First off, the BC Financial Institutions Commission (FICOM) is proposing a set of Residential Mortgage Underwriting Guidelines to bring BC credit unions (who are not covered under the federal Office of the Superintendent of Financial Institutions, or OSFI) in line with federal regulations restricting HELOCs to a max of 65% of the value of the mortgage, amongst other restrictions.
In an interview with CMT, Doug McLean, the Deputy Superintendent of FICOM claims that the new BC guidelines have nothing to do with the feds, but they were certainly inspired by them given the similarities. Perhaps Doug also got a little antsy from the likes of Vancity offering a little too much lending "innovation" by letting people borrow half their minimum down payments.
The new guidelines are out for feedback, but if I know government agencies, that's hardly more than a formality and they will likely be adopted almost as is. How many people will be affected? Impossible to say, but what's certain is this will prevent some people from extracting equity from their homes, and prevent others from qualifying to buy, thus taking some demand out of the market.
At the same time, CMHC is getting nervous again and is tightening the screws on borrowers. CMHC has announced that they will stop insuring second homes (Finally! Which industry shill on their board thought that was ever reasonable??) and stop accepting "non-traditional" (aka fake) proof of income for self-employed borrowers. Again, the impact isn't huge, with those programs making up only 3% of CMHC business, but the little adjustments add up (more info on the changes here). And CMHC isn't done yet, even announcing that more changes are coming. Funny how things change when you throw out the industry insiders and bring in people that actually know how to regulate financial institutions.
All this comes with the chance it might destabilize our apparently stabilizing market. After 4 years of decline and 6 years of flat prices in Victoria, it seems our market has shed some risk while the rest of the country continued to go bananas (1.3 months of inventory in Calgary right now!). However the government remains the wildcard in this game, and they are not concerned with little Victoria. In order to slow the nation, Victoria might get sideswiped.
207 comments:
1 – 200 of 207 Newer› Newest»Of course the debt peddlers over at CMT will think regulating the CMHC is a bad idea.
Oh and by the way if you think there is going to be a market crash, BMO has something to tell you.
BMO Dream Home
"A dollar today is not a dollar five years from now. His rent is money that could go into his own mortgage and a home that might be appreciating and creating equity. Finbar could be losing opportunities by waiting"
Operative word: "might"
@Dasmo
"By making better stuff ..."
"Just let me know if you want me to keep going..."
Yeah, but you don't create a world-beating economy that way.
We made "better stuff" for 25 years, paying up to 15 times the wages that were being paid in India for equivalent IT work. But ours was not an operation that could expand to conquer the world. It thrived because of massive M & P input of expertise (aka sweat equity).
We provided some jobs locally but without Indian competition at paying a fraction of Canadian wages we'd have provided many times more jobs.
Reverting to topic, I continue to believe that short of a major economic storm, nothing will be allowed to crash the property market before next year's Federal election, since a property crash would crash any chance the Harper Conservatives have of re-election, or even mere survival as a significant political force. Therefore, I don't believe any changes to mortgage lending rules will be such as to make any but a marginal difference to housing demand.
Home prices in Canada make the excesses of the US
"..nothing will be allowed to crash.."
Worry not citizen. The people in charge are in full control. They have figured out this whole "economy" thing. Nothing will be allowed to crash.
Today, older homes in Fairfield are hot commodities. Such as the house on Olive that just sold in 12 days at $597,000. This area, near the waterfront has always been in demand. Nothing new about that. But what seems to have changed is what type of home is in demand.
Back in 1994, buyers preferences were not for older 1940's war shacks. And that is evident in that this same home, back then, took close to hundred days to find a buyer and required several price drops to get a price of $239,000.
So why today is this same home so hot?
Because it's a candidate for a renovation.
There are so many wannabee entrepreneurs looking for a dumpster to fix up these days. It's a business for them and they'll do most of the work themselves because of the horrendous costs of hiring a construction company. And there is no shortage of lenders willing to help them.
So another wannabee finances a $600,000 purchase, dumps another 50K in hard costs to renovate in order to sell for $700k.
You can't run these numbers and make sense out of the market. It just doesn't work economically to buy, renovate and flip these days. This property like the dozens before it will become a rental. The buyer becoming another unintentional landlord.
The wannabee will lose money every month and run the debt on this home to devour the equity. Then refinance at an inflated "valuation" by some Equity lender who has an appraiser in her back pocket. The property falls into foreclosure and the bank's lawyers call for an appraisal by a reputable firm.
It's a WTF moment for a lot of the banks then. Zero home equity plus another hundred thousand dollars of mortgage loss to the bank. That God it was CMHC insured.
So why does there seem to be an endless stream of wannabees trying? Simply, if you're a laid-off carpenter, plumber, electrician or IT worker what else are you going to do?
It worked well for 50 howe...
The private insurers will take up the 3% slack. The two programs only accounted for 3% of CMHC’s volume. I welcome any tightening as the “1.3 months of inventory in Calgary“ will soon spill over here. Vic is prime playground for oil wealth and now that the USA prices and USA dollar have strengthened, Vic’s weakened prices have again become that much more appealing to recreational buyers, foreigners and retirees. Lenders and govs know what’s coming down the pipe. Lest you have any doubts, check out what Canadian sector is leading the economy this year by a country mile.
http://stockcharts.com/c-sc/sc?s=XEG.TO&p=D&yr=2&mn=11&dy=0&i=t17382713353&r=1398829145065
Besides, other B.C. sectors like tourism, forestry, shipbuilding are starting to rise from their own ashes again.
It does seem so for 50 Howe. Bought 685K and flipped after two years of renovation at $862K.
What's interesting about this home is what BC Assessment thought. Even though it was bought right at the time when the assessed values are estimated and the sale price would have been compelling evidence of what the assessed value should be - BC assessment chose to assess it at $774,000.
hmmmmm - makes you think.
Nevertheless, this is the kind of story that would bring another dozen wannabees, or fresh meat, into the market.
The private insurers will take up the 3% slack.
There might be more to it than that. VCI is interpreting the 3% as 3% of insurance in force, not 3% of volume. If that is true, then they are saying it could remove 10% of volume.
Bought 685K and flipped after two years of renovation at $862K.
Could be good depending on their carrying costs, reno costs, and how much work it was. Or could have just been a poorly paid job for 2 years.
Those who forget the past are doomed to repeat it.
1 in 4 homeowners regrets buying a house
I think they did fine at 50 Howe. The work didn't take 2 years, it took maybe 6 months or so to do the renos. Probably an interest only loan for the time. I looked the place and it didn't have much to do but I thought it was way too much considering the stuff that did have to be done. I think at the time they were still asking over 700k for it. They then dropped the ask to 690k but it was still too much to me...
I suspect something similar will be done here. Raise it up a bit, put in a proper sweet in the basement, and polish it off and sell for 800k+.
Not easy money by any stretch but it seems like some money can be made.
What happens to my mortgage if the housing market plunges?
oh man, could you be more fucked if you weren't a sub prime borrower?
@koozdra
As you say ... the buyer with a conventional mortgage (who put more than 20% down and therefore didn't get CHMC or similar mortgage insurance) could be at a greater risk of the the lender requiring a lump sum payment to get the loan value under 80% of the resale value.
@ Phil
"The private insurers will take up the 3% slack. The two programs only accounted for 3% of CMHC’s volume. I welcome any tightening as the “1.3 months of inventory in Calgary“ will soon spill over here. Vic is prime playground for oil wealth and now that the USA prices and USA dollar have strengthened, Vic’s weakened prices have again become that much more appealing to recreational buyers, foreigners and retirees."
There is no evidence that buyers from Alberta or any other province have had a positive effect on house prices in Victoria.
Why would a retiree buy a house in Victoria when houses in many (year-round) warm US cities are available for a fraction of the cost of a Victoria house?
House prices in many US cities have recovered some, but are still well below (2006) peak levels. Prices in Las Vegas may have recovered more than in any other US city, but the total price recovery from bottom in that city is only about 25%.
House prices in Victoria will continue to decline and out-of-town buyers will not prevent that from happening. If anything, things have gotten worse for Victoria in that department as HAM buyers are officially a thing of the past in Canada.
Re: 185 Olive and 50 Howe
And now for the rest of the story...
185 Olive was re-listed after languishing on the market most of the winter with a couple price reductions; so it didn't really sell in just a few days. And, it sits near the edge of an ancient swamp and stream, so the geotechnical engineers might discover the bearing strength of the subsoil might not support a bigger house without major excavation work and engineered rip-rap fill. The ancient Fairfield swamp was between the 5m and 6m elevations with an ancient stream draining through the park next door to 185 Olive Street, then to Ross Bay along Memorial Crescent where it drained into the Pacific. First nations people used this stream as safe-harbour during storms and as access to the abundant wildlife in the Fairfield swamp. The swamp started at May and Moss, then covered all of May west of Moss, all of Chapman, all of Oxford, and included what is now Cook Street Village. During Victoria's first building boom, which began in 1907 and ended in 1913, the Fairfield swamp was drained and the streams culverted throughout Fairfield. Most of the culverts in Fairfield are very old, some are original wood stave; I suppose that explains Mayor Fortin's anxious implementation of the new property tax levy to manage the old storm water infrastructure with his expensive new levy on home owners.
50 Howe was a long expensive renovation and in the end, the wife said it broke up their marriage. So definitely it wasn't all roses and profit for the former owners.
Nice info on the swamp but I call BS on 50 Howe...
Thursday May 1, 2014 7:35am:
Apr Apr
2014 2013
Net Unconditional Sales: 664 615
New Listings: 1,521 1,408
Active Listings: 4,404 4,585
Please Note
Left Column: stats for the entire month from this year
Right Column: stats for the entire month from last year
Just Janice here -
50 Howe and Olive are in my neighbourhood...it is a very desireable area. I wouldn't be surprised if Olive actually winds up being dozer bait. New construction in this part of town is fetching north of a million (look at the VUE development which is near $2M each) and the ones on Dallas ($1.3 on microlots), even the one on Bushby (behind the ones on Dallas) is asking 950k or so. It is possible the purchasers are seeing it as a buy a lot now, live with it for now, and build new later...
I will say though that there was a recent listing right on Dallas (beside the new ones) for about $800k - does anyone know what that actually sold for?
re Fairfield swamp:
check this: http://www.empr.gov.bc.ca/Mining/Geoscience/SurficialGeologyandHazards/VictoriaEarthquakeMaps/PublishingImages/geology.jpg. I believe the main areas of concern are the two bright red blobs to the east and west of Moss Rock. The rest of Fairfield has surface geology not unlike the rest of Vic, OB and Saanich
Worry not citizen. The people in charge are in full control. They have figured out this whole "economy" thing. Nothing will be allowed to crash.
Oh crashes always happen. But the timing is subject to political manipulation. Like, in 2015 after the Liberals have formed a government would be a good time pour le deluge.
The major hazards to the market in the short-term are exogenous: a full-blown war in Ukraine, for example, would spook all markets — and remember we're right there with our observers, or fighter jets and our navy.
Another risk is excessively irrational exuberance, leading to a premature crash. But realtors are not yet knocking at the door in search of listing (well only one, so far this year), so I doubt if we're at the blow-off stage.
Here's a primer on political market rigging by a former US Deputy Treasury Secretary, economics prof. and WSJ editor.
Re: House of Cards
Are you saying that "they" have mastered the art of building the house of cards? Unforeseen consequences are by definition unforeseen during decision making.
For all we know, Canadians taking on massive amounts of debt at record low interest rates to stimulate spending might not be such a good idea.
At least it's backed by the most stable thing in the world, the Canadian housing market.
There may be a market for a few new homes over a million in the core - but it is a weak one. Over a years worth of inventory. In my opinion, that isn't sufficient to become a trend.
It's an enigma for Victoria. You have to pay such a high price for some areas that it becomes economically unfeasible to ever build new. The thought of buying and holding for a few years then re-developing isn't feasible -because you can always realize more money by selling and not by demolishing and re-building.
The costs of construction are just too high. For similar reasons this is why we don't see apartment rental buildings being constructed.
" For similar reasons this is why we don't see apartment rental buildings being constructed."
Except for the Hudson and the New England Hotel...
" it becomes economically unfeasible to ever build new"
Which is why you are seeing new small lot conversions and duplexes or townhomes in these areas. half a Duplex in Fairfield selling for 850k can make buying the right lot somewhat attractive. Abstract is all over this neighbourhood doing spec builds and are building brand new shiny digs for themselves. That's a sign there is some money to be made...
I've got agree with Dasmo - even at the sky high prices - there's money to be made, particularly if you can buy two house and put 3 new ones where they once were. In the case of dallas road, taking what was once 3 lots and making 4 homes...
You have to pay such a high price for some areas that it becomes economically unfeasible to ever build new.
The contractors don't agree. Spec. house on single lot on Heron St sold, it is said, for $1.8 million.
Tear down on Lincoln Road just went for $861, new house with swimming pool to be constructed.
Tear down on Burdick, with new house listed at $1.9 something million.
New house on 90 - 100 ft lot on Beach Drive offered with "Hollywood glamour" for $9.9 million.
New house on small lot at the top of Dewdney went for around $1.6 million last summer, and a new house on Cadboro Bay Rd at Lansdowne went for, I believe $1.9 something.
Also last year on Beach a perfectly good million dollar bungalow torn down for a massive new house with a swimming pool.
A two million dollar house overlooking the Esplanade at Willows Beach torn down and replaced by what could be another $10 million dollar offering if it comes to market.
And another million dollar bung torn down on Beach at Cattle Point being replaced now by a huge new house. Oh, and there's another one just torn down further North on Beach, or actually I think there are two. So the new build business in Oak Bay is booming.
The million dollar market has slowed down over recent years.
On a related note CMHC stopped insuring mortgages for sub prime borrowers who were buying million dollar homes.
What if we remove the CMHC all together? That would crash the market.
Let me rephrase:
If we don't continue to provide government insured financing to sub prime borrowers the market will crash.
Repeat the mantra: "We do not have a sub prime mortgage problem in Canada. Our banks are well regulated. There is no bubble."
I said economically feasible. I don't see any of those properties as being profitable when you consider what they will likely end up selling at. All of these properties will sell for less than what it cost to build them.
Of course if you can change the density of the housing that's different. By rezoning a single family home to a two family or multi-family or subdividing the lot. But obviously that isn't the same property anymore.
"I said economically feasible. I don't see any of those properties as being profitable when you consider what they will likely end up selling at. All of these properties will sell for less than what it cost to build them."
There is no reason that there should be any major economic return to me if I buy an old house, tear it down and pay people to build a new house for me and then sell it. Anyone that wanted to buy my newly built house could just as well buy a lot themselves and pay to build a house to THEIR specifications.
I don't see any of those properties as being profitable when you consider what they will likely end up selling at. All of these properties will sell for less than what it cost to build them.
I don't think so. Most of the properties I mentioned, with others that have been built in Oak Bay recently, have sold. Some were custom built but others were spec. houses sold for what were almost certainly large margins. E.g, the one on Heron Street, doesn't look like it cost three hundred and something per square foot to build, although that's what it sold for. likewise the one at the corner of Uplands Road and Burdick, which sold last year for $1.6 million. The developer subdivided a lot, moved the original house onto one of the two new lots and sold it with a new basement and new paint for around the price of the original property, so the extra lot couldn't have cost more than half a million and probably considerably less. If the new house on an approximately 50 ' lot was 4000 square feet it still sold for well over $250 a foot, for what looked like fairly basic construction.
There is no reason that there should be any major economic return to me if I buy an old house, tear it down and pay people to build a new house for me and then sell it
No, except it's a heck of a lot more convenient to buy a new house that's been financed and constructed by someone else, than do the planning, find the construction finance, and then find somewhere else to live while your new house is under construction. That's why there's can be, and currently is, a profit in tearing down old houses in OB and building new.
If we don't continue to provide government insured financing to sub prime borrowers the market will crash.
Exactly. It's a rigged market. And it won't crash before the election, barring some gross incompetence by the BoC or Treasury, or some exogenous shock over which to government has no control.
I wouldn't put so much faith in government control.
Hi all - LeoS's wife here. Long time lurker, first time poster! Can anyone recommend either a lawyer or notary public to prepare a will? We've been procrastinating getting a will completed since mini-LeoS was born. We don't need anything fancy or too detailed.
Yep One of us has to collect on the others' life insurance to pay for the house.
I am also looking for recommendations with regards to setting up a trust / will.
Notary by the name of Shipley did ours. He's at 1551 Pandora. Efficient, knowledgeable, priced fairly.
Count me in for good will hunting.
Dave3
EDIT: Spelling
Good news for Vancouver:
Microsoft announces $90 million Vancouver expansion, 400 new jobs created
@seth Perry: I believe what we will probably find is that ms uses this excellence center office as another conduit to get great people into the us from India and china. Ms has no interest in creating jobs for Canadians, despite the handwaving. Notice the flavour of the article- much more about the excellence center, whatever that is, than the actual paying jobs.
RE: Vancouver and Microsoft. You are partially right that Microsoft wants good cheap labour but that's achieved by hiring local Vancouverites. Wages in IT in Vancouver are lower than Victoria even. So you're right it's about saving money but it's not about outsourcing to India.
@nan - Interesting perspective. I'm also hearing a lot about foreign workers these days.
reddit.com/r/canada is full of temporary foreign worker headlines:
French jobs fair tells firms they can hire foreign workers without skills assessment
http://www.theglobeandmail.com/news/politics/french-jobs-fair-tells-firms-they-can-hire-foreign-workerss-without-skills-assessment/article18374962/
Recruiter advertises 8 jobs – 7 for temporary foreign workers
http://ntfw.ca/2014/05/recruiter-advertises-8-jobs-all-for-temporary-foreign-workers/
Canadian helicopter pilots say cheap temporary foreign workers 'slowly killing the industry'
http://news.nationalpost.com/2014/04/30/canadian-helicopter-pilots-say-cheap-temporary-foreign-workers-slowly-killing-the-industry/
Temporary foreign workers: Everything you need to know (theglobeandmail.com)
http://www.theglobeandmail.com/news/politics/temporary-foreign-workers-everything-you-need-to-know/article18363279/
@Death Plague
"Wages in IT in Vancouver are lower than Victoria even"
Stats?
I'd be very surprised if Victoria IT workers were making more money than their Vancouver counterparts. I've been told by several friends and one family member that IT wages are higher in Van. I'm in IT and I've never heard anyone say the opposite until now.
‘Living wage’ rises in Victoria making life here less affordable.
The “living wage” in Victoria continues to rise as singles and families struggle to make ends meet and find affordable housing and decent-paying jobs
To meet basic needs, two full-time working parents with young children living in the capital region need to earn $18.93 an hour, not including savings or debt costs
“The living wage gives us an indication of why there’s rising household debt,”
The Living Wage Report for 2014 can be found here
Min wage needs to go up without question. No BS about competing with China. Their wages have been going up over the last number of years... We don't need shit for less we need less thats better...
I wouldn't put so much faith in government control.
Interfering in the market for mortgage finance on a gargantuan scale has served the present Government well so far.
True, government may be unable to negate market forces for ever, but to do so until the next election is as far ahead as most governments are thinking.
I wouldn't put so much faith in government control.
Interfering in the market for mortgage finance on a gargantuan scale has served the present Government well so far.
True, government may be unable to negate market forces for ever, but to do so until the next election is as far ahead as most governments are thinking.
Sigh, well here's the downside of renting. Our Saanich landlord has let us knowing they're selling after just one year here.
It's unlikely we could buy the place, but here's a question all the same -- our old realtor belongs to the same company as the realtor selling this house. Is that a problem or conflict of interest somehow?
Bubbles and soft landings all over the place.
Eye-popping farmland prices may have peaked, experts say
True, government may be unable to negate market forces for ever, but to do so until the next election is as far ahead as most governments are thinking.
It comes down to the fact that the market forces cannot be controlled forever. If they could, then we would never have any crash in any regulated market, as the government would prevent it.
So the question is only how long can it be controlled? It could be to the next election, or it could be only until tomorrow, or it could be until 2020. I don't see a lot of basis for a loss of control after the election being any more likely than at any other point. The next government, whoever it is, will try just as hard as the current one to keep the market stable.
It's unlikely we could buy the place, but here's a question all the same -- our old realtor belongs to the same company as the realtor selling this house. Is that a problem or conflict of interest somehow?
Are you planning on using your old REALTOR® or do you want to approach the listing REALTOR® directly?
Judging by the activity to start the month I think it is safe to predict that May will be the first month in over 49 months to break the 700 sales barrier.
@Marko, I don't know what's best. We have these three options, I suppose.
1. Go back to the agent who sold our old house. He's well connected and sold our old house before we even put out the sign by working his contacts, but the last time we had him as a buyer's agent, I felt a bit pressured into making a deal.
2. Approach the listing agent. I'd always heard this was unwise though.
3. Approach a cash-back agent. We don't need showings or comparables or anything but the offer and paperwork, so we may be able to agree on a lower rate.
I wish they'd contacted us before getting a realtor.
In your situation difficult to say which one is the "best."
1/ You have a relationship with this individual, but no cash back perhaps.
2/ Motivation to put the deal together, but you have no representation which sometimes can be useful.
3/ Guaranteed discount, but you don't have a previous relationship with the individual.
Speaking of wages and Temporary Foreign Workers...
It's rather obvious that Temporary Foreign Workers are keeping minimum wages artificially low.
End the TFW program for everyone except manual labourers on farms and suddenly the fast food joints and others will be raising wages without government mandated increases to minimum wages.
It comes down to the fact that the market forces cannot be controlled forever. If they could, then we would never have any crash in any regulated market, as the government would prevent it.
But a crash can be a handy thing. For example, to sink your successors, when your time's up. The crash of 2008, for example, proved highly profitable to some Republican Party backers on Wall St, while sand-bagging the Obama administration, a blow from which it has yet to recover.
The next government, whoever it is, will try just as hard as the current one to keep the market stable.
But a market crash is like an avalanche, easy to start, more difficult to stop.
But here's the definitive thesis on government market rigging.
I like watching the peripheral markets in the core. The ugly Betties of real estate. They weren't always unwanted, back in 2008 they were selling in under two weeks for a smidge under $200,000. But that's when there was twice as many prospective buyers in the market than today.
Now with more choices and less buyers, the bloom has come off the Rose of these leasehold town homes off Admirals road. Half their value has evaporated and the home owners are leaving them to the bank to foreclose on.
That means the monthly complex fees have had to increase by 50% since 2008.
Even though it's possible to buy and rent for positive cash flow, the buyers still aren't coming.
This is what it's like to be caught between a rock and a hard place. Almost every buyer today is a momentum buyer following the crowd and hoping that the other buyers know what they're doing.
In my opinion, the newbee buyers of today are less knowledgeable about real estate than the generation that bought before them. They have been dumbed down by a decade of low interest rates, lose credit and TV shows.
Re: 832 Haliburton Rd.
http://beta.realtor.ca/propertyDetails.aspx?PropertyId=14367781
This property is now a court ordered sale. If I remember correctly, this is part of a development called “Haliburton Heights”. It looks like it was the only one built, and I don’t believe anybody has even lived in it. I think the original land was sold with an older home a few years back for around $1.6M. They did a renovation on the older house and subdivided the land into about five lots. Not sure whether they built the house on spec, or somebody else bought the lot and built this house. Either way, it seems like it was a poor decision all around.
I’m also noticing a lot more listings coming onto my PCS account at the moment, especially in the Gordon Head – Cordova Bay area. I marvel at the endless amount of listings I see with the words “Completely renovated”, “Beautifully remodelled”, “Stunning renovation”, “Just renovated”!! They are oh so beautifully staged! Even the furniture and accessories look like they’ve just arrived from the store. Is there nothing more interesting to do in Victoria than renovate homes?
What is everybody going to do when it all goes wrong.
For example, to sink your successors, when your time's up. The crash of 2008, for example, proved highly profitable to some Republican Party backers on Wall St
Doesn't add up. First you say that the conservatives would want to delay a crash until after our election, but somehow the republicans would want their crash just before the election. An explanation that requires much less twisting is that the train just went off the rails and the government had little power to change it. If it's going to go it'll go.
Does anyone know the story on this house? It has this awesome patio but the layout of the actual house was pretty bad...
http://beta.realtor.ca/propertyDetails.aspx?PropertyId=14301328
Oh - the reason I ask is because this is the second time I have seen it for sale in the last couple years...
How The Economic Machine Works by Ray Dalio
A great video worth watching.
I would be interested to map out Canada's short term debt cycle on top of the longer term debt cycle and then lay those on top of the productivity line, then see where we are heading.
http://youtu.be/PHe0bXAIuk0
"Today, our demographics have turned, our productivity growth has slowed and the world is undergoing a competitive deleveraging."
"We might appear to prosper for a while by consuming beyond our means. Markets may let us do so for longer than we should. But if we yield to this temptation, eventually we, too, will face painful adjustments."
"It is better to rebalance now from a position of strength; to build the competitiveness and prosperity worthy of our nation."
- Mark Carney | 12 December 2011
So, how are we doing?
Slow Productivity Growth
Since 2011, Canada increased from 103 to 104.3 index points
http://www.tradingeconomics.com/canada/productivity
We've taken on more debt
Canada's disposable household debt-to-income ratio is at a near-record high of 164.0 percent. from 150 back in 2012
Wages grow more than productivity?
Is this modest growth even sustainable when our productivity is so slow?
http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/labr69a-eng.htm
Rebalancing, no thanks. You're talking to the wealthiest middle class in the world.
... and for all of you waiting for the HAM to save our real estate and our economy. Here comes the reality check you have been warned about.
China bubble acknowledged...
Doesn't add up
So you're saying governments don't endeavor to control the economy? Or are you saying governments do try to control the economy but solely in the public interest?
Either way, dream on!
As for the crash of 2008, GDP fell only 0.3% or $620 per capita in Bush's final year, but if fell 2.8%, or almost $2000 per capita in the first year of Obama's presidency.
US unemployment in Bush's last year was 5.8%, but averaged 9% throughout Obama's first term.
Seems to me the numbers add up quite well.
Rebalancing, no thanks.
What was Carney talking about? I thought rebalancing was about altering one's investment profile. But what's that to do with Canada's competitive position in the world?
Or is he speaking code for cutting back on mortgage lending so folks don't go so deeply into debt?
If the latter, how much unemployment would Carney have been willing to see, I wonder.
There seems no alternative to ever increasing debt-financed consumption except either deep recession, or revival of manufacturing.
But there'll be no revival of manufacturing until there is greater wage convergence between the West and the Rest.
The good news is that the minimum wage for Bangladeshi garment workers was recently increased by 77%. The bad news is that the new rate of $68 per month is still only 4.5% of Canada's minimum wage.
So it seems likely that cheap mortgages and growing debt will be features of the economic landscape for years to come — unless either some major disruptive event forces a change of course, or some innovative thinking is applied to the challenge of providing opportunities for those at the bottom of the employment ladder, e.g., a negative tax regime.
Re: China bubble acknowledged.
If China's property market is about to crash, wouldn't that encourage, not discourage, the flight of capital, some of which could well end up in BC real estate?
Re: the dalio video,
With all due respect, I think this is total bunk:
Debt, says Mr. Dalio, is the key to understanding economic cycles. Most people borrow when young – to buy cars, houses, etc. — then accumulate savings in middle age. This, according to Dalio’s cartoon, gives rise to short-term economic cycles of rising and falling debt, which in turn give rise to cycles in rising and then falling economic demand.
Now let’s think about that. Folks do indeed tend to borrow when young, then pay back and accumulate savings later on. But that creates no cycle of rising and falling debt. Populations do not pass through youth and middle-age in synchrony. My debt is balanced by your savings. The overall level of debt has nothing to do with the individual’s cycle of debt.
So much for Dalio’s explanation of short-term business cycles. As for the long-term, he says, folks just borrow more and more and more till, well, until they decide enough is enough, then they deleverage, which takes years and years, and that’s what we’re going through now.
LOL. And this guy’s worth $13 billion. But then his business formula is pretty simple. Two percent off the top on the money you place with him, plus 20% of the gains. Why don’t we all run a hedge fund, I wonder? I guess the clever bit is selling the service to rich investors who you’d think would know better.
Re:
http://beta.realtor.ca/propertyDetails.aspx?PropertyId=14301328
It has two frontages, and backs onto Cadboro Bay Road at a tricky intersection with Cedar Hill X Rd. So I should think not suitable for anyone wanting a quiet spot.
So you're saying governments don't endeavor to control the economy? Or are you saying governments do try to control the economy but solely in the public interest?
I'm saying governments try to control the economy but they're not nearly as good at it as you imagine. Since when is government known as a well oiled machine that can outsmart the market and prevent or cause crashes at will?
As for the crash of 2008, GDP fell only 0.3% or $620 per capita in Bush's final year, but if fell 2.8%, or almost $2000 per capita in the first year of Obama's presidency.
The Republicans lost partially because of the terrible economy. The idea that they knew back in 2006 (when the wheels started to come off the housing market) that it was hopeless they would win and so they would let the crash happen to hamper Obama is completely unbelievable.
The idea that they knew back in 2006 (when the wheels started to come off the housing market) that it was hopeless they would win and so they would let the crash happen to hamper Obama is completely unbelievable.
I didn't say that.
But the Bush family have a close association with financial disasters, George HW having been VP at the time of the S@L disaster, which has been described as the "largest theft in the history of the world" (prior to the mortgage scams of the Bush II era), and which is said to have involved "many members of the Bush family" (see review here)
It seems quite plausible to me that the Bush II White House, run by a former Goldman Sachs CEO, with a former Goldman Sachs CEO as Treasury Secretary would have turned a blind eye to Wall St shenanigans, including Goldman Sachs selling clients dud mortgage bonds that they themselves were shorting. For one thing, they could have reasonably assumed that the fallout would likely not occur until after Bush II left office. In fact, the collapse began a little too soon for comfort. But as you say, governments don't have total control.
But it seems naive to suppose that governments do not attempt to manipulate the economy for electoral advantage. Economics is what politics is almost entirely about.
It would be astonishing, for example, if under the influence of the present Government of Canada, the Bank of Canada were to sharply jack up interest rates to achieve the "rebalancing" that Carney was urging at the end of 2011. It would create a recession and doom the Tories to pretty certain defeat.
On the other hand, if current policies that are driving RE prices higher mean an eventual crash, then obviously the desired timing for that will be after the election. Then if the Liberals or NDP are in power they will be hampered by the fallout, or if by chance the Tories scrape back, then they'll have four years to deal with it, and its better to be in office with a problem than to be out of office.
CS said...
Re: China bubble acknowledged.
If China's property market is about to crash, wouldn't that encourage, not discourage, the flight of capital, some of which could well end up in BC real estate?
---------------------------
This has nothing to do with the
'flight of capital' but rather the up front loss of capital. As in 2011 when China implemented a one person, one property investment strategy. Investors, mostly citizens who were now legally allowed to purchase their home were in fact buying 5-6 properties in Ghost cities prior to this. The value of these properties continues to tank and so do their investment funds. No flight of cash when there is no cash to be had.
Rather the destruction of family investment of 2-3 generations who had saved up to purchase and their $$ are now gone, vanished.
Coming soon to a province near you....
The overall level of debt has nothing to do with the individual’s cycle of debt.
But the overall level of debt should be influenced by the relative size of generations.
That is, when the boomers were moving into their educational and car/house buying (i.e. borrowing) years, you'd expect overall debt to increase since there were more of them than their parents.
What's truly scary is that you should now be expecting overall debt to be decreasing, since the boomers' kids are less numerous than the boomers, yet it's been increasing at the fastest rate ever.
Monday, May 5, 2014 8:00am
MTD May
2014 2013
Net Unconditional Sales: 81 659
New Listings: 198 1,428
Active Listings: 4,378 4,783
Please Note
Left Column: stats so far this month
Right Column: stats for the entire month from last year
I am predicting May will be first month in 49 months we go over 700 sales in one month :)
Why not become a foodowner instead of a homeowner?
http://www.nytimes.com/2014/05/06/upshot/everyone-wants-to-be-a-homeowner-why-not-a-foodowner.html
But the overall level of debt should be influenced by the relative size of generations.
Yes, that's true.
What's truly scary is that you should now be expecting overall debt to be decreasing, since the boomers' kids are less numerous than the boomers, yet it's been increasing at the fastest rate ever.
If you look at the cost of debt service, the numbers are not so scary — until rates go up!
"If China's property market is about to crash, wouldn't that encourage, not discourage, the flight of capital, some of which could well end up in BC real estate?"
The program that brought HAM buyers to BC is officially a thing of the past.
Investor road to Canada hits a dead end with immigrant programs' closing
Quoting:
"Many criticized the program as a way for rich foreigners essentially to buy citizenship and live abroad without creating jobs or economic growth in Canada. The plan, which was ended in Tuesday’s budget, allowed foreigners with a net worth of more than $1.6-million to gain residency and potentially citizenship by lending the government $800,000 that would be paid back in about five years without interest."
Some of you obviously missed this important information when I posted it a month or two ago.
I am predicting May will be first month in 49 months we go over 700 sales in one month :)
Hmm... One less workday and some sign of recent slowing. I'll predict we'll be just shy of 700.
Marijuana Prices Are Going To Crash (May 31, 2014)
Quoting:
"Marijuana prices are going to drop substantially over the next year, and then drop even more once full legalization happens.
(Shrinking exports drive down prices)
Marijuana prices in BC have dropped about 30 percent over the past decade (with about half that drop happening since 2011)...
Before (the mid 1980's) virtually all marijuana and hash in North America was imported from Mexico or South America."
Falling BC bud prices will have a negative effect on house prices in Victoria (BC bud may be Victoria's biggest industry).
They didn't shut down the immigration program in reality since they replaced it with another one...
So far this year, Victoria's single family home sales total is well below average. SFH sales in Victoria have been extremely low since 2010.
2014's SFH sales total (Jan. + Feb. + March + April) is approx. average compared to 2010 - 2013.
2014: 1022
2013: 927
(note that private sales were allowed to be counted in sales totals beginning in 2013)
2012: 1011
2011: 1005
2010: 1281
2007: 1462
2006: 1413
(06 and 07 were close to average years (overall) for SFH sales)
note that private sales were allowed to be counted in sales totals beginning in 2013
what are you talking about?
@ dasmo
"They didn't shut down the immigration program in reality since they replaced it with another one..."
Unlikely that the feds would identify major problems with one program, ax it, then replace it with a similar program that creates the same problems as the first.
Perhaps, dasmo, you can share some of your valuable knowledge with us. According to you, the new program will carry on from where the old program left off in such a way that it will be as though the feds "didn't shut down the immigration program in reality".
Please provide details.
"note that private sales were allowed to be counted in sales totals beginning in 2013"
"what are you talking about?"
Beginning in 2013, real estate boards across Canada were allowed to count private sales in their sales totals. Garth Turner has talked about this on his blog.
This may be the case in Victoria. If it is, then it would create problems when comparing 2013 and 2014 sales totals to previous years.
SFH sales in Victoria are still in the tank and have been since 2010, even if this change wasn't made in Victoria.
"In April, 2013, Canada initiated a new “pilot” entrepreneur visa program to ostensibly take the place of the outgoing IIP. The new program, which seeks to connect foreign entrepreneurs with Canadian venture capitalists. would these entrepreneurs to obtain permanent residence visas if they can attract sufficient investment and also meet Canada’s general immigration criteria."
Here you go info, you can form your own opinion of the program and it's potential affect on the housing market if you like...
http://www.cic.gc.ca/english/immigrate/business/
Sounds to me like they want it to be easier to get the money in, not harder....
Beginning in 2013, real estate boards across Canada were allowed to count private sales in their sales totals. Garth Turner has talked about this on his blog.
Except Garth has not idea what he is talking about. I posted a rebuttal to the post he made on this blog....I guess you never read it.
Nothing changed in 2013 in terms of how we report sales here in the VREB. I think I would know since REALTORS® report each individual sales and I am a REALTOR®.
@info
"So far this year, Victoria's single family home sales total is well below average. SFH sales in Victoria have been extremely low since 2010."
However they are up solidly year over year contrary to your September prediction of "sales will tank". Since that prediction every month has been up y-o-y.
Victoria single family home sales have been in the tank since 2010. That weakness has continued into 2014.
Sakes can't really tank when they are already in the tank and Victoria single family home sales are definitely in the tank.
Lower prices normally follow weak, slow, sluggish sales. House prices in Victoria have a long way to fall before a bottom will be reached.
Victoria single family home sales have been in the tank since 2010. That weakness has continued into 2014.
Agreed - sales are still weak by historical norms. However your prediction of "sales will tank" is still wrong. They didn't. They went up.
At the time I made that prediction I didn't realize how weak Victoria SFH sales were. They were already in the tank as I later found out.
It's possible and even very likely that sales activity can increase as prices decrease.
Simply looking at the volume of sales may be misleading. Personally I watch the Months of Inventory, the Sales to New Listings ratio and the Days-on-Market in order to forecast what is most likely to occur in the next 90 days.
It's best to do this for the specific market you're looking to either sell or buy into. Why would you include single family homes when you're looking to buy a condo? Or why would you include Penthouse or Ocean view condos when you're looking at buying or selling a middle income 2-bedroom suite?
Our current market is fickle, it isn't homogenous through out. Some market segments are doing well and others are road kill.
"Marijuana Prices Are Going To Crash (May 31, 2014)"
Sadly, this brings no direct savings into my life.
Won't people just buy more weed?
I'm not seeing a slow market out there. I guess maybe old crap sells slow but anything good is gone fast. As for wages in the IT sector well it's best to contact a recruiter. I make more than 6 figures here in Victoria and Vancouver recruiters thought I was crazy when I looking. I ended up with two offers before hooking up with my current gig. Vancouver wages suck and the traffic and housing are even worse. Why do you think when people move out of Victoria it's to cowtown or back east?
However your prediction of "sales will tank" is still wrong. They didn't. They went up.
Sales didn't go up, they tanked negatively.
"I'm not seeing a slow market out there. I guess maybe old crap sells slow but anything good is gone fast."
Agreed. If the price is right and the seller is motivated, it goes quick. I've seen two places in the last month sell the same day. There's also no shortage of listings with too high asking prices - these sit forever.
I'm not seeing a slow market out there. I guess maybe old crap sells slow but anything good is gone fast.
The percentage of properties selling at asking or over asking is quite surprising.
Canada's sub prime mortgage market.
In Canada we have three main insurers for sub prime mortgage borrowers, CMHC, Canadian Guarantee and Genworth.
Perception:
CMHC is run by the government and is backstopped 100% by tax payers. The other two are private entities.
Reality:
The Canadian tax payers are responsible for the majority of all three.
CMHC: 100%
Canadian Guarantee: 90%
Genworth: 90%
So if things go south, or to be more precise, if things go as they did south of us, then we'll have a bigger sub prime problem than they did in the states.
In other news. Genworth and Canadian Guarantee will still continue handing out stated income loans and sub prime loans for people to purchase SECOND homes.
"Well regulated" or Well....."sort of regulated".
May 6, 2014
Average price of single home in Toronto shoots up 13% to $965,000
One part talks about a 72 person bidding war on a fixer upper that "went for $1.366 million."
Crazy!
@ Marko
"The percentage of properties selling at asking or over asking is quite surprising"
Please provide data to substantiate your claim.
Supply continues to exceed demand in Victoria.
Overall, Victoria's housing market is a buyer's market and has been for some time.
In a buyer's market, buyers have an advantage over sellers in price negotiations. Buyers are in control.
The local board released its monthly report. Their SFH index data indicates that April 2014 SFH prices were lower than in April 2013. Another year-over-year price decline for Victoria SFHs.
SFH prices in Victoria have been falling since 2010. SFH prices have fallen (year-over-year) in 40 out of the last 41 months.
This is based on the local board's (subjective) index data. The only thing we know for sure about this data is that it isn't biased to the downside. (Some Canadian real estate boards have recently manipulated sales data to make it look stronger).
Victoria's price decline will continue. The bottom will be reached when prices reach a level where incomes and rents can provide price support. Prices will probably overshoot this level. This is what happened in the US as their housing market experienced its price correction.
Housing bubbles always deflate and prices always revert to the long-term mean. It isn't different in Victoria.
This Oak Bay house is priced well below its assessed value ($655 K) but no buyer:
2508 Florence ($619 K)
You see what you want to see. I see flat:
Single Family Benchmark Home: Greater Victoria ‐0.2%
Single Family Benchmark Home: Core + 0.1%
Single Family Benchmark Home: Westshore + 1.2%
®LOL®, ®Ma®co®... ®not® ®sure® ®you® ®got® ®enough® ®registered® ®trademark® ®symbols® ®in® ®your® ®posts® ®!®!®!®
®PS.® REALTOR, REALTOR, REALTOR, REALTOR, REALTOR, REALTOR, REALTOR, REALTOR.
^^^^^^^^^^^^^^^^^^^^^^^^ sue me.®
For what it's worth, I've seen a plenty of places sell for asking, but very few have gone above, including ones I was sure would cause a bidding war. Maybe 3 or 4 went above asking this year based on my search criteria/area.
Some segments of the marketplace are having serious liquidity issues. Acreage in Sooke for example. Some areas have 20 months of inventory and a sales to new listings ratio of under 25% along with a days on market over 100. In the world of bull and bear markets, Sooke acreage is bearish to the point of being shallow and dysfunctional. That makes pricing real estate difficult as most properties will sell for less than current replacement cost these days.
But then you have Victoria, Oak Bay and Saanich East. Prospective buyers seem to be spending money faster than a drunken sailor in a whore house in these areas.
Well if I take a look at just the last 5 hours of pending sales I see three above asking.
List/Sold
2431 Camelot Rd - $579,500/$600,000
1234 Union Rd - $606,000/$608,250
1795 Forest Rd - $529,000/$531,400
I am not saying the market is hot or a sellers market by any means, just noting that I am surprised how many properties go above asking given how high the MOI is.
It does seem that listings have taken a jump from last April when some 579 houses were listed for sale in the core areas for that month. This April there was 882 new house listings
And how about the number of house sales in the core districts for April.
In April 2013 there were 199 and last month was 215.
So it seems YOY demand didn't change much, but listings jumped by over 30 percent. That's interesting because it could signal a shift from a demand-driven market to a supply-driven market.
Not that this means instant price drops are coming to your neighborhood. It just means you might find it difficult to find your way home through all the "For Sale" signs.
How the mighty have fallen ... The SFH at 1153 Lyall Street has been on the market for over three years under many different MLS numbers:
2014-02-24 $460,000 - MLS# 333458
2014-02-17 $479,000 - MLS# 333458
2013-06-14 $499,000 - MLS# 315030
2013-05-01 $519,900 - MLS# 315030
2013-04-09 $535,000 - MLS# 315030
2012-09-19 $579,900 - MLS# 315030
2012-07-18 $589,900 - MLS# 310889
2011-03-12 $649,900 - MLS# 284965
2011-02-26 $659,900 - MLS# 284965
Someone is taking a haircut on this property. It last sold in 2004 for $272,500.
It does seem that prices in the core for houses has moved up a smidge. When I look at the Sales to Assessment ratios for pending versus sold sales the pending sales are about 1.25% higher.
Since properties generally sell at 97 or 98 percent of list price, I can understand Marko's observation about some houses selling at or above list price. A very likely thing to happen in a Spring market.
Even though listings are coming on strong, we still have a shortage of listings in the core.
Lyall is an ugly duckling.
With 53 homes for sale in Navy Town and only 11 selling last month, with the typical home selling at 101.4 percent of its assessed value, there still might be another price reduction for Lyall coming.
2508 Florence in Oak Bay would have sold at assessed value if this wasn't a down market. It remains on the market at well below assessed value with no buyer.
Here is a list of Homes that sold in the past month at or above asking price that were within my criteria:
840 Sayward S: 655,500, A: 639,900
1416 Fort S:539,500, A:499,900
847 Carrie S:499,900, A:499,900
1234 Union S:608,250, A:606,250
4163Longview S:650, A:649
1070Iris S:565,500, A:564,900
965Milner S:559, A:549
718 Powderly S:645, A:629,900
2879 Gorge View S:530, A529900
2879 Parview S:500, A:500
1670Sheridan S: 545, A:542,500
731 Belton S:496, A:485
2753 Asquith S:594, A:594
1795 Forest S:531,400, A:529
1804 Fairhurst S:638,500 A:638
3354 Browning S:489 A:489
2593 Vancouver S:422,500 A:399,900
4353 Northridge S:546, A:529,900
1740 Foul Bay S:599,900, A:599,900
3861 Carey S:439,999,A: 439,999
3977 Birchwood S:535, A:525
1946 Ferndale S:725, A:719,900
1102 Vista S:524,500, A:524,900
4624 Sunnymead,S:667,500,A:659,500
157 Wellington S: 649, A: 649
4994 DelMonte S:719, A: 719
I'm as shocked as anyone that a 2 bed 1 bath 1200 sq ft house in oak bay is having trouble selling. No idea why that would be...
The cherry picking by you bears is hilarious.
^ lol
How the mighty have fallen ... The SFH at 1153 Lyall Street has been on the market for over three years under many different MLS numbers:
2014-02-24 $460,000 - MLS# 333458
2014-02-17 $479,000 - MLS# 333458
2013-06-14 $499,000 - MLS# 315030
2013-05-01 $519,900 - MLS# 315030
2013-04-09 $535,000 - MLS# 315030
2012-09-19 $579,900 - MLS# 315030
2012-07-18 $589,900 - MLS# 310889
2011-03-12 $649,900 - MLS# 284965
2011-02-26 $659,900 - MLS# 284965
Someone is taking a haircut on this property. It last sold in 2004 for $272,500.
It was purchased in June of 2004 when the average SFH price was give or take $385k. The average price now give or take is $600k.
Using a crude calculation, assuming no improvements to the property $600k/$385 = 1.56 x $272,500 = $425,000.
This most likely isn't a case of the falling market, more likely priced too high to start.
@Marko
I agree that the initial pricing of the Lyall Street house in 2011 was way to high. I suspect that the owners put quite a bit into fixing up the interior and were trying to cash in at the height of the market. It's not a great street get get premium pricing ...
Curses! No editing allowed ...
to = too
Florence street is a tough sell because it falls between two target markets.
The home is what might be called a "starter" or an "exit" home. The price is too expensive for a starter family without a basement suite and the retiree market in this price range is going for the condo. Do you really want to take on a 100 year old home at age 65?
As for builders these properties, are too risky for a contractor to buy, demolish and build. The best scenario would be working for wages, the worst is they'd have to sell their truck to cover the bank loss.
What you end up with is a property that likely will take longer than normal to find a buyer. It doesn't mean that it is priced wrong.
Yet, these are the properties to watch. The ones that fall between target markets as they tend to be the first to decrease in value. There are a few of them around today. The ones that are always a bridesmaid but never a bride. Too much value in the land and too little of a house.
Did you know you can buy an updated one-bedroom mid 1980's condo in the city for $138,500. That's $190 a square foot at Hillside and Quadra.
AND you can ASSUME A MORTGAGE at 2.25%
Assuming a mortgage is something you should think about. It can sweeten a deal. And if this market goes the same direction as past markets you'll find a lot of vendors offering assumable mortgages.
Maybe we should talk about how much an assumable mortgage is worth? Dig out your six functions of a dollar and get calculating. What's a hundred thousand dollar mortgage at 2.25% relative to today's rates worth to you?
@ Death Plague
"I'm as shocked as anyone that a 2 bed 1 bath 1200 sq ft house in oak bay is having trouble selling. No idea why that would be...
The cherry picking by you bears is hilarious."
That wasn't cherry picking. For an example of cherry picking, see Alexandrahere's last post.
@ Alexandrahere
It's interesting that you chose to post only those sales within your search criteria that sold at or above asking price. Clearly you are on the side of the bulls.
None of that data could be verified by bears anyway, which makes it suspect to begin with.
If you had included the sales that were at or below asking price (there were probably many of them) I'm sure some bears would have given you the benefit of the doubt, even though it is impossible to verify your information.
As far as bears are concerned, it's too late for you to post the sales at or below list price now. Even if you do, bears will question whether or not you included all of the sales at or below list price. Now that you have made your position on this blog clear, bears will consider everything you post questionable. Bears will not give you the benefit of the doubt.
Houses sell for above asking price in a down market all the time, but it doesn't reveal much about the market in general. Some of the sales in your list could have been below assessed value, after several price drops.
I took a look at the comments from a year ago on this blog. You were searching back then as well. Are you actually searching or do you sell houses? You seem to have a lot of information for someone who is searching.
Any thoughts on 2123 Jason Lane in Colwood? To me looks like not a bad price for such a large lot - but with a bad layout and off a five lane highway... thoughts?
2171 Allenby St just went for $880,000 (asking $859,900).
Really well played by the sellers as they used a mere posting to list on MLS® as well!
Again, if this wasn't a falling market, 2508 Florence in Oak Bay would have sold by now, probably at or above assessed value.
In 03, 04, 05, 06, 07 and 09 this Oak Bay house would have fetched (substantially) more than its assessed value. But now that Victoria's housing market has weakened substantially, the seller can't find a buyer. Clearly the party is over in Victoria.
Several bulls have posted typical bull explanations as to why this Oak Bay house hasn't sold, but these explanations are nothing more than excuses.
At this time of year in Victoria, there is typically a higher than normal proportion of recently (extensively) renovated house sales. Many of these houses sell for more than their assessed value. It's a spring market thing. This (upward) skews the price data.
This also creates problems with Just Jack's numbers (comparing sold prices with assessed values) since recently renovated houses often sell for more than assessed value, even in a falling market.
This happened last spring/summer as well and put many bulls in a lather of excitement that lasted for a few months before the effect wore off and reality set in again.
2508 Florence in Oak Bay isn't an example of a recently renovated house. That it is listed well below assessed value with no buyer is a clear sign that Victoria's housing market is struggling, even in Oak Bay. Other areas of Greater Victoria are experiencing worse problems than Oak Bay.
The housing market credit/lending/interest rate environment in Canada continues to receive considerable amounts of stimulus. Prices across the rest of Canada continue to rise which is what is suppposed to happen with all of the housing market stimulus in place.
Victoria's housing market has been reacting abornmally (negatively) to this (extreme) stimulus since 2010. Prices have fallen about 10% from peak. There are many (underwater) mortgage holders in Victoria.
Victoria's housing market will continue to struggle even if the feds don't remove any more stimulus.
Hindsight is so 20/20.
When you look and think back to 2009. The lunacy that was going on with buyers. Buyers who thought they would be priced out forever.
And now that reasonableness is returning to the market those choices made in haste are shown to be so costly today.
Like the "Falls" complex downtown. Some serious coin was spent on these near the top floor units. Close to a million with taxes got you a 1,200 square foot condo. And today one of these top floor units sold for $640,000 almost $300,000 less than it did in 2009.
But you say "heh, that's crazy - anyone could have told you a mill was too much" Yet in Sooke there is a 1,300 square foot condo listed for $979,000.
Sooke the "fishing" capital of Canada
Geez, you can't please some people!
@ Marko
"2171 Allenby St just went for $880,000 (asking $859,900).
Really well played by the sellers as they used a mere posting to list on MLS® as well!"
Lately, 95% of what you post on this blog has been in an effort to create the illusion of a positive market. Clearly you are only posting information that might possibly convince potential buyers that now is a good time to buy. This is extremely selfish on your part.
None of the information that you post on this blog can be verified by any of the bears on this blog. All of the information you have posted lately has been cherry picked and one-sided.
I don't think this market is struggling. It's just normal. Comparing today's activity to the frenzy of the mid 2000's is a flawed approach. I would expect a frenzy when it's cheaper to own than buy and I would expect calm when it's more expensive to own than buy... But as I've said before we see what we want to see. What I see as flat you see as falling...
huh?
Lately, 95% of what you post on this blog has been in an effort to create the illusion of a positive market. Clearly you are only posting information that might possibly convince potential buyers that now is a good time to buy. This is extremely selfish on your part.
It must be working as sales have picked up :)
2171 Allenby St just went for $880,000
Around the year 2000 or so our landlord offered to sell us our rental rancher on Allenby for ~$200,000. We were kids and thought that was an outrageous amount of money. :)
I'm always surprised to see a home like Allenby sell for so much.
The style of the home is a bi-level from the 1950's. This is the econo-box of its time, the least costly home that can be built on a price per square foot basis.
That's why you see SOOOO many of them.
The good news is that it backs onto a lawn bowling club. The bad news is that a few of us are planning to rent the club for an event - and we all like to drink Gin and Shot Put - so keep your cats indoors.
It's the highest price paid for a house on that street - ever! A few years back one or two new homes were built and they tried to sell them for a little over a 1.1 million or between $365 to $395 a square foot but without success.
In contrast this one sold close to $300 a square for an updated 60 year old home. It would be a tough one to justify to a lender. I would suggest a 70% loan to value ratio on this one to a bank or have it insured. If it were insured then it wouldn't matter how high the loan to value ratio was.
As I've said, Victoria single family home sales are in the tank and have been in the tank since 2010.
Comparing sales this year to last year only is cherry picking stats - something Marko is obviously good at.
re "unverifiable information".
Wouldn't the information that alexandrahere or Marko post on list price and sales price be accessible to anyone with a PCS account with criteria that included those properties?
Personally I like to assume that most of the posters here post facts that they believe to be true (they may be wrong, but they aren't intentionally deceptive). Call me naive!
Predictions or opinions about the future will of course nearly always be wrong even if honestly offered
A lot of bulls are on denial. House prices in Victoria have declined at least 10 percent from peak but some bulls think that's flat. Some of these bulls might think a mountain is flat too.
All of this price decline has taken place in a heavily stimulated environment of extremely low rates and lax lending standards.
House prices in Victoria will continue to fall.
My neighbor finally took her home off the market because she couldn't get the price she wanted.
That got me thinking. How successful are sellers in getting their price?
I looked at the listings for April a year ago and I found that of the 695 homes listed that month 186 or 27% expired and 148 or 21% were cancelled.
That meant that only half or 52% of the properties listed for sale that month ever sold. Compare that to April 2009 when close to 70% of the properties listed sold or 2007 when it was 75%.
In fact you have to go way back to when BC was in a recession in 1995 to find such a low success rate of selling.
So what does all of this mean?
F^&% if I know.
Info: I am not a bull or a bear.
I was merely responding to remarks made by J.J. and Marko.
I am telling the truth about the sold and asking prices of those I listed. If you are in doubt, pick any two of them and ask Marko.
During the timeframe I mentioned, and within the same criteria, I had 91 SFH go for below asking price and 26 going for at or above selling price.
I have been buying and selling houses for all of my adult life.
The ups and downs of real estate has always interested me as it does many others.
Regretably, I am in a condo. It is an older one and has gone down in value by almost 30%.
In my opinion, most homes in the core municipalities would go for less now than they would have at their peak....however, I think most would sell for more today than they would have one year ago.
I do not watch the Western Communities.
Older condos are now selling for the least amount since their peak.
Correction: I had 91 SFH go for below asking price and 26 going for at or above selling price.
typo: "regrettably"
I have to stop drinking during the day... Replace buy with rent in my previous post...
None of that data could be verified by bears anyway, which makes it suspect to begin with.
Huh? Get a PCS account and you can verify it yourself.
I think when you say "bears" you mean that info is the one true bear. You're not speaking for anyone else.
Again, if this wasn't a falling market, 2508 Florence in Oak Bay would have sold by now, probably at or above assessed value.
What was that rant about posting unverifiable information?
Lately, 95% of what you post on this blog has been in an effort to create the illusion of a positive market. Clearly you are only posting information that might possibly convince potential buyers that now is a good time to buy.
And you are posting information to give the illusion of a crashing market. Isn't it better to have multiple views or would you rather be in an echo chamber?
One thing both bulls and bears may have underestimated was the amount of money that would continue flowing into our country since 2000. I came across this little gem today. Red line is our currency, and black is Vancouver home prices. Foreign capital seems to keep pouring into our currency, then onto parking itself in our property, corporations and bond markets (lowering our borrowing rates). Nobody knows if it will continue but I checked and our currency hit a low of 88 cents this winter and is now climbing to near 92 again. Like it or not, Canada remains one of the best houses in the hood. If our stock markets are any indication then the influx may be accelerating again.
https://ca.finance.yahoo.com/echarts?s=%5EGSPTSE
I would expect a frenzy when it's cheaper to own than buy and I would expect calm when it's more expensive to own than buy
The reality in RE markets is more like the opposite. When buyers are calm, they are less willing to pay a premium to buy over renting, and when they are in a frenzy they are more willing to pay a premium.
And the peak of the frenzy is usually near the peak in prices, as demonstrated by that famous Time magazine cover (Home Sweet Home).
Interesting point, that could be another way of analyzing irrational exuberance by using days-on-market. If the average DOM fell below say 14 days, then that could be a sign of a "bubble"?
I know that there certainly was a feeding frenzy in 2009 with some people paying way over market value in order to secure a property. Today some of these people are finding themselves with a mortgage close to the property's current market value.
What are the best odds of selling a home in 30 days?
If you look at last month 23.6% of the houses listed and sold in Victoria City sold in 30 days. And the list is:
23.6% for Victoria City
22.5% for Saanich East
19.2% for Oak Bay
18.2% Esquimalt and Vic West
15.5% for Saanich West
If you lived in Langford or Colwood that success rate dropped to 9.5%.
And those in Sooke had nothing.
As for condominiums the success for the entire core districts was only 7.3%
One of the issues with real estate is its liquidity along with the security of the capital invested and income stream. All of these form a measure of risk.
That makes Sooke the riskiest place to purchase, followed by condominiums and the rest of the Westshore. In contrast the least risky place to invest in a home would be Victoria City and Saanich East.
Do we have too many or too little homes listed for a million and more?
Last count is that we now have 369 homes for sale over a million dollars of all types in all areas.
The most expensive being in Snob town along Humber Road at 17 million. The agent will have to cut 10 million off the asking price to get any action on this one.
Down to a 4300 square foot home in Dean Park. Dean Park? Really? Does anyone even remember where Dean Park is? That so not kool anymore hood.
The median sale price for the last 12 months in the millionaire range is $1,300,000 with only 20 homes selling, on average, each month everywhere. That means the exit gates at Uplands are pretty crowded these days with U-haul trailers.
Re: 2171 Allenby
This house was gutted and re-built about 7 or 8 years ago. The builder invited me inside for a tour when he was nearing completion. The rebuild was a perfect example of a well done reno with high quality work and finishing. The suite was, at that time, one of the best I'd ever seen.
The recent selling price seems a bit high to me, but I'm not really surprised because it's spring in Victoria, so prices are 5+% higher than winter prices for quality houses.
Several houses in this block of Allenby have had substantial renos of exceptional quality in recent years, much like Olive Street in Fairfield, which has also seen several high-end renos/rebuilds in recent years.
The bubble is reaching a crescendo.
http://www.thestar.com/business/2014/04/28/lawrence_park_fixer_upper_gets_72_offers_goes_for_195_per_cent_of_asking.html
The Schrodinger bubble. It's clearly there but at the same time it doesn't exist because rates are low.
"BUY IT NOW WITHOUT using any of **your hard earned cash** and RECEIVE a FREE Fiat 500 Pop. Receive a Fiat 500 Pop with every purchase of the fantastic suites at Quattro3."
*ZERO DOWN** and a FREE CAR... (Surrey)
Victoria unemployment down to 4.9%!!! Up, up and away for real estate!!!
http://www.bcstats.gov.bc.ca/StatisticsBySubject/LabourIncome/EmploymentUnemployment.aspx
Oops - wait a sec...total employed down to 179,000 - lower than all 2013 months and lower than all annual averages going back to 2007. 2008 annual average was 190,600.
Unemployed people wanting to earn money not staying in Victoria.
http://www.bcstats.gov.bc.ca/StatisticsBySubject/LabourIncome/EmploymentUnemployment.aspx
Victoria employed down by 2.5% from last years average. Unemployed -1.9%. So the discrepancy is 0.6%. Hardly an exodus of the employable... It's just more flatness...
You didn't read it all Dasmo.... 190,000 in 2008.
That is a trend my friend...
Canada’s next housing bubble: real estate agents
"The number of people selling real estate reached 108,706 during the first quarter of the year, according to the Canadian Real Estate Association. To put it another way, that’s one realtor for every 245 Canadians over the age of 19."
This is unbelievable. The correct term is REALTOR®. I can't believe that a writer for a major newspaper would be dumb enough not to fact check this important point.
>> Victoria employed down by 2.5% from last years average. Unemployed -1.9%. So the discrepancy is 0.6%.
Eh? They don't cancel each other out.
The only explanation I can see is more retires or more people that gave up looking for a job
Monday, May 12, 2014 8:00am
MTD May
2014 2013
Net Unconditional Sales: 229 659
New Listings: 572 1,428
Active Listings: 4,512 4,783
Please Note
Left Column: stats so far this month
Right Column: stats for the entire month from last year
"The only explanation I can see is more retires or more people that gave up looking for a job"
True - the employment/unemployment stats can't tell if people are retiring, giving up, or giving up and leaving. I suspect the truth lies somewhere in between.
Nonetheless, less people working (and continuing that way)is pretty bearish no matter how you look at it.
Don't know if we'll hit 700 this month...will be close. Market can't seem to take the corner is either direction. A whole lot of boring.
"True - the employment/unemployment stats can't tell if people are retiring, giving up, or giving up and leaving. I suspect the truth lies somewhere in between. "
Except that the stats show our population is growing so they aren't leaving....
Yes - nobody leaves Victoria except in a casket. Amazing but true.
Actual Victoria CMA pop'n growth is at just over 1/2 of 1% per year. woohoo.
2008 345285
2009 348006
2010 351040
2011 352362
2012 353192
2013 355281
or an urn...
Working age population has been declining since 2010:
http://www.bcstats.gov.bc.ca/StatisticsBySubject/Demography/PopulationEstimates.aspx
Greater Victoria ages 15 to 64 from 2006 to 2011 is up +5%
Hate to remind you but jobs dropped off big time between 08/09 and woking age started to decline shortly thereafter. Your stats would have only cuaght the tail-end (which did show a decline in 2011 incidently).
Sorry a 2012 and 2013 decline with your group.
(I was using 18-64 for my working age #s)
From 2006 to 2011, the Greater Victoria population increased 14,827.
The number of dwellings increased during the same period by 8,152. That's about 1.8 new persons per new dwelling. The National average is 2.5 persons per dwelling.
We've been building more dwellings than we need in Greater Victoria. Mostly in condos.
It wouldn't surprise me to find that one quarter of all the newer condos are vacant or around 2,500 condos. That's about a 2 or 3 year supply. Bought by foreign and domestic investors. Condos that are kept mortgage free.
Normally, that would cause prices to come down significantly. But not this time. The action of building creates economic activity and that keeps prices for newer condos stable.
Much like what is happening in the near empty cities of China.
But a condo kept intentionally vacant does little for the local economy after it is built. Vacant condos don't buy beer and pizzas. So you get the scenario of all this new downtown construction, yet downtown businesses are struggling and closing down.
We are building the wrong type of dwellings in Victoria. We shouldn't be building anymore condos that will be left vacant. Instead we should be building low rise family housing like town homes or houses on small lots. Dwellings that attract families and revitalize the core with businesses that cater to families.
CRD population ages 15-64
2011 367887
2012 368727
2013 370913
That look like it's increasing to me....
"we should be building low rise family housing like town homes or houses on small lots. Dwellings that attract families and revitalize the core with businesses that cater to families." This I agree with wholeheartedly. The capital city center lot needs this. High density, town house style for families. Not a condo. Maybe someone will get the lot for the right price to make this happen now that the crooks have gone belly up...
According to BC Stats in CRD we have slightly more deaths than births (presumably because of the older demographic). This is not true province-wide.
That means we need net in-migration just to keep the population stable.
Back to school Dasmo - those are totals not 15-64.
RD Year 15 - 64 Total
Capital 2006 244755 355438
Capital 2007 246657 357279
Capital 2008 249475 360661
Capital 2009 251354 363445
Capital 2010 253054 366515
Capital 2011 253108 367887
Capital 2012 251653 368727
Capital 2013 251437 370913
oops I see that now. I guess I have to admit that the employable age group did decline from 2011 by 0.66% ;-)
Dasmo - there was no single year that employables did not grow from 1986 (earliest data on that BC Stats web page) until 2010, it averaged 1.4% per year growth and maxed at 2.8%. It is now in decline. That is significant.
On the topic of "dwellings that attract families" - you know what attracts families: good schools, friendly neighbours, reasonably priced housing, opportunities for family appropriate recreation, adequate daycare availability and convenient family friendly shopping. I think the Westshore is a fantastic place for families and that the core is quickly becoming undesireable unless you can drop $700k or more on housing. Even if you do drop $700k on housing, you'll spend good portions of your time driving out to the Westshore to go to Costco, playzone, etc.
@Janice
"you'll spend good portions of your time driving out to the Westshore to go to Costco,"
The reverse commute is pretty big on the weekends for sure. Personally after a painful few trips to Costco I decided the economics didn't work for me despite the great savings.
Personally I've found pretty good toddler/preschool recreation options in Vic, Esquimalt and Oak Bay without having to resort to the West Shore commute.. It helps that kids seem to love a certain amount of repetition. I have lost count of how many times I have gone to the petting zoo......
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