| February 2014 | February 2013 | ||||
| Wk 1 | Wk 2 | Wk 3 | Wk 4 | ||
| Unconditional Sales | 101 |
200
|
394
| ||
| New Listings | 372 | 588 |
1039
| ||
| Active Listings | 3556 | 3599 |
4072
| ||
| Sales to New Listings |
27%
| 34% |
38%
| ||
| Sales Projection | --- | 400 | |||
| Months of Inventory |
10.3
| ||||
Pretty steady sales rate of 100/week. Soon we will no longer be blowing last year's numbers out the water for sales. But the government is getting nervous again, with some tweaks to CMHC in the 2014 budget. If the market in the rest of the country doesn't settle down soon there will be more, and more significant ones.
217 comments:
1 – 200 of 217 Newer› Newest». . . . . . . . . . Percentage Price Decline From Peak . . . . . .
. . . . . . . . . Greater Victoria - Single Family Homes. . . . . .
. . . . . . . . . . . . . . (MLS Home Price Index). . . . . . . . . . . .
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------------------------------------------------------------------------------
. . . . . . . .F. . M. . A. . M. . J. . J. . A. . S. . O. . N. . D. . J. . .
(*) = Most recent index price level
(x) = Second most recent index price level
This price chart shows the year-over-year price declines for Greater Victoria single family homes over the last 12 months. It was put together using MLS home price index data.
From December to January 2014 single family home prices across Greater Victoria increased 0.33% from 10.96% below peak to 10.63% below peak.
There have been at least 24 consecutive months of year-over-year price declines for single family homes. More on this in another post.
"And starting Wednesday, the government will increase the threshold for a first-time home buyers exemption from the property tax transfer from $425,000 to $475,000 – a modest announcement that merited mention in a bare-bones budget."
Oh those poor first time home buyers.
Families not first in British Columbia budget
And another reason.
The the third time in as many years I had to call police about an addict.
The first time I was harangued when I didn't give enough. The second time, a woman wandering around in the middle of the intersection of douglas and Hillside.
this morning, a guy with an extraordinary talent for invective crossing the crosswalk in front of my car, charges toward me, hurling obscenities, ripped off his shirt and threw it at my car.
Great place to live.
"And starting Wednesday, the government will increase the threshold for a first-time home buyers exemption from the property tax transfer from $425,000 to $475,000 – a modest announcement that merited mention in a bare-bones budget."
If you pay for the appliances separately via the contract of purchase and sale and assuming it is a sliding scale to $500,000 this will be somewhat useful in Victoria for first time buyers.
Most of Victoria's housing price decline took place while 5-year fixed rates were declining. We all know that 5-year rates hit bottom last year and will generally be following an upward path over the next number of years.
Not even an increasing Canadian household debt-to-income ratio could prevent or halt Victoria's RE price decline.
Canada's household debt-to-income ratio is extremely high. It is a major source of concern for the federal government.
Most household debt is mortgage debt. The feds know that the extreme level of mortgage debt in this country is a major source of risk to the Canadian economy. The rest of the world understands this.
Further mortgage credit tightening will likely happen. The result will be even more downward pressure on house prices in Victoria. The rate of price decline will increase as a result.
info:
We all know that 5-year rates hit bottom last year and will generally be following an upward path over the next number of years.
By looking at Victoria’s past 5 years, it looks like if interest rates rise the next number of years, prices will rise (with a two month lag).
Whatcha think about that implausibility ?
Spanky,
Skillful, time-bound cherry picking...
"this morning, a guy with an extraordinary talent for invective crossing the crosswalk in front of my car, charges toward me, hurling obscenities, ripped off his shirt and threw it at my car. "
.....can I have my shirt back?
I grew up in Vancouver but had cousins on the Island. My family always spoke of the Islander part of our family as being a bit strange.
When I moved here, I noticed it right away. Those that grew up in Victoria march to a different drummer. They're just a bit off, in a kind gentle manner like Uncle Bob who made you dig deep in his pant's pockets for candy.
I blame it on the lack of fluroid in the water.
@ TJ from previous post
They are inflation adjusted prices you are fitting in that plot. Inflation adjusted prices do not grow according to a power law they grow linearly at a very small rate over the long term.
Quite clearly in Victoria they have grown (after inflation) at about 4% a year for the past 60 years.
How does this mesh with the data from the US showing more or less flat real prices over 100 years? I don't know.
In 2013 dollars, the real price of a house in 1960 was just shy of $70,000. Clearly prices are never going back to that level, so the flat line appreciation does not seem to apply to individual cities. I see your logic, and it makes sense, but it does not reflect reality.
If you project out 20 years and then factor inflation back in you'll see that the prices the power law on inflation adjusted prices predicted will be huge (this is what I was saying).
Yes, I certainly agree that the 4% real rate is completely unsustainable going forward. Those people that bought during that period were at the right place at the right time and those days are over.
I wonder where prices will be in another 50 years? I suspect appreciation may more like 1% a year average for the next 50 years (rather than the ~7% we've been used to).
24% of Canadians see their home as main source of retirement income.
On the brighter side (from the same article) homes only make up 10% of expected retirement income
"But real estate is a volatile asset class and can’t be counted on to sustain high values forever, Mr. Dougherty cautioned."
Crazy talk. This guy has been spending too much time on Garth's blog.
. . . . . . . . . . Percentage Price Decline From Peak . . . . .
. . . . . . . . . . . .Oak Bay - Single Family Homes. . . . . . . .
. . . . . . . . . . . . . . . . (Source: VREB). . . . . . . . . . . . . . . .
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- 8.5%. . . *. . . . *. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 9.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 9.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..*. . . .
-10.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
----------------------------------------------------------------------------
. . . . . . . . 07. . .08. . .09. . .10. . .11. . .12. . .13. . .14. . . .
This chart is made up of 6-month average data for Oak Bay single family homes (VREB).
Price levels have been plotted for December of each year. I've also plotted January's 6-month average and the peak 6-month average (September 2011).
Last month when Poloz had that interview with CBC he seemed very nervous, especially about deflation:
CBC National
Now the IMF is warning about deflation:
Bloomberg Link
And China is dumping U.S. Treasuries:
Bloomberg Story
All the world's major countries want inflation at 3%+ because it diminishes debt without spending a dime, but it's just not happening.
Poloz talks about debt being magnified by deflation. He's worried judging by the quivering lips and rapid eye movement during all his interviews recently.
That interview was from the time they thought retail competition was the source of the disinflation. However it's persistence has signaled that it was only a contributing factor.
"Poloz is confident that Canada will achieve a so-called soft landing"
There are two forces that govern markets greed and fear. So far greed has taken hold on a massive scale. Real estate hoarding made possible by low rates is common place.
If the market drops ten percent (the never before achieved "soft landing" in real estate) watch fear start to take hold. The memory of the US is all too fresh in the collective mind.
Could it happen here?
It sure can.
LeoM
A quick look at Canadian CPI shows it has been increasing m-o-m lately and y-o-y, although we don't have January read until later this week. Let's just see here... since January, natural gas is up 50%, oil is up 10%, coffee is up 55% and wheat is up 12% to name but a few recent inflations. The concern is definitely inflation, not deflation.
We will just call it deflation because the price of smart phones are down 20%....
"The concern is definitely inflation, not deflation."
Wow. Which country do you live in?
The CBC National link has Poloz stating that governement policy has changed housing prices for Canadians.
Something that has been said several times on this blogg.
How can anyone apply free market economic reasoning to housing when the government has purposely manipulated prices through political intervention?
government has purposely manipulated prices through political intervention
That's almost as silly as saying that our government manipulated the price of oil from $20 in '02 to $140 in '08.
>> That's almost as silly as saying that our government manipulated the price of oil from $20 in '02 to $140 in '08.
Yes those two things are exactly the same. As we know there is a government entity, the COFC (Canadian Oil Futures Corporation) that guarantees hundreds of millions of dollars worth of loans so that Canadians can trade in oil on margin.
Spanky, Tiff Mecklem is stepping down as the deputy head of the Bank of Canada. You should apply. You seem to have a firm grasp economic principles.
You should let them know that there actually is inflation out there. They're all worried about disinflation leading to deflation.
I'm sure they are just confused. It is your duty as a citizen to let them know how wrong they are.
Also, could you enlighten us as to why the government is keeping their key overnight rate at one percent?
Well Spanky, watch the CBC clip. At the 2 minute mark Poloz will school you.
"We changed the market for them"
If you live in Victoria, Saanich East or Oak Bay most likely you believe that house prices will moderate downwards only slightly.
Pretty much the same thoughts as those that lived in the Westshore did a few years ago.
Back in 2004, bussiness was brisk in the construction trades. Those that worked on the many condo and town houses bought into the complexes and subdivisions they worked in. By the act of building alone, developers were creating their own demand. After all the governement was making it easy for people to buy homes. A generation before, a trades person would have to work several years to get the down payment for a home. But now, less than a year into your trade you qualified not just for used home - but a NEW home.
Back in 2004, you could buy a townhouse in Royal Bay (Colwood) for $310,000. And things were great. Property values were going up.
Then in 2011 business was off a bit and you thought it would be good to make some cash by selling the home. So you listed your luxury Royal Bay town home for $456,000 and dreamed of all the money you'd have to spend.
Several offers made, but you chose to hold out for more money. After 6 months you chose to lower the price to stimulate demand. Nothing happened.
Then for the next 2 years you tried to follow the market down, but still holding out for the best deal.
And this week you got your best offer and took it at $367,000. $57,000 more than you bought the townhome for 10 years ago.
The odd thing is that you are still thinking... "That won't happen here"
And in the pecking order of real estate when the prices in Victoria eventually come down - those living in Vancouver will also say "That won't happen here"
How can anyone apply free market economic reasoning to housing when the government has purposely manipulated prices through political intervention?
Exactly, which is why I have argued, contrary to the confident assertions of Ms.Info, that the RE market won't collapse before next year's election.
I love the way the CBC interviewer/commentator, Amanda Lang pontificates about economics:
Referring to Japan she speaks of:
"an economy that hasn't seen much growth in 20 years, all thanks to deflation."
Yeah, right. Or could it be that in an economy with a shrinking and aging population, people just don't wanna spend like they used to?
And anyhow, with RE having bloated six-fold before the crash beginning in 1990, the Japanese have had a bit of financial retrenchment to do, whatever the rate of inflation or deflation.
Re: Poloz's admission of housing market manipulation through the Central Bank monetary policy, is he signaling his alibi for when the market crashes — Mark Carney done it.
There're opportunities in distressed markets.
Sooke has 184 house listings, but only 9 sales in the last 30 days. With 59 new listings in the same time period.
My pick for best possible "deal" to be made is for a home in need of repairs, vacant, and under foreclosure by Scotiabank on Galena Road in Sooke at $228,000.
You'll likely be the only offer on this 2,000 square foot 1976 built ugly duckling that has now been listed for 7 months. The land is valued at $150,000.
Of course you'll need to be handy and have spare cash to finish.
But that's what makes this special.
Recently renovated homes like this one are selling around $350,000. Buy it, fix it up and blow it out for $320,000
20 percent of the properties listed for sale in the urban core are VACANT.
59 detached homes
6 half duplexes
156 condos
42 town houses
And what I figure is a good asking price is a town home on Tyee Road in Dockside Green.
1500 square feet at $310 per sq. ft.
Listed on and off since 2011. Now asking $470,000.
Worth a low ball offer???
Spanky, Tiff Mecklem is stepping down as the deputy head of the Bank of Canada. You should apply. You seem to have a firm grasp economic principles. You should let them know that there actually is inflation out there. They're all worried about disinflation leading to deflation.
It wouldn't pay enough :)
Financial Post, Feb 21
Canada's inflation surge
OTTAWA — Canada's annual inflation unexpectedly jumped
"Canada's inflation surge"
Surge is too strong a word. Modest is more accurate.
Canada's annual inflation unexpectedly jumped
It wouldn't call it much of a jump ... the annual inflation rate rose from 1.2% in December to 1.5% in January, primarily due to increased transportation and food costs. Considering that fuel and fresh food are traded in $US, and with the recent drop in the value of the $CDN - I'm not sure why anyone is surprised. Seems like Economics 101 to me ...
Financial Post, Feb 21
Canada's inflation surge
OTTAWA — Canada's annual inflation unexpectedly jumped
You missed a key piece: "The year-over-year rise was led by higher costs of shelter, which rose by 2.1% on a 12-month basis after December’s 1.9% 12-month increase."
Not exactly something that will continue if prices decline across the country.
You missed a key piece.
The year-over-year increase in the "Electricity prices increased 4.7% in the 12 months to January, after rising 4.1% the previous month. Consumers also paid more for rent (+1.6%) and for homeowners' home and mortgage insurance (+5.4%) in January compared with the same month a year earlier.
The mortgage interest cost index decreased 0.6% "
Modest is more accurate.
It wouldn't call it much of a jump ...
Not exactly something that will continue
CPI rose 0.7% in the 12 months to October 2013
CPI rose 0.9% in the 12 months to November 2013
CPI rose 1.2% in the 12 months to December 2013
CPI rose 1.5% in the 12 months to January 2014
I'll say 1.9% for February. Place your bets folks and keep in mind what I said above; since January, natural gas is up 50%, oil is up 10%, coffee is up 55% and wheat is up 12%.
Do I hear 3.0% by later this year?
Do I hear 3.0% by later this year?
Yesterday it was 6 degrees, today it was 4. I conclude that by March we will be frozen solid.
CPI is the same now as it was 7 months ago. Yeah real crazy surge.
Not exactly something that will continue if prices decline across the country.
Not so Leo, because "shelter costs" encompasses all costs associated with renting and owning, except land costs.
A jump in interest rates, for example, would produce an increase in shelter costs even though prices would likely fall.
A jump in interest rates, for example, would produce an increase in shelter costs even though prices would likely fall.
yes good point.
Just Jack, what is your take on how the PTT threshold increase to $475,000 will change the dynamic in the local market, if any?
Do you think those homes that were around 425k will now be less desirable and those in the 450-475k range will gain more desirability?
Curious to hear your take on it?
A jump in interest rates, for example, would produce an increase in shelter costs even though prices would likely fall.
For prices, it's more likely similar to when we finally got the jump in interest rates between 2005-2007, after the early 2000s recession. Prices rose significantly as interest rates were rising. I believe it was the BofC rate alone more than doubled from 2005-2007 whilst prices nearly doubled. I remember there was also a lot of people back in 2004 who believed prices would likely fall when interest rates started moving up.
A quick look at Canadian CPI shows it has been increasing m-o-m lately and y-o-y....
Let's just see here... since January, natural gas is up 50%, oil is up 10% ... to name but a few recent inflations.
Neither of these items is included in the Bank of Canada CPI index. Also excluded are gasoline, indirect taxes, intercity transportation, fruit, vegetables (the last three all energy intensive products).
According to the Bank of Canada's index, the CPI is up 31% since January 2000. But the price of oil is up around four-fold, so what use is the CPI index in measuring your actual cost of living?
And what use is such an index in adjusting house prices over time to constant dollars? Rather little, perhaps, as suggested by the improbable exponential increase in house prices adjusted by the CPI index to "constant" dollars.
@ Spanky
"For prices, it's more likely similar to when we finally got the jump in interest rates between 2005-2007, after the early 2000s recession. Prices rose significantly as interest rates were rising. I believe it was the BofC rate alone more than doubled from 2005-2007 whilst prices nearly doubled. I remember there was also a lot of people back in 2004 who believed prices would likely fall when interest rates started moving up."
In 2005, the average variable mortgage rate was 4.4%. In 2007, the average variable mortgage rate was 6.1%. That was an increase of 39%, not over 100% as you claim.
House prices in Victoria increased by 50% from 2005 to 2007, not nearly doubling (increasing by 100%) as you claim.
In 2005, the average 5-year fixed-rate mortgage was 5.98%. In 2007 the average 5-year rate was 7.01. 5-year rates increased 17% from 05 to 07.
Anyone qualifying for a mortgage must do so under the 5-year fixed-rate (not variable).
0-down, 40-year mortgages were brought in between 05-07. This accounts for the surge in prices during this time.
5-year rates hit bottom last year and over the next number of years they will follow (in general) an upward path. Again, those who wish to qualify for a mortgage must do so under the 5-year fixed rate.
5-year rates will (in general) be increasing over the next number of years. It is unlikely that something like 0-down, 40-year mortgages will be brought back in to counter the effects of rising rates this time. In general, house prices fall as rates rise.
Since 2010 house prices in Victoria have fallen 10-15% while prices across the rest of Canada have increased 10-15%. Most of this happened while the 5-year rate was falling.
Victoria's housing market is the weakest in Canada. Prices will continue to fall for years, even if the 5-year rate remains steady (we all know it will increase).
You left out a number of key factors in your analysis. As well, you overstated certain important numbers.
As rates rise over the next number of years, house prices in Victoria will continue to decline (not increase as you claim).
I don't know Marko.
I wonder how many prospective first time buyers this would have an affect on.
I don't know Marko.
I wonder how many prospective first time buyers this would have an affect on.
For prices, it's more likely similar to when we finally got the jump in interest rates between 2005-2007, after the early 2000s recession. Prices rose significantly as interest rates were rising.
And then what happened in 2008 (note: well before the financial crisis in Q3)?
Interest rate changes always have a lag in their effect on house prices. You saw the same with with the interest rate cut in Q3 2008.
All right, so prices shoot up again as rates rise from 2015-17 (similar to 2005-7), then in 2018 we get a 10% correction similar to 2008. Then new highs by 2019. None the less, by 2020 (aka2010) prices could similarly be over 50% higher than from where rates start rising in 2014-15? I'm not saying a similar outcome will occur. I'm simply pointing out how much prices can rise while interest rates are rising.
http://theeconomicanalyst.com/sites/default/files/article_inside/2011/07/house_prices_and_interest_rates_since_2000_1.jpg
>> right, so prices shoot up again as rates rise from 2015-17
Rates rising do not trigger price increases. Just because in an existing boom a rate increase doesn't automatically stop price increases doesn't mean rate increases somehow cause price increases.
So how's that wave of affluent retirees just around the corner doing?
Middle-class dreams a ‘myth’ in troubled economy: internal government report
Monday, February 24, 2014 8:00am
MTD February
2014 2013
Net Unconditional Sales: 314 394
New Listings: 836 1,039
Active Listings: 3,679 4,072
Please Note
Left Column: stats so far this month
Right Column: stats for the entire month from last year
Is it inflation or price adjustments?
The Canadian dollar is down 10% so consequently commodities and imported goods are going up 10% because we pay with Reserve Currency (U.S. dollars).
That's not inflation, that's price adjustment due to government manipulation of the Canadian dollar.
Deflation is still the big risk, even if it's masked by a lower Canadian dollar.
"Rates rising do not trigger price increases. Just because in an existing boom a rate increase doesn't automatically stop price increases doesn't mean rate increases somehow cause price increases."
Exactly.
Leom your line of reasoning breaks down once you consider the USA is experiencing higher y/y CPI inflation than we are.
Anyone have any experience with how zealous Oak Bay is with enforcing bylaws against illegal suites?
It seems they may be heading towards legalizing them, but the draft OCP is 6 months away. Would hate to do work and then have it all ripped out.
Thanks for your thoughts.
In 2005 the average 5-year fixed-rate mortgage was 5.98% and in 2007 it was 7.01%.
From 2005 to 2007 house prices across Canada increased dramatically as a result of federal policy. That policy provided enough stimulus for Canada's housing market that house prices increased despite rising rates. Normally, of course, house prices fall as interest rates rise.
Nobody should be surprised that house prices in Victoria also increased from 2005 to 2007 as the effects of the loosening of mortgage lending standards overpowered the effects of rate increases. House prices in Canada were in an uptrend during that time and Victoria's housing market followed that trend.
However, many mortgage holders should be concerned that Victoria's housing market has bucked the (upward) price trend set by the Canadian housing market in general since 2010. House prices across Canada have increased substantially since 2010 (up 10-15%) but not in Victoria (down 10-15%).
Obviously credit/lending conditions across Canada have been conducive to housing price increases since 2010. 5-year fixed rates are lower now than in 2010. Outstanding household mortgage debt in Canada has increased since 2010, not slowing after the mortgage rule tightening that took place in 2012 (this chart includes information up to July 2013). It may be the case that the amount of taxpayer-backed mortgage insurance that has been issued in Canada since 2010 has continued to increase at a rate that is conducive to housing price increases and that the Canadian housing market continues to receive enough housing market stimlulus to maintain the trend of rising (bubble) house prices. Taxpayer-backed mortgage insurance is available in Canada through CMHC, Genworth and Canada Guaranty.
Victoria's housing market continues to experience price declines despite lending conditions in Canada that are conducive to price gains.
House prices across Canada will peak soon. Canada's housing bubble is much larger the 2006 US housing bubble and many other national housing bubbles that were allowed to inflate over the last 50 years.
Housing bubbles always burst and the resulting multi-year price correction is always deep. Canada will experience this as well. The rate of price decline in Victoria will increase.
Housing bubbles always burst and the resulting multi-year price correction is always deep.
That is not so, according to this chart. From '85 to '93 Canadian house prices rose 2.5-fold then remained flat until 2000, more than doubling again by 2011, and still rising today.
Only if it is argued that the bubble began almost 40 years ago and that we will revert to 1980's prices does Info's claim make sense.
Perhaps that's what she meant, but in that case she should be more explicit. Otherwise, her oracular statements are too ambiguous to have any predictive value.
It would also be useful to define some terms, such as "bubble", i.e., how much and how fast does a market have to rise to be "in a bubble," and in that connection it needs to be stated whether one is talking constant or nominal prices.
. From '85 to '93 Canadian house prices rose 2.5-fold then remained flat until 2000
That's an aggregate statistic which obscures the cycles of the individual markets, which were not in unison.
Toronto saw a large price runup in the late 1980's and an equally large bust in the early 1990's.
Vancouver saw rising prices in the early 1990's and declining prices in the late 1990's. And so on.
Unknown said...
Anyone have any experience with how zealous Oak Bay is with enforcing bylaws against illegal suites?
---------
Oak Bay is the strictest anti-suite municipality in Greater Victoria. They will make you rip out everything done without a permit when they catch you--- and they will catch you. One neighbour can make an anonymous 'inquiry' at Municipal Hall about your reno work and you'll have two inspectors on your doorstep the next morning. Or one disgruntled former tenant can report you and you'll be shut down the next day.
When the inspectors arrive at your door you can not refuse them entry. When the Municipal Inspectors find your non-permitted construction and plumbing they will then call the Provincial Electrical Inspector, and he will make you rip out walls to expose any electrical work so he can visually inspect all electrical work.
Oak Bay has always been this way, at least 40 years that I know about, and in my opinion they will not be changing to allow any basement suites in the next decade.
The residents of Oak Bay do not want a bunch of rowdy basement renters ruining their neighbourhoods with their loud parties and parking their pre-2000 vehicles on their pretty streets.
Thanks for the great blogging experience. The discussion and statistic available on this site has been enjoyable. I've read daily since moving here 3 years ago.
My wife and I finally bought a place, meaning I'll be taking a break from reading the blog, else I get too stressed with the continued short-term price declines.
Over the long run I think prices won't be much higher in 10 years than they are today, but I don't have forever to pay off a mortgage so I can't afford to wait much longer. And who knows, maybe I will have timed the Victoria market perfectly.
This is the house we bought. We got it for $507,000.
http://www.victoriamls.ca/matrix/public/portal.aspx?k=209562XFZDG&p=DE-16356789-633#1
I will continue to tell all my renter friends about the blog and I wish you all the best. The statistics are fantastic. I'll continue to check in once in a while.
Canada,s housing bubble is larger than the 2006 US housing bubble.
Canada's price to income ratio increased much more from 2000 to 2014 than that in the US from 2000 to 2006. Canada's price to rent ratio increased more from 2000 to 2014 than that in the US from 2000 to 2006.
I did a big post on this recently and I will repost this soon.
If the US had a housing bubble in 2006 then Canada certainly has one now. No question.
@Richard
It looks like you got yourself a deal in Central Saanich. What is your opinion on why the home was listed at $68K less than the assessment?
Price increases alone do not define overvaluation or a housing bubble.
When the price to income ratio of a housing market is significantly higher than the long term average of the price to income ratio of that market then that market is overvalued.
The increase in the price to rent ratio is also an important part of determining whether or not a housing market is overvalued.
Canada's overvaluation is more extreme than that of the US in 2006 and comparable to other national housing bubbles.
DavidL,
We are set back not far from Pat Bay highway so there is some noise (but the house is up the hill so it has some good views).
Nothing came back on the inspection so we are wondering the same thing ourselves, though I think the closeness to Pat Bay is the biggest reason, but it's really not that bad.
Everyting inside the house seems fantastic, as far as we can tell, for the price.
I think the sellers needed out fast too.
Well done Richard. Beautiful property!
Brilliant timing and great patience waiting the last 3 years.
Hey Richard,
I showed your property in the fall to my buyers. Lots of house for that price! Isn't there a putting green in the back?
Oak Bay is the strictest anti-suite municipality in Greater Victoria. They will make you rip out everything done without a permit when they catch you--- and they will catch you. One neighbour can make an anonymous 'inquiry' at Municipal Hall about your reno work and you'll have two inspectors on your doorstep the next morning. Or one disgruntled former tenant can report you and you'll be shut down the next day.
When the inspectors arrive at your door you can not refuse them entry. When the Municipal Inspectors find your non-permitted construction and plumbing they will then call the Provincial Electrical Inspector, and he will make you rip out walls to expose any electrical work so he can visually inspect all electrical work.
Oak Bay is the strictest by far but you are exaggerating a lot too.
Since when is the electrical provincial inspector a he?
He or she shows up to less than 10% of new home builds let alone going around Oak Bay making people rip out stuff on 80 year old homes. They don't even go around cracking down on knob and tube and other serious safety hazards but they'll throw their resources at making people tear apart walls?
Reality is every other home in Oak Bay has a finished basement, suite or no suite; however, none of the basements meet minimum code; therefore, they couldn't have been done with a permit. Oak Bay is not going to go around making everyone rip apart the basement, especially when you consider that in most homes the work was done before the current owner purchased the home.
Suites will come to Oak Bay, only a matter of time.
It's interesting how many councillors I've come across in municipalities that don't allow suites, but they personally have suites.
"That's an aggregate statistic which obscures the cycles of the individual markets, which were not in unison."
Could be, but Info is comparing Canada with the US and there seems no question that, in aggregate, US prices did not achieve a soft landing. In fact, according to the Case Shiller 10-city index, US prices dropped by one third after 2006, which I suppose could be described as a crash, although it's not exactly a wipe-out.
But it seems we are to understand from Info that RE can crash in Canada without a fall in prices. If so, who's gonna worry about it?
Nice place Richard
Looks like good value for the current market, though I haven't really been following the Peninsula
If you are in for the relative long term I suspect you'll do just fine.
Marko - I agree with most of what you say on this blog but if a family is considering buying a house in Oak Bay and building an illegal suite to rent to a non-family member; And without the suite rent they might be financially strapped; And, they are asking about how zealous Oak Bay is with enforcing bylaws against illegal suites; then it's important to help this fellow blogger clearly understand the risks.
I know I'm reading a bit between the lines and assuming they will be doing a reno and not buying a house with an existing suite; but either way, Oak Bay is strict and I know for a fact they will make a homeowner tear out newly constructed walls, they will send in inspectors, and they will even force you to hire a structural engineer if you modify a bearing wall or bearing post. In addition, the 2012 Building Code amendments require structurally engineered box-beam walls for all new or modified bearing walls - a structural engineer is required for this on older house renos.
If you don't believe that Oak Bay Inspectors are this strict, then just go to Oak Bay Municipal office and ask an inspector. The inspectors in Oak Bay have no mercy on people who do work without a permit and they do not tolerate illegal suites. A finished basement is not a suite and that's not what the question was related to; the question is specifically about "illegal suites".
@Richard P - Congrats, neighbour! ;)
They threw some pretty insane parties there. Our backyard is a few away from yours so we always knew when they had their friends over.
My wife and I were looking at that house when it came on the market, very nice house for the price.
We absolutely love the neighbourhood but we are still saving and waiting and why not when we can rent for $1100 (all in). It's nothing like 6566 Rey Rd though! Pretty sweet place. Hot tub party soon? :D
Best of luck to you and your family.
>> When the price to income ratio of a housing market is significantly higher than the long term average of the price to income ratio of that market then that market is overvalued.
That was exactly the case in Victoria in 1994
In a free and open market, the market can never be "overvalued".
You may over pay for a property relative to the current market. But the market sets the measure not the individual property.
The price to income ratio is simply a crude measure of a properties worth relative to other similar properties within the same marketplace. It's irrelevant to all properties in all markets. And is incorrect when used to compare time periods or markets with different politcial, geograpical, social and economic factors.
Even in the stock market where the price to income ratio is commonly used as a unit of comparison. It is used for "current" earnings relative to other similar companies. You don't compare a companies current earnings to what it earned 15 years ago because that's irrelevant. Neither do you compare current earnings of resource company (Vancouver) to a communications company ( San Francisco).
So why do you insist on doing this with real estate?
I know I'm reading a bit between the lines and assuming they will be doing a reno and not buying a house with an existing suite; but either way, Oak Bay is strict and I know for a fact they will make a homeowner tear out newly constructed walls, they will send in inspectors, and they will even force you to hire a structural engineer if you modify a bearing wall or bearing post. In addition, the 2012 Building Code amendments require structurally engineered box-beam walls for all new or modified bearing walls - a structural engineer is required for this on older house renos.
If you don't believe that Oak Bay Inspectors are this strict, then just go to Oak Bay Municipal office and ask an inspector. The inspectors in Oak Bay have no mercy on people who do work without a permit and they do not tolerate illegal suites. A finished basement is not a suite and that's not what the question was related to; the question is specifically about "illegal suites".
What I see people doing frequently is they'll take out permits for a basement, if it can meet code, they'll throw in a 4 piece bathroom and a "bar/media" room (all legal). Later they add a stove to "bar/media" room. If the municipality comes back you just take out the stove.
If you are doing everything without a permit you are inherently taking on a risk in any municipality.
I've run into inspectors in municipalities that don't allow suites and had a long discussion with a few. The smart ones take the stance of, "I know exactly what is going on when someone is building an illegal suite so I encourage safety (such as fire rated drywall between the space, etc), because I know what they'll do when they get the occupancy paperwork."
In my opinion it would be best if every municipality legalized suites. In the City of Victoria suites are legalized and when you are building a new home you need to design enough off street parking, you need two hydro meters, plumbing for the suites needs a separate main water shut off, fire protection etc....a very long list. It is kind of like building a duplex.
Is it better to have an extremely well built suite or have people throwing them in after occupancy?
The price to income ratio is simply a crude measure of a properties worth relative to other similar properties within the same marketplace. It's irrelevant to all properties in all markets. And is incorrect when used to compare time periods or markets with different politcial, geograpical, social and economic factors.
Exactly.
House prices in Victoria crashed from 1981 to 1985.
The only data available from that time period is yearly average prices. In 1981 the yearly average single family home price in Victoria was $126,776.00. In 1985 the yearly average SFH price was $93,865.00. In 4 years, house prices plunged 26%.
A 26% price drop in 4 years may not qualify as a crash, however, let’s look into this a little deeper.
In order to determine the actual price drop from 81 to 85, we would need to calculate the monthly MLS home price index price drop by comparing the index level of the peak month of 81 to the index level of the lowest month of 85. That data doesn’t exist. However, if it did, the MLS HPI price drop would have been much bigger than the yearly average price drop.
Yearly average data is much too smoothed and is basically useless in determining price peaks and valleys which are an essential part of finding accurate price declines.
Below are examples of recent price drops for Victoria, Calgary and Toronto. Let’s look at how the yearly average price drop compares to the MLS home price index price drop in each case.
Toronto (2008 high to 2009 low):
Yearly average price drop: -0.5%
MLS HPI price drop: -7.7%
Calgary (07 high to 09 low):
Yearly average price drop: -6.3%
MLS HPI price drop: -16.9%
Victoria (08 high to 09 low):
Yearly average price drop: -0.5%
MLS HPI price drop: -9.6%
Victoria (10 high to 13 low):
Yearly average price drop: -5.0%
MLS HPI price drop: -11.0%.
In each case, the yearly average price drop was much smaller than the MLS HPI price drop.
We can apply this rule to Victoria’s price drop from 81 to 85. If MLS HPI data was available for the period of time, it would have shown a much bigger price drop than the yearly average price drop of 26%.
I estimate that Victoria’s MLS HPI price drop from 81 to 85 would have been between 35% and 45%.
A 35% to 45% price plunge in 4 years qualifies as a crash.
There was no Canadian housing bubble in 1981. Victoria’s housing market wasn’t in a bubble either.
Victoria’s housing bubble is comparable to the largest housing bubbles in the US (Miami, Los Angeles, Las Vegas, Phoenix, etc.) in 2006.
A housing market can crash without having a history of crashing. There can always be a first time.
A price crash is definitely a possibility for Victoria’s housing market.
There may not be a crash. However, if house prices decline at a rate of 5% per year for 8 to 10 years it would amount to a total price decline of 40% to 50%. In the opinion of a lot of people, a 40% to 50% price decline in 8 to 10 years would basically be a crash.
@just jack
"The price to income ratio is simply a crude measure of a properties worth relative to other similar properties within the same marketplace. It's irrelevant to all properties in all markets. And is incorrect when used to compare time periods or markets with different politcial, geograpical, social and economic factors."
Really not quite sure what you're saying here, JJ, especially when you say " And is incorrect when used to compare time periods.....". How about an alternative explanation that included specific examples?
"The price to income ratio is simply a crude measure of a properties worth relative to other similar properties within the same marketplace."
Incorrect.
The price to income ratio of a housing market isn't used to compare properties within that market. It is used to compare the current price to income ratio of a particular housing market to the price to income ratio of that market in the past. This is done to determine the amount of overvaluation/undervaluation of a particular housing market.
"It's irrelevant to all properties in all markets."
Incorrect again. This statement makes very little sense.
"And is incorrect when used to compare time periods or markets with different politcial, geograpical, social and economic factors."
Again, the price to income ratio is useful in determining whether or not a particular housing market is overvalued/undervalued. This is done by comparing the current price to income ratio to the long term average of the price to income ratio of that market.
After determining the amount of overvaluation of a particular housing market (for example, Canada's), it is then possible to compare the overvaluation of Canada's housing market to the overvaluation/undervaluation of other national housing markets (for example, the US).
It is evident that many of you do not understand what overvaluation of a housing market is and how the price to income and price to rent ratios are used to calculate the amount of overvaluation of a housing market.
On its own, the price to income ratio is not useful as a comparative tool between two housing markets.
The price to income ratio is used to determine the amount of overvaluation/undervaluation of a particular housing market, whether that market is a city or a country.
Once the amount of overvaluation is determined (using the price to income ratio in the calculations), the amount of overvaluation of a housing market (Victoria) can be compared to the the amount of overvaluation of other housing markets in Canada or elsewhere in the world.
Lethbridge AB is the culprit in Canada.
Its 2014 Price to Income ratio is 21.41
How can a market be overvalued?
Value is determined by willing buyers and sellers acting in their own interests.
You don't like the prices - that's okay. But it doesn't make the market overvalued. People buying and selling determine market value.
Let's say the cost for a 4 series BMW is $53,000. The only way you could say that the price is over valued is by comparing the BMW with other SIMILAR luxury cars in TODAY'S market.
Not the market ten years ago and not by comparing a BMW to a Dodge Truck.
So why do you keep trying to do this with real estate by comparing today's market with 5, 10, 15 years ago. Or comparing Victoria to Toronto.
If the price is too high - the dealer will lower the price until it's at market value. You can overpay for a BMW only relative to the marketplace. The marketplace can never be in a state of overvaluation.
@Info.
There may not be a crash.
Agree with that.
I'd also agree with the proposition that there may be a crash, although I now think that unlikely.
The developed nations seem to have little idea how to effectively restore income to the middle class in an era of off-shoring and automation. It seems likely, therefore, that we'll see lot's more stimulus both in the form of continued low interest rates plus government money printing to finance hockey rinks and blue bridges, etc., which will generate nominal wage growth, thereby driving down price to income ratios.
Let's say the cost for a 4 series BMW is $53,000. The only way you could say that the price is over valued is by comparing the BMW with other SIMILAR luxury cars in TODAY'S market.
Despite the 435i redesign I still think S5>435i.
Apparently our middle class isn't doing so bad.
http://globalnews.ca/news/1171700/b-c-residents-wealthiest-in-canada-stats-canada/
Home Ownership in Victoria / Vancouver (A Bear's Perspective)
Ventureone Hybrid is the only vehicle that I've gotten a rush from. Too bad it's not going to happen. That morning commute was going to get A LOT more enjoyable.
Can't see the Ventureone holding up too well in a side impact.
dasmo said...
Apparently our middle class isn't doing so bad.
http://globalnews.ca/news/1171700/b-c-residents-wealthiest-in-canada-stats-canada/
_--------------------------
Yes, using stats from home ownership as their basis....in the highest priced, most consumer indebted province, I can see this being a real story..... if it was true.
Realtors trying to build up a non-story for the spring market.
"Total net worth is the amount each family would have if they sold all of their assets and paid off all of their debts..."
ASSuming that all of their assets are even close to what their real value is. ie: using 2011 stats to pump 2014 values.....
“Realtors trying to build up a non-story for the spring market.”
Nothing to do with realtors. The study is from Statistics CAnada.
http://business.financialpost.com/2014/02/25/canada-middle-class-statscan-net-worth/
Canadian politicians have been trying to make the middle class out to be a poor huddled mass of declining fortunes, but a landmark study from Statistics Canada paints very much the opposite picture.
The good news is that Vancouverites are so much wealthier they can afford to go deeper into consumer debt.
http://www.cbc.ca/news/canada/british-columbia/vancouver-ends-2013-with-highest-consumer-debt-in-canada-1.2552029
"...economists noted that the biggest single reason overall for the improvement was rising house prices, which are widely expected to moderate or even fall in the next few years."
Geez, I feel like Koozdra over here.
Dave3
Check the study out and draw your own conclusions.
http://www.statcan.gc.ca/daily-quotidien/140225/dq140225b-eng.htm?HPA
Looks like 43% is in Real estate, primary residence and other. 30% is in "private pension plans" RRSPs etc. 10% is in other financial assets like stocks, bonds, etc within TFSA's or outside of RRSPs. So 17% is in other stuff like cars and other things they can sell on used victoria?
Incomes in Victoria have stagnated since 2008 (14th chart).
Incomes dropped in the US as the 2006 US housing bubble deflated and are currently at or below peak levels, several years later.
During the inflation of the US housing bubble, abnormally high levels of housing market activity provided stimulus for the US economy, similar to what is happening in Canada right now. After house prices began to fall in the US, this stimulus disappeared. This had a negative impact on the US economy and incomes. The same will happen in Canada.
Victoria's housing market is extremely overvalued. Prices will correct back to the point where incomes and rents can provide support. Incomes will likely continue to stagnate over the next number of years and will not shoot higher to prevent a major, deep housing market correction in Victoria.
The increase in the first time home buyer's property transfer tax exemption is interesting.
I think that number sets an artifical price limit for a lot of first time buyers and creates demand in the price range right below it (and stifles demand in the range just above it)
Anecdotally that proved true for us when we sold our house in Kelowna almost 4 years ago.
We listed at 438k, and felt that was priced right(had over 40 viewings and 4 offers, a rarity in Kelowna), yet not a single buyer would go over 425.
One dropped out because of the multiple offers, and the other three all offered exactly 425 and wouldn't budge, not even by a couple thousand dollars. In our instance, the buying realtors were inexperienced and too thick to explain the sliding scale of the tax to their clients (and a couple didn't even understand it themselves), but I would bet that a lot of buyers are fixated on that number regardless of logic.
I think that homes that were in the old sweet spot at 425 or just under will probably see a little less demand because some 1st time buyers will be willing spend more.
And likewise, homes in that 430-475 range may get a little more money for their homes now and those in the 480-500 range may get dragged down to 475.
The US housing market was extremely overvalued in 2006.
In general, house prices in the US corrected back to where incomes and rents were able to provide support.
The bubblies US markets experienced the biggest price corrections. Prices in these markets shot deep into bubble territory, leaving the price supporting fundamentals of income and rents far below. As these markets corrected, prices had a long way to fall before incomes and rents were able to provide price support.
Victoria's extreme overvaluation is comparable to that of the bubbliest US markets of the 2006 US housing bubble. Victoria's housing market will experience a deep, multi-year price correction.
Lax lending standards and emergency level interest rates cause housing bubbles to form.
The US housing bubble formed as a result of lax lending standards that created an environment of excess credit. The same thing happened in Japan and many other countries around the world, including Canada.
Major price corrections always follow the bursting of a national housing bubble.
"Total net worth is the amount each family would have if they sold all of their assets and paid off all of their debts...
The problem with this is that if you sell your house, the buyer is likely taking on more debt than you're paying off. So consumers in aggregate become more indebted.
@ info
and now they are rebounding back up.
2013 Case-Shiller yoy:
Detroit 17.2%
Las Vegas 29.1%
Los Angeles 21.8%
Miami 14.3%
Phoenix 18.6%
Portland 13.5%
San Diego 20.9%
San Francisco 25.7%
@fatjay
Interesting perspective with your experiences in Kelowna. If I listed my house for sale, it would be in the $460 to $470K range, so maybe it would sell better thanks to the proposed increase in the first time home buyers property tax exemption?
I think that's "were".
Case-Shiller: Home Prices End 2013 On a Dip
I think this rally is about done, as any improvement in the US economy is going to result in higher interest rates.
The always reliable Calculated Risk comments on the latest trends in US prices. In his view they are going to see a slowdown in the rate of price increases which is hardly surprising considering the torrid rate.
It's too early to say that the Case Shiller has turned down. Even in the very rapid increase from 2012 to now there have been minor reversals in trend (based on looking at the monthly numbers in the Comp 20.
One dropped out because of the multiple offers, and the other three all offered exactly 425 and wouldn't budge, not even by a couple thousand dollars. In our instance, the buying realtors were inexperienced and too thick to explain the sliding scale of the tax to their clients (and a couple didn't even understand it themselves), but I would bet that a lot of buyers are fixated on that number regardless of logic.,
I work with a lot of first time buyers and there are many legal tools to employ in regards to avoiding property transfer tax.
In terms of selling, if I was the listing REALTOR® in the scenario above I would have suggested agreeing to $425,000 purchase price without appliances and asking $2,000 extra for fridge/stove/washer/dryer/microwave assuming the appliances are worth that much.
The extra $2,000 can be adjusted via the lawyers as credit/debit.
David said...
“Realtors trying to build up a non-story for the spring market.”
Nothing to do with realtors. The study is from Statistics CAnada.
----------------------
Yes David and timing is everything but no matter how you play this article - No real estate has value until liquidated on the current market - or as one very popular and educated blogger just stated-
"Real estate equity doesn’t exist until it’s realized. The gain is meaningless. It can’t be used to finance a retirement, send a kid to university or buy that desperately-needed Softail Fat Boy until the property is actually sold and turned into cash......"
I don't think I understand the first time home buyers' tax break. I get that for up to $425,000 they pay no taxes on the purchase - which could go up to $475,000 soon - but what if they're buying a $500,000 house? Do they pay the full amount, or just for the amount above $425,000?
>> Do they pay the full amount, or just for the amount above $425,000?
Full amount
I don't think I understand the first time home buyers' tax break. I get that for up to $425,000 they pay no taxes on the purchase - which could go up to $475,000 soon - but what if they're buying a $500,000 house? Do they pay the full amount, or just for the amount above $425,000?
$475,000 is already in effect I believe.
$475,000 = $0 PTT (if you qualify for first buyer exemption).
$500,000 = $8,000 PTT
Between is a sliding scale.
I don't think we should be surprised about this article nor the present generations needing, nay demanding they have it all.
Now with the upcoming CMHC announcement tomorrow (hopefully raising the min down to 10%) the free market may yet reset itself.
Canadian banks cash in on climbing Canadian personal debt
That is precisely why I own stocks in banks... Scotia and CIBC for me...
Anyway, What I got out of that article was not that our middle class was rolling in the dough. With almost half tied to real estate that simply isn't the case. What it tells me is they are not sitting on the precipice of financial disaster. An asset is an asset so yes, in order to become cash it needs to be sold. Nothing new or devious being stated here. If prices came down by 20% it looks like most people would be fine and would not be forced into foreclosure. It also looks like most people could afford a moderate rate hike upon renewal.
So.... More Halibut fishing ahead is what I read....
Yes Dasmo...you take out of it what you will. Unforttnately -a quote from the article - "...consumers don’t seem to be paying any notice to the prognosticators. In fact, their appetite for more debt keeps getting bigger." -
does not support what you say about sitting on the precipice of financial disaster. But as I said you take out of it what you will....
We all do yes. The thing about more debt being taken on is it's so cheap right now. So to me it's an obvious result. I am guilty of this myself. I used to carry a max of $3000 in credit card debt before I got nervous. Now I have way more and am not very nervous at all. It is a fraction of my liquid assets but I let it sit unpaid. Why? Because I am paying zero percent interest for another 5 months. After that I might pay it off, or I might get another offer from another card, or I might just put it on my HELOC at 3.5%. It's just not a big priority to pay off the debt right now. Better of to max out the TFSA again. I just made 175% in one year on AAL that I cashed out tax free.... for instance....
Weren't you the one, about 4 months ago that told me the 0% use of money on credit cards was a dumb idea and misuse of credit? Me thinks you were...
I was yes.... It's subtle. The borrowed money was to redo my kitchen. The investment money was earned. It's a subtle thing but I thought that very thing myself. I still can't recommend someone borrow 10k on a 0% credit card to invest it... I have outs. That 0% turns into 11% after 7 months....
I still can't recommend someone borrow 10k on a 0% credit card to invest it.
But at some level isn't that what you are doing? If you are simultaneously carrying credit card debt and investing in a TFSA then isn't it fair to say that you are borrowing to invest even if the actual expenses you put on the card are reno expenses?
Just to be clear, not criticizing your decision, if debt is free it makes sense to take advantage if you can use it wisely.
The difference is this. I slowly invested in smaller chunks so I could do it wisely an methodically. I borrowed to do the kitchen because it needed more all at once. So even though the end result is similar you need to consider how I got here... It's a question of timing.
From the G&M: Mortgage insurer CMHC primes market for announcement
Seeing the Case-Shiller numbers above made me recall a discussion about bottom calling on the Sept. 17/2013 blog post
Marco Said:
"Impossible to time the bottom."
Along the way, I basically disagreed and said:
"I think predicting when the bottom will come is almost impossible but knowing it when you see it is a different story...I am not talking perfection here but bottomish" and them asked/answered: "In general, would you say that US RE is near bottom? I say yes. (this is one of my rare predictions)
That was pretty easy:
http://ca.spindices.com/indices/real-estate/sp-case-shiller-20-city-composite-home-price-index
Next time I need to act on it....:-)
Sept 17/2012 that is....
First price drop of $31,000 for 2571 Dunlevy. Now $859,000.
I wonder what they paid for it and when?
http://beta.realtor.ca/propertyDetails.aspx?PropertyId=14021218
What do you suppose is wrong with 2588 Dufferin. Is it just priced too high or something else. Been on the market for a long time. Have not been through it yet. Similar properties sold late last year closer to $645k so maybe just overpriced.
. . . . . . . . .Percentage Price Decline From Peak . . . . . . . . . . .
. . . . . . . . . . . . . Las Vegas Home Prices. . . . . . . . . . . . . . . . .
. . . . . . . . . .(Case-Shiller Home Price Index). . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0%. . . . . . . . . . . . . . . . . . . *. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 10%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-15%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 20%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-25%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-30%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-35% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-40%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-45% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-50%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-55%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . *. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-60%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .* . . . . . . . . . . . .
-65%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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---------------------------------------------------------------------------------
. . . . . . 2000. . . . . . . . . . . 2006. . . . . . . . . . . .2012. . .2013. . .
As of December 2013, Las Vegas home prices were 45.3% below peak.
The bottom was established in January 2012 at 61.6% below peak.
Las Vegas home prices may have rebounded more than any other US market since hitting bottom.
It looks as though the rally has erased about one quarter of the prices losses since the peak in 2006. The amount of recovery in many other US markets would probably be a lot less than this.
Millions of US families continue to deal with underwater mortgages. Buying a house always comes with risks.
Many think the US housing market is ripe for another price correction.
CMHC is the wildcard in this market. Any orderly decline we might think we have now could turn into a landslide when the government tinkers.
2588 Dufferin is a fairly small house. It is being advertised at 2,113 sq ft, but the main level is only 1,413 sq ft. The rest of the square footage is in the basement level, which has only 6’6” ceiling height.
Otherwise, the house is quite nice on the inside. I see from one of the photos that the main bedroom is adjacent to the kitchen. Not sure about that as a selling point, unless you are somebody who craves food in the middle of the night. Plus, there are only two bedrooms on the main.
The original listing price was $718,000, but I see that the BC assessment is $645,000.
It looks like Marko has the listing as a “Mere Posting”, which I think means that he has put it up on the MLS, but it is up to the Seller to do all the showings, and maybe even has to orchestrate the deal itself (Marko would know). That could put some off, as a large percentage of people still prefer to deal with a realtor.
Maybe Marko has an idea of why it is not selling, or maybe people are finally being put off paying $700,000 for a cute little house these days, even if it is in Oak Bay?
Dufferin has had a lot of interest at $699,900. The owner has an accepted offer on it right now.
Really nice addition put on in the later 1990s.
It looks like Marko has the listing as a “Mere Posting”, which I think means that he has put it up on the MLS, but it is up to the Seller to do all the showings, and maybe even has to orchestrate the deal itself (Marko would know).
Correct.
That could put some off, as a large percentage of people still prefer to deal with a realtor.
Incorrect. 90% or more of buyers have a REALTOR® and this Mere Posting is offering an attractive commission (in excess of $11,000) to the buyers' REALTORS®.
The point of a Mere Posting is to save the bulk of the savings on the listing portion of the commission. I am not a huge fan of cutting down the buyers' REALTORS® commission too too much.
http://www.cmhc.ca/en/hoficlincl/moloin/moloin_013.cfm#cont
Good move in my opinion. It should encourage saving for a down payment a bit more.
Sorry doomers, the announcement that there will be an announcement was way more exciting than the announcement....
@ Marko
Incorrect. 90% or more of buyers have a REALTOR® and this Mere Posting is offering an attractive commission (in excess of $11,000) to the buyers' REALTORS®
* * *
Yes, I meant most people (buyers and sellers) prefer to work with a realtor.
I have taken a look at your Mere Posting package - it's certainly sounds like a good way to save. Do you get a lot of sellers using this model these days?
I can see the showings being easy for the seller, but how about when it comes to the negotiations for the sale with the buyer and their agent - Do many of them end up bringing you back in to help with that?
I guess we'll have to wait to find out what Dufferin sold for!
Why I think CMHC fees are a rip-off of the consumer.
The premium is added to the mortgage and amortized over 25 or 30 years. But few people have a high ratio mortgage for 25 or 30 years. I would think that most people by the end of 5 years have the mortgage below 80 percent of their original purchase. And when they refinance they are now conventional and not insured.
They've paid that premium over 5 years not 25 or 30 years. That's about $2,000 to $3,000 a year to insure a half million dollar home in Victoria.
In contrast, in the USA, Fannie Mae refunds the difference to the home owner for the unused portion of the insurance.
@ dasmo
"Sorry doomers, the announcement that there will be an announcement was way more exciting than the announcement...."
Victoria's housing market has been the weakest in Canada for years. House prices across Canada have increased by 11.8% since 2010 while prices in Victoria have dropped 11.2%. Victoria's price correction will continue without any further significant mortgage rule changes and will probably be the deepest in Canada.
Bubble house prices are a bad thing for Canada as the average family can no longer afford the average home. The real doomers are those who think this is a good thing.
Info, it depends on where in Greater Victoria you're buying and what you're buying.
Prices for all areas and all types of properties are certainly down from the peak, but that's not much help if you're trying to buy a house in the choice hoods of Victoria.
My opinion is that House prices here are going to remain flat for some time. It's not a want, it's an observation / prediction...
Victoria's housing market overvaluation is comparable to the overvaluation of the bubbliest US markets at the peak of the 2006 US housing bubble.
Canada's housing bubble is much larger than the 2006 US housing bubble. More on this soon.
Housing bubbles always burst. This is always followed by a major price correction. This will happen in Canada.
The price to income and price to rent ratios of national housing bubbles always revert to their long term averages as prices correct. This is what happened in Japan, the US, etc.. It isn't different in Victoria. It isn't different in Canada.
House prices in Victoria have a long way to fall before they reach a level where incomes and rents can provide price support. This is how it happened in Miami, Phoenix, Las Vegas, Los Angeles and many other cities with bubbly housing markets around the world. Victoria isn't different.
Undoubtedly housing in the core districts is very expensive. And it does seem that, for the core, buying real estate has become a rich man's game only. One of the major reasons why there are so few sales today is that there are fewer people playing the game.
And if it wasn't for the safety nets of HELOCs and CMHC I think our market would have corrected by now. As it did in the past when HELOCs were not common and the banks had more skin in the game.
Our market is deteriorating as I now find listings of properties IN THE CORE that are under a "Conduct of Sale" by the courts. These properties never got this far in the foreclosure process a year or two ago. The owners could re-finance or sell the property before it got to that point.
And that's the trend for Victoria. An increasing amount of distressed sales. A death by a thousand cuts.
The announcement that there will be an announcement was way more exciting than the announcement
Yup, by itself it is a nothingburger in terms of any impact on the market. A minor positive step for the CMHC itself though.
First price drop of $31,000 for 2571 Dunlevy. Now $859,000.
Still looks pricey, since 2820 Heron, a larger house on a larger lot in the Uplands, just went for only slightly more ($862). And with a basement height of only 6.5 feet, the finished basement seems of questionable value – who wants to live in cave?
Sorry doomers, the announcement that there will be an announcement was way more exciting than the announcement....
15% to 25% increase in fees is not insignificant.
This is the first of many small steps towards privatizing CMHC. Gotta get those rates slowly in line with something that the private industry would actually find attractive.
My downtown parking went up 15% last week. I'm still parking there...
emergency low interest rates are rhe ONLY reason housing has inflated to current levels and the ONLY reason it has not collapsed. I think segments of the market are showing signs of decline and it may collapse under the burden of it's own weight. also noticing how MSMedia is using the BUBBLE word a lot lately. Reports on not a good idea to rely on house value for retirement...better to sell at the front end of the curve before everyone decides to cash in and crash this sucker. The mood is changing but with cheap money it's like molasses.
My downtown parking went up 15% last week. I'm still parking there...
Housing demand is not perfectly inelastic.
We were talking about CMHC insurance premiums not housing demand. I would argue that they are inelastic...
One would have to agree that the announcement from CMHC is just a "we told you so" tax. It does nothing to slow anything. It does however publicly install just another increase in the coffers of the taxman.
It does nothing to decrease the unrealistic housing demand of the firt time buyers. What's another $5 added to their mortgage payment they can't already afford?
15% to 25% increase in fees is not insignificant
It's a significant increase in revenue for CMHC, but it's a completely insignificant increase in the net purchase price of the property, which is what matters to the market. Not even 1%.
Gotta get those rates slowly in line with something that the private industry would actually find attractive.
Mortgage insurance in Canada is not going to be attractive to private industry without at least a 50% decline in real prices, regardless of rates. Even in the US today, the USG through Fannie/Freddie/FHA still insures almost all new high ratio mortgages.
That of course does not rule out a sham privatization of CMHC where the retail operations are handed over to the private sector while the federal government stills holds the bag.
@ CS
I agree. At $859,000 I think Dunlevy is still overpriced. As I mentioned in one of my previous comments “So, yes, I am expecting several price drops and a long wait.”
If you take a look at 1441 St. Patrick Street, I think there is much better value in this listing. At $779,000, you have a character house with 2,012 sq ft on the main and upper levels. The basement is low, but they are not including that in the square footage. A drawback for some, maybe, is the small lot. However, it is very nicely finished on the inside and priced near their BC assessment. I would say this has a much better chance of a sale.
http://beta.realtor.ca/propertyDetails.aspx?PropertyId=14113340
I have taken a look at your Mere Posting package - it's certainly sounds like a good way to save. Do you get a lot of sellers using this model these days?
Mere postings are a decent percentage of my business but still <1% of the overall market. I've stopped seeing Y-O-Y gains. I did 26 last year and on pace for about 24-28 this year. Just a function of market demand as there is no new competition eating into the pie of mere postings.
Seems like the consumer complains a lot about commissions but then when it comes time to list they go with the status quo. Boggles my mind that the vast majority of sellers still pay 6%100k+3%balance in this day and age.
I can see the showings being easy for the seller, but how about when it comes to the negotiations for the sale with the buyer and their agent - Do many of them end up bringing you back in to help with that?
Not at all. When I do the mere posting paperwork with the seller I explain the process and I advise them if they have any concerns with the contract and or negotiations to add a seller subject, "Subject to seller's lawyers reviewing by such and such date. This condition is for the sole benefit of the seller."
A lot of lawyers will look at the contract included in their conveyancing fee and some will charge $100 to take a look. Either way, not breaking the bank.
I agree. Dunlevy is asking too much. Plenty of better option in that price range....
>> We were talking about CMHC insurance premiums not housing demand.
CMHC insurance premium increase is the same as a housing price increase for buyers that need it
>> Mortgage insurance in Canada is not going to be attractive to private industry without at least a 50% decline in real prices, regardless of rates.
Clearly if rates were higher private industry would be interested. They might have to double or triple to get to that point but certainly there is a point where premiums would adequately cover the risk
Many bloggers on this site use their favourite predictors to assess the current market and the overall economy. Here are a couple that I use; one for the local market and one for national market.
I call the local criterion “The Junk Yard Factor”
I call the national criterion “The Copper Factor”
The Junk Yard Factor is simply how busy the Hartland Road dump is with the junk bins for home owners and small contractors. Recently, the activity at the junk-yard bins at Hartland is very slow and getting slower. People were lined up with their trucks for the years 2005 to 2011, but the activity has declined substantially in the past couple years and is now almost dead on most days. This lack of junk-yard activity is usually a prelude to a significant slowdown in real estate activity in Victoria.
The Copper Factor is the commodity price of copper and the warehouse stock level. Prior to an economic boom and during an economic boom you will see copper prices increasing and copper stockpiles increasing. These days, copper prices are falling even though the warehouse levels are also falling. In Economics, the many copper indicators are collectively known as “Doctor Copper” because copper stockpiles and prices usually foretell the overall economy; hence, the metal copper is reputed to have a Ph.D. in economics because of its ability to predict turning points in the global economy.
Copper prices are still relatively high, but slowly declining, so Doctor Copper is predicting a slow-down, not a crash.
Dunlevy is asking too much.
But I was told by a realtor that 2720 Heron was asking too much, yet they got 6.5% above the BCAA assessment. So in the Estevan area, prices still appear to be at the tippy top, what ever Info's dot plots may suggest to the contrary. Dunlevy will probably hold out for close to the present asking at 7.5% above BCAA assessment.
Still I don't think many people will like that 6.5 foot basement. So their hopes may be disappointed.
Speaking of the Estevan area, what is a tear-down in that area likely to fetch relative to the BCAA land value assessment. Any comments would be appreciated.
I don't know if you will ever find a "tear-down" in Estevan.
It just isn't economically feasible to buy an older home, tear it down, build and sell a new home in Estevan at a profit.
Any newer housing tends to be from contractors building a home for themselves and then selling a year or two later. This seems to be the only way to make a profit or break even.
When you're looking at the BC Assessment that breakdown between land and improvements is a "best guess" Or what an assesor thinks the "residual value" of the lot in relation to the calculated depreciated value of the improvements. A property sells for $750,000. The BC Assessment computer calculates the depreciated value of the improvements at $200,000. Therefore the residual value at $550,000 would be the land value.
That's far different than saying the market value of the land is $550,000.
The valuation of in-fill housing in areas like Estevan is different from estimating land values in a new subdivsion where there are plenty of land sales. Because in Estevan, there are NO land sales.
You end up buying a lot with a home of nominal value and wait a few years until it becomes economically feasible to re-develop the site with a new home.
However, in a few years time you find that it is almost always better to sell the property as improved than as a building site. And that's why Estevan seems never to change except if there is a fire or a builder building his own home.
If you want to build new in Estevan, you have to accept that when you finish your home, its market value will be much lower than the cost to build it.
The duplex and high end homes seem to make Abstract the cheddar though (at least the ones in Faifeild and south Oak Bay.
I would agree withh JJs comment though. Unless the tear down price has a 5 in the front it probably not going to be profitable no matter what neighbourhood. Unless it's waterfront or subdividable into two normal size lots...
"If you want to build new in Estevan, you have to accept that when you finish your home, its market value will be much lower than the cost to build it."
I suspect that is true in all of the established neighbourhoods of the city. If you buy a place, tear it down and pay someone else to build a new place for you then you aren't doing it for the money since your costs will usually exceed what you could get for selling it right away.
A few people do it nonetheless, perhaps because they just love the hood, Or folks with the money who want exactly what they want.
this morning, a guy with an extraordinary talent for invective crossing the crosswalk in front of my car, charges toward me, hurling obscenities, ripped off his shirt and threw it at my car.
Great place to live.
One of those "only in Victoria" stories, for sure.
I blame it on the lack of fluroid in the water.
Fluroid, a combination of influenza and steroids.
Nice spelling, genius.
My pick for best possible "deal" to be made is for a home in need of repairs, vacant, and under foreclosure by Scotiabank on Galena Road in Sooke at $228,000.
But then you'd have to live in Sooke.
There's a reason prices are lower in Sooke: relatively few people want to live there.
I wonder how many prospective first time buyers this would have an affect on.
When the difference between affect/effect is elusive to an adult, I do wonder what else may be elusive to him.
Speaking of the Estevan area, what is a tear-down in that area likely to fetch relative to the BCAA land value assessment. Any comments would be appreciated.
Assessment is really useless for tear downs. You have to use comparables and you have to know the comparables really well and the bylaws in the municipality too. For example, a 6,000 sq/ft lot with 60 feet of frontage and a 10 foot combined bylaw sideyard offset is a lot more desirable than a 6,000 sq/ft lot with 40 sq/ft of frontage and a 15 foot combined bylaw sideyard offset.
A 50' x 120' lot on the 2800 block of Dufferin sold for $520,000 in September. I think it was the third one in from Cadboro Bay Road. As you head towards Willows Beach and if bigger than 6,000 sq/ft the price starts to go up.
Monday March 3, 2014 7:15am:
Feb Feb
2014 2013
Net Unconditional Sales: 412 394
New Listings: 1,064 1,039
Active Listings: 3,770 4,072
Please Note
Left Column: stats for the entire month from this year
Right Column: stats for the entire month from last year
This information comes from the latest 'Monthly Comparative Activity By Property Type' Report
Pimco see 30% slump in Canadian housing market
Canada's under 35s are also-rans in the wealth race
Re: 30% slump. Pimco cuts Canadian holdings.
“The change this year would be that I actually think it starts this year.”
Lol, every economist and their dog has said similar for almost ten years now.
The 30% slump will come when you read the headline, “Pimco goes all in on Canada.”
@David
agreed - even if the prediction about the magnitude of the correction is correct, getting the right timing is tough. And at some point a "correct" prediction that is 5-10 years too early really isn't all that "correct"....
Thanks for comments, re teardowns.
There is evident skepticism about the economics, although a number of people have done it anyhow. Or they've strip to the studs and refinish inside and out.
A complete refinish must save a bit for framing, footings and roof trusses, but at the cost of restricting one's options. I wonder how much that saving is. Fifty grand? a hundred — can't be more than that, can it.
There is evident skepticism about the economics, although a number of people have done it anyhow.
There is very little behind the economics of new custom homes in high-end areas. When you see an abstract or christopher developments sign on a lot I doubt the owner is looking to flip the property in the near future.
No economics in buying high-end cars either, but people still buy them.
I observe a lot of Abstract spec home developments in these neighborhoods. Seems like Oak Bay and Fairfield has done them well. converting tear down houses in these hoods and doing Small lot subdivision, duplex, or high end conversions seems to be working for them. Judging from their new digs there is pretty good economics if you get the property for the right price. My guess is somewhere around 500k depending on the features of the lot, ease of tear down and redevelopment. They seem to be able to sell a duplex in the high 8's. So some basic guess work math: lot 550k, build 650k = 1.2mil. Sell for 1.7mill=500k profit.
Judging from their new digs there is pretty good economics if you get the property for the right price.
The very fact that they keep doing them suggests that there is some economics at least.
However a developer building spec homes and subdividing or strata titling is a far cry from an individual paying someone to build a custom home on a vacant lot/teardown.
@ subprime 11
There you go – 2588 Dufferin gone to pending at $672,500. A very good price for the Seller, I think. Plus, thanks to Marko’s Mere Posting, they’ve saved quite a lot on the commission.
I hope that the Buyer/s of this property will look back in a couple of years and feel happy that they got a good deal too!
Time will tell.
Lol, every economist and their dog has said similar for almost ten years now.
Well no they haven't. There wasn't talk of a Canada-wide bubble until a few years ago. And don't bring Garth into this, I'm talking about the domestic and foreign analysts being quoted in the news lately.
I know it's easy to assume BC represents the whole country, but it doesn't.
"There wasn't talk of a Canada-wide bubble until a few years ago."
You heard occasional rumblings about a Canadian housing bubble in 2005 IIRC. However it stared being seriously raised when the US market was in full slump mode in 2007 and more so 2008.
So I'd say the "Canadian housing bubble" meme has been quite widespread for 6 or 7 years. That said references to a Canadian housing bubble became much more common since 2010. And now in 2014 it is pretty much conventional wisdom.
If you search google searches over time the term "Canada bubble" appears in 2005 ish and is steady with a spike around 2010-2011....
...you don't need to search as much anymore as the articles are in your face.
Canada Housing Bubble and Canadian Housing Bubble appear much later - around 2010 aside from a blip in July 2008. Google Trends includes news headlines.
Interesting nonetheless.
Dave3
You heard occasional rumblings about a Canadian housing bubble in 2005 IIRC.
I didn't. Why don't you give us some examples?
And I was in full bear mode on BC real estate and was following housing bubble topics on the Internet in 2005. The groundbreaking Economist article on the global housing bubble didn't mention Canada at all. They didn't start calling a Canada-wide bubble until 2011 when the metrics started approaching the US at peak.
To imply that analysts of stature were calling a Canada-wide bubble circa 2005 is nonsense.
Check out Google Trends for yourself ...
"Canada Housing Bubble"
You heard occasional rumblings about a Canadian housing bubble in 2005 IIRC.
I didn't. Why don't you give us some examples?
Google is your friend. Here is an example from the National Post in 2005.
Quoting from the beginning of the article:
"Bubble to burst?
It's the question on just about everyone's lips: Is Canada in a housing bubble? Yes, say the doomsayers, who see prices climbing monthly, cranes in robotic frenzy in Vancouver and Toronto, open fields getting gobbled up on the outskirts of Calgary and personal savings levels plunging to Depression-era lows."
The article concludes with the opinions of two analysts one more pessimistic, the other more optimistic
See also
http://www.cbc.ca/news/canada/british-columbia/real-estate-bubble-warning-for-vancouver-victoria-1.542604
and
this 2004 analysis from a mutual fund company. They concluded no nationwide housing bubble but clearly thought the question worth asking as early as mid 2004
"To imply that analysts of stature were calling a Canada-wide bubble circa 2005 is nonsense."
Definitely in 2005 the idea of a Canada wide housing bubble was not the mainstream opinion, though you can find examples like the one I quoted above.
By 2008 you can find lots of examples, Merrill Lynch, Shiller, Garth Turner, Michael Shedlock.
I think Dean Baker and Krugman who called the US Bubble early called a bubble in Canada around 2008, but I didn't spend the time to look for definitive evidence of that.
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