Well maybe 734 people last month earn $100k in Victoria. Or maybe it's a big debt orgy.
Well it just got a little harder with CMHC raising rates by 15% (about $2700 extra for the average Victoria home), which we can expect to continue as the government fights to keep the housing market from boiling over. Doubling the TFSA contribution limit plays into this as well by encouraging people to invest in things other than real estate. Of course the tax on zero is still zero.
A good month for the home market in Victoria though. At 5 months of inventory we're solidly in balanced market overall, but as we know from Just Jack's finer analysis, this is only the average of a pretty hot core and a languishing westshore.
That trend of improving market shows no sign of stopping yet.
Sales up 22% YtD over last year. Even though I guessed the highest it looks like I was far too pessimistic in my yearly sales forecast.
124 comments:
From the previous thread (don't you guys take an Easter break?)
I wouldn't be surprised if for April we saw a significantly lower YOY % gain in sales.
Partially this could be due to constantly comparing to an improving market. At some point the YoY % increases need to mellow out, but so far it seems the steam is still picking up a bit.
As evidenced by Leo being too busy mowing his lawn to make a new post....
Actually I came home today to a freshly mowed lawn. Nice to have the MIL around.
Leo, you seem to be busy doing hard work such that you can't start a new thread on the blog. Did you recently become a landlord?
No I'm busy enough. Don't need a second job. I'll leave that to you and totoro (who apparently loves being a landlord so much she wants to sell as soon as the market starts to liven up).
81,000 couple families in Victoria CMA with median income of 88K. Percent making over 150 K ?? - I haven't seen this statistic.
Pretty sure statscan has this. The data is somewhat questionable due to low numbers.
Great graphs again Leo. Your second job could be teaching us older guys how to make nice graphs!
1/ MOI inversely related sales price, and the trend is definitely going the wrong direction if you are house hunting
2/ Cheap debt and limited choices and you can trend SFH @ $543K today to clearing $550K by yearend all things being the same.
3/ Incomes
- it is not how much u make
- it is how much is u save. A family of 4 making $150K is not going to have much left @ the end of the month. A retiree making $100K (e.g. Pension/Investments), you can bet they'll have $80K at the end of year because they are so frugal...not to mention driving up to Costco from the core to buy $20 worth of goods...haha
- wonder if Marko could share some insight into typical age of his buyers? younger? older? I wouldn't be surprised if the majority are 55+
"I wouldn't be surprised if for April we saw a significantly lower YOY % gain in sales."
We just need "info" back. Every month since she predicted "sales will tank" has seen a y-o-y increase in sales.
Info'll be back after the Federal election, in October. Expect the déluge to begin then.
Usually April is the best month for sales. March house sales in the core are up 33% to the level we typically would see in April of around 215 house sales in the core.
Could we have a 33% increase to 300 house sales this April? Or did we draw April sales forward into the month of March due to the drop in the interest rate?
March house sales in the core are up 33% to the level we typically would see in [Just Jack's nightmares.]
Okay Stats Can doesn't have info that I can find that specifically lists income over $150k, but this is what I was able to find... for the year 2011, Victoria specifically:
Total dual-earner families: 54,000 (59.5%) - avg family income $106,600 - median family income $101,400.
Dual-earner families, wife earned more than husband: 15,000 (16.9%) - avg family income $96,200 - median family income $92,600.
Dual-earner families, husband earned more than wife: 38,000 (41.8%) - avg family income $111,800 - median family income $108,000.
Total single-earner families: 25,000 (27.8%) - avg family income $93,900 - median family income $68,600.
Single-earner families, husband sole earner: 16,000 (17.8%) - avg family income $103,900 - median family income $77,900.
Single-earner families, wife sole earner: 10.1%. Rest of data "too unreliable to be published".
Neither spouse had earnings: 11,000 (12.7%) - avg family income $56,500 - median family income $46,000.
I do believe we have reached the second highest median price for houses in the core.
.........$625,000................
Only in February of 2010 did we reach just a wee bit more at $630,000 before tumbling to $562,500 eight months later.
Sale Price, Median
Month 2010 2011 2012 2013 2014 2015
Jan $625,000 $634,000 $582,500 $540,000 $576,250 $542,500
Feb $630,000 $615,000 $576,900 $590,000 $579,000 $597,500
Mar $613,500 $597,800 $576,800 $574,750 $568,950 $625,000
Apr $613,550 $595,000 $590,000 $610,000 $599,450
May $617,500 $616,250 $589,950 $551,250 $609,450
Jun $600,000 $620,000 $585,250 $585,000 $583,000
Jul $582,000 $582,000 $587,500 $570,000 $576,000
Aug $585,000 $580,000 $575,000 $556,100 $595,000
Sep $580,000 $599,900 $545,000 $575,000 $585,000
Oct $562,500 $573,950 $559,000 $579,500 $570,000
Nov $569,000 $563,750 $562,000 $555,500 $569,000
Dec $597,450 $575,000 $566,000 $571,750 $561,250
,wonder if Marko could share some insight into typical age of his buyers? younger? older? I wouldn't be surprised if the majority are 55+
A variety of ages I guess, no particular majority.
Dual-earner families, wife earned more than husband: 15,000 (16.9%) - avg family income $96,200 - median family income $92,600.
Would be curious as to how this one breaks down by age group.
Well, finally back to 2010.
Wonder what will happen next.
My best guess is that prices in the core will continue to rise modestly keeping pace with inflation.
I do believe we have reached the second highest median price for houses in the core.
.........$625,000................
Booya!
@Leo S
As always, thanks for the informative charts!
I notice that listings are really picking up in my VREB Matrix accounts. In previous years, the listings have usually taken off a month earlier. Maybe there are some homeowners hoping to "cash in" before rates rise (and prices adjust accordingly)?
House listings in the core seem to be coming to market at about the same rate as last year.
What I've noticed though is that the pace of sales in the first week of April has dropped off. Realistically though it is too soon to tell if the higher prices have negated the drop in the interest rate.
We need to wait for more data to come in to make sure one way or the other.
Although I suspect we may have reached a price ceiling in the core. From time to time we have bumped up to the peak and then moderated downwards.
That seems to be the most likely scenario for the rest of the year.
Aha, JJ has gone Halibut...
Looking forward to the chart "The Salary You Need to Rent a Home In Cities Across Canada."
Since Info's taking a break, I thought followers of this blog would appreciate the latest pearl of wisdom from Garth:
"Always remember this. Houses cost too much because mortgages cost too little. When rates rise – even a little – real estate falls.
This is not a new normal. It’s a trap."
Well, if you are going to head over there you'll find Info is still posting up a storm:
http://www.greaterfool.ca/2015/03/12/the-scent-of-a-fall/
http://www.greaterfool.ca/2015/03/05/subprimal-2/
I wonder how Garth would explain how houses went up more than 10 fold between 1945 and 1981 as mortgages went from 2 something % to 20%.
I wonder how Garth would explain how houses went up more than 10 fold between 1945 and 1981 as mortgages went from 2 something % to 20%.
One factor is that the adult hourly minimum wage increased from $0.31 in 1945 to $3.35 in 1981.
Another factor is that zero down mortgages, or anything like, were unavailable in 1945. So despite rising interest rates, the amount people borrowed nevertheless probably increased between 1945 and 1981, though I have no data to test that assumption.
In my opinion, the higher premium for insurance is indicative of CMHC loosing money rather than the government trying to put the brakes on the housing market.
The extra $2,700 is just added to the mortgage and amortized over 25 years. That really isn't a deterrent or barrier to entry into the market for a home buyer.
Monday, April 13, 2015 8:00am
MTD April
2015 2014
Net Unconditional Sales: 264 664
New Listings: 561 1,521
Active Listings: 3,870 4,404
Please Note
Left Column: stats so far this month
Right Column: stats for the entire month from last year
Inflation or Deflation and Interest Rates
If you thought the spring rush in the core real estate market was just pend-up demand, wait until Wednesday. That's the day Poloz makes his next announcement.
Does he or doesn't he? Will he or won't he?
Does he fear DEFLATION? Will be drop interest rates to 0.5%
Expert predictions are that he will go to 0% sometime in 2015 if oil prices stay low.
If you thought we were having a spring rush from pend-up demand, wait until Wednesday. If Poloz drops rates again then watch house prices go for another spike.
My guess is he will drop rates again before mid-summer and that will cause a spike in RE prices...in Victoria, but panic in the Calgary RE market.
If you have a spare hour you can read and digest this detailed overview:
Globe and Mail Article
This Google search has some interesting related links:
Google Search
This is the Google link I tried to insert...
https://www.google.ca/?gws_rd=ssl#tbm=nws&q=poloz+"april+15"
Teranet for March: 139.7
Down 0.24% MoM
Up 3.27% YoY
Just helped friends bought a house in Victoria/Oak Bay border on the weekend. We were students together in UVic back to 27/28 years ago, and they moved away to Calgary for work after graduation. They want to move back to Victoria, just like us, to retire. And they have multiple friends who want to do the same.
The house was listed on last Thurs, they saw it on mls Friday morning. After we viewed the house, they flew over on Sat morning, bought it by 1pm the same day, and they were one of the 6 offers. A solid house, excellent location, very good price for the area, even after the biding war.
^^^ That's Victoria for you!
How about a look at the prime districts in the core. Those hoods are Victoria, Oak Bay and Saanich East.
About 400 houses for sale, with about 160 sales in the last 30 days. The calculated Months of Inventory is 2.5 and the median Days-On-Market is 13.
In the same 30 day period another 262 homes were listed. That's a sales to new listings ratio at 61%.
Less than 5 MOI, an SNL% greater than 60% and a DOM under 30 days is market in favor of sellers. With the better properties likely having bidding wars.
If you're bidding on any of the better properties you're likely going to have to pay in excess of its market value to obtain the home.
If you have deep pockets that fine. You can afford to kick in an extra $10,000 to $50,000, for a middle income home, that you can write-off. That money is gone - you'll never see it again.
Keep in mind that banks don't lend on what you offered they lend on market value. You can overpay for a property but a bank is not going to over lend on the property.
If you're at the affordability margin and get caught in a bidding war you're gambling that the bank is going to back you. That may not happen and unless you can come up with extra cash for a bigger down payment, the sale may collapse. And the property may be put back onto the market.
And since inventory is starting to build slowly, if the property comes back onto the market, in a month from now, it may sell for less than your bid.
The silver lining to this cloud is that if you lose a home to a bidding war, there is a chance that the home will be re-listed.
I am seeing a lot of sold signs in VicWest....SOLD! SOLD! SOLD!
Certainly worthwhile taking a look at VicWest.
59 condos for sale. 14 sold in the last 30 days. 33 new listings added in the same 30 days. Median exposure of 43 days DOM
4.2 MOI
42% SNL%
43 DOM
A balanced market would, in most cases, be 5 to 7 MOI, SNL% between 40 to 60 percent and a DOM between 30 to 90 days.
The market for condos in Vic West looks slightly in favor of sellers. But not favoring sellers enough to create bidding wars on appropriately priced condos. Which is a good thing because a market with collapsing sales is destabilizing.
The Days on Market for condos can be a bit tricky when it comes to pre-construction or buildings that have not been registered at the lands registry.
Seeing old listings move fast. A few houses that seem to have been listed for the last three years...SOLD. Can I revise my predictions? I expected a later build after rates were at 1.99%. This early activity combined with the BOC rate drop to .5% is going to fan the flames. I wouldn't expect burning houses on the cover of McLeans for a while now....
Ideally, this shortage of listings will continue and spread out to the Western Communities propping up prices.
March had a 30 percent increase in the number of sales over that of March 2014. However, so far April is showing the same volume of house sales as last year in the core.
Maybe Poloz has to drop the rate again to stimulate demand because it seems that the bloom has come off the Rose on the last interest rate drop. The rise in prices seems to have negated any benefit of the lower interest rate.
"If you're bidding on any of the better properties you're likely going to have to pay in excess of its market value to obtain the home."
A price obtained via an open auction is nearly the exact definition of market value.
From wikipedia:
Market value or OMV (Open Market Valuation) is the price at which an asset would trade in a competitive auction setting.
The Canadian courts have ruled on the definition of market value for real estate not Wikipedia.
DEFINITION OF MARKET VALUE: The most probable price which a property should bring in a competitive and open market as of the specified date under all conditions requisite to a fair sale, the buyer and seller
each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.
Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: buyer and seller are typically motivated; both parties are
well informed or well advised, and acting in what they consider their own best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in Canadian
dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale.
(Source: Canadian Uniform Standards of Professional Appraisal Practice)
If two bidders get caught up in the emotion of bidding on a home that doesn't change the market value of the property.
You simply have the last two bidders acting in an irrational manner. They can bid the price up as high as their cheque book will allow them. That doesn't mean the property's market value has gone up. Nor does it mean that all properties in the neighborhood have suddenly increased in value because of a few irrational bidders.
If someone offered $50,000 for a Ford Pinto would that make all Ford Pintos worth $50,000? Of course not. That's just common sense. However when it comes to real estate we seem to lose our common sense.
It would be the market price for that Pinto. Maybe it was owned by someone famous....
Jon Voight's Pinto?
I was thinking Gary Busey....
If you're bidding on any of the better properties you're likely going to have to pay in excess of its market value to obtain the home.
Market value being:
The most probable price which a property should bring in a competitive and open market as of the specified date under all conditions requisite to a fair sale, the buyer and seller
each acting prudently and knowledgeably
These statements appear to entail a logical contradiction. They amount to saying that the probable price is above the probably price, i.e., the market price, which is less than the price the market will bear!
But watch out: the probable price may soon be below the "market price" according to this item by wolf Richter:
Magnificent Housing Bubble Unravels in Much of Canada
If two bidders get caught up in the emotion of bidding on a home that doesn't change the market value of the property.
You simply have the last two bidders acting in an irrational manner.
You're pretending as though irrationality isn't subjective.
One sale does not make a market.
What we're seeing now may prove to be only the first leg up in a property hyper-bubble if European-style negative interest rate mortgages come to Canada.
Probably not that dramatic. Nothing has been so far. Just an uptick after some flat years that allowed prices to moderate after a strong run up.
If you want to stimulate the economy then relying only on interest rates isn't going to be enough.
The government would have to pay people to buy new homes.
If you buy a NEW home you get a tax credit.
Why only new? Because building has a multiplier effect on the economy.
Property taxes would be geared towards energy efficiency of the home. Older less efficient homes would pay more property taxes than newer homes. This would encourage demolition of the older homes and once again stimulate the economy with new construction.
Cities could better manage the land base by targeting run down neighborhoods making it economically feasible to tear down the older homes rather than keep them. As it is now, our property tax system encourages people to allow their property to run down and penalizes those that improve their homes.
You could have entire city blocks demolished and assembled into efficient small lot housing. Including new city infrastructures like sewers, water, storm, sidewalks provided at a fraction of the cost rather than the one lot at a time method which is very expensive.
"The Canadian courts have ruled on the definition of market value for real estate not Wikipedia."
The quote you gave is not from a Canadian court decision it is from appraisal standards, a definition which everyone on this blog is aware of since you have posted it multiple times
"If two bidders get caught up in the emotion of bidding on a home that doesn't change the market value of the property."
Equally you can't reject open market sales as a powerful indicator of market value. Are you going to reject all recent sales as being subject to "undue stimulus" or perhaps label all the recent buyers as not `acting prudently and knowledgably`
According to Just Jack, all sales occurring after 2001 are irrational.
But we know from where JJ's resentment derives: the fact that he's one of the few Gen X-ers who, because he didn't buy a house in the 90s, has effectively been priced out of the market.
Actually it is international valuation standards that Canadian Courts recognize. Also the Appraisal Foundation (USA). And the Appraisal Institute of Canada.
The Courts are not in the business of writing definitions.
http://www.ivsc.org/
see also
The Appraisal Foundation, the Appraisal Institute of Canada, Universal Standards of Appraisal Practice, the Canadian Universal Standards of Appraisal Practice.
This definition of Market Value has been developed by court cases and precedents.
Not by Wikipedia.
Those are all straw man arguments.
A careful reading of the definition of market value eliminates all of those contradictions you've implied.
The downtrodden appraiser-renter with his textbook definitions of market value and myriad wave metaphors to explain how what occurs in Sooke will surely--one of these days--impact South Oak Bay.
The government would have to pay people to buy new homes.
Which is what they seem to be doing in some European countries by facilitating negative rate mortgages.
But I agree there are better ways to stimulate the economy. It would be good to see stimulus funding supporting imaginative proposals for creating well designed/engineered communities instead of more boring spread out suburbs that promote the automobile culture and destroy the best farm and horticultural land, e.g., Gordon Head.
@Just Jack
You could have entire city blocks demolished and assembled into efficient small lot housing. Including new city infrastructures like sewers, water, storm, sidewalks provided at a fraction of the cost rather than the one lot at a time method which is very expensive.
In a different time and age - that was actually done here in Victoria. Check out the history of the Blanchard Street Thoroughfare at: http://www.victoriaheritagefoundation.ca/Neighbourhoods/hillsidequadrahistory.html.
Virtually nothing remains of the original houses in the “Hillside Extension” because the Urban Renewal Report in 1961 recommended that it be the city’s first priority for redevelopment. Citing the fact that 127 houses (representing 97% of the total) were constructed before 1912 and that 76% of them were in “poor” condition, it advocated their total demolition and replacement with 120 units of community housing to be funded jointly under a federal-provincial scheme. The concept was approved and Blanshard Court was built, with 157 families being displaced in the process.
Marko, I've always wondered: do vacant homes sell any faster than occupied ones?
The house my friends bought on the weekend is vacant and an estate sale (owner lived there for over 50 years, just passed away). Vacant homes are convenient to view at anytime (as long as the Realtor can make it, which is normally the case), and buyers can walk outside at anytime, and sit on the patio and calculate the numbers. ;-)
Note for houses/lots sit over the border, the property assessment value need to be combined from the numbers in both municipalities. Otherwise, you could be missing a big piece, and make wrong price judgement.
jj - you said the Canadian courts have "ruled on" the definition of market value. Can you point us to such a ruling?
Ruling on an issue is quite different than "recognizing" something that professional or industry associations develop.
Marko, I've always wondered: do vacant homes sell any faster than occupied ones?
I would say that properties that are very difficult to show can take longer to sell, but a super easy to show non-vacant home probably sells just as quickly if not faster as a vacant super easy to show home, all other factors being the same.
jj - accepting your definition of market value which is actually incredibly similar to (though more fulsome than) the Wikipedia definition it seems like an appraiser would have to accept either:
a)the market value of a home is largely determined by sales of similar homes (including potentially as one data point the subject home)
b)everyone in that market segment is acting irrationally so the sales data is an unreliable indicator of market value.
For instance you claimed that buyers of "better properties" in Victoria, Saanich, Oak Bay would have to pay above market value.
If everyone is paying "above market value" how do you distinguish these two possibilities:
1) the market value of "better properties" in those areas has actually increased.
2) all purchasers in the market segment are acting irrationally
One can say that irrational exuberance pushed average SFH prices in Vancouver to over a million dollars, but that is still their market value.
Hypothetically speaking, if the Wikipedia definition of market value was accurate for real estate then no one would ever overpay for a property. Market Price would be equal to Market Value.
Irrational behavior would happen when someone is not acting prudently and not well informed. That behavior would lead someone to pay $2,000,000 for a property that is only worth $1,000,000. Such as someone who is caught up in the emotional environment of an auction.
Anyone who has ever been to an auction has seen examples of people getting caught up in the excitement and bidding $300 for a bike that can be bought at Walmart for $100.
I'll let Introvert answer this one.
If a Port Renfrew home sells tonight for $750,000 what is its market value?
I think in real life the market value is indistinguishable from the last sale price. Yes someone may have over or underpaid by some $10,000 or so but almost never will it happen that the purchase price is wildly out of whack with market value. For all intents and purposes the terms are interchangeable.
And I've yet to see a bank actually act prudently when lending. Bank assessment for our property came in $20,000 over the purchase price but I guarantee you we didn't get a $20k discount over market value.
If you're trying to estimate the market value of a property you can't use the property your appraising as a comparable sale.
Because it isn't a comparable.
You can't compare Hank Arrons carreer to Hank Arron's carreer. You have to compare him to someone else.
Most of the time Market Price and Market Value are equivalent.
Only when the marketplace is distorted by low listings and high demand can Market Price and Market Value diverge wildly.
When you have under a months worth of inventory, 90% of listings are selling in under a week. Then you can get bids of several hundred thousand dollars over market value in places like Vancouver and Toronto.
The rational person would step back and stop bidding knowing that other houses will be coming up for sale. The irrational person will keep bidding until they get the house at any price. And that's not market value.
It sounds to me like market value is inherently unknowable. People can have opinions on what it is backed up by whatever formulae or evidence they may have, but there is no true and correct and agreed upon answer as to what it is. Otherwise everyone would just pay market value and no more.
In real life the last sold price seems to be one of the more accessible guidelines as to what market value may be. Then again if Jack runs through his calculations and determines people are being irrational he may say that last sold price is ultimately not a good indicator of market value.
Dave3
You can't compare Hank Arrons carreer to Hank Arron's carreer.
Interesting spellings of both "Aaron" and "career."
"If you're trying to estimate the market value of a property you can't use the property your appraising as a comparable sale."
That surprises me. I had assumed for example that if the subject property sold a year ago and now sold again with no major change to the property that the previous sale would be a good data point. To use your example - kind of like comparing Hank Aaron's '55 season with his '56 season.
so funny to read market value and market price.
look at the stock market, there is always book value and the stock price.
so very simple
price = what 2 parties price wise in absolute terms will exchange an asset at.
value = metric in accounting terms based on bunch of variables that it might be worth.
the delta between the 2 are market factors and human emotions.
Great house for sale on Willows Beach:
http://www.realtor.ca/propertyDetails.aspx?PropertyId=15539611
2014 Assessment: 1,325,000$
Asking: 2,195,000$
Delta = 870,000$
We love that property, but our human emotion is not worth an extra 870,000$.
Because we are cheap, close to assessment is what we would offer them. What do you think are our chances? haha
If you want to determine market value for a property you need to look at a judgement sample of at least three alternative properties that the person could have purchased instead of the subject in the last say 90 days.
The two things wrong with using the subject sale from a year ago to estimate current market value is that the person did not have the option of buying their own home again and last years sale price isn't showing what is happening in today's market.
The past sales history of a property can be supportive evidence as long as you can demonstrate how market values have changed over time relative to how the price of this one property has changed over time.
When you pay in excess of market value for any asset that will likely have an effect of your net profit when it comes time to sell.
Yet you can take advantage of a market that is very heavily weighted towards the seller and chose when to sell your home. You can pick when to buy and when to sell in order to maximize net profit.
I doubt people would do this with their principle dwelling. However it would be good to know when the market is in your favor when selling investment, unique and hard to sell properties.
"I never doubted my ability, but when you hear all your life you're inferior, it makes you wonder if the other guys have something you've never seen before. If they do, I'm still looking for it." -Hank Aaron
In an efficient market, market value is always the sold price, ie. any listing with high market exposure like MLS.
Anybody else surprised Calgary and Edmonton have already turned upward on the March Teranet numbers?
That behavior would lead someone to pay $2,000,000 for a property that is only worth $1,000,000.
It was worth $2Mil to the seller wasn't it? But I guess what the lender wants to know is what they would get if they had to sell it.
Buffet said, "price is what you pay, value is what you get". However the value he's talking about is fundamental value derived from earnings (rental value in the case of RE), and has nothing to do with market value as used by appraisers.
Stock valuation (as done by analysts) is not an appraisal, i.e. it's not based on sale prices but on expected earnings.
In an efficient market, market value is always the sold price, ie. any listing with high market exposure like MLS
RE markets are not efficient, the most obvious reason being you can't sell short. Every property being unique is another.
They may not feel efficient for the patriot who bought in Ottawa last year,.. ahem, you should have listened to me and bought in Vancouver.
But the Teranet numbers show a new winner in Canada for worst housing market: Ottawa-Gatineau…And it suggests prices in Ottawa were falling at a 14-per-cent annualized pace in the first quarter of the year.
http://www.huffingtonpost.ca/2015/04/14/house-prices-canada-teranet_n_7064620.html
"I never doubted my ability, but when you hear all your life you're inferior, it makes you wonder if the other guys have something you've never seen before. If they do, I'm still looking for it." - singer ridiculed by Simon on American Idol....
One thing I always find interesting is when my buyers asking me "what do you think the market value is," when there are 3-4 offers in a multiple bidding situation.
Does it even matter what "market value" number I come up with? If you want the house you probably need to go asking or above asking irrelevant of "market value."
Well Phil,
The property has to be exposed on the real estate market for a reasonable period.
A reasonable exposure on the real estate board is most often quoted at between 30 to 90 days.
Zero days on market would not be considered reasonable exposure.
Market exposure is explained in the definition of market value for real estate but not included in Wikipedia's definition.
Market Value for real estate is different than financial valuation as real estate derives its value from what is physically there or under a hypothetical assumption what is proposed to be constructed.
I agree, in order to get the house the purchasers would have to pay over market value.
Two years later the same purchasers want to refinance their home at a higher amount but the property's market value is lower because they paid too much.
And the home owner falsely blames the real estate agent for talking them into paying too much.
I would think an agent would have to be careful explaining the difference between market price and market value to his/her clients when entering into a bidding war. Because some people don't understand the difference between the two.
Most of the time Market Price and Market Value are equivalent. However, depending on the property and the market for that property the two can be significantly different.
Buffet said, "price is what you pay, value is what you get".
It's always good know what a buffet says. And dessert carts, too, can be very incisive.
Market value for a primary residence is an educated guess... Enough people overpaying for solar properties will adjust that value....
Does it even matter what "market value" number I come up with? If you want the house you probably need to go asking or above asking irrelevant of "market value."
Yes, if you really want that house, it doesn't really matter.
However, if you don't really want that house, or if you're hellbent on never ever overpaying for a property, then it does matter.
If you don't want to overpay for a property, Detroit is a great place to look. And your would-be neighbours are super friendly: they won't hesitate to invite you for some barbecued raccoon.
Good luck getting a "deal" anywhere in Oak Bay, Victoria or Saanich East. There's too much demand, too many eyes carefully watching each property that gets listed.
The days of sometimes getting a "deal" in these areas are pretty much gone, in my opinion.
Good luck getting a "deal" anywhere in Oak Bay, Victoria or Saanich East. There's too much demand, too many eyes carefully watching each property that gets listed.
The days of sometimes getting a "deal" in these areas are pretty much gone, in my opinion.
A lot of my listings in the core hit over 1000 PCS accounts + Realtor.ca exposure.....yet there is a ton of naive buyers out there that they somehow think in this day and age they will score a deal.
There still are a lot of deals. Look at Cedar for 550k, Vista for 450k and a lot of others. These are 2006 07 prices with int rates at half of what they were then.
You have about 4 months of house inventory for sale in Oak Bay these days. That's an improvement from just a couple of months ago. And a heck of a lot better than Saanich East with only 2.5 months or Victoria City with a smidge over 2 months now.
Months of inventory is increasing slowly. And it looks like prices in the core may have dipped a very small amount down to a median of $615,000.
It's still a good time to sell a house in the core and will likely continue to be good for at least the next 90 days.
Can someone tell me why we shouldn't expect house prices to go down in lockstep with interest rates going up (assuming they ever do..)? I just look around at people I know getting mortgages, and the method is simply to see what the max they can borrow is, and then to go spend that much or more. Surely this type of buying will be immediately and directly affected by any interest rate hikes? In other words, can someone please convince me that this isn't a horrible time to buy a house?
What was the latest affordability graph you did Leo? Seems like that's a good place to start to answer Supernova's question.
Dave3
Can someone tell me why we shouldn't expect house prices to go down in lockstep with interest rates going up
There are many examples of the opposite happening, ie. 1971 to '81 houses in Victoria went up 5X from about 25K to 125K as 5-y mortgage rates went from 9% to 21%. As mortgage rates rise, some regions of the country will do poorly and some very well. I don't believe Vic will go up 5-fold from now to 2025. But never say never.
Rates will rise when incomes do...
In other words, can someone please convince me that this isn't a horrible time to buy a house?
The right time to buy in the core was 2013/early 2014, but I wouldn't say now is a "horrible time." Probably less risky than 2010.
The much more important factor is finding a property that is the right fit for you versus trying to time the market.
Why are so many Canadians whose families have lived here for generations still worried about interest rates and house prices for little average homes? One would think that such families would have made it by now. I guess not.
I can't even imagine paying for a car with a loan over 5 years or even 7 years nowadays.
If one cannot afford Victoria maybe just move to Nanaimo or Port Alberni.
You have to think long term when buying a property today.
Will the house meet your needs 10 or even 15 years from now?
That isn't as easy as it sounds. Most new home owners will sell in under 7 years. That being a long term commitment to a lot of Canadians.
First time buyers tend to buy too little of a house and simply outgrow the home as children and pets come along. Or they buy a house that the spouse doesn't want. Such as a fixer upper that never gets fixed. That's a divorce settlement coming your way.
After reading the above, if you find yourself saying that you can't afford what you want. Then this isn't the market you should be buying into.
Rent until the market turns in your favor.
Or your spinster aunt dies leaving you her Gordon Head home along with a box of unmarked grammar papers.
If you think now is a bad time to buy because interest rates will go up, then you're right, it is a bad time for you to buy. If you can afford to buy now, then you will buy a better house for less money after interest rates have gone up a few percentage points. That's the easy part. The hard part is 'When?' It might be a few years before rates rise 3% above current rates due to all the deflationary pressures in the world today.
you will buy a better house for less money after interest rates have gone up a few percentage points. That's the easy part. The hard part is 'When?' It might be a few years before rates rise 3%
The last time mortgage rates went up 3% between 2004-2008, prices went up about 50%.
http://www.sonofabroker.com/wp-content/uploads/2012/12/Picture-1.png
Two years later the same purchasers want to refinance their home at a higher amount but the property's market value is lower because they paid too much.
No they didn't pay too much. According to Marko, they paid what they probably had to pay in order to have the winning bid in the auction that was taking place at the time they bought.
In other words, they paid market price. Later, if they had to sell for less, it was because the market price had declined.
The only way anyone overpays, i.e., pays over the market price, is if they pay substantially more than the next highest bidder was prepared to pay.
I can't even imagine paying for a car with a loan over 5 years or even 7 years nowadays.
These days it is really tough to get enough of an incentive on a cash car purchase to forgo the dirt cheap financing/leasing most manufactures are offering.
Good point on the car loans Marko, I'm just saying even with 3% loan its harder for most people to get extra returns on top of that money if they have it to invest. Most people in society are just getting by as society is one giant pyriamid when it comes to the socioeconomic stratification.
I had no student loans in university, parents paid for everything. Bought a classic sports car as teen and drove a jalop for everyday driving.
Most cars even German cars go to zero dollars eventually. Better to buy a classic and drive a jalop for everyday.
I feel sorry for most people as their not brought up to think about finances and if you bring up the topic with those people they get stressed.
Phil said: The last time mortgage rates went up 3% between 2004-2008, prices went up about 50%.
-------------
It was a different time back then. So many things were different. For example; we just dumped the NDP Socislists in BC after their decade of decline through the the 1990's and the average house was about three times annual income. There was pent-up demand in 2002 after the Liberals revitalized the province. And, prices had been stagnant and low for over ten years. It's not like that today; for instance the average house is about eight time annual income. There are lots of reasons why prices could go down but few reasons for increases. But people will believe what they want to believe; just ask any advertising executive.
I feel sorry for most people as their not brought up to think about finances and if you bring up the topic with those people they get stressed.
Wait so you coasted on your parents money and you are judging other people about finances?
Exactly.
Yep sounds like good financial planning.... Get parents to pay for university, and buy you a German sports car you don't drive, have them also buy you a second car you do that's a piece of shit... And have them buy you a house... Simple... What's everyone bitching about?
And, prices had been stagnant and low for over ten years.
I'm sure it was closer to 7 years, or about as long prices have been stagnant now.
It's not like that today; for instance the average house is about eight time annual income.
I’m sure it’s closer to 6. However with techie, zoomer, foreign money starting to migrate in, I really see it closer to a 3 for them. I often overhear visitors say how cheap they think our prices are.
There are lots of reasons why prices could go down but few reasons for increases.
I see the reverse; few reasons prices could fall. Too much money being printed around the world. Time will tell.
@ Phil "The last time mortgage rates went up 3% between 2004-2008, prices went up about 50%"
During the period 2004-2007, there were also more relaxed government lending rules which helped push up prices:
- Zero down payment (or less than 20% requiring mortgage insurance - which was down from 25%)
- 40 year amortization.
- Change in allowable loan to value ratios from 85% to 95%.
A timely Globe article after this week's discussion: Carried away: Bidding wars push homes past bank valuation
Caption: Some Canadian markets are so hot the term 'market value' is losing its meaning
I guess it's the end of bubbles bursting in the media (short lived as it was) and back on to pumping it up.... The Mcleans article will be the canary....
So how many quick sales, list to sell in under 30 days, have we had in the core house market?
Out of the 110 houses listed between March 15 to April 15, 93 have sold. The sales to assessment ratio ranged from a low of 75% for a home needing a lot of work to a high of 166% for a renovated South Oak Bay home. The typical home selling at around 110% of its assessed value.
You would think that this month the core would be experiencing an increase in prices like we saw each month so far this year.
Month Median Price
Jan $542,500
Feb $597,500
Mar $625,000
Apr $630,000
But it doesn't seem to be happening. Have we hit a price ceiling? The upper limit of affordability in the core?
The Condo market in the core has been robust this year too.
Month Median Price
Jan $265,000
Feb $310,000
Mar $279,950
Apr $280,000
A market that I assume to have a greater percentage of first time buyers than the detached house market. Despite a short supply and increased demand over last year, this market seems to have peaked back in February.
In my opinion, the price velocity of condos may be an indicator of future prices for houses.
And if I may plagiarize, the future for house prices in the core looks like it will follow the condo market and be as flat as a Halibut.
Can you give me an opinion about this house? Thanks
http://www.realtor.ca/propertyDetails.aspx?PropertyId=15321216
can't seem to get the link to work?
I think it is this one:
http://www.remax.ca/bc/victoria-real-estate/na-800-royal-wood-pl-na-crea_id15321216-lst/
I think the complacency buyers are not aware of is not the interest rate or inflation fears, but the risk of a credit squeeze in international markets. Seen several articles the past few weeks of early signs in UK, and US of credit rejection increases and concern from the IMF. Canada will not be immune if fears of 2007-08 credit crunch start to become reality.
http://www.telegraph.co.uk/finance/economics/11538509/IMF-tells-regulators-to-brace-for-global-liquidity-shock.html
After spiking in March, sale volume are back to normal again.
The first 15 days of this month we saw 101 house sales in the core districts which is about the same for most of the last half dozen years.
The highest were recorded in 2002 and 2005 when there was around 140 sales. The lowest volumes in the same decade were around 75 house sales.
Inventory is steadily rising in the core and we should reach 600 active house listings some time this month.
@JustRenter
Regarding 800 Royal Woods ... It's inexpensive for a reason. I'm sure that there would be lots of noise coming from the Pat Bay highway: https://goo.gl/maps/t9TYz
"risk of a credit squeeze"
?
I only see credit loosening on the horizon and only risky if you have no assets in order to gain your share of the money creation.
Today example: http://www.wsj.com/articles/chinas-central-bank-kicks-it-up-a-notch-1429458102
Monday, April 20, 2015 8:00am
MTD April
2015 2014
Net Unconditional Sales: 479 664
New Listings: 879 1,521
Active Listings: 3,894 4,404
Please Note
Left Column: stats so far this month
Right Column: stats for the entire month from last year
Thank you DavidL! That is true.
Two other points might be that the property is a corner lot siding along a residential collector road and the property has a minimal rear yard. Factors that may deter some prospective purchasers.
While this neighborhood is described as Broadmead, it is at the fringe. Properties accessed off Falaise do not readily command the premium that you'll find several streets to the east off of Boulderwood.
The hood is just a a half step off from the mainstream Broadmead buyer and that's why the price is so appealing.
Started a position in ETSY @ $25. Just for the record....
Just Jack thank you!
The 1.99% mortgages are coming.
https://www.cibc.com/m/mortgages/fixed-rate-closed-mortg.html?WT.mc_id=ExtPAID_campG-E-Mortgage_General_kwdcanada_+mortgage_adgrpmortgages-E
Hi, I think that I saw you visited my web site so I came to “return the favor". I am trying to find things to enhance my web site! I suppose its ok to use some of your ideas!!
토토사이트
Post a Comment