *. . . . - 9 %. . Victoria
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 10 %
-----------------------------------------------------------------------------
June 2010. . . . . . . . . . . . . . . . . . . . . . . . December 2013
Since June 2010:
Victoria: -8.85%
The rest of Canada (without Victoria): + 13.52%
Difference: 22.37%
In my opinion, if the rest of Canada had remained flat since June 2010, Victoria's total price decline would be 22.4% by now.
This information can be found here.
I just don't see the connection why a house selling in Mississauga would have an affect on house prices in Fairfield.
So in my opinion if the rest of Canada had stayed flat, Victoria would still be -9%.
Market conditions in Canada have obviously been conducive to price appreciation since 2010. Victoria is part of Canada. Victoria house prices more than doubled since 2000 as a result of overall market conditions across Canada. The strength of Victoria's market is closely tied to Canada's market .
Therefore if Canada's market had been weaker since 2010 that weakness would have affected Victoria's market as well causing prices to decline more than they have since 2010.
The very fact that Victoria went down while the rest of Canada went up would suggest that there isn't exactly a mechanical linkage between the two
Yet people will still line up to pay more than $650,000 for a "Grandpa" house in Estevan.
It doesn't seem such a bad deal if you put the hydraulics under it, add a new main floor and turn it into a duplex. Now the new owner, instead paying $1500 a month in rent lives in their own home with a tenant downstairs paying the mortgage.
At least that seems to be the logic, with at least four houses in the Estevan area having received the duplex treatment in the last couple of years.
Victoria: -8.85%
The rest of Canada (without Victoria): + 13.52%
And within Greater Victoria, there are probably ever greater differences among areas. The Oak Bay waterfront, for example, is still going strong, with one $8 million dollar home torn down last year and the bare lot now offered at the same price!
So although interest rate changes could play havoc with the national housing market, prices will not likely fall equally everywhere, or even fall at all in some places, including, perhaps, parts of Victoria.
Over half of Canadians (52%) were not even somewhat familiar with the word “amortization.”
Sad.
The very fact that Victoria went down while the rest of Canada went up would suggest that there isn't exactly a mechanical linkage between the two
Two ways to look at it. One is simple price differential between markets. How much other markets affect Victoria depends on the market and how similar it is to ours.
Start with a close one. If the price difference between the Westshore and Victoria city increases, then all other factors equal more people will chose to live in the west shore until it balances again.
Then hop across the pond to Vancouver. As prices increase there and decline in Victoria, more people will move to Victoria even though they might earn less since the cost of living is cheaper.
Then take a faraway market like Mississauga. Obviously the link between that and Victoria is small, but it still exists. Maybe one buyer every 10 years will be considering the two locations and be swayed by the housing price.
Same with the US. Most people don't cross shop housing between countries, but some do. Especially those looking for winter vacation homes might compare Victoria to Florida or Arizona.
So relative price movements in other markets will affect Victoria, but how much exactly is probably impossible to determine.
The other way to look at it is by the environment which leads to price gains. The rest of Canada saw strong house price appreciation in the last few years. This was largely because credit is very cheap and easy to get. Those same conditions existed in Victoria but prices declined because they were so overvalued to start with.
So assume that prices in the rest of Canada stayed flat. Well the only way that could happen is if credit was harder to get or incomes were lower in that period. And if that was the case then Victoria prices would have declined more.
The reality is probably far more complex than info's fixed differential, but there is definitely some link between the markets.
Property Assessments Notices are out; next up...
Property Tax Notices
The mayors are busy crunching numbers now to determine the property taxes they will charge this year, or in Victoria's case - how much they will gouge you this year!!! Next year, City of Victoria property owners will be gouged twice due to that new storm water levy.
In other words, City of Victoria property owners will get two property taxes next year, one is disguised as a levy.
I suppose that's why Fortin and crew seem to have abandoned all care and maintenance of the storm water system. I see the streets are still choked with rotten leaves from last fall and dirt from last summer and it's all washing down into the catch basins and has plugged dozens of city drains. Oh well, the property owners will fix it... the new levy is coming soon...
Some solid sales in Oak Bay today.
"So relative price movements in other markets will affect Victoria, but how much exactly is probably impossible to determine."
Sure
One way they affect us is that the rise in prices elsewhere and the fall in Victoria prices makes Vicoria a more attractive destination again for other Canadians.
Victoria is still expensive in 2014 relative to a lot of Canadian locations, but the differential has shrunk since 2010
If credit had been tightened enough in 2010 so that Teranet's composite index had remained flat since that time, house prices in Victoria would have declined 20 to 25%.
That credit tightening in 2010, for example, could have been an increase in the minimum down payment. It would have resulted in bigger price declines from peak for Victoria than 10 to 15%.
Victoria houses would have lost more value in a tighter credit environment . Victoria's market isn't directly linked to other Canadian markets but it reacts in a similar manner to changes in the availability of credit as other Canadian markets.
>> Victoria is still expensive in 2014 relative to a lot of Canadian locations, but the differential has shrunk since 2010
Yep. Victoria used to be more expensive than Toronto.
"If" and "would" is a bit of a pointless to debate... What about "when" the US has regained it's losses? Or when the Canadian dollar loses value against the greenback? Or when home values in Alberta climb even higher?
I predict a further flattening affect...
Yeah screw uncertainties. What about when Victoria prices continue to decline?
It's not necessary to predict the next economic event.
We can say with near certainty that it's going to happen.
The question is how we are going to deal with it.
With the situation currently, it's looking not so good.
Of course it hasn't looked good for years. It's all been masked by the rise in home prices.
Bankers disagree on housing bubble
"They've been worrying about this bubble for ten years now, they keep warning us but then nothing happens"
For some reason the story of the boy that cried wolf comes to mind.
Another month and the search continues for an "Executive smaller family" that wants to live in east sooke.
This home will not be available long, $2500/lease
I think it will be available for long.
Which sale in oak bay would you refer to as a "solid sale" and what does that mean? Maybe just realtor language I only noted one OB sale.. Also some solid price reductions today.
Ratehub mortgage infographic
Average home equity
2012: 70%
2013: 66%
"11% of homeowners accessed an average of $57,000"
In one year!!
I'm not sure how stating 11% of homeowners accessing home equity at that average is an bombshell of an issue without further analysis.
Seventeen per cent of Canadian households have a HELOC. You are indicating that 11% of 17% have accessed an average of $57,000. So what.
The question would be how much of the HELOC is used to buy appreciating assets or start businesses or increase home value, rather than on consumer goods or travel for example.
Most of the homes bought by Canadians in the US are bought with HELOC money. Many businesses are started with HELOC money. Interest on a HELOC used to start a business is tax deductible.
My view is that there is likely a divide in the use of HELOCs between those who borrow to buy wants and those who borrow at incredibly low rates to invest in income-producing businesses and other assets.
How much of the 11% of 17% goes which way, I don't know, but I find the stat pretty meaningless without this information.
It's a problem if you subscribe to the bubble theory.
If you are using credit responsibly and the underlying asset securing a debt declines in value there is little impact imo.
The issue is risk and risk management, not the HELOC itself. HELOCs are like a knife, they can be used as a tool or they can be destructive.
For someone using a HELOC to finance a solid business or other appreciating assets or investments, the risk can largely mitigated even if there is a "crash" in prices.
My view is that interest rates upon first renewal poses more of a risk than use of HELOCs.
Most common use of Heloc's is debt consolidation.
Paying off short term high interest credit cards with long term home equity.
What may be interesting is to see how equity withdrawals have been changing over the last decade.
I suspect they have increased considerably over the last few years.
Is 11% of 17% significant? It depends on the sales activity in the general area. The fewer the sales the greater the percentage of highly motivated sellers.
Renewal times are spread out or evenly distributed over the course of the year. Because of that they wouldn't be a concern unless there was a spike in interest rates just before it was time for you to renew. But that would only affect you and those like you that are about to renew.
Loss of income from unemployment, under employment or other income suppliments have an immediate impact on making that monthly mortgage payment. Which is another reason why people run up their credit card debts too.
Look in your purse... How many credit cards and what is the sum of credit that you have available. Could it be near... $57,000?
Good debt versus bad debt.
A $30,000 student loan to finance your education when you're 25 years old - good debt.
A $30,000 student loan to finance your education when you're 70 years old - bad debt.
A $30,000 home equity loan to finance home renovations in a rising market when you are going to sell - good debt.
A $30,000 home equity loan to finance home renovations in a declining market and you're not planning to sell - bad debt.
Bad debt - buying a business in an industry that you just got laid off from.
"I don't think there's a ceiling, I think it will continue rising"
Good laugh for the day.
24% of homeowners have a HELOC according to that infographic, not 17%. There's a HELOC + mortgage slice and a HELOC only slice.
11% of ALL homeowners accessed equity, not 11% of 17% according to that infographic. 11% of all homeowners is about 1 million. 1 million x the average that was accessed ($57k) = $59B that they list.
Hopefully for the economy all that equity is spent wisely right?
Dave3
oops missed the link up there
Creative home buying strategies
How do you know the most common use is debt consolidation? I haven't found the stats. Most common among those I know are home renos, education, investments and business.
What does it have to do with sales activity? We are talking about 11% of 17% of homeowners here.
As for as interest rates go, this is the largest financial risk to an individual with a large mortgage imo and this impacts everyone at point of renewal or, if variable, on an ongoing basis. I'm not sure what your point is.
Job loss can happen. Disability aside, it can often be mitigated through a combination of an emergency fund (even in the form of a HELOC), training, insurance (can assist with disability) or finding another job.
Are you saying that 11% of 17% of homeowners have $57,000 of credit card debt they have consolidated?
Sixty-four percent of Canadians pay off their credit card balance in full each month, avoiding credit card debt and interest payments altogether.
According to the Bank of Canada, credit card debt only makes up five per cent of total household debt in Canada and there has been virtually no growth in unsecured debt in the past two years. Credit card default rates are half of U.S. levels.
"Most common among those I know are home renos, education, investments and business."
Seems like a pretty small sample to form an opinion on the behavior of people on a national scale.
Actually, I should have clicked on your link Koozdra - sorry I missed it.
The site sets out the most common uses for the funds borrowed by the 11% of the 17% of homeowners who have a HELOC. The average borrowed by the 11% was $57 000 and it was spent on:
16.6B debt repayment
15.5B investment
12.3 home renos
9.7 purchases
5.3 other
So we have 27.8 in potentially "good debt" and 26.3 in potentially "bad debt" (best guesses but purchases could be good and renos could lose money). 5.3 unknown - which could include trips or education for the kids.
Seems like about half of the 11% of 17% might be able to recover or make a profit from the heloc funds from these stats, while half might be consolidating debt or purchasing luxury items.
"11% of the 17%"
"24% of homeowners have a HELOC according to that infographic, not 17%. There's a HELOC + mortgage slice and a HELOC only slice.
11% of ALL homeowners accessed equity, not 11% of 17% according to that infographic. 11% of all homeowners is about 1 million. 1 million x the average that was accessed ($57k) = $59B that they list.
Hopefully for the economy all that equity is spent wisely right?
Dave3"
Currently, only 17 per cent of Canadian households have a HELOC, according to 2012/2013 data from the Canadian Association of Accredited Mortgage Professionals.
I agree that the graph shows that 24% of individual homeowners, who may be joint owners, accessed a heloc. It makes sense that this would translate into a smaller percent of overall households ie. 17%.
1.65M with a HELOC and a mortgage / 9.52M homeowners = 17%. Perhaps that's what CAAMP was talking about wherever you read 17%.
Dave3
A $30,000 student loan to finance your education when you're 70 years old - bad debt
Au contraire - the very best kind of debt. One you'll likely never have to pay off in entirety
1. A $30,000 student loan to finance your education when you're 25 years old - good debt.
MAYBE NOT. Depends on ex. whether you are getting a psychology degree or a trades certificate. Higher education is sometimes not all it is cracked up to be when you add in the lost opportunity costs of spending a long time in school.
2. A $30,000 home equity loan to finance home renovations in a declining market and you're not planning to sell - bad debt.
MAYBE NOT. If it allows you to rent space or fit your family in rather than move it is good debt imo.
3. Bad debt - buying a business in an industry that you just got laid off from.
MAYBE NOT. I do happen to know folks who have started up their own businesses in this situation to their advantage.
IMO you need to weigh the risk vs. the return accounting for all material factors.
HELOCs can present an amazing opportunity.
@LeoS "Yeah screw uncertainties"
You love to straw man me... I was referring to info's predictions of the past i.e. "if" X had happened then prices "would" have crashed. Why bother predicting the past? It is the furthest thing from uncertain...
11% of the 17% of homeowners who have a HELOC.
It doesn't say that. 11% of all
homeowners.
16.6B debt repayment
15.5B investment
12.3 home renos
9.7 purchases
5.3 other
So we have 27.8 in potentially "good debt" and 26.3 in potentially "bad debt"
The only potentially good debt I see there are 15.5B in investments. And who knows what they're investing in. Given the stats on market investments I'm going to guess the majority of those investments are into more real estate.
So likely
- most of 16.6B is used by people living beyond their means by spending their equity.
- most of 15.5B is used by people becoming even more leveraged by buying more real estate
- most of 12.3B is being used by people to give themselves a new kitchen or floor or bathroom or deck, which, unless they plan to immediately sell will make only a marginal difference to their home's value. The other option is that they're using it for critical repairs to the house, which again implies they cannot actually afford the place.
- 9.7B on a new ATV, flatscreen, and an RV
- 5.3B on who knows what. Possibly good things, possibly bad.
Dave, I read it in the globe here and it references households:
http://www.caamp.org/meloncms/media/Change%20in%20Cdn%20Mortgage%20Mkt.pdf
But the underlying study is here and sets out that 24% of homeowners have a HELOC. It is quite detailed:
http://www.caamp.org/meloncms/media/Change%20in%20Cdn%20Mortgage%20Mkt.pdf
Leo, you are guessing, like me.
The truth is that we do not know because the survey was not detailed enough.
The fact is though that buying more real estate is not the only investment people are making.
Some are doing the smith manoeuvre and buying stocks http://www.milliondollarjourney.com/the-smith-manoeuvre-a-wealth-strategy-part-1.htm, others are starting or investing in businesses.
Some will make money and others will lose it.
If you choose to invest your emergency fund wisely and instead use a HELOC in an emergency this might also be a good strategy that makes you money.
As far as renos go, increasing usable space generally adds to the bottom line imo. The question of when you sell is a different factor.
The detailed CAAMP study sets out the following breakdown for HELOCs:
12% used for debt consolidation or repayment.
45% used for renovation or home repair.
22% used for purchases (including spending for education).
14% is for investments.
6% is for “other” purposes.
The fact is though that buying more real estate is not the only investment people are making.
But we know it is by far the majority. Ownership rate is 70%, stock ownership rate is about 50% (in the US, likely similar here). Only the wealthy own significant market investments outside their homes.
Some are doing the smith manoeuvre and buying stocks http://www.milliondollarjourney.com/the-smith-manoeuvre-a-wealth-strategy-part-1.htm, others are starting or investing in businesses.
You're talking about very very few people here.
As far as renos go, increasing usable space generally adds to the bottom line imo. The question of when you sell is a different factor.
Think about how many people do renos and how many renos actually add liveable space.
"Remodeling of rooms (95 per cent) was the most popular renovation in 2011, followed by painting or wallpapering (54 per cent) and renovations involving plumbing fixtures and equipment (38 per cent)"
http://www.cbc.ca/bc/news/bc-120918-cmhc-renovation-and-home-purchase-report.pdf
Eh, the Fall Report is out and seems to match the infographic. Without digging too deep I'd guess they aren't talking about joint owners / distinguishing between households and homeowners in that way, but feel free to dig. Either way 11% is a lot.
The fall report's updated numbers are:
28% debt consolidation / repayment
21% reno / repair
16% purchases (including education)
26% investments
9% "other"
There's a small table (3-4) of the change in equity positions Jack. If you want to know how it's changed over time you could probably open up some old reports and gather all of it into one table.
Dave3
"a new kitchen or floor or bathroom or deck, which, unless they plan to immediately sell will make only a marginal difference to their home's value." That's not true. Why renovate just before you sell when you can't even enjoy it. I put a new roof on last year. It's a good one and will last 50 years. 20 years from now it will still have added value. Renovations that add function will add value for long past the time they were done. For example, adding a dishwasher to a kitchen that didn't have one, creating a laundry room, adding a suite etc...
If you renovate your kitchen today then 20 years from now when counter tops are made from diamonds your kitchen will look outdated.
So you are saying that it is more likely that homeowners buy more real estate when the rate of second home ownership in the US is 6% and the rate of stock ownership is 50% (assuming they are similar in Canada again)?
I would say most people buy a house and invest in stocks if they have RRSPs.
I would suggest that a fair bit of the "investment" portion would be used to fund RRSP contributions and get the tax break and the investment gains.
Also, are you saying that all people who own a second home use HELOCs? I, for one, do not. I would expect those buying in the US would because mortgages are hard to get, but others might not.
As for renos, I don't know but my best guess is that you get some of the money back at least, and sometimes much more than you put in:
http://propertylimit.com/Seller_Home_Renovation.html
Remodelling a kitchen gets you 72% back according to the link. Painting gets you 73%.
I don't know how accurate these stats are, but I do think you can keep costs down to a point where you get 100% back in many cases of remodelling.
What often doesn't pay back as much imo are invisibles that require hiring others like new furnaces, hot water tanks, and plumbing. That and luxury items like hot tubs and sun decks.
Ugly counter tops will not add much value regardless of when they are done. We did clean white quarts (from a fantastic source that was the same cost as laminate from other quotes). That counter-top will add value 20 years from now because it's good quality and will be in good shape and even if a perspective buyer was planning to change it. Especially since there was no counter there at all before. Renovations should be done for yourself if you can afford them. Major renovations should not be done before you try to sell your house unless you are in the business of doing that. Clean things up yes, renovate, no....
.Percentage price increase / decrease since May 2010 . .
. . . . . . . . . . . . Victoria vs. Canada . . . . . . . . . . . . . . . . .
. . .MLS Home Price Index - Single Family Homes. . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 15 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *. . . . + 14 %. . Canada
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 13 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 12 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 11 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +10 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 9 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 8 %
. . . . . . . . . . . . . . . . . .* . . . . . . . . . . . . . . . . . . . + 7 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 6 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 %
*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 4 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 5 %
. . . . . . . . . . . . . . . . . . .*. . . . . . . . . . . . . . . . . . . - 6 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 7 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 8 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 9 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 10 %
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *. . . . - 11 %. . Victoria
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 12 %
-----------------------------------------------------------------------------
May 2010. . . . . . . . . . . . . . . . . . . . . . . . December 2013
Since May 2010:
Single family home prices across Greater Victoria have declined 10.96 % while single family home prices across Canada (MLS HPI aggregate) have increased 13.91 %.
Difference: 24.87 %
In my opinion, if credit had been tightened enough in 2010 so that the MLS Index for SFHs (across Canada) had remained flat from 2010 until now, single family home prices in Victoria would have experienced a 25 % decline so far.
Examples of credit tightening could include: increasing the minimum down payment to 10%, decreasing the maximum loan size that CMHC covers from $1 M to $ 400 K, etc…
Note that none of these credit tightening measures were taken.
Victoria’s housing market has been extremely weak since 2010.
In my opinion, Victoria house prices will continue to lose ground in relation to house prices across the rest of Canada for some time.
When house prices across the rest of Canada are in decline mode, I think that the rate of price decline in Victoria will increase.
"We did clean white quarts (from a fantastic source that was the same cost as laminate from other quotes)."
Well that sounds pretty nice... care to share your source?
Carney’s Legacy: Canada’s Credit and Housing Bubble
Why are so many people saying nasty things about Canada's housing market?
"There are two distinct camps where Canada’s housing market is concerned: The doom-and-gloomers and the I’m-alright-Jack folks.
It’s interesting to note, too, that those in the first camp are largely observing from afar, while the latter group lives here."
I would suggest that a fair bit of the "investment" portion would be used to fund RRSP contributions and get the tax break and the investment gains.
You get a deduction for the RRSP contribution - a one time break - but no deduction for the ongoing interest payments.
For this reason borrowing to make RRSP payments is a poor strategy beyond the very short term, i.e. you can pay it all back next year.
But of course buy now pay later always has its attractions.
"You get a deduction for the RRSP contribution - a one time break - but no deduction for the ongoing interest payments."
Borrow $20,000. Get a 46% tax break if you are in the top tax bracket. Get an extra close to$10,000 back on taxes which you use to pay down your HELOC. Earn more than the interest cost of the $10,000 HELOC on the $20 000 RRSP investment...
I'm sorry, but what is not good about this?
Earn more than the interest cost of the $10,000 HELOC on the $20 000 RRSP investment...
I'm sorry, but what is not good about this?
First of all, you're ignoring the taxes you have to pay when the money eventually comes out, which means the $10K versus $20K comparison is bogus. $20K in your RRSP is not $20K in your pocket.
Second, any leveraged investing strategy is risky. You're making a bet on interest rates as well as the returns on the investments you buy.
By the way, do you know how high your income has to be before you're in that 46% top bracket?
You don't need to use your home equity as collateral for an RRSP.
The RRSP is its own colateral.
Your bank would explain that to you. My guess is that none of the HELOCs are for RRSPs.
Walter Brennan explaining Helots (HELOCS)
http://www.youtube.com/watch?feature=player_detailpage&v=M84XBBd-h_M
Yes, there are online calculators that set this out clearly.
Even if we lower your tax bracket it is still going to save you quite a bit. At $80,000 a year this will save you 23% in taxes - or about $5000.
You are ignoring the fact that when you take the money out of the RRSP you are going to be in a lower tax bracket - in fact, if you retire early with a paid off house and a spouse who is still employed or has a similar strategy you may live quite well and be in a non-taxable bracket when you withdraw.
This converts your taxable income to non-taxable income and creates a complete gain.
I agree there is a risk that interest rates will rise on your HELOC above the returns on your RRSP.
There is also a good chance that all of the tax exempt compounding gains on your $20,000 RRSP contribution, including the initial $5000 windfall, will exceed your HELOC interest costs.
You may also sell your home and pay off your HELOC and mortgage. Or you may inherit and pay it off as well.
You may lose your job and be very glad of that extra $5000 in your RRSP.
All sorts of things can happen in life, but borrowing against your HELOC to make an RRSP contribution seems like not a bad plan in the scheme of things.
Victoria Granite. No website but you will get the address if you Google it. You will most likely need to go there and bang on the garage door as I needed to do. My impression was they most likely serviced the "designers" in town who could then mark them up 100% and thus have the same price as Colonial....
"First of all, you're ignoring the taxes you have to pay when the money eventually comes out" Hey we agree on something Patriotz! I prefer to pay my taxes now when I can most afford them.... I am suspect of RRSPs. No capital loss write offs for one. I haven't done the math but in simplified from for discussion I pay 20% on capital gains outside an RRSP and have full control of the cash. When I'm forced to withdraw an RRSP I might be in my peak earning years so it might be taxed at 40-50%. Any of you math heads done any real analysis on this? (TFSA are a no-brainer)
You don't need a HELOC, but RRSP loans generally have a repayment term of a maximum of five years (unlike the HELOC) and do not offer interest only should you choose this for any reason.
A RRSP loan means that you will need to pay a large amount each month instead of the relatively minor amount you will pay for a HELOC.
dasmo - thanks for the tip.
Also, for RRSPs, I would generally agree that they are not very good or flexible and if you need them in a high income year this is problematic.
If; however, you plan to retire before you will receive any pension they can be a good idea.
As you said:
"Borrow $20,000. Get a 46% tax break if you are in the top tax bracket. Get an extra close to$10,000 back on taxes which you use to pay down your HELOC. Earn more than the interest cost of the $10,000 HELOC on the $20 000 RRSP investment... "
What's the monthly payment on $10,000 over 5 years? It's the the same for a HELOC as an RRSP loan. Why would you use your home equity again?
Oh, so you can spread the payments out on $10,000 for 360 payments instead of 60. And at the same time reduce the equity in your home.
How many of us think this is a good idea?
I do under the right circumstances.
If you are going to make more on the money that you do not have to pay to the RRSP in that year than the cost of the interest on the HELOC you are better off.
This might because you contribute to a TFSA and your tax exempt rate of return is higher than the HELOC interest. It might be because you save the difference and make an RRSP contribution saving 46%.
There are a number of factors to consider. Including interest rates and how long you plan to own the home.
And I am in error, on $80,000 the marginal tax rate on the $20,000 is 26%, not 23%.
Why renovate just before you sell when you can't even enjoy it. I put a new roof on last year. It's a good one and will last 50 years.
Ah yes, I also often think about how much joy my roof brings me.
20 years from now it will still have added value.
Sure, without the roof your house would have been waterlogged by that time. Not the kind of renovation people are talking about though.
Renovations should be done for yourself if you can afford them.
That might bring joy, but it certainly is not make withdrawing that money from your home equity a good idea from a financial perspective.
So you are saying that it is more likely that homeowners buy more real estate when the rate of second home ownership in the US is 6%
Comparing by percentage doesn't make sense. Owning one share of anything makes me a stock owner, owning one additional house means I have at least tens of thousands invested.
Here is the data: http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil116a-eng.htm
Somewhat out of date, but median asset value of primary residence is $180,000 (8 million owners) while other real estate is worth $85,000 (2 million people owned other real estate).
What about financial assets? Lots of owners but only an median value of $6,100. Only about 2 million people own stocks/bonds/or other financial assets (not savings accounts).
Amongst home owners only 9.8% have any financial assets outside their pension.
http://www.bankofcanada.ca/wp-content/uploads/2010/01/dp09-7.pdf
Which sale in oak bay would you refer to as a "solid sale" and what does that mean? Maybe just realtor language I only noted one OB sale.. Also some solid price reductions today.
2465 Chiltern and 819 Byng. A number of other properties with A/Os right now too.
Victoria Granite
I can vouch for these guys from previous experiences. Very competitive pricing and great quality.
"Ah yes, I also often think about how much joy my roof brings me." Well, I obviously wasn't talking about the roof however in my case it did make my house look a lot better too which does make me feel good.
"but it certainly is not make withdrawing that money from your home equity a good idea from a financial perspective."
Maintaining your house is always good from a financial perspective. If you can't afford to do that, then owning the house is bad from a financial perspective.....
The bank of canada table shows that homeowners have an average of the following asset mix in 2005:
9.8% in financial assets
28.7% in retirement funds which includes pensions and rrsps which are invested in other financial assets
43.7% in real estate
10.4% business equity
17.4% other
Definitions:
Financial assets: chequing and savings accounts, term deposits, mutual funds, savings
bonds, stocks and shares of private companies, RESPs (registered educational savings
plans), home ownership savings plans, treasury bills, money held in trust, mortgage backed
securities, deferred profit-sharing plans, and annuities
– Retirement assets: RRSPs (registered retirement savings plans), LIRAs (locked-in retirement
accounts), RRIFs (registered retirement income funds), and employer pension
plans
– Real estate: the value of all real estate, including the principal residence
– Business equity: the market value of the household’s equity in any businesses operated by
the economic family
– Other assets: all remaining assets – mainly vehicles, collectibles, furniture, contents of the
principal residence, and copyrights
So that was 2005. Nine years later and 67% of Canadians have RRSPs. That counts as retirement assets invested in other financial assets in my books and is not a pension.
http://finance.yahoo.com/news/bmos-annual-rrsp-study-increasing-110000544.html;_ylt=A0SO8zQXV9dSR0QAVABXNyoA;_ylu=X3oDMTEzaTBzdDVzBHNlYwNzcgRwb3MDNwRjb2xvA2dxMQR2dGlkA1ZJUDM2NV8x
Fifty percent have a TFSA. Also, other financial assets.
Nine percent of Canadians own a second home: http://www.gbm.scotiabank.com/English/bns_econ/spretrends.pdf
75% of second homes are in Canada.
What this means in relation to the use of a HELOC I don't know. Many vacation cottages, for example, are inherited.
Good to hear about the counters - I'm going to follow up on that :)
"Well, I obviously wasn't talking about the roof"
"That's not true. Why renovate just before you sell when you can't even enjoy it. I put a new roof on last year. It's a good one and will last 50 years. 20 years from now it will still have added value.
Obviously.
Not talking about the roof in reference to enjoying the reno, rather that it adds value long after it is done... I guess that wasn't so obvious after all...
Nine years later and 67% of Canadians have RRSPs.
Meaningless. Again, I could have $1 in an RRSP and be counted as having one.
Nine percent of Canadians own a second home: http://www.gbm.scotiabank.com/English/bns_econ/spretrends.pdf
Nope. That is only counting vacation homes.
"Households’ holdings of ‘other real estate’ almost doubled between 1999 and 2005, with an estimated 16% of households owning real estate other than a principal residence"
And that is, as you say, 9 years ago. Likely the percentage is significantly higher now.
Tracking the market:
548 Whiteside. Only 11 years old and been trying to sell for ages.
Assessments:
2011: $643,000
2012: $612,000
2013: $601,000
2014: $569,000
And another one to watch: 568 Whiteside.. Sold only about a year ago for $469,000 after being completely renovated. They even reused the same description and now they want $499,000 for it. DELUSIONAL.
Here's an article about chosing home renovations..
http://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&ved=0CFMQFjAB&url=http%3A%2F%2Fstaging.aicanada.ca%2Fimages%2Fcontent%2Ffile%2FReno_tips_AIC_2013-04.pdf&ei=unrXUu_OK5TfoASxrYKgBg&usg=AFQjCNFAHOlPh4CeO5eChSKHTOa-lIx_Uw&sig2=Oer4HgJ8bEkCVTWWtdjbpA&bvm=bv.59568121,d.cGU
Hey everyone, looking for some advice.
I'm very interested in an acreage for sale in Central Saanich.
It was first listed for sale in 2007 for $639,000. It didn't sell, so they rented it out and did some remedial work on the land to bring it up to ALR standards. They brought it back on the market 6 months ago for $669,000 and lowered it back to $639,000 three months or so ago and the price has not budged since. It's assessed at $575,000. While the land is flat and usable, the house is smallish: rancher, no basement, 1700-1800 sq ft, although it's only 10 years old.
On paper, it ticks all of our boxes, though we haven't seen the inside yet. My problem is that I have set myself a hard line of $600,000. If they haven't moved price below $639,000, is it even worth wasting my time going to see and offering? It doesn't look like anyone else is jumping at this place - but it is an excellent long term option for us.
Thoughts?
If anyone knows what it sold for last, I'd love to hear it, also.
Thanks!
Oh, which means you'd need the address. whoops
1841 Highfield Rd.
Unless your time is worth thousands an hour it is definitely worth looking at. Why not? If you like it make them an offer under your limit, using as justification the assessment, defects in the place, maybe you can do it without a realtor so they save commission, etc
Although it seems to me that small acreages are suffering quite a bit in this market. Could also be beneficial to hold on. Just Jack any thoughts on acreages?
House-poor Canadians
Definition: house poor
Spending more than 30% of your income on housing related expenses.
Population affected: 1 in 4
"Consumers are only a few interest rate hikes away from disaster"
We live in a country with a Schrodinger bubble. It exists and doesn't at the same time. More like there is a potential for it to turn into a bubble. However in it's current state it's not (by definition).
Sixteen percent of households have additional property, not sixteen percent of individual homeowners.
A household consists of one or more people who live in the same dwelling and also share at meals or living accommodation.
This captures adult children, unrelated adults living together, and people who cohabitate but do not share ownership.
A much smaller percentage of individuals will own other properties.
Estimated average RRSP holdings per adult in Canada was $93,952 in 2013. I'm not sure of the median, it will be lower but def above the $30,000 median amount it was in 2006.
http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/how-many-canadians-have-super-sized-retirement-savings/article9099700/
http://www.canadiancapitalist.com/wealth-of-canadians-assets/
"Definition: house poor
Spending more than 30% of your income on housing-related expenses."
That is ridiculous given that incomes vary widely, as does household spending.
This is like using a percentage of house value to estimate maintenance and repair costs. Makes no sense at all.
Renter:
You need to see the inside of the place first in order to understand value. You are not going to be able to judge this from paper.
There is no harm in making an offer.
"That is ridiculous given that incomes vary widely, as does household spending."
That's the Stats Canada definition. You should contact them with your complaint.
statscan has a benchmark of 30% or more of pre-tax income spent on housing leading to an issue with affordability.
I couldn't care less about statscan's definition, but I do care that it is put out here as an indicator of being "house poor" without acknowledging the pre-tax basis or the fact that it applies equally to renters as well.
As far as making sense, it does not except for people in specific markets with specific incomes.
Some people spend a lot on travel, consumer goods and eating out. That is fine, but it reduces the income available for other necessities. Some people do not and it increases the income available for necessities/investments.
Here is the thing, if a couple makes $150 000 together and spends $50,000 on housing, this leaves them with a post-tax amount of $65,000 to save, invest and spend.
They are not "house poor" if their other expenses amount to, say, $25,000 per year, which is entirely possible.
maybe you can do it without a realtor so they save commission, etc
A REALTOR® may decrease his or her commission when double-ending but it certainly ins't the "norm."
What you are espousing is called "minimalism" and "saving". These are foreign concepts to the Canadian consumer.
If people start behaving in this way on a macro scale, get ready for unemployment to rise. You might even see people not wanting to buy that ridiculously priced home. (not good for the most inflated housing market in the world [in my opinion])
It's called the paradox of thrift.
The reason our economy is doing so "well" is because we have more spenders than savers. Savings rates plummeting, outstanding debt growing, and retails sales rise every year.
Well.. not this year. Perhaps a leading indicator?
"... did some remedial work on the land to bring it up to ALR standards."
I'm not sure I'd want to plant a garden there.
What was the remedial work?
Was the land chemically contaminated or what?
And what assurance is there that the remediation was effective in eliminating the contamination, or whatever?
Minimalism and saving are not foreign concepts.
Your world view of the median or average Canadian has led you to believe that housing will collapse.
While I agree that debt and spending are a problem for some, the question is for how many.
My view is that you have focussed on a segment of consumers that do not form the majority in Canada and are using this as your benchmark.
You ignore median net worth of $234,000 per household, of which less than half is in primary residence equity.
You focus on the worst case scenario media stories and not on median spending patterns. Your worst case scenarios exist, but they do not dominate.
http://www.freedomthirtyfiveblog.com/resources/median-and-average-net-worth
http://www.ingdirect.ca/en/aboutus/whoweare/whatwereupto/PR_2007-11-27.html
What Happens When People Save More and Spend Less on Consumer Goods?
"When you read books written by economists rather than newspaper reporters, they tell you that consumers are not the engine of economic growth. They are actually the caboose.
What is the engine of growth, then? It is the savers and investors.
Only by sacrificing current consumption, can people put money into banks or share offerings, which end up in the hands of new and existing businesses who can then use that money to create new technology, factories, or human capital, allowing them to increase their productivity. Capital creates productivity, and productivity is the driver of our standard of living.
If a country becomes both productive and thrifty it would lead to:
a) Exporting way more stuff and importing less
b) Choosing to work less and having shorter working hours.
There will always be young people looking to get ahead quickly and companies looking for cash to finance productivity improvements – these people will still need loans to start and fund companies.
Similarly, there will always be mobile people in need of housing – and so real estate (just another form of capital) will continue to provide returns in the form of rent payments."
http://www.mrmoneymustache.com/2012/04/09/what-if-everyone-became-frugal/
Don't quit your day job.
Why do people like to approach the topic of Canadian spending/real estate as if everyone else is idiotic and blinded by shiny toys?
My view is that extreme stories "sell" - and most people don't do their own research after reading these stories.
People seem to enjoy reading about how hard life is for others. About how landlords are sitting with vacant homes and people can't leave Victoria when they lose their job because they own an overpriced house.
Some people seem to want to feel like they are somehow better than others. Guess what, you aren't and even if you save more, or own a house, the real test imo is life satisfaction.
Some folks also appear to have their own agenda. They hope for a housing crash so they can cash in so they focus on stories that support this view and keep putting them out their in the hopes that this will contribute to a decline.
Here is my take after spending a little time looking at the statscan and other sources of data.
The average Canadian household is doing just fine and could weather both a modest interest rate hike and a decline in home values.
The average and median Canadian households do not seem to have problem spending, or a debt problem.
FWIW, who cares if you are below the median. What it does mean is that if someone wants to save/invest more to meet the median it might be possible to do so.
As far as buying a house in Victoria goes, it is really expensive, particularly given the risks of increased interest rates for those looking to buy now. There is no stat to deny or minimize this fact imo.
If you really want to own real estate and you don't have a high income or other help, you probably are going to work harder to save more, be careful with your purchase, and maybe have a suite. You could also just continue to rent and invest elsewhere I suppose.
Or you can continue to believe there will be a huge crash that will allow you to enter the market at bottom. You might be right, but it seems a bit like the lottery approach to me.
As for the Highfield acreage. You should look at the aerial photos of the land for the last few years.
Something odd about that land. You'd have to walk it, to find out why?
It isn't like the adjoining farmland. Rock outcrops? poor drainage? Doesn't appear to have enough pasture land out of the 4.25 acres to feed a goat.
But - you can have it appraised to find out the market value. And make your offer subject to a satisfactory appraisal.
How's the acreage market? I haven't looked at acreage for several months now. The last time I did, there was lots of inventory, slow sales and declining prices. That may have changed - but I'd have to do a new market study to make certain.
The real estate market is a teenie, weenie itsy, bitsy piece of all real estate in Canada. Only 3 or 4 percent of Canadians are buying and selling real estate at any time of the year.
So when economists, bankers and real estate companies state that the average Canadian will be fine. - I totally agree.
Now - let's talk about the marketplace in your region.
"Why do people like to approach the topic of Canadian spending/real estate as if everyone else is idiotic and blinded by shiny toys?"
Here's why:
"Over half of Canadians (52%) were not even somewhat familiar with the word “amortization.”
http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2014/01/a-fundamental-question.html
A REALTOR® may decrease his or her commission when double-ending but it certainly ins't the "norm."
I'd imagine that the seller has quite a bit of leverage here. Clearly if they could sell their place at a lower price and be no worse off financially by not paying the buyer's agent then they would want to do that to get the sale. The onus is on the seller to put pressure on the selling realtor. Of course the realtor would rather have double commission.
If they don't want to go down to the price, then walk. The beauty of a buyers market.
Sixteen percent of households have additional property, not sixteen percent of individual homeowners.
Our entire discussion is about households. All the stats are about households. Your 9% figure is about households.
Estimated average RRSP holdings per adult in Canada was $93,952 in 2013. I'm not sure of the median, it will be lower but def above the $30,000 median amount it was in 2006.
Yes above surely because of an aging population, but not hugely above. Unless you have a compelling reason that retirement savings suddenly exploded in 9 years, the far more likely scenario is that they are largely similar. Income inequality means the average is highly skewed.
The average Canadian household is doing just fine and could weather both a modest interest rate hike and a decline in home values.
Agreed. So what does this statement mean? Anyone with average or above financial situation will withstand a modest rate hike and decline in home values. Sounds great. Except it also means that families with below average financial situation could be in serious trouble. In other words, your statement also means that if the cutoff for being OK is the average Canadian household, then 49% of Canadians could be NOT ok with a rate hike or house price decline.
I don't believe that, but I'm pointing out how meaningless that statement is. The average Canadian is OK, but with 70% owning a home, that leaves some 20% that could be not ok while the average canadian is fine. And 20% not ok is catastrophic.
Thanks for the thoughts, folks.
Of course I wasn't going to make any decisions without looking inside.
I do know what the deal is with the fill, actually. Owner is a contractor, acreage was prone to flooding, got council permission to raise the level of the property with fill from his construction sites. Site was never contaminated; the only question is quality of the soil, which will be part of our inspection if we decide to go that far.
The biggest concern I have is that it's in the golden nematode quarantine zone - but so is the entire peninsula, so there's that.
And naturally if I can't get a price I like, I would walk. Have done it before - twice, in fact - would do it again.
The report distinguishes between Canadians and households - they point out the number is 9% for Canadians and 16% for households. The report may be in error in its use of terminology and you might be right on that - those numbers would make more sense.
IMO, the average household would be ok, as would the median household.
I don't know where the risk line is below median (ie. is it the bottom 20% of those with few assets and lower income?) because it would take time to analyze this and there are loads of factors that come into play. Many of them can be controlled for.
Homeowners are already above the bottom third of households when you look at assets and incomes.
People looking to purchase a home in Victoria need to qualify for the purchase. This means that they will need to have the down payment and meet the lender requirements.
Once they have the home, paying for it may be a challenge upon first renewal if rates are a lot higher. That is a risk.
Otherwise, barring disability, divorce or permanent job loss, I don't see that a decline in prices will do anything catastrophic to a home owner who does not have to sell.
I thought this statement from Garth Turner last September in the post was interesting:
"Housing permabear, blogger and former MP Garth Turner thinks “those people that are waiting for a U.S.-style cataclysmic dump are never going to see it.""
http://business.financialpost.com/2013/09/04/canada-housing-doomsayers/
$15.3M repair estimate leaves owners of Ottawa high-rise condo in shock
"The owners — some of whom rent their properties — are facing charges of about $40,000 for a one-bedroom unit, $55,000 for a two-bedroom and $66,000 for a three. The money is to be paid in instalments through 2017 as contractors move from stage to stage of the overhaul. The first instalments — anywhere from $2,940 to $4,555 — were due Wednesday."
...
"Some seniors on fixed incomes say there have been many tears and sleepless nights as they fear losing their homes. Some young families with children say they are in the same predicament. Some have taken out personal lines of credit to cover the charges, but they are worried they will not be able to pay back their banks."
I would rather never own than own a condo.
"Otherwise, barring disability, divorce or permanent job loss, I don't see that a decline in prices will do anything catastrophic to a home owner who does not have to sell."
In general, Canada's housing bubble is no different than the bubbles that formed (and burst) in the US, Spain, Ireland, Greece, Japan, etc..
As major national housng bubbles deflate, there is always enough mortgage holders that have to sell and it is those sales, at lower and lower prices, that bring down prices across the whole market.
As I have said, house prices in the US peaked in 2006. It has been 8 years and prices in the US are still far below the level of the 2006 peak. It might take 15 to 20 years (in total) for house prices to recover to the peak level of 2006.
In Japan, house prices peaked in 1990. That was 24 years ago and prices could still be in decline. It could take 50 years or more (in total) for house prices to recover to the peak level of 1990.
See examples of national housing bubbles here.
The buy and hold strategy provides no guarantees for any mortgage holder when it comes to buying near the peak of a major, once-in-a-century national housing bubble (like Canada's).
. . . . . . . . . . Percentage Price Decline From Peak . . . . .
. . . . . . . . . . . . . . MLS Home Price Index. . . . . . . . . . . .
. . . . . . . . .Greater Victoria - Single Family Homes. . . . .
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---------------------------------------------------------------------------
. . . . . . . . .10. . . . . . . 11. . . . . . . . 12. . . . . . . . 13. . . . . .
The MLS Home Price Index data has been updated to include December 2013.
Single family home prices across Greater Victoria have now declined a total of 11% from the peak that was established in May 2010.
December 2013 was the fifth consecutive month of lower post - peak lows for Greater Victoria single family home prices.
So far, the total price decline from peak for townhouses is 12% and the total price decline for condos is 13%.
I would rather never own than own a condo.
Looks like a 70s or early 80s condo. Can't expect it to last forever without major expenditures.
It looks like a steel and concrete building with brick facing.
How many of you think concrete can leak?
More likely the mortar between the bricks is coming lose and their is a hazard of falling bricks. At the same time the windows would be replaced, new landscaping, etc.
The work would not just repair the building but would likely better the building. The home owners would likely recover some of the repair costs in higher property values.
If strata councils were given the legal right to obtain financing for the building, then they could pay for the remediation by assigning a portion of the strata fee to the lender for the next 25 years.
If I were in charge of a union or insurance fund, I'd lend the council the money based on the future income stream of the units. Pretty secure investment.
The Gorge road condo foreclosure that I mentioned a few days earlier sold today at $221,600.
I figure that's about $50,000 profit in one day for the buyer.
Paint, carpet and some imagination to get a $290,000 price in three months from now.
The report distinguishes between Canadians and households - they point out the number is 9% for Canadians and 16% for households.
Where does it say 9% of Canadians? Here is a direct quote from the report you linked to: "
The rate of second home ownership is also on the rise. Based on data from Statistics Canada’s Survey of Financial Security and CMHC, 9% of Canadian households owned a second home (e.g. a cottage, resort condominium or other vacation home) in 2005"
Not only is it clear they are talking about households, it is also very clear that by "second home" they mean only vacation homes, not all secondary property (that is 16% of households.)
Homeowners are already above the bottom third of households when you look at assets and incomes.
If 70% own then this is impossible.
There may be a more recent study that I do not have, but in 2006, renters comprised 36% of all households but held only 9% of total household net worth.
In 1999, the vast majority of renters, constituting 30%
of all households, had no substantial assets and held just
3% of total net worth.
Renters with substantial ($50,000+)levels of net worth comprised just 6% of all households
and held 6% of total net worth.
http://www.cmhc-schl.gc.ca/odpub/pdf/65006.pdf
Renters with substantial ($50,000+)levels of net worth comprised just 6% of all households
and held 6% of total net worth.
Which isn't exactly great news for the housing market as that doesn't speak to a whole lot of pent up demand!
Of course homeowners have more assets. We have had the biggest national housing boom in Canadian history. Many many people around the country have won the lottery.
So much so that the banks allow them to borrow against those winnings with interest only loans (or very low interest).
Renters don't have this resource.
Are homeowners in some way smarter? Nope.
Nobody likes to think of the value in their house as transitory but a crash will wipe out quite a bit of those winnings.
How many will be prepared for that? I guess we'll see how many smart homeowners realized those winnings instead of just talking about them.
Except for all the studies posted here that show that home equity makes up less than 50% of home/property owner net worth. Even if we take it to zero, net worth will remain higher.
This is not because homeowners are better, this is because those that are not homeowners are probably younger or have lower incomes, making buying a house or investing harder.
A deep correction in house prices, by itself, will have little affect on people's lives.
The affect is on future spending habbits. You're more reluctant to use the credit cards. You become a saver rather than a spender. You buy a used stove instead of a new one.
Yet there seems to be an irrational affect on home owners. While half of the population may not know what amortization is, my guess is that 90 percent or even more assume that equity and cash are the same thing.
Except for the fact that first time homebuyers do not make up the majority of home sales: repeat home sales do.
Six percent of households bought a home in 2011 and the ratio of first-time buyers was 35%.
Thirty-one percent of first-time buyers hope to move within the next five years, compared to just 19 per cent of repeat buyers.
Yes, I agree with JJ, a significant drop in house prices will affect consumer spending habits.
I don't agree that 90% of homeowners view home equity in the same light as cash. We've already gone over the HELOC stats and that is not the conclusion I reach.
The implication is that most people don't know that equity in their house can disappear just as easily as it appeared.
The implication of what precisely?
Only 36% of homeowners have a HELOC. How is this most people?
Of this 36% of homeowners who have a HELOC we can put less than half of the funds used into a category that might point to problematic spending patterns.
I would say that very few people do not realize that home equity is dependent on market conditions. I don't know anyone personally.
In any event, HELOCs are limited to the available equity of 65% of the home value. This is a limitation on negative equity through HELOC use unless prices drop more than 35%.
If you have a house $600,000 and you have $210,000 paid off, you won't get a HELOC. That is a big buffer.
Except for all the studies posted here that show that home equity makes up less than 50% of home/property owner net worth.
National average is 60% according to this: http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/canadians-getting-richer-average-net-worth-tops-400000/article13415380/
Except for the fact that first time homebuyers do not make up the majority of home sales: repeat home sales do.
Actually 57% were first time buyers in 2013.
It's not about helocs.
Person buys a house for $300,000. Ten years later it's doubled in value.
This person now claims they have $600,000 dollars. They don't. They have the potential to have $600,000.
The winnings are only realized on a sale. But people consider it as safe as money in the bank. It's not the same thing.
Equity != cash
Thanks for that Leo - I did not have the 2013 stat for first time homebuyers or net worth in home equity.
Who is this mythical person claiming they have $600 000? Is this another example of how all homeowners are blinded by shiny things?
Holy shrinking market batman!
Was curious about total sales in Victoria in general (prices and volumes aside). So I summarized total sales of SFH, Condos and Townhouses for 2006-2013 from VREB. Was I surprised? - not at the trend but the extent and robustness of the trend. The true health of the market?
Check out the chart:
http://i.imgur.com/HbTZcrN.jpg
. . . . . . . .Percentage Price Decline From Peak . . . . . . . .
. . . . . . . . . . . . MLS Home Price Index. . . . . . . . . . . . . .
. . . . . . . . .Greater Victoria - Condominiums. . . . . . . . . .
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-12.0%. . . . . . . . . . . . . . . . . . . . . . . . . .*. . . . . . . . . . . . . . .
-12.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-13.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .* . . . .
------------------------------------------------------------------------------
. . . . . . . . .10. . . . . . . 11. . . . . . . . 12. . . . . . . . 13. . . . . . .
December 2013 condominium prices were down from November across Greater Victoria.
December 2013 was the second consecutive month of lower post - peak lows for Greater Victoria condominium prices.
Two price points are included for each year on this chart (June and December) as well as the peak price point (March 2010).
The size of outstanding HELOC debt compared to GDP is higher in Canada than it was in the US at the peak of the 2006 US housing bubble.
Americans can deduct mortgage interest from their taxes. Canadians can't.
In the US the typical amortization term is 30 years while it is 5 years in Canada. Americans are much more sheltered from the risk of rising interest rates than Canadians.
The US housing market crashed. Canada's housing market will experience a deep price correction and this will affect many Canadian households.
Correct me if I'm wrong - and I'm sure there are a few that will.
Isn't there a cap on the exemption from Capital Gains in the USA.
The shrinking market is a big concern, Batman.
Low sale volumes in the past have preceeded a market correction. And it didn't take long for the market to react - a year, two years of low sales.
But this time around - the market has stretched out that time period. Some might say deferred what likely should have occurred already.
If or when a market correction does happen that means there will be a lot more people that have to dig themselves out of debt before they can become home buyers again.
The bigger they are- the harder they fall.
I'll stick with penny stocks - they're safer.
@reasonfirst
Interesting. So the increase in sales in 2013 over 2012 was entirely due to an increase in commercial property sold?
Canada Has Its Own Housing Bubble—And It’s About to Burst
We're the talk of the town.
Leo S
"So the increase in sales in 2013 over 2012 was entirely due to an increase in commercial property sold?"
Not sure - I only looked at SFH, Condo and Townhouses in the Victoria core from these reports and added each month for annual total:
http://vreb.org/pdf/historical_statistics/MSS1312.pdf
Was an increase reported elsewhere?
Numbers showing the decline in total $ value of sales from 2012 to 2013 are City of Victoria only. Some other municipalities had an increase from 2012 to 2013, so the net across the region is a slight increase in total sales $ from 2012 to 2013 from 2.47 B to 2.55 B
The Time Mag. article in every dental and medical waiting room across the land might well spook the market.
But according the Financial Times, quoted here, Canada's household debt (adjusted, in some unspecified way) is not quite so large as Time and Info suggest, and does not yet exceed the peak achieved in the US before the RE crash.
The good news from the FT is that any housing crash in Canada will spare the banks. Instead, the cost will be borne by the taxpayer, who's already got the back of every crazy low-rate mortgage lending bank in the country by way of CMHC, which has insured more than half a trillion in Canadian mortgage debt.
In Greater Victoria, weakness in house prices seems to be closing in on the core, with a number of vendors offering to accept less than the original asking, presumably before anyone even asked. Will this Dutch auction style of marketing become the norm? Or is it just a seasonal thing, houses that didn't go last year being offered at a more reasonable price this year?
And, just for the record, did anyone's prediction of declining Victoria prices exceed mine, first made about a year ago, of 40% (29% nominal)?
No wizardry required to see 15000 by 2015.
My prediction is for some long-awaited inflation, rising interest rates, and rising home prices in threesome erectile bliss ;-?
"But according the Financial Times, quoted here, Canada's household debt (adjusted, in some unspecified way) is not quite so large as Time and Info suggest, and does not yet exceed the peak achieved in the US before the RE crash."
The key words here are "adjusted, in some unsepecified way".
Fact: Canada's household debt to income ratio is much higher than the debt to income ratio in the US at the peak of the 2006 US housing bubble (third chart). There is a big difference between suggesting something and quoting factual information.
"It’s doubtful our home prices could continue declining if our equity markets have begun a bull phase."
House prices in Victoria will continue to decline for years, and there are thousands of first-time buyers, who took on enormous mortgages at near-peak prices, who will certainly contribute to declining home prices. Many of these high-risk, high-ratio buyers are already underwater on their mortgages.
There is no clear evidence of an equity market bull phase.
If anything, equity markets are due for a correction.
Even if there was an equity market bull phase, how would that help the household finances of thousands of first-time buyers who took on mortgages at peak or near-peak prices in Victoria who are already underwater on their mortgages?
It would help very few, at best. Most near-peak first-time home buyers in Victoria would have taken on mortgages with a minimum down payment (borrowed in many cases) and as I've said, are already underwater on their mortgages, struggling to make monthly payments. BC residents are, by far, the most indebted in Canada. It is doubtful that many of these near-peak first-time buyers would be investing in equity markets. As I've said, equity markets are probably headed for a correction, not a bull market.
Kilgore: Smell that? You smell that?
Lance: What?
Kilgore: foreclosure, son. Nothing else in the world smells like that.
[kneels]
Kilgore: I love the smell of a foreclosure in the morning. You know, one time a house in Sooke, sold 4 years ago at $365,000. When it was all over, the bank sold it for $271,000. They didn't find one of 'em, not one stinkin' buyer for 200 days. The smell, you know that smell, the whole Village. Smelled like
[sniffing, pondering]
Kilgore: victory. Someday this market's gonna end...
[suddenly walks off]
*Stolen from Ben*
Average house prices Canada vs US
Somebody gonna get a hurt on.
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