House Hunt Victoria

Jan 23: Monday Market Update

2012-01-22T20:52:00.000-08:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

January 2012 (last week's numbers)

Net Unconditional Sales: 240 [154] (52)

New Listings: 717 [497] (228)

Active Listings: 3456 [3428] (3,358)

Sales to new listings ratio: 33%

January 2011

Net Unconditional Sales: 339

New Listings: 1,187

Active Listings: 3,283

Sales to new listings ratio: 29%

Sales to active listings ratio: 10.3% or 9.7 MOI

Not much to say about this one. Looks like we're on pace to more or less match last January's numbers, except with 5% higher inventory.

Jan 16: Monday Market Update

2012-01-16T09:17:00.000-08:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

January 2012 (last week's numbers)

Net Unconditional Sales: 154 (52)

New Listings: 497 (228)

Active Listings: 3428 (3,358)

Sales to new listings ratio: 31%

January 2011

Net Unconditional Sales: 339

New Listings: 1,187

Active Listings: 3,283

Sales to new listings ratio: 29%

Sales to active listings ratio: 10.3% or 9.7 MOI

Hi, Leo S here. I've offered to prepare some of the regular stats-related updates for HHV to save him the work. The blog remains HHV's, and I intend to keep my remarks to a minimum. However in the future I would like to resurrect Double Agent's charts of this kind of data (active listings, sales, inventory, MOI), which I found very helpful. Thanks to HHV for keeping the blog going.

2012-01-15T13:57:00.000-08:00

Breathing again. Back to our regularly scheduled programming Monday. Thanks to everyone who expressed concern. Regrets to those who'd danced with joy believing I'd written this little corner of the Interwebs off.

The truth

2012-01-03T21:13:00.000-08:00

You can read the spin, or you can learn the truth. Year over year, single family home prices in the VREB reporting area fell by 8.4% between December 2010 ($647,063) and December 2011 ($595,582).

Marko Juras gives us the sales volume breakdown in unit sales and dollar amounts:

2007 = 8,931 unit sales: 12.23%
2008 = 6,519 unit sales: (27.01%)
2009 = 8,096 unit sales: 24.19%
2010 = 6,546 unit sales: (19.15%)
2011 = 6,040 unit sales: (7.73%)

2005 - $3,206,969,321
2006 - $3,373,171,099
2007 - $4,146,651,569
2008 - $3,111,882,746
2009 - $3,775,730,705
2010 - $3,239,493,835
2011 - $2,981,977,290

No matter how many times industry reps repeat the "balanced market" mantra, the numbers don't live up to the lie. It wasn't a balanced market. Not compared to 2010, nor 2009, nor even the height of the dismal 2008 market. 2011 was an absolute stinker compared to 2007. A flop when evaluated against 2006 and just "a wee bit off" when you go so far back as 2005. Truth be told, you have to go back a decade to find a market like this past year. Remember then? That was back when everyone was telling you that real estate was a horrible investment.

It's true though: when expressed as an annual average, the market only fell by just under 3%. Until you add in inflation to your loss, which effectively doubles it. Heck. A piddly little one year GIC paid better than Victoria single family home real estate last year.

But don't worry if you bought last spring, you're in it for the long haul right? Hopefully you bought in Fernwood.

2012

2011-12-28T10:06:00.000-08:00

End of the world? Doubtful. End of the Victoria real estate market stability? Perhaps.

Here's a prediction post for you to do some educated guessing.

From Animal Spirit:

Spent a bit of time modeling the relationship between the listing price to sales price ratio (y axis bar) and month within 2011 (x axis bar). While the pending, new listings and price change ratio medians jump about quite a bit, the sum of all listings with an update on PCS exhibits an extremely strong relationship to month. A full 92% of the variability in the median list price to assessed price ratio (for the median for the entire month) is explained by the month of the year. Using the equation y = 106.14 -1.0428 x, one can see that list prices started at 106% of assessed and have dropped by 1.04% per month. Only 8% of the change in the list price to assessed price (monthly median) ratio is not explained by the chimes of the clock.

Looking forward, what does this mean? Absolutely nothing of course. Unless you want it to be different here. Or prefer to see if the 7K drop per month on a 500K house continues.

Here's an interesting blog post with all kinds of good, sound, expert economic analysis of the Canadian housing market data. It doesn't deal directly with Victoria, but offers some provincial analysis that we can reasonably extrapolate to the local market. Isn't a particularly pretty picture, but then again, nor has the Victoria market been a pretty picture post 2009.

And of course, we have Marko Juras to thank for the December 2011 snapshot to further base some of your predictions on (still 3 days left though):

December 2011 (month to date)
Net Unconditional Sales: 301
New listings: 441
Active listings: 3,695
Sales to new listings ratio: 68%

December 2010
Net Unconditional Sales: 349
New listings: 522
Active listings: 3,252
Sales to new listings ratio: 66%
Sales to active listings ratio: 10.7% or 9.3 MOI

On a personal note, I want to thank the dedicated readership here and the contributions of the those who share data and anecdotes. This blog and its discussion is so much more because of your time and efforts. It's appreciated and you're the reason why it continues to be what it is. If it weren't for your commentary, analysis and data sharing, it would have morphed into home-updating-on-a-budget 101, which partially explains my growing absence.

Double counting

2011-12-14T13:03:00.000-08:00

US home sales, for the past 5 years, seem to have been, in some cases at least, double counted. WOW. So the NAR misreported already weak home sales, on the upside. Who would have thunk it? A weak market is weaker than they tell us. Sheeeeeeeet.

Early this year, the Realtors group was accused of overcounting existing homes sales, with California-based real estate analysis firm CoreLogic claiming sales could have been overstated by as much as 20 percent.

Could this also be happening locally? Now don't get me wrong, I'm not making an assertion that monthly data released by local boards across the country is nefariously manipulated to misrepresent the strength of the market. I'm just asking a question: why do we put so much trust in data so jealously safeguarded against third party verification? Is the Landcorp info, or the Teranet info, enough to allow a firm like the US-based CoreLogic from exposing issues with the reported data?

Monday market update: pre-holiday doldrums

2011-12-12T10:11:00.000-08:00

MLS numbers are courtesy of the VREB via Marko Juras. Numbers are for the entire board reporting area, including Gulf Islands, Sooke and Shawnigan Lake.

December 2011 (month to date)
Net Unconditional Sales: 146
New listings: 222
Active listings: 3,879
Sales to new listings ratio: 65%

December 2010
Net Unconditional Sales: 349
New listings: 522
Active listings: 3,252
Sales to new listings ratio: 66%
Sales to active listings ratio: 10.7% or 9.3 MOI.

We're averaging 13 sales per day. That's about a 14% drop from a rough three month daily average. Nothing too shocking considering we're at the pointy end of the annual sales slowdown. But listings are also up over 16% from this time last year--in other words, a seller's market this aint!

Quiet times: open thread

2011-12-09T07:14:00.001-08:00

Clearly I've been MIA most of this week. Thanks to regular contributors for keeping the comments going, especially for those willing and able to supply readers with fresh and accurate data (Marko Juras and JustWaiting Cheers!)

Here's an open thread to hopefully make the comments section a little easier to navigate. I'll get back to the regular Monday market updates in a few days.

Based on JustWaiting's recent daily data, it looks like daily sales volume is down significantly (35% or so). I wouldn't be too quick to say this is anything but the Holidays are looming effect; interesting trend no less.

November data

2011-12-01T11:55:00.000-08:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

November 2011 (last week's numbers)
Net Unconditional Sales: 482 |419| {314} [200] (90)
New Listings: 847 |756| {570} [369] (201)
Active Listings: 4,329 |4,202| {4,218} [4,265] (4,503)
Sales to new listings ratio: 57%
Sales to active listings ratio: 11% or 9 MOI

November 2010
Net Unconditional Sales: 479
New Listings: 722
Active Listings: 3,723
Sales to new listings ratio: 66%
Sales to active listings ratio: 13% or 7.7 MOI
Average prices are as follows: SFH = $592K TH = $380K Condos = $320K

Sales volumes are so low, and have been for months, that they're more influenced than ever by unit-type and price sales mix.

Animal Spirit feeds us some more really gem analysis on the low end market:

As people may know, as part of a master plan to take over Starbucks I’ve been collecting a few datasets on single family homes in the core areas. Since prices are generally set at the margins and since the lower margin is much more important for house prices than the upper one (i.e. house prices include a nominal lot value for which a house would sell to a builder like Marko’s dad, serving then to regenerate the housing stock).

For quite a while prices at the low end of the market weren’t changing much. A house listed for 400K two years ago was listing (and selling) for 400K this year. Then fall happened. In May, out of 1050 listings, there were only 36 houses listed for under 400K. November 24, with 1008 listings on the market, there were 62 low priced beauties – or a 72% increase from May. If this is converted to dollars, the 5^th percentile (95 listings out of 100 are for more money) in May was $415K, and in November this had dropped to $388K – $27,000 – 6.5%, or more than most down payments.

So how does this compare over time? The figure below shows that there were comparatively more low end houses in February of 2009, but that since April, 2011 (the dark blue line) there is a clear drop in prices (or at least more listings) for everything under $450K. I’ll let people play around a bit to see how much. But wait, doesn’t Marko tell us that lots are still going for $330-$350K in Fernwood. Sure, the graph shows us that there are virtually no houses listed for under $350K – the change (right now) is happening from $350-$450K.

Since someone will probably say that the types of houses that are listed for are changing, I’ll pull out a new data series that I’ve been collecting. Taking all houses $575K and less in price, >1,000 sq ft and in the core areas (including Central Saanich) and pulling out the area, list price, assessed price, sq. ft. and other data one can get a pretty good idea of what Mr. Market is doing without having a real estate license in good standing. Today’s post focuses on changes in the low end between May and November, so here is a scattergram/regression analysis showing the price per square foot (y axis) with the square feet of the listing (x axis).

Taking the output trend line, one can solve for what the average price for a listing of a given size would be at different points in time:

Size (sq ft)	May	Oct / Nov	Change
1,000	453,359	427,560	-25,799
1,250	473,205	450,377	-22,828
1,500	490,063	469,922	-20,141
2,000	517,893	502,501	-15,392

Here we can see that a 1,000 sq foot shack that would have listed for an average of $453,000 in May is now $428,000 (26K, or 5.7% less). Interestingly, there is less change as houses get larger. Could this be that the underlying lot value is dropping? Or is it because speculators have been chased out of the market by the CMHC changes?

Monday market update, it's almost over

2011-11-28T15:18:00.001-08:00

Monday market update

2011-11-21T09:46:00.001-08:00

Turns out Victoria is different

2011-11-15T10:55:00.001-08:00

RBC released a new report today on the near-future of housing in Canada. They predict house sales volumes and prices will rise next year from coast to coast to rocky mountains. If you live on the left side of our great nation, where you've likely been told for a generation that everyone wants to be and will pay a premium to live, and for the last decade or so you've know it as The Best Place on Earth!, you should expect your home to drop in value, statistically anyway, as fewer people plunge into this over-inflated market.

The average price of a detached bungalow is forecast to rise in all regions, expect [sic] B.C. alone, where prices are projected to slip by 1.7 per cent.

Too late to re-think that best place slogan? How about "The best place on Earth to be a renter"? Or "The best place on Earth not to buy a home"? Or my personal favourite: "The best place on Earth to blog about real estate."

Monday market update: steady as she goes

2011-11-14T09:08:00.001-08:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

November 2011 (last week's numbers)
Net Unconditional Sales: 200 (90)
New Listings: 369 (201)
Active Listings: 4,265 (4,503)
Sales to new listings ratio: 54%

November 2010
Net Unconditional Sales: 479
New Listings: 722
Active Listings: 3,723
Sales to new listings ratio: 66%
Sales to active listings ratio: 13% or 7.7 MOI

For almost 3 months we've been averaging 15 unit sales per day. Which is remarkable considering this time of year is not prime buying, and therefore selling, season. Weird. Demand is exceptionally low comparatively to the past decade, but perhaps 15 unit sales a day is "the floor"? Or maybe that should read "the norm"? And if that's the case, wouldn't you shudder at the thought of being one of the 1200+ licensed agents in this town trying to feed your family and put all kinds of iGadgets under the tree in just 40 short day's time?

Despite the still-high number of active listings out there, I'm not sure what's uglier: the quality of offerings or the prospects of trying to sell them quickly for "expected" prices?

Monday market update: WTF Tuesday?

2011-11-08T05:42:00.000-08:00

Monday market update: October data

2011-10-31T09:47:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

October 2011 (last week's numbers) Final October numbers in bold
Net Unconditional Sales: 483 457 {358} [231] (131)
New Listings: 1,086 1,015 {799} [556] (340)
Active Listings: 4,687 4,504 {4,538} [4,569] (4,562)
Sales to new listings ratio: 44%
Sales to total active listings: 10.3% or 9.7 months of inventory

October 2010
Net Unconditional Sales: 467
New Listings: 976
Active Listings: 4,046
Sales to new listings ratio: 47%
Sales to active listings ratio: 11% or 8.7 MOI

Month is ~~almost~~ over. ~~Expect~~ The numbers ~~to rise~~ rose slightly in time for ~~tomorrow's~~ today's end of the month report.

I'll update this post with price data as soon as it's available. I'm guessing here, but we should see an average + or - $10K nearing $600K for SFH. Average prices are: $595,836 SFH, $307,329 Condos and $428,040 Townhouses.

Prices are falling, inventory remains excessive for this time of year and sales volumes are low when compared against the decade average for October. Sitting on the sidelines has little downside these days (and arguably much upside).

Monday market update

2011-10-24T13:14:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

October 2011 (last week's numbers)
Net Unconditional Sales: 358 [231] (131)
New Listings: 799 [556] (340)
Active Listings: 4,538 [4,569] (4,562)
Sales to new listings ratio: 45%

September 2010
Net Unconditional Sales: 467
New Listings: 976
Active Listings: 4,046
Sales to new listings ratio: 47%
Sales to active listings ratio: 11% or 8.7 MOI

Average SFH price is currently $595K while condo average sits at $314K. These averages suggest there hasn't been a ton of buying action in the upscale market this month. I guess the 1% is nervous and doesn't want to be showing off their big earnings by buying Victoria luxury properties. Though the property transfer tax they'd pay would go a long way to addressing issues of economic inequality no? Anyway, digression over.

Sales activity is higher than I'd expect for this time of year. It's still at near decade-lows, but that said, 15 unit sales per day on average is close to the summer-time numbers we saw in 2011. There's no upward price pressure though: look at the 4,538 active listings. Most of the 2000s spring selling seasons didn't offer buyers such copious quantities of mainly crap-quality listings!

What are you seeing out there this month?

More Animal Spirit analysis

2011-10-20T18:20:00.000-07:00

You may recall this post from a couple weeks ago where Animal Spirit gave us some insight into what's happening in the low end SFH market. He's given us some more great analysis demonstrating how, despite average reported pricing being relatively flat, the median, and in reality, resale home prices are dropping, and in some cases significantly.

The graph below shows you the listing prices over the past couple of years, plus a few months. Most of the analysis below is Animal Spirit's word for word.

Quite striking is the run up at the higher end of the market in fall/winter of 2010, followed by an equal decline. The same decline to pre-January 2009 numbers hasn’t occurred yet for the median, 25 or 10 percentile listing prices, but there is a clear downward trend since the beginning of June. Also interesting is how the median sales price tracked the 25th percentile for a year, and then diverged upwards (indicating that sales distribution became more high-end than low-end at that time). Expect the median to revert back to the 25th percentile bar at some point in the next while (bringing with it substantive, but not actual, reported drops in median sales prices). Data is not inflation adjusted.

Here's the data in another form:

The table shows the decrease in percentile listing prices over the last year, 6 and 3 months, all annualized. Basically it shows that a person will have saved $24K by not having bought the median listed house last year. Add to this another 4K for inflation on a 20% down payment and the buyer has saved $28K by now – a pretty tidy sum.

If the current trend on lower end houses continues for a year, then the 25th percentile house that list for $515,000 in July would be listing for $58,000 less (or $457,000) in a year’s time (wiping out a fair sized down payment). There is no solid proof the downward listing price trend will continue at the same pace, however with the entire distribution shifting lower, there is virtually no basis to say the price for the same house will increase.

That the rolling median sales price (not inflation adjusted) is up 1% over the year while the median list price is down 5.4% shows that the relative quality of houses sold has increased rather than the actual price of the same house. In other words, people are buying a better house for the same coin.

A quality Case Shiller metric in Victoria would be miles better than having to analyze percentiles from manually searched data, but this is one way to try to replicate the results.

All analysis above is based on what shows up as ‘Victoria’ for a MLS search, mostly excluding the outlying areas, in particular places like Sooke where prices have likely been going down for longer.

2011-10-17T12:05:00.000-07:00

Monday market update

2011-10-11T09:52:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

October 2011
Net Unconditional Sales: 131
New Listings: 340
Active Listings: 4,562
Sales to new listings ratio: 38.5%

September 2010
Net Unconditional Sales: 467
New Listings: 976
Active Listings: 4,046
Sales to new listings ratio: 47%
Sales to active listings ratio: 11% or 8.7 MOI

We're averaging 13 unit sales per day, including a three day weekend in there. Low, high or about right for this time of year?

Resilient seems to be the word best to describe this market these days--if you focus on average reported prices only. The truth is anything but. With abnormally high inventory for October, and sales volumes at decade-lows, there is significant pressure towards lower prices, and zero pronouncements from industry players calling for higher prices.

Bear Mountain: single family homes built on speculation

2011-10-05T18:31:00.000-07:00

Currently there are 51 SFH homes for sale on Bear Mountain (BM). In the month of September two homes sold so we have about two years of inventory up there. Why are there so many homes for sale? Pretty simple really: people built or bought on speculation to make a quick buck. You don’t see homes for sale very often in a development like Gordon Point (much smaller). Why? Because people built homes to live there.

The SFH market peaked on BM in early 2008 with homes like 2192 Nicklaus Drive selling for $1,200,000 and 1289 Rockhampton for $1,000,000. Both are likely worth south of $900,000 now.

2009 brought a dire market throughout Greater Victoria including BM; however, while most of the market has come off the 2009 lows, BM continues to set new lows.

So where will prices on BM head? In the case of a flat market, probably down. Remember the hype around Broadmead 15 years ago? No one talks about Broadmead anymore but it does have a decent location; whereas, BM does not. As the homes on BM age they will depreciate and as heating costs increase, which they will, owning a 4,000 sq/ft home on top of a mountain all of a sudden becomes a lot less desirable.

How bad is the situation? You be the judge...

Currently listed

1293 Rockhampton - $998,888 (Purchased $1,028,000 April 2009)
1291 Rockhamtpon - $919,000 (Purchased $985,000 July 2007)

2317 Copper Rock Crt - $799,000 (Purchased $801,000 March 2010)

987 Ironwood Crt - $784,900 (Purchased $804,000 February 2010)

2150 Nicklaus - $775,900 (This particular property was built in 2006 and was placed on sale in 2008 with an asking price of $1,650,000)

Recent successful sales

2196 Nicklaus – Feb 2011 - $854,250 (Purchased for $883,000 September 2007)

1173 Deerview – July 2011 - $763,000 (Purchased for $780,000 Jan 2007)

1295 Eston – September 2010 - $740,000 (Purchased for $869,000 May 2006)

Where do you see Bear Mountain in 15 years from now?

This is part two in our Bear Mountain series from an anonymous contributor; once again sales data was fact-checked for accuracy.

September stats, listings spike in the low-end

2011-10-03T12:29:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

September 2011 (last week's)
Net Unconditional Sales: 458 (352)
New Listings: 1,303 (1,065)
Active Listings: 4,940 (4,745)
Sales to new listings ratio: (35%) 33% or 10.8 MOI

September 2010
Net Unconditional Sales: 395
New Listings: 1,211
Active Listings: 4,323
Sales to new listings ratio: 32%
Sales to active listings ratio: 9% or 10.9 MOI

Single Family Home average price: $622,393 (median $535,000)
Townhouse average price: $436,039
Condo average price: $332,490

Animal Spirit has been watching the SFH market intensely for several years and provides us with this unique snapshot of listings volume over the past 3 years:

The chart shows the distribution of listings by price bracket on the dates indicated at right. It's not a complete listing snapshot, rather it's isolated to what most of us would call Victoria--that is, it excludes the penninsula, Sooke, Malahat and Langford etc. The chart clearly demonstrates that there has been a significant year-over-year listings spike in the so-called low-end of the SFH market.

Two things could be happening here: there's simply more low-end listings on the market or, and I'm more inclined to lean this way, those houses that used to sell between $500K and $600K are coming on the market for under $500K these days.

We've seen incredible "discounts" in the high-end market for over a year now, the weight is getting heavier and I'd say it's starting to push on the "median and average" properties of Victoria. It'll be interesting to see how the foundation holds up...

Rents matter, big time

2011-10-01T09:38:00.000-07:00

Ben Rabidoux, the economist author over at The Economic Analyst, has been filling the interwebs with quality analysis of the Canadian housing market for a while now. And today he hits another one out of the park with his post titled House prices and rents: Why they should track each other and why it should concern us that they haven't.

Here are a few choice quotes:

All of the usual factors that people tend to associate with rising house prices, namely rising population, income growth, limited supply, and the general desirability of a particular city or area, should affect the price of renting a home as well as buying a comparable home.

There are two main factors that can cause the value of a house to rise faster than the rents that a comparable dwelling would command... cheap and readily available credit... [and] ...what economists call the ‘ownership premium’.

The main point to understand is that a house is ‘worth’ either the sum of its future rents (for the investor) or the sum of the rents saved by the owner of the house, discounted for future inflation and an expected return.

So rents do matter. What does the gap between current rents and house prices look like in Victoria today?

Bear Mountain - Victoria's Vegas - Part 1

2011-09-28T22:06:00.000-07:00

The Bear Mountain development, brainchild of Len Barrie, a former NHL hockey player, along with several other NHL players acting as investors, broke ground in 2005. The original $2.1 billion plan called for 1,112 single-family homes, 1,997 condos, 220 townhouses and more than 1,000 fractional-ownership town homes. Early in the last real estate boom, the development received country-wide attention and was even mentioned in the New York Times.

By 2006 several condominium buildings were under way and many more had been approved, including the 20-storey Soaring Peaks and 14-storey Highlander (started but never finished).

In 2006, the Bear Mountain sales team set a record for condo sales in one day with $66 million worth of units sold!

In 2007, Vancouver-based development company Quigg announced plans for 45-, 39-,33- and 27-storey towers--these plans stalled in 2008 due to the economic downturn. 2007 and 2008 were also the years that condo prices on the mountain hit their peak.

By 2009, due to a weak global economy and poor management decisions, things slowly began to unravel – the entire development was put on hold and remaining condos prices were slashed significantly to clear out remaining inventory. While prices in to the Bear Mountain condo market recovered slightly in 2010, 2011 has brought another bear market to Bear Mountain. Let's examine some of this year’s sales, previous purchase prices and current listings:

Current listings looking at huge losses

Unit	List price	Previous sale price	Date
105 – 1400 Lynburne	$258,000	$334,900 + GST	Nov 2008
509 – 1400 Lynburne	$319,900	$355,000 + HST	August 2010
305 – 1325 Bear Mountain Pkwy	$298,000	$350,000	June 2008
417 – 1325 Bear Mountain Pkwy	$311,000 (court ordered)	$479,000 + GST	June 2007

2011 sales and previous purchase prices

Unit	2011 Sale price & date	Previous sale price & year
416 – 1325 Bear Mountain Pkwy	$312,800 (Sept)	$517,924 + GST (2007)
302 – 1375 Bear Mountain Pkwy	$365,000 (Sept)	$319,047 + GST (2009)
147 – 1335 Bear Mountain Pkwy	$412,000 (Aug)	$415,000 + GST (2010)
414 – 1335 Bear Mountain Pkwy	$345,000 (Aug)	$365,000 (2009)
144 -1335 Bear Mountain Pkwy	$220,000 (July)	$262,000 (2010)
617 – 1400 Lynburne	$307,500 (July)	$335,000 + GST (2009)

*The above post was contributed by an anonymous reader. Sales data was fact-checked for accuracy.

Monday market update, it's ugly

2011-09-26T08:41:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

September 2011 (previous week's numbers)
Net Unconditional Sales: 352 {237} [126] (51)
New Listings: 1,065 {810} [502] (186)
Active Listings: 4,745 {4,738} [4,689] (4,590)
Sales to new listings ratio: 33% {29%} [25%] (27%)

September 2010
Net Unconditional Sales: 395
New Listings: 1,211
Active Listings: 4,323
Sales to new listings ratio: 32%
Sales to active listings ratio: 9% or 10.9 MOI

We're likely to break 400 sales by month-end, maybe even hit 430ish. Which is better than September of last year, but only marginally so. It's not been a good month no matter how you spin it. Take a look at the rest of the decade (h/t Just Watching for updating the graph):

Victoria, not as beautiful as Saskatoon

2011-09-24T10:27:00.000-07:00

Call it craziness, but those funny folks over at Microsoft's MSN.ca think there are six cities in Canada with more attractive people, places and things than Best Place in Canada™ Victoria. And I thought blue-hair was the new black?

A favourite argument of the ever-increasing-Victoria-home-price crowd is the desirability of Victoria in the minds of too-many-to-count, from-away Canadians. "Everyone wants to live here." "We have the mildest climate in Canada." "We're in a rain shadow!" All of which are subjective statements only partially grounded in comparable truth. Victoria might be in a rain shadow, but it still has miserable months of endless grey in the winter time, four of them, from November to February, that chase many a snowbird to sunnier climes for a desperate dose of natural Vitamin D.

It's funny, when we compare the most beautiful cities as ranked by MSN to the most expensive cities as ranked by MSN, you'd expect, if the argument that beautiful equates to people willing to pay more to live there, that places more beautiful than Victoria would also cost more. It ain't so though.

Victoria is the seventh most beautiful city, yet the second most expensive. There must be something missing in that argument to justify high home prices then outside the beauty. It must be livability; or maybe not, as MoneySense, a magazine that factors in costs relative to incomes/opportunities etc, ranks Victoria 8th on their list, behind places like Brandon, Manitoba and Fredericton, New Brunswick, yes, New Brunswick.

Now I know, I know, using MoneySense to fight an argument originally supported by MSN is like saying these apples aren't as nice as these oranges. I tried to find an MSN article, but the one I found didn't have Victoria on it. But of course, it also contained the qualifying word "Next" so I'm sure Victoria was omitted primarily because it must be included on the original list. Funny though, CBC has an article and poll up about Canada's most livable cities, including such desirable locales as Yellowknife and Winnipeg, but it leaves Victoria off it's list entirely.

Now I know, some of you who think the sun shines out from underneath the soon to be rebuilt Johnson Street Bridge will lambaste my "arguments" in the comments as pure hogwash. Which is perfectly fine. I chose to fight fire with fire on this little topic.

When you want to dig up some population growth, household formation, housing start and demographic data to support the claim that "desirability" is higher in Victoria than elsewhere, that land constraints are actually leading to a reduction in available supply creating a supply/demand imbalance supporting escalating prices (isolated from other factors like interest rates, incomes and the looming demographic purge of real estate), we can move on from tripe-filled, spurious arguments about local real estate valuations.

Monday market update

2011-09-19T09:18:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

September 2011 (last week's numbers)
Net Unconditional Sales: 237 [126] (51)
New Listings: 810 [502] (186)
Active Listings: 4,738 [4,689] (4,590)
Sales to new listings ratio: 29% [25%] (27%)

September 2010
Net Unconditional Sales: 395
New Listings: 1,211
Active Listings: 4,323
Sales to new listings ratio: 32%
Sales to active listings ratio: 9% or 10.9 MOI

Daily sales volume is averaging 13 units per day... a noticeable drop from last month's 16-17 units per day average. This is remarkable as the typically industry spin usually tells us the market picks up again once the summer buying doldrums end. Am I the only one noticing the absence of that line? Seems steady-as-she-goes is the new buy-now-or-be-priced-out-forever. There are only two truths in the Victoria market right now: sales are low and inventory is high.

Stupid is as stupid does

2011-09-13T10:11:00.000-07:00

EagerBuyer(Not) pointed us to a most interesting survey released recently by Manulife Financial. It contains some startling, OK, not really, let's call them confirming, results about just how crazy and ignorant debtors really are in Canada:

More than 1 in 3 Canadian homeowners aged 30-39 are unaware interest rates are near historic low

This just happens to be my age cohort. How in the name of all that is good in this world could anyone of my generation not know that interest rates have been on the steady decline for almost 30 years? Even if they've been smoking too much herb, they'd have to be completely oblivious to not know that rates dropped drastically just over the past few years.

When asked how today's interest rates compared to historical norms, more than one in three Canadians aged 30-39 incorrectly responded that today's rates were about average or relatively high.

Emphasis mine. I think the only thing "relatively high" are 1/3rd of Canadian homeowners between the ages of 30 and 39, which, coincidentally happens to be the age range of the bulk of first time home buyers in Victoria. Coincidence? I'll let you decide.

While there is no expectation we'll see rates like those of the 1980s, a rise of even a few percentage points could have a significant financial impact on this younger generation of Canadians.

The effect of a "few percentage points" rise in interest rates will very likely be catastrophic considering more than one in two Canadians are living pay cheque to pay cheque.

The rest of the release reads like an advertisement for a Manulife One account, if you know what that is, and odds are at least 1:3 that readers don't. Regardless, I'd like to say these results are shocking, except they're not. The evidence of stupid consumers is all around us. I guess the message that Canadian lenders are prudent and conservative has had the unintended consequence for one-third of us believing that means they'll take care of us and we don't need to learn anything basic about money ourselves.

Further reading: Ben, over at The Economic Analyst linked to this Irish Times article: Canada's Northern Tiger looks very like a bubble. Not that Ireland would know anything about real estate bubbles.

Monday market update, listings jump

2011-09-12T10:56:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

September 2011 (last week's numbers)
Net Unconditional Sales: 126 (51)
New Listings: 502 (186)
Active Listings: 4,689 (4,590)
Sales to new listings ratio: 25% (27%)

September 2010
Net Unconditional Sales: 395
New Listings: 1,211
Active Listings: 4,323
Sales to new listings ratio: 32%
Sales to active listings ratio: 9% or 10.9 MOI

Time to pull the ejection seat? Holy Hannah batman, I can't recall the last time we saw 316 listings hit the market in one week in any September. For every housing unit sold in Victoria so far this month, four have been put on the market. If the trend continues (likely won't as listings tend to be front of the month heavy) we could see around 1400 new listings offered. Those are height of the spring selling season (April/May/June) type numbers.

What gives? Panic selling? We won't know till we have more data. But I'd hesitate to call this kind of listings dump normal activity for early September.

September slumber? Monday market update

2011-09-06T08:56:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

September 2011
Net Unconditional Sales: 51
New Listings: 186
Active Listings: 4,590
Sales to new listings ratio: 27%

September 2010
Net Unconditional Sales: 395
New Listings: 1,211
Active Listings: 4,323
Sales to new listings ratio: 32%
Sales to active listings ratio: 9% or 10.9 MOI

No bones about it. September 2011 is off to a slow start. Yes, there's a long weekend in there. Regardless, 10 unit sales per day is a drop of nearly 40% from the averages we've witnessed over the past couple of months. It won't continue thought. Sales numbers will rise, even if slightly. I say this with confidence because this first "week" was really a holiday weekend.

Will September be a good or bad month for local real estate sales? I'm guessing more of the same. Slow sales with a glut of overpriced, crap-quality inventory. There are a few deals to be found in some segments... as long as you define deal as "priced lower than this time last year" and you ignore the fundamentals of price to rent and price to income ratios.

August sales, a modest bounce

2011-09-01T08:45:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

August 2011 (weekly in brackets)
Net Unconditional Sales: 542 <469> {354} [236] (116)
New Listings: 1,200 <1,056> {845} [595] (296)
Active Listings: 4,944 <4,811> {4,821} [4,843] (4,783)
Sales to new listings ratio: 45% <44%> {42%} [39%] (39%)
Sales to active listings ratio: 11% or 9.1 MOI

August 2010
Net Unconditional Sales: 425
New Listings: 956
Active Listings: 4,356
Sales to new listings ratio: 47%
Sales to active listings ratio: 9% or 10.25 MOI

If you compare the year-over-year numbers, we're looking at a sales volume gain of nearly 22%. Month-over-month, we're looking at a modest gain of only 2.8%, or basically a flat market. It's interesting that over the first 28 days of the month, daily sales volume was about 16.5 units; then suddenly in 3 days, we see a "spike" to 24.3 units per day. Strange.

The SFH average reported price will be in the $650,000 range. I think happy hour will start around 11:30AM for the communications team, along with their friends at the TC, today. These are the kind of days they live for: press releases like the one you'll see in about 3 hours time write themselves and require no editing. Just cut, paste and hit Upload! Badaboom badabing, now we're drinking pints on the patio in the summer sun. And it's only Thursday before the long weekend.

Truths. Much needed but rarely told in the Victoria real estate market.

Monday market update, HST free

2011-08-29T10:23:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

August 2011
Net Unconditional Sales: 469 {354} [236] (116)
New Listings: 1056 {845} [595] (296)
Active Listings: 4,811 {4,821} [4,843] (4,783)
Sales to new listings ratio: 44% {42%} [39%] (39%)

August 2010
Net Unconditional Sales: 425
New Listings: 956
Active Listings: 4,356
Sales to new listings ratio: 47%
Sales to active listings ratio: 9% or 10.25 MOI

We know know what happens when this blog covers more than just real estate topics. Oops, my bad.

Back to the market, which can only be described as an atypical August: reported prices will peak out this month very near the all-time average reported price top we witnessed in 2008. The truth in the market is nothing close to that though: prices continue to soften while market conditions continue to favour buyers, especially outside the core.

Daily average unit sales have been remarkably stable, still in the 16-17 range. Look for the spin machine to be in overdrive on Thursday as the usual suspects promote the sh&t out of flawed market reporting methods.

George Washington was in a cult

2011-08-28T19:09:00.000-07:00

And the cult was into aliens man*

This is your open real estate thread until we post the near month-end stats tomorrow.

* I bet you don't know what movie that was from...

HST results are in

2011-08-26T12:06:00.000-07:00

And those that wanted the tax gone won by a margin of 54.73% to 44.27% province-wide. How did it break down in Victoria area neighbourhoods (by electoral districts)?

Turns out only Oak Bay/Gordon Head were in favour of the tax:

No (to keep the tax):
Oak Bay/Gordon Head - 51.4%

Yes to get rid of the tax, go backwards in time to when kids clothes were PST-free and increase the provincial debt by around $3B when all is said and done:
Esquimalt-Royal Roads - 57.96%
Juan de Fuca (Sooke west) - 62.5%
Saanich North and the Islands - 51.35%
Saanich South - 52.52%
Victoria Beacon Hill - 55.76%
Victoria Swan Lake - 57.73%

Get set for more economic uncertainty as the fall-out over the inevitably long, drawn-out process to move backwards in time causes more people to delay buying and selling homes in this great city of ours as they wait to see which way the market winds will blow.

The NDP are already calling on the federal government to let BC'ers have a free lunch and some of their spin-doctors are claiming the $1.6B given as transitional funding by the federal government has not yet been spent. I'll not hold my breathe as I wait to see either one of these "suggestions" work out in favour of those making them.

UPDATE: The HST will exist until March 31, 2013, after which a 7% PST will return (Exemptions are as yet undefined).

Baby boomer sell-off may drive house values down for decades

2011-08-23T14:05:00.000-07:00

Interesting research from the US Fed reported here today. I've taken the liberty of editing the piece to make it Victoria real estate market applicable. I'll let you readers trash or praise my edits in the comments.

Aging baby boomers may drive down house values for the next two decades as they sell their homes to finance retirement, according to researchers from the Federal Reserve Bank of House Hunt Victoria.

Victorians born between 1946 and 1964 are beginning to retire as the local market is still bolstered from the hyper-low interest rates that began in 2009 with the collapse of the global economy. The timing is “peaking” and, since house prices have been closely tied to demographic trends in the past half century, “portends poorly for equity values,” adviser Smith and researcher Wesson wrote in a paper released by the bank.

The house-price-to-rent ratio of Victoria homes multiplied drastically from 1981 to 2010 as baby boomers reached their peak working ages, according to Smith and Wesson. Overseas investors’ demand for Victoria homes might help mitigate the effect of a baby-boomers’ sell-off, yet the impact would probably be limited, they said.

“For many primary purchasers of Victoria homes outside Victoria, their demographics are even worse than ours, in particular Europe and Japan, which have older age profiles prevailing than Victoria does,” Smith, vice president of the bank’s research department, said in a telephone interview today.

At the same time, foreign investors, including those with mitt fulls of Hot Asian Money, may decide to hold a larger share of Victoria homes, Smith and Wesson said. Also, emerging market countries such as China may ease foreign ownership rules, allowing their citizens to invest in Victoria bed and breakfasts, they said.

Just for a little balance

“We’re well aware that a lot of other things can happen” that would buffer the impact from retiring baby boomers, said Smith, 82. “There’s not necessarily a rule that this is the only thing that’s going to drive prices down, going forward.”

Still, “we do see it as something of a gale-force headwind as the housing market is attempting to stay high,” he said.

The VREB reported average has bounced around like a five-year-old with ADD, or about 13% since 3-weeks ago, but hasn't stayed even with this time last year, all year.

Wesson, 104, an adjunct finance professor at the University of Camosun’s Amor de Cosmos School of Real Estate Magnatism in Gordon Head, has also researched the link between demographics and home valuations. He said that growth in developing countries should generate enough demand to absorb a baby-boomer sell-off and “keep home prices high.”

As long as the economies of countries like China and India expand at an annual rate of at least 14% to 16%, investors “will have the resources to buy our homes” and “keep our housing market fully valued into the future,” Wesson, author of the 1978 book Home Valuations to Retire On, said in a telephone interview.

“If we don’t get hyper-growth abroad and/or we block foreigners from buying Victoria houses, the outlook for our local market is much worse,” Wesson said.

Monday market update: more of the same

2011-08-22T09:15:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

August 2011 (previous week's numbers)
Net Unconditional Sales: 354 [236] (116)
New Listings: 845 [595] (296)
Active Listings: 4,821 [4,843] (4,783)
Sales to new listings ratio: 42% [39%] (39%)

August 2010
Net Unconditional Sales: 425
New Listings: 956
Active Listings: 4,356
Sales to new listings ratio: 47%
Sales to active listings ratio: 9% or 10.25 MOI

Sales have been steady all month at roughly 16 units per day. It's the first time in a long time I can remember where this number hasn't bounced at all from one week to the next. Strange. That said, it's nothing to be happy about if you're trying to make a living charging people commissions to buy and sell real estate. No matter how you look at it, market volume is terrible right now.

Here's a head-scratcher: average reported prices are up, and significantly; single family home average right now is at a record high of $665,000. That's right, your home, if you own one, has increased in value by nearly 13% in just 3 short weeks!*

*No, it hasn't. But such is the misleading "truth" about using averages to report prices from one month to the next.

Monday market update: invasion of the HAM

2011-08-15T13:44:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

August 2011 (last week's numbers)
Net Unconditional Sales: 236 (116)
New Listings: 595 (296)
Active Listings: 4,843 (4,783)
Sales to new listings ratio: 39% (39%)

August 2010
Net Unconditional Sales: 425
New Listings: 956
Active Listings: 4,356
Sales to new listings ratio: 47%
Sales to active listings ratio: 9% or 10.25 MOI

Sales pace neither picked up nor declined over the second full week of August. I will confidently suggest we'll see over 500 sales in August, a fair bit better than last year, though a far cry from what you'd actually suspect a healthy August should look like given the performance of the local market between 2001 and 2010.

What's that I hear? Average sales price is high, almost record setting even, nearing the $690K mark? A few notable high-end sales coupled with the lack of low-end sales volume is dragging that average number up with the hot August air. Look for the TC to follow up with a puff piece citing one example of a home sold on St. Charles street to a foreigner from the old mainland - China not Richmond - as "a new wave of foreign buyers drive prices to record highs; Chinese discover Victoria gems!"

Just once, I'd love to see them write a story about how average reported prices are a waste of time in market conditions like this.

Strange, but true*

2011-08-10T10:08:00.000-07:00

I got a phone call from a number I didn't recognize the other day. I answered it anyway. When I said hello, I expected to hear a response, but I didn't get one. Strange. But then I realized two people were talking. I should have hung-up, but something I sensed led me not to. Instead I grabbed a paper and pen and jotted down a couple of notes. I figured I had meant to be in on that call and I was meant to share it's contents with you readers.

It's not word for word, but I'll do my best to transcribe it for you:

Market owner: I've got a great story for you.

Reporter: We usually don't let business people pitch stories directly to us. Let me put you through to our advertising department.

Market owner: No. Wait. Please. This isn't advertising. It's a true story. It's a great story too. It's about Victoria and how we're insulated from the economic terrorism taking place in the rest of the world.

Reporter: Did you really just say economic terrorism? OK. You've got a great angle. Pitch me. Let's do this thing.

Market owner: Awesome. Well, you see, I sell things in my store and business has been pretty stable these last few months. Typically, I order in about 100 oranges a week. I usually sell 80 of them in the first 5 days. But by the sixth and seventh day, the remaining oranges start to look a little stale in my market.

Reporter: Makes sense. So I guess you throw them out then right?

Market owner: Heck no. If I did that I'd be out of business. Here's my secret. For the first five days of the week, I price the oranges a little higher because they're fresh and most people want fresh oranges. But there's also a small group of people out there who look for a good deal. I call these folks my weekend shoppers. So I discount the stale-looking oranges on days six and seven. I run an ad in your paper on Friday to let all those deal hunters know what I've got for them.

Reporter: I can see why you have the most successful market in town. That's brilliant.

Market owner: I'll say. And here's the best part: I still make a great profit on those stale oranges. So much so that I've decided to stock more of them.

Reporter: You can order stale oranges? What will they think of next? Marketing is amazing!

Market owner: Well, I guess you could order stale oranges if you really wanted to. But I don't need to. I know I'll consistently sell 80 oranges over the first 5 days I have them on the market. So instead of ordering 100 oranges next week, I'm going to order 120. That way I'll have 40 stale oranges instead of 20 with which to increase my profits.

Reporter: What happened to the economic terrorism angle? I thought I was getting a juicy story here? Sounds more like a business-as-usual, the-market-is-stable piece to me.

Market owner: Here's the thing. We live in a Navy town right? So people are in-tune with all things military and seaman right? They know what nautical terms mean. We can weave some into the story and people will go "Ahah! I know what they're getting at here..." We're also in a time where people are fighting mad... see the connection? There's likely a new tax on the horizon, or even a regression to an old tax that's going to cost us all a lot of money over the years... so people may be feeling uncertain, like they're having a hard time keeping their heads above water, but they're looking for certainty. All we need to do is conjure up some images to connect with their natural emotions: fight, floating, stability... They will then come to my market and buy my 40 extra oranges because they'll believe they're getting a great buying opportunity and they'll know my market is stable.

Reporter: I'm not sure I follow. How does the Navy and boats equal economic terrorism?

Market owner: Our submarines, if they weren't stuck in dry dock, would be out using things like bouys to signal and look for terrorists wouldn't they? All Victorians know this. They'll make the connection. It's a great metaphor and you can tag your story on your website with words like economic and terrorism and all those people, and more than just the local readers, will use Google to search those terms and find your story. You may even attract some foreigners, maybe even mainland Chinese... think of the possibilities!

Reporter: F'n brilliant! Do you have this story written down? Do me a favour, I want to make sure I get your quotes right, so send it to me electronically and I'll get it online as soon as possible. We may even do a follow-up in tomorrow's print run. Now I'll transfer you over to the advertising folks and they'll get you set up for Friday's ad to sell those 40 stale oranges.

H/T to the TC-Parrot for the link to the inspiration for this post in the previous comments section.

*not really true, but almost believable eh?

Monday market update

2011-08-08T11:03:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

August 2011
Net Unconditional Sales: 116
New Listings: 296
Active Listings: 4,783
Sales to new listings ratio: 39%

August 2010 totals
Net Unconditional Sales: 425
New Listings: 956
Active Listings: 4,356
Sales to new listings ratio: 47%
Sales to active listings ratio: 9% or 10.25 MOI

18 sales on the week, my A$$. Even if you narrow the sales area down to only the "City of Victoria," which is not our local market, I doubt the data offered was even close to the truth. Cherry picking stats to serve a meme that doesn't exist to the degree he desires only serves to fuel the arguments of those who seek to discredit the writings of the so-called bears on Canadian real estate. As the writer with the highest profile in Canada, Garth Turner should hold himself to a higher standard.

With that little rant out of the way, August 2011 got off to a rough start. Will it be a repeat of 2010? Likely not. We're looking at a daily average of about 16.5 unit sales. If that continues, we'll hit over 500 sales. If that happens, the spin will be unbearable as the VREB and TC parrots trumpet "Sales increase 15%!!!!!" No matter how you choose to spin it, the truth of the matter is this: even with sales volume in the 500 range, we're experiencing sales volumes in the decade-low range as evidenced by this graph from Double-Agent last year (H/T Just Watching):

And with inventory as high as it stands, we're not in "balanced market" territory no matter what industry tries to tell us. Sellers: sharpen your pencils. Buyers: demand discounts.

July sales data

2011-08-02T09:08:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

July 2011 (last week's numbers) [previous week's numbers]
Net Unconditional Sales: 523 (380) [270] [140]
New Listings: 1,374 (1,062) [763] [407]
Active Listings: 5,094 (4,902) [4,856] [4,756]
Sales to active listings ratio: 10% or 9.7 MOI

July 2010 totals
Net Unconditional Sales: 527
New Listings: 1,119
Active Listings: 4,477
Sales to active listings ratio: 12% or 8.5 MOI

There's no way to spin these numbers positive. But look for the VREB and parrots over at the TC to try regardless. Active listings are at all-time highs while sales volumes are at decade lows. It's a game of supply and demand, and clearly the supply side is lopsided.

So why aren't prices falling? There's a whole bunch of things going on here, but the first thing you should know is that prices ARE falling. Anyone who tells you they aren't is either using a micro-segment of the market to prove they're not, or is, well, telling you what they think you want to hear to get you to act in the market in some manner--in other words, they're blowing smoke up your kiester.

Your money buys more house in the Victoria market today than it did just a few short months ago. Average reported prices are misleading, because the average depends more on the type and make-up of unit sales from one month to the next... they're easily miss-representative of the market, both on the way up and the way down. They should be viewed with a grain of salt.

There's a few "deals" out there if you only compare today's prices to what some people got for these places four and five years ago, especially if you look out in the Westshore and Bear Mountain. But there's no deals to be found when it comes to looking at the standard fundamentals of price versus rent and price to income ratios over history; we're still trending well above the historical ratio of Victoria.

The core tells a different story; but mostly in the single family home category. Demand is isolated in the CRD to the east and the south for the most part. There is little demand for the crap that used to sell in bidding wars; I'm talking specifically of tear-downs and ex-rentals in the depressed neighbourhoods to the west of the city core. And there is a lot of crap on the market, which is evidenced in the difference between sales to new listings and sales to active listings.

Yes, there's plenty of evidence suggesting well-priced quality offerings are selling quickly. But there's far more evidence of a bunch of low-quality offerings having to lower their "shoot-for-moon" original prices just to drive people to an open house.

UPDATE: VREB spin is out (H/T a simple man). And the standardized TC cut and paste job is up already too... (I won't link there). Forgive me for having a little fun, but hey, it's my blog and all that:

Victoria Real Estate Board President... noted that despite the drop in the number of sales last month compared to June, market activity is now very close to what we saw at this time last year. "In the coming months, we anticipate that market activity will remain relatively stable and similar to what we saw during the summer and early fall months of last year."

I get such a kick out of these baseless statements. So July sales volume nearly matched one of the worst July sales volumes in over a decade? And because sales numbers didn't sink lower (even though inventory is substantially higher), readers and market watchers should be happy that the "bottom" has been found; except that we don't know that, nor can we, because we can't predict the future.... but he who shall not be named apparently can.

...added that the increasing inventory means sellers need to be realistic in pricing their homes in order to attract qualified buyers. "A REALTOR’S® expertise can be invaluable in today’s market to help sellers price their homes to best advantage"

Or you could simply scan your neighbourhood and surrounding areas for homes on lots just like yours and price your property in and amongst the lowest priced offerings. That's the best advice you're likely to receive anyway if you truly want to sell.

Remember this little ditty I wrote in July: Victoria home prices to fall $79,900? Guess what? We've shaved off $48,175* in just a few short weeks since that post was written. Can we get another $31,725** off over the next 4 weeks? Better suit up, cuz that will be awesome!

*That's what those damned average numbers say anyway

**If you're making offers on properties these days you can help achieve this dream by starting all offers at 8% below asking price, which is what the average dropped last month!

The rental hunt

2011-08-01T11:37:00.000-07:00

Vacancies are up in Victoria lately. Searching for a half-way decent rental should be a bit easier these days than in years past. And a cool new tool is on the scene to help you isolate listings by neighbourhood and move beyond the terrible list format of Craigslist.

PadMapper is making rental hunting easier and map-based:

It's pulling in rental listings from a variety of sources, though Craigslist seems to be dominant... which is fine since it's one of, if not, the biggest rental listings source in Victoria these days.

If you're in the rental market looking to move up, down, sideways or just want to find some cheap student apartment options for the upcoming school year, check it out here: PadMapper.com

Monday market update: into July's home stretch

2011-07-25T09:08:00.000-07:00

Monday market update

2011-07-18T08:56:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

July 2011 (last week's numbers)
Net Unconditional Sales: 270 (140)
New Listings: 763 (407)
Active Listings: 4,856 (4,756)
Sales to new listings ratio: (35%) 34%

July 2010 totals
Net Unconditional Sales: 527
New Listings: 1119
Active Listings: 4,477
Sales to new listings ratio: 47%
Sales to active listings ratio: 12% or 8.5 MOI

Sales volume is up ever so slightly from about 14 units per day to 15 units per day. If the trend holds, we will see around 465 sales in July. Any way you look at it, spin it, or close your eyes and ignore it, that's a dreadful number. It's in the range of the two worst sales volume surprise months in recent memory: August and September 2010.

Victoria home prices to fall $79,900

2011-07-14T15:54:00.000-07:00

You may have already seen the TD Economics housing market outlook report that's been floating around the real estate blogosphere already. In case you haven't, here it is.

Now TD Economics didn't specifically address the Victoria market. But they sure did go after the Vancouver market. They predict Vancouver will suffer a 14.8% drop in market value before the correction hits bottom. Based on the price/income and price/rent fundamentals that's extremely conservative. But let's take them at face value and say their predictions are spot on.

Saskatoon will take an 11.1% drubbing. Toronto 11.7%. Heck, even cities that still haven't recovered from the 2008 correction, like Calgary and Edmonton, are expected to drop a further 6.4% and 6.6% respectively. And cities that missed out on the largely isolated Western housing decade of double digit gains (save Toronto) are still expected to drop anywhere from 5.6% to 8.3%. The Canadian average as a whole will drop over 10%. In case you're wondering, that's pretty significant. Especially coming from one of Canada's largest originators of housing related debt products.

Forgive me, but I'm conjuring this number up on TD's behalf: Victoria will* drop 12.7%. That's $79,900 plus the cost of a family dinner at McDonald's or so.

*we might anyway

And why does TD Economics see falling prices in the near term (heck, for that matter so do the national real estate industry leaders over at Royal LePage)? TD blames:

an exhausted pool of first time home buyers,
looming mortgage interest rate increases,
reduced mortgage originations (those Flaherty rules are having an impact apparently),
record levels of indebtedness (signs are already pointing to a retrenchment, which occurred exactly at the start of the US housing market collapse too might I add ),
weak economic outlooks across Canada, and
supply demand ratios that are already out of whack (Victoria especially in the multifamily dwelling category).

All of those factors are just as real in Victoria as they are in Kelowna, Kingston, Saskatoon, Moncton, Antigonish or Shediac. We don't have an influx of mainland Chinese invading Gordon Head just so their kids can attend Frank Hobbs School (HAM). Nor do tourists spend much money in downtown art galleries anymore, so the local tourism industry isn't making people wealthy as fast as it used to. For that matter, more Victorians are out of work right now than in the last five years; in June 2011, almost three times as many households lost an income than those who went and bought a house.

So TD's got it right: prices will fall. There's not a sign pointed in the opposite direction. The flat-market indicators are nil. Buying incentive couldn't be lower right now in the Victoria real estate market. And yet, I still get e-mails like this one from some well-educated, financially savvy individuals (at least I assume them to be based on their declared education and workplaces):

Hi, I am a first time home buyer. I have used some of your tools on your blog. I like your honesty and opinion. I am still so confused about the Victoria market. Where is a good place to start researching good deals. Is there a real estate map that realtors use to pinpoint properties etc…

To which this post is dedicated to as a piece of (hopefully) sober second thought. Look, I've said it here since the beginning: if you can afford it, even when interest rates rise substantially (2% or more), can see yourself living in the place you buy for at least a decade, then give'r. Go get that roof over your head you've been dreaming of. There's nothing wrong with that. But if you can't answer yes, unequivocally, to those questions, keep renting or living in your parent's basement--either way you're saving money. Add the answer to this final question: Can you stomach seeing that home you just bought drop in value by roughly one year's before-tax income (at minimum) in the next few years (or 12.7%)?

If you're set on shopping, I don't know where the deals are right now. I don't believe there are any deals to be had out there to be honest. I too am still confused by Victoria's market. It doesn't make sense. Each morning I wake up thanking the big spirit in the sky for intervening in my efforts to own a home in Victoria. But if you want to start researching, you can dig back through the many posts on this blog; you can get in touch with regular Realtor readers here to get yourself set-up with a VREB Matrix account and start viewing properties in more detail. You can use the map feature on the Realtor websites to pinpoint properties by type and location.

Good luck and be strong. Anyone buying in 2011 is going to need to me thinks.

Realtor gifts

2011-07-12T13:42:00.000-07:00

There's a lot of things that drive me batty about the relationship between agents and the real estate marketplace, but perhaps none more so than the practice of gifting clients on completion.

Sure, there a few examples of good gifts, like the gift of 70% cash back by buyer's agents who recognize the truth about who actually pays commissions on real estate transactions. But for the most part, gifts realtors give to their clients are given for one of two reasons: marketing or, because if they don't, they'll appear cheap.

I remember the first time I heard about a realtor gift. A friend bought his first place. He spent about $300,000 if I recall correctly. His realtor, a young guy like himself, after earning somewhere around $6,000 for the time he spent on his client (I'm not sure how much, but I'd bet it was fairly considerable) before deductions etc, showed up at the closing with a brand new beer fridge for the garage, full of premium beer. It was the perfect gift for this single guy friend and it had our social circle talking. Good marketing, eh?

Another couple we know gets a gift annually from their realtor, who they used once way back in 2003, and will never use again, mostly because of this gift: a custom-labelled 375ml bottle of U-Brew ~~wine~~ swill that wasn't drinkable the day it was bottled, complete with old-school photo of said realtor. These bottles get passed around our social circle as white elephant gag gifts and have been the source of many jokes about realtors, real estate and bad marketing in general.

Until recently, we'd never received a gift. I don't begrudge the realtor we used for the commission they received. We made a choice to use a full commission buyer's agent and they made the full commission while spending less than 20 hours on us in total. Sure it pisses me off to no end knowing they "earned" more than $300 per hour while literally doing little more than scheduling viewing appointments and unlocking doors. But that was the rule of the game when we engaged their services and we entered into it knowingly. As they say: don't hate the player, hate the game.

Sure we tried to find a cash-back agent to save some bucks. We weren't successful, obviously, nor were we patient enough to wait until we could find an agent with a cash back structure we felt was realistic (you'd be amazed at how many agents advertising cash back deals have more fine print than legal documents and end up at full commission in the end) Anyway, back to the gift.

There's not much point in going into too much detail. The gift basket was crap. It was cheap. It was full of junk food and the one item that had any household usability was so engraved with marketing that we gave it away to Sally Ann. Even more, our agent called us that morning to ask what kind of wine we prefer: red or white? Here's the thing: when you only spend $10 on a bottle of gift wine you're going to save face by buying both, calling before hand to ask just draws attention to the cheapness of the gift.

I'd love to hear from the realtors who frequent this blog: Why do you give gifts? What do you give? Are your gifts personalized with your name and contact info permanently etched into glass or metal? If so, do you think your clients appreciate this?

I'd love to hear from other readers too: Do you appreciate the gifts? Anything positively memorable? Do you pass any on as gag gifts for the jokes they originally were? What gifts do you want to get? Should realtors just stop gifting altogether?

Monday Market Update

2011-07-11T08:38:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

June 2011
Net Unconditional Sales: 140
New Listings: 407
Active Listings: 4,756
Sales to new listings ratio: 34%

June 2010 totals
Net Unconditional Sales: 527
New Listings: 1119
Active Listings: 4,477
Sales to new listings ratio: 47%
Sales to active listings ratio: 12% or 8.5 MOI

The numbers above include the first 10 days of the month, so our regular weekly round-up of sales volume data is a bit off. Nevertheless, so far in July we're averaging 14 unit sales per day. If we compare that to roughly the same time frame in June 2011 (18.5 sales per day over the first 12 days) we can see sales volumes have dropped almost 25%. It's early, but I'd call that significant. If we maintain this pace, we'll see around 420 sales for the month total. Sales volumes drop into the summer annually, but by 25%? That's sharp.

Listings volumes have dropped a little too. In the first 12 days of June 2011, we saw almost 50 new units hit the MLS each day. Right now we're averaging almost 41. This is fairly typical for this time of year.

August and September were very bad sales months in 2010. 2011 is shaping up to be a bad year for the market if we isolate unit sales volumes as our indicator. 2011, after 6 months, is already 25% below 2010 numbers from the same months. Listings are higher as well, albeit only by around 5% or so. Prices should be falling right now, and very likely are, although the convenient law of averages keeps our reported average house prices at near-record levels.

Interest rates: buy low or buy high?

2011-07-06T09:13:00.000-07:00

Only when the tide goes out do you discover who's been swimming naked ~ Warren Buffet

There's a conventional ~~wisdom~~ thought in the real estate world that buying a home during times of low interest rates is a good thing. This is very true at the beginning of cycles, but nothing could be farther from the truth at the end of cycles. Back in 2000-2001, when the Victoria real estate market started heating up after the doldrums of the 1990s, we watched interest rates drop over 3% seemingly overnight. If you'd bought a house then, you've likely done exceptionally well in the housing market (especially if you've stayed in it and not lost money to transaction costs). Average reported prices have grown at over 9.6% per year, or almost a full 3% per year higher than the previous 23 year history of appreciation in the Victoria market (1978-2001). See the correlation?

Reid, way back in 2009, wrote this informative post about interest rate effects on valuations. It contained this simple graphic illustrating the interest rate effects on mortgage affordability:

Let's assume for a minute that the average Victoria first time buyers have an annual income of $100,000. They all have a minimum down payment of some varying degree, but let's say they all have to be CMHC insured. We'll work with the lowest common denominator of 5% down to keep these calculations simple.

At current discounted 5-year interest rates, this household get's qualified for a mortgage that looks something like this:

If mortgage rates rise 2%, like they did between 2004 and 2006, then this same household will be looking at a far different story:

These folks are likely shopping for a single family home, preferring to be in the Saaniches, but perhaps settling in the West Shore when they see the differences their money can buy. Very few of these folks will be thinking to themselves, if I can't find a house I like, I'll just buy a condo. A few might consider, or even purchase, a townhouse. But the fine folks looking to live downtown in the new highrises aren't out shopping for fixer uppers in Marigold. These are different markets altogether.

Affordability plays a huge role in real estate prices. Average households with average incomes, by and large, are out shopping for the average house. They could, relatively, easily get it in 2001-2004. During the period 2004-2007 it became far more difficult for a variety of reasons, interest rates being one of them. Then in 2007, mortgage product innovation (extended amortizations and no down payments) coupled with drastic interest rate reductions in late 2008 and early 2009 coupled to pour gas on the fire of what was then a quickly falling market.

There are no policy options left: the government's move to curtail extended amortization and no skin in the game mortgages (#fail), signals the death of these choices and fixed-term interest rates can't get any lower. Which leaves us where we are today: record high prices, coupled with record low interest rates, and some of the most unaffordable housing options in Victoria's history.

If you do fit the mold of the above household, choose to buy today at your max, and interest rates rise 2% in the next five years, you could be perilously close to being underwater in your home should prices track affordability over the same time frame, which they mostly have over the past 33 year history in Victoria.

Real estate is local

2011-07-05T09:59:00.000-07:00

If you've been reading the news or the real estate blogosphere lately, you'll have undoubtedly noticed a lot of commentary about a Canadian housing bubble. And perhaps you'll be wondering why I have not written about some of these stories yet. It's pretty simple: I don't believe there is a "Canadian residential real estate market" so I don't have much to say about it.

For a market to be functioning it needs two basic things: actors on the supply side and actors on the demand side. Sure there are a few examples of supply-side actors who are active Canada-wide (very few). And perhaps there are examples of a minuscule few demand-side actors who are actively shopping for homes across Canada (though I doubt it). Even if someone drops a comment with anecdotal evidence suggesting their cousin's aunt's mother's daughter's sister is looking for the best luxury house $225,000 can buy from coast to coast to coast, I won't be convinced there's a Canadian housing market.

Why is this important you may ask? Simple. Commentary about a Canada-wide housing bubble is purposefully designed to set-up a provable thesis: there is no Canada-wide housing bubble. And this is true. Same as there was no US housing bubble. No Irish housing bubble. No Spanish housing bubble and no Australian housing bubble. Instead, a bunch of local markets within these nations experienced conditions that led to actors on both sides of the markets speculating: supply side over-built and demand side over-bought; market balance turned to instability when a glut of supply met a dearth of demand and the inevitable lowering of prices began, and in many cases, continues. And the same can, and very likely will, happen within certain Canadian markets.

Here's the thing: economists, nay, "journalists," like to lump these cities into a group called "Ka-na-duh" and ask the question "is it a bubble?" Then the industry mouth pieces and their enablers answer the question with "take Vancouver and Toronto out of the equation and no, Canada is not in a real estate bubble." Even if this is true, which it very likely isn't because there's a lot more cities that are over-valued than just the two largest, so what? It is an entirely useless discussion to homeowners and those who desire to own homes in specific locations.

What should matter is the answer to this question: "is Victoria (or whatever city you insert) in a real estate bubble?" This is a question few local experts are willing to answer despite evidence of many fundamental economic measures pointing to extreme over-valuations. There are few local indicators of a shift away from present conditions, which is reason enough not to stake professional and academic reputations on any claims of future local market conditions.

Sure, the industry types, who get a free ride from media who don't have the knowledge base, desire or editorial go-ahead to pursue the truth, are more than willing to spout off about "subdued, yet balanced valuation growth." Of course, those trying to sell books or stock market investment products/services are also given ample media opportunities to wax-poetic about housing Armageddon. But none of these positions have proven true, yet, and all of them have some semblance of "motive" that should have your skeptic meter flickering.

Does Victoria have an over-supply problem? When we look at current market conditions it's evident supply is very high and demand is very low. There's anecdotal evidence of falling home prices all over the market, despite the unarguable fact that VREB average reported prices appear stable thus far in 2011, likely skewed by market activity within individual segments -- which is exactly why average reported prices are the favoured market-reporting choice of those collecting money through real estate transactions.

Is Victoria currently over-valued? If we use historical average income/rent versus price numbers to perform any calculations the evidence is fairly solid. Same for Vancouver, Toronto, Ottawa and Montreal. Edmonton and Calgary too, although they're both down from previous peaks, same for Regina, Winnipeg and Saskatoon. Kelowna, sure. How about London? Possibly, but not nearly like Victoria. Or Halifax? Likely the same.

Are the over-valued cities in a "bubble?" The best possible clue may just be all the chatter in the news about the existence of a Canada-wide bubble, averaging numbers has a way of working out like that...

Day late, but hey, we broke 5,000!!!!!

2011-07-02T13:09:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

June 2011 (last week's numbers in brackets)
Net Unconditional Sales: 618 (511)
New Listings: 1465 (1209)
Active Listings: 5,050 (4,845)
Sales to new listings ratio: 42% (42%)
Sales to active listings ratio: 12% or 8.2 MOI

June 2010 totals
Net Unconditional Sales: 625
New Listings: 1,503
Active Listings: 4,730
Sales to new listings ratio: 41.5%
Sales to active listings ratio: 13% or 7.5 MOI

In the first month that looked like it may match 2010 totals, June 2011 failed to. And we broke 5,000 listings, although expect 300+ to disappear from the market by Monday morning as would be sellers take their homes off the market to wait for more favourable selling conditions; it matters not though as these are market peripherals, dreamers and schemers only attempting to find the "one buyer" willing to value their property at some astronomical number conjured up by owners who's homes are simply "worth more" than their neighbours.

It's not a good time to be a first-timer active in the Victoria market. Crappy offerings still dominate the low-end of the market. We don't have the reported average prices from the VREB yet, but I suspect that prices changes may show slight increases or flat. This isn't indicative of anything other than what's actually selling - there are all kinds of properties selling right now, but sharply priced mid-market homes are dragging average reported prices up. Buyers of these properties probably feel like they're getting deals and the sellers are probably bitter that their "investments" haven't made them a dime in the past 3 years.

The Victoria market has truly been flatter than a Saskatchewan farm for some time now.
Happy Canada Day weekend all.

Monday market update: back to the stats

2011-06-27T08:53:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

Month-to-date June 2011 (last week's numbers in brackets)
Net Unconditional Sales: 511 (368)
New Listings: 1209 (912)
Active Listings: 4,845 (4,803)
Sales to new listings ratio: 42% (40%)

June 2010 totals
Net Unconditional Sales: 625
New Listings: 1,503
Active Listings: 4,730
Sales to new listings ratio: 41.5%
Sales to active listings ratio: 13% or 7.5 MOI

It's unlikely June 2011 sales volume numbers will match June 2010. That said, it looks like the early volume bleeding of 2011 has diminished, although that's not to say the days of low sales and high volumes are over, because they're not. There's no price pressure up right now, and the market is proving very resilient against the substantial downward pressure that exists right now. Status quo remains the norm in Victoria. Patience may well be tested for the remainder of 2011 if you're itching to buy this fall and ~~believe~~ desire prices will be attractively lower in a few short months.

The HST

2011-06-21T13:20:00.000-07:00

I apologize for getting political on you. If you don't want to read or discuss this, simply skip down to the previous post.

BC faces a critical decision. It's important you're in the know before casting your vote in the upcoming mail-in referendum on the HST. Here's some links:

http://www.hstinbc.ca/

http://fighthst.com/

And the two most important things you can watch when it comes to this critical economic decision for BC:

We've been discussing prudent economic choice here at HHV since day 1. That's why I'm advocating that you choose to keep the HST. It's the right economic choice at this time. Please take some time to watch the videos above, unfortunately it's close to 30 minutes in total, but I remind you that financial matters are rarely quick decisions...

2011-06-20T12:13:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

Month-to-date June 2011 (last week's numbers in brackets)
Net Unconditional Sales: 368 (225)
New Listings: 912 (590)
Active Listings: 4,803 (4,742)
Sales to new listings ratio: 40% (38%)

June 2010 totals
Net Unconditional Sales: 625
New Listings: 1,503
Active Listings: 4,730
Sales to new listings ratio: 41.5%
Sales to active listings ratio: 13% or 7.5 MOI

Sales activity rose slightly from the previous week. This isn't out of the ordinary as mid-month sales volume has been busier than early month sales activity all year. This is the month for sales activity in the VREB area, sales volume typically declines as spring turns into summer then fall. Here's what it looked like last year:

Listings have likely peaked as well. Given the relatively crummy weather we've had, we may even see a listings pick-up over the coming weeks prior to the annual reduction of 1200-1500 listings we see every year as the spring/summer market ends.

Average reported prices are likely going to post gains month-over-month. This isn't because market values are rising; this is purely a case of more Honda's selling than Kia's.

Household debt overwhelms

2011-06-14T09:12:00.000-07:00

Many people think the US housing bust was triggered by NINJA loans and sub-prime lending. While those products definitely contributed to the hyper-inflation of US household debt from 2002-2006, they were hardly the trigger to the housing collapse. Once the ball started rolling downhill though, sub-prime so-called asset-backed securities had an underlying issue: zero equity.

Looks like Canada has the makings of it's own homegrown household debt issue. Apparently, we're in "dire straights".

From the article:

TD Economics warned that "following five years of excessive debt accumulation, Canadian households are finally tapped out."
Fifty-seven per cent of indebted respondents said daily living expenses are the main cause for their increasing debt;
The debt-to-income ratio in households reached a record high of 146.9 per cent in the first quarter of 2011, compared to 144 per cent in late 2009.
More Canadians are carrying debt into retirement, with one-third of retired households carrying an average debt of $60,000 and 17 per cent carrying $100,000 or more.

In case you are wondering what happens when a nation becomes indebted, suffers a financial crisis and then tries to grow itself out of the recession using more debt, we can learn from the US, which, as they say, is, well, F&%$!

We did it here too. CMHC = SUB-PRIME. Falling house prices will quickly lead to zero-equity for those who used the low-down, extended amortization schemes pushed hard by mortgage lenders, even today.

Monday market update

2011-06-13T08:58:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

Month-to-date June 2011 (last week's numbers in brackets)
Net Unconditional Sales: 225 (93)
New Listings: 590 (263)
Active Listings: 4,742 (4,651)
Sales to new listings ratio: 38% (35%)

June 2010 totals
Net Unconditional Sales: 625
New Listings: 1,503
Active Listings: 4,730
Sales to new listings ratio: 41.5%
Sales to active listings ratio: 13% or 7.5 MOI

Sales volume remains low, though activity picked up week over week. This is of course, relative; 2011 looks to be trending towards the volume lows of 2008, why reported average prices haven't dropped yet is determined by product sales and is bouyed by higher volume activity above the median rather than below. The median average price is more indicative of the true state of the market values of Victoria homes, and it's declining.

Monday market update

2011-06-06T08:52:00.000-07:00

May 2011: sales flat, listings jump significantly

2011-06-01T11:41:00.000-07:00

The average price for single-family homes sold in Greater Victoria last month was $628,462, up from $615,533 in April. The median price, however, declined slightly to $553,000 while the six-month average also declined slightly to $620,488. There were 26 single family home sales of over $1 million in May including one on the Gulf Islands. There were three sales in Oak Bay and one sale in Saanich West of over $2 million. The overall average price for condominiums last month was $328,345, down from $353,858 in April. The average for the last six months declined to $327,757. The median price for condominiums in May declined to $294,000. The average price of all townhomes sold last month declined to $466,845 from $480,621 in April. The median price also declined to $432,332 while the six month average rose to $447,581.

I suspect the winds of change to blow stronger as the year progresses from here on in and we'll start to see a slight shift towards declining prices as June rolls into July, August and September. By the end of the summer, the total active listings will likely start a steady decline until next spring, perhaps slowing the negative price momentum that may build in the next quarter.

As an aside, it seems odd to me that a city with over 4800 homes for sale has so few quality listings. There really are a lot of crappy product offerings these days. Sign of the times? Or do people just not give up on good homes?

Two days to go. Can we get there?

2011-05-30T20:07:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

Month-to-date May 2011 (last week's numbers in brackets)
Net Unconditional Sales: 527 (415) +112
New Listings: 1,381 (1107) +274
Active Listings: 4,666 (4,599) +67
Sales to new listings ratio: 38% (37%)

May 2010 totals
Net Unconditional Sales: 695
New Listings: 1,621
Active Listings: 4,521
Sales to new listings ratio: 42.8%
Sales to active listings ratio: 15% or 6.5 MOI

JustWaiting gave us as good as an analysis as we'll get around here:

Let's take a closer look at the weekly stats VREB has released for May. (+xxx) denotes change from previous week.

May 30 (4 day work week)
- Pending sales 527 (+112)
- New listings 1381 (+274)
- Active listings 4666 (+67)

May 24
- Pending sales 415 (+161)
- New listings 1107 (+336)
- Active listings 4599 (+56)

May 16
- Pending sales 254 (+126)
- New listings 771 (+375)
- Active listings 4543 (+126)

May 9
- Pending sales 128
- New listings 396
- Active listings 4417

The sales/new listings ratio for May is 527/1381 or 38% which is a sign of a buyers market (below 40%).

Sales have averaged about 27 per business day so we can expect around 581 from VREB on Wednesday. This is close to last month's 574 but way down from previous years.

2010 - 695
2009 - 879
2008 - 770
2007 - 963
2006 - 909

You can expect the usual "stable and balanced" market nonsense from VREB and their parrot the TC on Wednesday. Any comparison to last year will say that 2010 was unusually high etc. No mention will be made of the last 5 years.

Agreement schmagreement

2011-05-27T16:40:00.000-07:00

Well, who would have predicted this? Competition Board sues the Toronto Real Estate Board (H/T a simple man). We've known the CREA and its members wouldn't easily give up control of the gravy train without a serious fight, and thankfully the Competition Board seems like a willing and capable combatant.

At the center of this dispute is one undeniable fact: the real estate associations refuse to allow their members to share data in an innovative, open manner. They do this for a variety of "reasons," but I suspect (and have no solid proof to back this suspicion up) that the primary reason is time. When a realtor has to spend time looking after clients, they want to be paid for it. Fair enough, I have no issues with this.

But when a realtor wants to automate the way an individual gets information from them so as to free up time, lower costs and serve more clients, look out! here comes the TREB to "remind" the innovative realtor that only "time" can protect the information of the seller. And that realtor better spend the time faxing, emailing, meeting or speaking on the telephone about the information desired with a client rather than create an online system that offers said information in a manner that competes with the realtors who'd rather spend the time to get the bigger money from the fewer clients.

Would the VREB act this way? Who knows. The most innovative realtor I can think of in this town (regular readers will be familiar with him) isn't offering anything like what was tried in Toronto: he's offering full service listings for a fraction of the cost of the "traditional model," offering cash back to his buyers who are willing to do what most buyers are doing these days anyway (their own house hunts online) and offering a flat fee listing option.

Let me be absolutely clear: I've not communicated with this local realtor on this issue, nor will he necessarily endorse my description of his service offerings (although I hope he provides his own in comments). The VREB can't go after agents who operate in this manner because of the laws around price-fixing, but they don't need to either, because time isn't on these agents side. They still put in some serious hours attending to clients, they just happen to charge less than many of their peers for the same types of services.

If a licensed agent, with the capital necessary to pull it off, wanted to design a website that allowed his clients to log-in, do their own searches and see much of the market-, real property (land)- and house-related data contained in the realtor-only side of the MLS (seller's personal information hidden), then is it reasonable to prevent them from doing this?

The answer comes down to determining who owns the data. The TREB claims ownership and says they have a "legal and moral obligation" to that data. The Competition Board obviously disputes the legal side of that, but that's exactly why the communications experts over at the TREB chose to include the word moral--they're on the side of the little guys, or so they want you to believe.

I couldn't disagree more. Surely real property data is a key component to the economic public good of a functioning market and shouldn't be controlled by a private self-interest group that claims to have the public's interest in mind? And before you start calling me a raving leftist moonbat please consider the theory of economic freedom first. Finders keepers should be a losers' argument in this battle.

Market Update

2011-05-24T10:43:00.000-07:00

MLS numbers courtesy of the VREB (unconfirmed, thanks JustWaiting for sourcing these). These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

Month-to-date May 2011 (last week's numbers in brackets)
Net Unconditional Sales: 415 (254) +161
New Listings: 1107 (771) +336
Active Listings: 4,599 (4,543) +56
Sales to new listings ratio: 37% (33%)
Sales to active listings ratio: 9.2 (12% or 8 MOI) [estimated]

May 2010 totals
Net Unconditional Sales: 695
New Listings: 1,621
Active Listings: 4,521
Sales to new listings ratio: 42.8%
Sales to active listings ratio: 15% or 6.5 MOI

Sales activity definitely picked up last week from the prior two. But one week does not a trend make. Will we hit 600 for the month of May? Will we match April 2011's 574? We've been averaging 18 sales per day in May, including the uptick in activity last week. We'll need to see that number jump by 4 sales per day to match April. I won't be surprised if I'm wrong, but I suspect we won't hit that target. It'll likely be close, but it's irrelevant anyway. The bigger story is in the listings volume, which is now extremely high. We're now almost at 2008-like inventory levels. Why is that significant? Simple: from May to December 2008, the VREB reported average price of SFH's in Victoria dropped drastically.

The supply-demand market conditions for a repeat of 2008 are in place. Only time will tell us if recent history will repeat itself.

Of course, this time it's different*

2011-05-17T13:15:00.000-07:00

Sales volume is slumping faster than a binge-drinking alcoholic with a 2-4 of whiskey. But all over Canada, the bubble-meter is bubbling. Note the absolute disconnect from sanity that is Vancouver. Where's Victoria in all this mess? We'd be second, right about where the "What now?" question gets asked on the chart.

Read the analysis here, which includes this fine quote: "market risk is palpable." Ya think?

Full size chart here.

* no it's not

Monday market update: she ain't pretty, she just looks that way

2011-05-16T17:55:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

Month-to-date May 2011 (last week's numbers in brackets)
Net Unconditional Sales: 254 (128) +126
New Listings: 771 (396) +375
Active Listings: 4,543 (4,417) +126
Sales to new listings ratio: 33% (32%)
Sales to active listings ratio: 9.2 (11.5% or 11 MOI) [estimated]

May 2010 totals
Net Unconditional Sales: 695
New Listings: 1,621
Active Listings: 4,521
Sales to new listings ratio: 42.8%
Sales to active listings ratio: 15% or 6.5 MOI

If current trends continue, and this coming long weekend plays out like most with a dearth of sales activity, Victoria is going to be hard pressed to break 525 sales in May. With inventory approaching all time highs (have we ever broken 5000 listings?) and sales nearing 15 year lows, I just don't see how prices can remain as sticky as they have been thus far in 2011. But hey, I've been wrong before and I'll very likely be wrong again in the future.

One thing is for certain, if spring 2011 was to be a good market in Victoria, it played itself out long before now. Sales volume is low, listings are high and any claim of a "balanced market" by the real estate ~~experts~~ salespeople has been exposed for the bunk it is. If you're active in the market today, especially on the buy side, I have to question why? And I really do want to hear an answer, because I'm sure there are a few legitimate ones out there.

Buying: the search and the offer

2011-05-12T11:54:00.000-07:00

We've been at it for four long years. This search was very easy. We used a poor facsimile of VREB's Matrix or PCS system and the MLS® website to find the houses we wanted to view. Our REALTOR® scheduled appointments. We gave her a list of 30 houses we wanted to see, 15 each day for two days. After the first day, we asked her to add 5 houses she thought we should see based on our reaction to what we'd already seen.

Day one was very fast. We'd planned to be at it for around 7-8 hours. We were done in four. Let's just say we get to "no" very quickly. Mrs HHV came up with some handy acronyms for our listings sheets:

NWIH = No way in hell
NATP = Not at this price
WAO = Worth an offer

At the end of day one we had two WAOs on our list. We repeated the process again the next day, in almost as little time. We found the home we bought around mid-day. We looked at half a dozen more afterwards. By the end of our two-days of looking we had 5 WAOs on our list and one house we thought we really wanted.

We spent the rest of that day doing what we always do when we have a big decision to make. We compared the status quo to the anticipated outcome of the action taken. Action won out. We decided to schedule a second showing and, if it showed as well the second time, make an offer. It showed better the second time.

Here's an interesting side note: both times we viewed the home, the owners were present. Normally agents advise against this. The mobility of the owners was an issue, so they chose to stay home. We were very glad they were present. They made themselves scarce and weren't an issue for us. But they were a big part of the gut feel we got while inspecting their home. They were the original owners and their pride showed.

When we went to make the offer our agent showed us what had sold in the neighbourhood over the previous six months. Like many neighbourhoods in Canada, prices were on the downswing. The asking price was below the assessed value, only marginally so. The home had only been on the market a few days. Our agent suggested a price. We suggested another.

The negotiation would have been very simple if the listing agent hadn't been trying to take the day off. We had a few conditions on the offer: appraisal, inspection, financing and a change to the possession date. Our offered price was 2.6% below the asking price. We felt it was strong. Did it need to be? Given what we knew about the owners I'd say yes, it did. Given what we knew about the market conditions, I'd forgive you for telling me we paid too much.

So why did we choose to present a strong offer? Simple: the product and the people.

The house is immaculate and gives us the perfect opportunity to make it our own at our own pace. It needs nothing to make it livable today, but its old enough to make updating it worthwhile over the next 5 to 10 years. The layout is flexible. We're a small footprint family right now, but we may not always be. The house meets both those needs.

The lot size was above average for the neighbourhood. But the home built on it was about 90% the size of many of the other houses in the neighbourhood. The price reflected the home size, but not the lot size when we reviewed comparables. We value land. We like houses, but don't value a big house the way many people who choose to buy big homes on small lots seem to.

This house had one thing I always look for in a home: copper. If you've been in a new build in the last 5-7 years you'll often see an abundance of what's known in the plumbing world as PEX. We don't like it and don't trust the long term viability of it. I'd say 60% of the homes we viewed were plumbed with PEX versus copper. That was enough for us to rule them out, "good bones" and all that. All the major upkeep work had already been done: roof, siding, furnace, hot water heater etc.

This home was well-loved. Enough so that I wanted to know how it was well-loved. That was worth something to us: not leaving a distaste in the process of selling the home for the current owners. We wanted inside knowledge and were willing to pay for it.

Our agent suggested an offer price $5,000 lower than what we suggested.

The owner of the home had already decided his final price. It was $5,000 higher than our offer. When that came back we countered a matched price, but asked for some things around the property we knew the current owner didn't want to move (another reason why we were thankful they'd been around for the viewings and we'd had a chance to ask them a few questions). We certainly didn't get $5,000 worth of items, but we did them a service (they don't have to try to sell the lawnmower, yard tools, gas BBQ, spare fridge etc) and we saved a bit of time/money not having to go out and try to buy all this stuff anyway.

When I attended the home inspection 5 days after having the accepted offer in place, the inspector confirmed our gut feel had been right. No home inspection will ever be "perfect," but the total "fixes" necessary to this house are priced out under $500. Even better, the owners of the home showed me everything I had wanted to know about the house: how the sprinkler system works, how to maintain the water system, how to shut down the gas and water supplies, how to run the A/C/heatpump unit etc. We exchanged numbers and they'll be a good knowledge source in the future should anything surprise us.

Much of the time we discuss properties here at HHV, we focus on the financial side of things. We have to in Victoria because the prices dictate us to be excessively prudent to prevent ourselves from getting overwhelmed by the emotional side of buying a home and ending up in a potentially financially ruinous situation. Buying a home is emotional though, you can see that in some of my description above. It's been a positive experience for us thus far. We're not in the house yet and we know there will likely be a few initial "moments" when we are, but we're thankful that the price we paid allowed us to embrace the emotional side of the home buying experience -- there's value in that too.

Monday market update and a bunch of useless numbers

2011-05-09T17:08:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

Month-to-date May 2011
Net Unconditional Sales: 128
New Listings: 396
Active Listings: 4,417
Sales to new listings ratio: 32%
Sales to active listings ratio: 11.5% or 11 MOI (estimated)

May 2010 totals
Net Unconditional Sales: 695
New Listings: 1,621
Active Listings: 4,521
Sales to new listings ratio: 42.8%
Sales to active listings ratio: 15% or 6.5 MOI

I don't have much to say about the numbers other than they point to a flat market this spring. This is different from the previous two years, but not so unlike 2008, where there was absolutely zero upwards price pressure on the local market. So while the CREA hikes the forecast for home values in Canada, clearly they are skipping over the effect of Canada's 15th city (when ranked by size) on the national marketplace (H/T happy renter). Whatever, they skipped over all but ~~Upper Manhattan~~ Vancouver's west side when they tried to massage the numbers like Victoria's Secret massages cup sizes under the shirts of the Shark Club girls (OH, no he didn't!). Useless those numbers (I'll let readers decide which is which).

Which brings us full circle to another bunch of useless numbers, this time provided by our very own local board. Each month, the VREB solicits responses from local REALTORS® about who's buying, why and how they're planning to pay. I've seen the dispatch a number of times but never commented on it before, for two reasons: first, it's incomplete; and second, it's internal only, which means it can't be trusted enough to be released publicly in its internal dispatch form anyway. SweetRealtor provided us with some of the data in the previous post's comments, so I feel compelled to provide the HHV filter on the data (please read that as my opinion only).

The last time someone-in-the-know sent this to me was in a month where there were 318 sales. A grand total of 84 REALTORS® responded to the survey. That's a 26% response rate. Given that the scientific polls in Canada's 41st election couldn't have been more wrong about the outcome, I'm compelled to dismiss the "survey" of local REALTORS® without further discussion for the sales tool it's likely meant to be.

This is no slight on SweetRealtor, who's input and commentary I, amongst most of you readers, value greatly, but I simply don't think we should give any weight to the results of an inside buyer's motivation/financing survey when A) it doesn't capture every buyer and B) it is far beyond a stretch of the imagination to interpret these numbers as-given against market sales-related data and attempt to construe one set of numbers into the other to come up with any kind of explanation for the current market state.

Interesting they are; but definitive they are far from.

Buying: to REALTOR® or not to REALTOR®

2011-05-04T16:57:00.000-07:00

This isn't a bash session. Nor should it be. Please keep the comments section free from vitriol. Thanks in advance.

When we first decided we'd buy in our new city, the first thing we decided to do was start asking around for a REALTOR® referral from people we trust. It might be fitting that we didn't get one. Then again, that may just be because we only know a few people in our new town.

I, of course, hit the interwebs to do my research. The first thing I looked for was a cash-back REALTOR®. Low and behold, the agents offering cash-back schemes in the new town are nothing like the few agents offering true cash back options in Victoria. Granted house prices are approaching 60% of what a similar home costs here so naturally the commissions aren't anywhere near as bloated, but I'd have thought that more would be doing it. The only one I could find was a guy using the scheme purely to troll for buy-side clients. I had to talk to him on the phone to find out what the conditions on his cash-back offers were (and there were many) and once on the phone I knew right away we couldn't work with him.

So back to the drawing board. We asked for a referral from the relocation services company the new employer had contracted for us. We spoke on the phone one evening early in the week, got set-up with their proprietary listings service (think VREBs Matrix or PCS) and started giving them a list for the 3 days we planned to spend house hunting (only 2 days away). We narrowed the list down to 15 homes and asked for appointments all on the same day. We figured it was only one day and if the REALTOR® didn't mesh with us, we really had nothing to lose.

We got through 15 homes in the span of about 4 hours on the first day. Afterwards we provided a list of another 15 homes then requested the REALTOR pick at least 5 more that she thought we should look at based on what she knew about our tastes after the first day: we saw nearly 25 homes on day two, many of which were right for us. Of the almost 35 homes we looked at, at least 5 were on a list for serious, and by serious I mean let's go look again and make an offer, consideration.

We had tossed the idea around of just contacting listing REALTORS® and attempting to do our own deal, but given the circumstances no amount of pros vs cons comparison made enough sense to try to do it on our own. In this kind of circumstance, I recommend using a REALTOR®, it just makes things easier. And things were easier. The HHVs were dream clients: market savvy, knew what they wanted, quick to say no and quick to filter online.

The REALTOR® recognized the situation for what it was, stayed out of our way during viewings, did her best to answer questions when asked and busted her tail to keep up with our schedule. We were flying through homes so she spent much of the time trying to advance the viewing schedule so we could get into places earlier than the original plan called for.

The REALTOR® made very good money from us, that I know. I'd by lying if I said that I was happy about that, but I'm also a realist who well-understands that given the circumstances we found ourselves in and the other choices we'd already made, we were not in a position to act on our own.

The real estate market place, and its trading services industry, are what they are right now. Damn right I want to see it change, but if you're of the mindset to participate in the market at this time (buy or sell) sometimes you just have to hold your thoughts and play the game with the rules its played by at the time.

In the next post I'll outline how we chose the actual house.

So just how bad was April?

2011-05-02T09:12:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

April 2011 (percent change from 2010 in brackets)
Net Unconditional Sales: 574 (-24%)
New Listings: 1,577 (-12%)
Active Listings: 4,561 (+8%)
Sales to new listings ratio: 36%
Sales to active listings ratio: 12.5% or 7.9 MOI

April 2010 totals
Net Unconditional Sales: 756
New Listings: 1,783
Active Listings: 4,229
Sales to new listings ratio: 42%
Sales to active listings ratio: 21% or 5.6 MOI

Is it bad out there? Shoe-betcha! If you're trying to sell a home in Victoria right now, there are less buyers active than there were a month ago. And you should have sold last year because there were more buyers active then.

Buying today? Or trying to buy today? Rest assured you won't be involved in thick competition for crappy offerings anyway. Sure, you still see action on East Saanich properties in good shape or under-priced, but for every one of those you'll see a hundred or more other VREB area homes languishing on the market.

I wonder what will happen to prices this month? And the rest of the year?

Buying: show me the money

2011-05-01T17:10:00.000-07:00

I'll detail, some details anyway, the process that led to us buying our home (we aren't in it yet, but the subjects are off the sale agreement). It's a bit much to deal with in one post, so I'm going to break it up into several blog posts and intersperse those into the regularly scheduled state of the market updates we do around here.

Today it's all about the mortgage pre-approval. If you're shopping without one, I have to ask why? It seems entirely illogical to me to not know what the bank thinks of you before heading down the long drawn out path of purchasing a home.

When we began our house hunt, over four years ago, we had a period of about 6 months where we were "covered" by a pre-approval. I don't recall what our TDS (total debt service) ratio was back then so unfortunately I won't be able to compare the changes between then and now. We let the last pre-approval lapse in the fall of 2007 as we'd decided we weren't seriously shopping for a home in those market conditions.

Last fall, we undertook the process again. Financially speaking, the HHVs were in an entirely different place from 2007. The mortgage approval reflected this. And I was shocked, as was my wife. TDS was approved at over 42%. I nodded to the mortgage officer and said "I guess this explains the high prices eh?"

Since day one, we've had a total dollar figure target that we felt was a reasonable amount of debt to carry. Back on the day we made "the call" that dollar amount was representative of 3.25 times our annual income. Even as prices rose, we'd resolved ourselves to stick with that number -- it simply meant we'd have to save more before we bought if prices didn't drop. The amount of money the bank was willing to give us was around 40% more than what we felt we should spend. Another shocker. But once we got over the bank wanting to make us debt slaves to them, we realized if we stuck to our plan of spending considerably less it meant we could do it on one income and further insulate ourselves from interest rate and employment changes.

Our original locked-in rate offer was over 5%. I think it was around 5.4% or so. This time around, last fall, we were offered 3.24% for 5 years. When we renewed that locked-in pre-approval, it had risen to 3.49%.

We didn't use a mortgage broker. Not that we have anything against them. But the connections in our lives led us directly into a retail branch of a big 5 bank and we were happy with the product offering and the service we were provided. Our mortgage contract allows us to double the payments and make 15% lump sum payments annually. What this means is, if our mortgage amount was $100,000, we could drop $15,000 extra onto the principle each year AND if our monthly payment was $400, we could double it to $800 effectively allowing us to pay almost 20% extra off the principle annually without any penalties. Is that a great product comparatively to what else is out there? I'll let the experts judge, but it works for us.

We took out a 30 year amortization. The only reason we did so is because of the perceived flexibility it offers us to adjust payments based on what's occurring in our world financially. We'll be paying on a rapid bi-weekly schedule and adding 15% extra to every payment. That puts us on an 18-year amortization schedule effectively. We may end up making extra lump sum payments onto the mortgage each year depending on how our other savings vehicles perform. None of our regular savings efforts will need to be adjusted because of the mortgage. In other words, the TFSA and RRSP installments continue as is -- it would have been a deal breaker for us if we'd have to compromise these savings efforts.

We had all this sorted out before we even went in to get pre-approved. But the process necessitates you to make these decisions once you have an actual property purchase agreement in place, so these kinds of discussions may not occur with your lender until you've gotten to that stage.

Heading out for greener pastures

2011-04-28T13:29:00.000-07:00

For the first time since 1972, BC's net-immigration numbers are negative. You read that right. Despite all the HAM flowing into Richmond and Vancouver's west side, people are leaving in higher volumes than they're coming. That said, we're only talking about a number of souls that can fit into two 747's.

Which brings us to the absence of HHV from posting and discussion around here lately. We're joining the fine folks who, for whatever reason, have decided to head out for greener pastures. It should come as no surprise to those long time readers of this little corner of the interwebs that the HHVs haven't been sitting idly waiting for the market winds to shift. We've bucked the trends, stockpiled cash, paid off debt and executed a plan we're happy with. Part of this plan was on the career/earnings side and apparently people in other places took notice and, hey, good things do get offered when you put your head down and get to work.

We've decided to accept an offer that was just too good to pass up. So despite our yearning to live, work and play in Victoria for the remainder of our lives we've decided to head out on an adventure, earn more in a better role, pay less for shelter and take advantage of all the excitement a new province and city has to offer.

And we're now homeowners. I can't tell you how refreshing it was to look at 35 houses over the course of a weekend, all more than adequate for the next 10-15 years of our lives and be able to make decisions based on non-financial factors.

As for this blog, it will continue until it dies its natural death... if you can handle it's primary author no longer living in Victoria.

Monday market update: signals of a general strike

2011-04-18T11:09:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

Month to date April 2011 (last week's numbers in brackets)
Net Unconditional Sales: 299 (167)
New Listings: 846 (514)
Active Listings: 4,211 (4,103)
Current sales to new listings ratio: 35% (32%)

April 2010 totals
Net Unconditional Sales: 756
New Listings: 1,783
Active Listings: 4,229
Sales to new listings ratio: 42%
Sales to active listings ratio: 18% or 5.6 MOI

Buyers and sellers are both on strike. Inventory is still high, but it's not growing at a rate fast enough to create significant price pressure. Keep up the discussion!

Monday market update: woah nelly!

2011-04-11T09:19:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

Month to date April 2011 (first 4 days of April in brackets)
Net Unconditional Sales: 167 (47)
New Listings: 514 (135)
Active Listings: 4,103 (3,925)
Current sales to new listings ratio: 32%

April 2010 totals
Net Unconditional Sales: 756
New Listings: 1,783
Active Listings: 4,229
Sales to new listings ratio: 42%
Sales to active listings ratio: 18% or 5.6 MOI

The spring listings frenzy is on. If current pace continues (and it likely won't) we'll see 1410 new listings this month. I'll put the final number closer to 1250 as the beginning of the month typically sees more listings than the end, and with a major long weekend (4 days of Easter) happening late April, I think we'll see this number slow down.

Obviously the short-term trend of declining sales volume is continuing. If current sales pace continues, we'll be hard pressed to break 500 sales for April 2011. I'll peg the final sales volume number to be somewhere around 520ish.

There's some evidence to suggest the gap between asking price and sales price is growing. There's also evidence to suggest the gap between sales price and assessed value (as per BC Assessment) is shrinking. Both of these factors suggest prices are falling (despite how VREB calculates average prices). Based on current supply demand ratios I'm tempted to suggest that negative price pressure is slight, not substantial at this time.

Further note: that last post had some significant discussion, which I'm very grateful for. Every time I wanted to publish a new post, I felt like I'd be interrupting the discussion. Thanks to all of you readers and commentators out there!

Monday market update: 4 days of the same?

2011-04-04T11:24:00.000-07:00

Sales fall 21%, inventory up significantly in March

2011-04-01T09:02:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

March 2011 (percent change from 2010 in brackets)
Net Unconditional Sales: 622 (-21%)
New Listings: 1,501 (-13%)
Active Listings: 4,100 (+9.5%)
Sales to new listings ratio: 41%
Sales to active listings ratio: 15% or 6.6 MOI

March 2010 totals
Net Unconditional Sales: 789
New Listings: 1,719
Active Listings: 3,712
Sales to new listings ratio: 46%
Sales to active listings ratio: 21% or 4.7 MOI

Prepare for revised BCREA sales volumes forecasts soon. I have no idea how they think that sales volumes will increase from 2010 when the first three months of 2011 have shown a 20% declining trend.

If the mortgage rule changes indeed brought buyers forward (and it looks likethey may have slightly given the front-loaded sales volume in March) it didn't bring many. Are buyers exhausted, priced out or have Victorians finally figured out that paying $400K for a 2-bedroom crack shack on Burnside isn't a prudent financial decision?

How does March 2011 stack up against the previous decade?

So why aren't prices falling yet? The trend is towards an over hang of inventory and a lack of sales volume. We're not into the trend long enough to see price pressure yet.

Simple question

2011-03-30T17:55:00.001-07:00

Monday market update: feeling down?

2011-03-28T12:16:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

Month to date March 2011 (last week's numbers in brackets)
Net Unconditional Sales: 544 (438) +106
New Listings: 1,262 (987) +275
Active Listings: 3,902 (3,855) +47
Weekly sales to new listings ratio: 43% (51%)
Month-to-date sales to new listings ratio: 43% (44%)

March 2010 totals
Net Unconditional Sales: 789
New Listings: 1,719
Active Listings: 3,712
Sales to new listings ratio: 46%
Sales to active listings ratio: 21% or 4.7 MOI

Despite the arrival of spring, as indicated by the flowers and blossoms quickly making their presence known, the only dust collecting on the local real estate market isn't due to pollen, but rather stale listings.

Sales are definitely down year over year. Listings are definitely up year over year. There's little evidence of price pressure on the market, so we can't definitively say that buyers are getting good deals these days. Nope, sales price data is definitely disconnected from sales volume data right now. And I have few ideas why.

You?

All quiet on the western front

2011-03-23T21:45:00.000-07:00

D-day passed us by unceremoniously on March 18th. You can be forgiven for not having noticed, what with sales so low regardless in 2011. What's happening out there now?

Here's the most active category of home sales in pictures (Single Family Homes under $550,000 near the core):

Nothing but new listings and price drops today and yesterday.

Big bunch of price reductions on the 22nd. I guess these sellers got the message that the buyer pool shriveled drastically after the mortgage rule changes took effect.

One sale on March 19.

Other Matrix and PCS accounts show little activity as well. Like the VREB, BCREA and CREA will be doing later this spring, I might have to revise down my anticipated monthly sales volume total soon.

Eerie ain't it? These are beautiful days to be shopping for a home. Lots of listings, few buyers, great weather, low interest rates. Maybe people have finally woken up to the truth about Victoria's over-priced market? Or maybe they're finally all tapped out? Or maybe this is just one isolated segment of the market that isn't representative of the rest?

Monday market update: it's a stalemate

2011-03-21T17:31:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

Month to date March 2011 (last week's numbers in brackets)
Net Unconditional Sales: 438 (266) +172
New Listings: 987 (647) +340
Active Listings: 3,855 (3,638) +217
Weekly sales to new listings ratio: (51%)
Month-to-date sales to new listings ratio: 44% (41%)

March 2010 totals
Net Unconditional Sales: 789
New Listings: 1,719
Active Listings: 3,712
Sales to new listings ratio: 46%
Sales to active listings ratio: 21% or 4.7 MOI

Listings should be piling on this time of year. They're not. At the current rate, with only 10 days left in the month, we'll be lucky to see 1400 new listings on the month. That's a 15% decline from March 2010. If you're thinking that means prices will rise, think again. Buyers are even less active in the market than sellers, with March 2011 sales on pace to decline some 20% from March 2010.

One thing's for sure: the VREB is well off the pace necessary to support their rising sales volume thesis for Victoria's market in 2011 when compared to a "dismal" 2010. Lucky for those who can't fathom falling prices, the sellers are on strike too.

It will be interesting to see if sales volume can keep pace with the first 18 days of March for the last 13. I'm willing to wager they won't. I think this market will be hard pressed to see 620 sales by month end. Prices will be flat, which equals plus or minus 3% in current sales volumes.

Unless there's a rush for the exits, likely caused by a black swan event, 2011 looks like a whole lot of no-change for the Victoria market. Now more than anytime in the past 5 years, if you're buying, you'd better be buying the home you're buying for the long term. If you think you can live in a condo for the next two years and trade up to a house.... good luck, you'll need it.

Dropping the bomb

2011-03-17T22:05:00.000-07:00

In about 3 hours, if you haven't closed on your new home, well, you're literally sh&t out of luck if you can't afford the home you want without using a 35 year amortization and require government-backed mortgage insurance.

You snoozed, you lose-d.

It will soon be March 18th. All the usual pundits claimed that a sales-frenzy would be created by the mortgage rule changes and that spring would come early for the Victoria real estate market.

It didn't. Sales have been ho-hum, averaging about 20% less than this time last year. Sure, we're seeing higher sales volume than in 2009, only marginally so, but that's nothing to be happy about considering 2011 is shaping quickly into the second-lowest sales volume start to a year in the past 10.

If you're left wondering why, you're not alone. Unemployment isn't up. Nor are interest rates. There's no economic calamity. No recession. No impending doom. No riots. No protests. No instability. What could possibly be the issue keeping the Hot Asian Money from buying in Glanford? Why aren't the rich Albertan Oilmen snapping up Bayview and Hudson condos for weekend playgrounds? I thought it was en-vogue for gangsters to buy their goo-mah a Bear Mountain condo so that when they came to golf they never dined alone? And everyone, and by everyone I mean the world's elite wealth who really know what's what and who's up when the rest of us look down, wants to own a prestigious Beach Drive address so they can park their mega yacht in the sheltered bays and snap iPhone shots to tweet out to their legions of adoring fans, don't they?

Oh, wait. It's locals. I forgot. Real estate is always local. It's location, location, location. I guess the locals are exhausted. Or priced out forever. Or maybe they stopped caring. Whatever, they sure have stopped buying. I blame this guy. You should too:

Super Jim made it harder for you to buy a home today. It's too little too late, but damn it Jim, it's still St. Patrick's Day and I'd still like to buy you a beer for the effort. In that short 20 minutes I'll have your ear, I'll convince you to fire them all at the CMHC and privatize that crown corporation to get their gambling off our collective books.

Monday market update

2011-03-14T11:41:00.000-07:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

Month to date March 2011 (last week's numbers in brackets)
Net Unconditional Sales: 266 (119) +147
New Listings: 647 (279) +368
Active Listings: 3,765 (3,638) +127
Weekly sales to new listings ratio: (40%)
Month-to-date sales to new listings ratio: 41% (40%)

March 2010 totals
Net Unconditional Sales: 789
New Listings: 1,719
Active Listings: 3,712
Sales to new listings ratio: 46%
Sales to active listings ratio: 21% or 4.7 MOI

Despite the relatively high sales to new listings ratio, the true story about current market state in Victoria is being told in the low sales and listings volumes. Active listings volume typically peaks in Victoria in the spring. We're not seeing enough new listings to create significant negative price pressure. Nor are we seeing sales volumes at a level necessary to create upwards price movement.

Things look to be shaping into a dull spring market punctuated by a lack of quality offerings and a dearth of active buyers.

Lies, damned lies and statistics

2011-03-11T08:17:00.000-08:00

VancouverCondo.info linked to this disturbing article on the CBC's website today. It's a story about a survey that says Canadians are prepared to weather a housing price collapse -- conveniently they don't define what a housing price collapse looks like, and by they, I mean the RBC which conducted the study to support their business. It's actually quite blatant what they're trying to accomplish when you read the actual press release. Here's the synopsis:

The vast majority of Canadians (90%) believe in home ownership, you should too
The vast majority of Canadians (85%) have no trouble paying their mortgages despite record unaffordability and rising interest rates -- so don't worry about it and get yourself in over your head today too
The major reason why most Canadians are motivated to buy soon is rising home valuations (26%) and rising interest rates (22%) -- they want to buy now before they're priced out forever, very smart folks these, use our handy online calculator
BCers are most likely to want to buy new rather than used, most likely to buy before they're priced out forever and more prone to group think "buy now, buy now, use RBC, use RBC, buy now, buy now"

So yeah, the RBC release was a bit much in my opinion. But fair enough, we've come to expect this from business, so our spidey senses tingle and we read it for what it is. Note to RBC: in the future, if you want to have your press release turned into a news story without the inconvenience of edits for balance, send a box of chocolates and a bouquet of flowers to the fine folks over at the Times Colonist. They're well trained in the finer aspects of RIGHT CLICK>CUT and RIGHT CLICK>PASTE.

The CBC, well in this case, they did try to inject some balance into the story by using RBC's inconvenient survey contradictions against them. While RBC is currently saying Canadians are having no problems buying and paying for their houses, they didn't ask how the effects of doing so are impacting other important financial activities: like actually saving real money. Thankfully for us, back in October, RBC did ask Canadians that question and thankfully someone at the CBC (likely an industrious intern; they always go above and beyond) Googled for some balance (was that so hard?). Here's what they found:

58% of Canadians can't save what they think they ought to
38% of Canadians can't save at all

But the intern(?) didn't stop there. Industrious little folks, not content to wait for the established players to retire off and open a career path for them; nope, I tell you, these new-fangled millennial careerists are go-getter's who are going to manage the news desks sooner than the previous generations did; picked up the phone (not likely), or e-mailed (they're tech savvy), CAAMP to get a second opinion! And what did CAAMP tell them?

"Housing market crash? You're making a big deal out of nothing, there's nothing to see here, we're not like Americans and we didn't load up on mortgage debt over the past decade"
Only 2000 Canadian households would face foreclosure if interest rates rise
The Canadian mortgage market expanded by 10% this past decade

There's an old saying: there's lies, damned lies and statistics. In this piece, I've pointed out the lies and those last couple of bullet points are most definitely a damned lie (or it could be a misquote). Here's the statistics:

Does that look like 10% over the past 10 years to you? It's actually more than double. Maybe CAAMP meant 10% per year over the past 10 years?

What about last year when CAAMP told us that 16% of Canadians couldn't weather a $300 increase in mortgage payments and that 11% of Canadians couldn't weather a 1.5% rise in interest rates (source)? That surely will impact households significantly and a great many more than 2000 homes could (will) be forced into foreclosure.

Monday market update

2011-03-07T14:17:00.000-08:00

I won't be at all surprised if my March projections are off by 10%-20% when the final numbers come in, especially on the total active listings numbers. It's a steady as she goes kind of first week in March 2011. It's just one week, built on just two months, but I still don't see the kind of sales volume spike we'll need to create any upwards pressure on prices. Of course, to the opposite, I'm not seeing the listings volume pressure building up yet to create significant downwards price pressure either.

If you're out there shopping, and can't convince yourselves to keep renting, take your time shopping. There's certainly no reason why you should feel compelled to act fast in this market.

Wait or buy: some singular analysis

2011-03-05T16:22:00.000-08:00

Interesting discussion in the previous post's comments. Thought I'd try to expand on it a bit with an example I've been working through.

There is, what I think anyway, a great rental property available in the Hillside/Cedar Hill neighbourhood right now. It's listed for $1395 per month. Here's the listing. It's an odd skinny looking place, squished onto an odd lot with little yard space, but it's finished quite nicely and would be suitable for a professional couple or small family. It's only 2 bedrooms, but it's got 2 bathrooms, and at that price point, considering it's the whole house and not a partial suite etc, it's likely appealing to more than a few people. I'm guessing it's likely about 1200 square feet in total.

It also happened to sell in October 2010 for $475,000:

Which gives us a perfect opportunity to run some rent versus own equivalency numbers moving forward for a couple of years. I'm going to use the wait or buy analysis tool that, long-time commentator though MIA for some time, Roger created a couple of years ago. It's the best tool I've seen yet to do a comprehensive analysis easily. I highly recommend it. It's linked to the right under Resource Links.

This first scenario shows rent versus owning with the expectation of a modest 10% price correction playing out over 2 years. It assumes a 20% down payment and a rising interest rate environment, again a modest 2% in fixed terms over two years which is in line with what the banks are talking about.

Even only a modest correction indicates huge savings. Here it is broken down for you dollar for dollar:

I know there's more than a few of you skeptical of future devaluation. I get it. Real estate only goes up in Victoria, the boomers are coming, H.A.M. will save us... so I've taken the liberty to show you what will happen if the purchase price remains unchanged (surely no one is going to argue prices will go up much over the next two years right?).

If it plays out like this, the renter has essentially gambled and lost a cool $3,000. Here's the detailed breakdown of how that might have occurred:

At least the renter still has their savings in the end to offset some of that $3,000 gamble. Which is a far cry different for the folks who buy today, counting on prices staying flat over the next two years, who if wrong, and only a very modest correction of 5% per year for two years plays out, could find themselves a whopping $55,000 down in the hole.

Feel free to mess around with the calculator. You could say that we're 30% overvalued right now (the Bank of Montreal thinks we are) so we'll see that kind of correction in the near term (I'm not personally thinking it will happen, but you can) and then you'll see a massive monetary gain for the patient buyer who waits a couple of years before buying the home they live in from their landlord who is potentially in financial distress. If this little scenario plays out the renter nets $147,000.

You could also easily argue prices rise with inflation for the next two years, so say 6% in two years, in which case the folks who snapped this place up last fall will be $37,000 ahead of the folks who are renting the place from them, despite having subsidized their lifestyles by almost $500 per month for two years.

Things really don't look so bad for the patient buyers these days. Even in a rising interest rate environment, the risk/reward factors are heavily in favour of the folks renting this place.

Houses and incomes, they correlate, they always have

2011-03-03T23:49:00.000-08:00

That's not to say that other factors, like say, rising and falling interest rates, can't also play a factor in home prices. Of course they do.

Long-time readers of HHV may remember this post from April 2009, just about the same time the mini-crash we experienced in the latter half of 2008 and early 2009 was ending, highlighting a TD Economics report that pegged Victoria average home prices to be 18% out of whack when incomes and rents were compared.

In the past couple of days, BMO has released a similar analysis of the Canadian real estate market. Ben over at Financial Insights has some commentary up. And the Financial Post is weighing in too with this piece titled: Housing crisis inevitable if prices outpace incomes.

While the economist at BMO, Sal Guatieri, was quoted, and some of the quotes were juicy purple bear kool-aid, the report can hardly be called a damning indictment of the current market conditions. But let's drink from the fountain anyway OK?

Tighter mortgage rules, which come into effect March 18, along with higher interest rates, lower affordability and elevated household debt, “should keep house prices on a tight leash,”

Emphasis mine. Did you see what bond yields did today? Astonishing (H/T Ben). That's right, if this doesn't drop in a hurry, you better prepare for fixed-term interest rate hikes in short order from the major lenders. Do I hear a full half percent in a 30 day span? Effectively dropping qualifications an additional 7%?

By March 18, when the new mortgage rule changes come into effect, if we see a coincidental interest rate hike, buyers could see their mortgage qualification amount drop substantially. But of course, this won't impact Victoria 'cuz we're on an island and we're insulated.*

Let's get back to the numbers. TD Economics had us pegged at 18% overvalued in 2009. Back then interest rates were roughly what they are today. So what's happened? Well, according to BMO, BC is now 31% overvalued. Considering the Victoria average is oh, 10%-15% higher than the BC average, we might say things are looking downright Saskatchewan-y in Victoria if you buy into the history of price to income ratios.

The margins really are ever so tight right now. I giggle like a school girl every time I hear someone talk about the current situation in comparison to the big market crash Victoria experienced in the early 1980s. They say inflation was rampant back then. They say interest rates jumped to over 20% back then. They say that there is no way interest rates can jump that high again. They say because that can't happen there's no way the same situation can play out in Victoria now.

I say they don't have a clue how interest rates effect payments, markets and qualification amounts. We don't need 20% interest rates to see a monumental reduction in affordability to 1980 crisis levels. Two or three percentage points at today's prices will create the same conditions. Looks like the bond markets are starting to get jumpy with all this risk floating around.

BMO expects interest rates to rise 2% over the next 18 months. If that expectation plays out, say good bye to 30% of your mortgage qualification amount. Best buy now before you're priced out forever.**

* We are on an island, but that doesn't mean we're insulated, regardless, get ready to hear this meme in overdrive from the usual suspects.

** Yes, this was sarcasm. Extremely sarcastic.

The problem with "evidence"

2011-03-02T17:44:00.000-08:00

I've often wondered why the filter that different people use to view the evidence surrounding them can render a picture so different than what others would consider reality.

If you've ever read a political blog, or the comments on a political story on a media website, you'll know exactly what I mean. Heck, for that matter, if you've spent enough time on this blog and read the various comments you've likely caught yourself wonder WTF is that guy thinking? I like to think I've inspired a few of those moments for you readers over the past 4 years myself.

I had a couple WTF moments today that left me scratching my head at just how ~~brain farts~~ thoughts get tossed out as evidence in the world of real estate marketing.

On Twitter today I came across a tweet from what I assume to be a well-regarded, well-known and fairly successful REALTOR®. The guy is, of course, bullish on the Vancouver real estate market where he works. He's likely seen first hand evidence of the Hot Asian Money being thrown around on the west side of town his offices occupy. It's beginning to feel like spring, so of course listings and sales activity is increasing. But this tweet didn't just say "Wow, I'm really getting busy, got 2 offers and 4 showings today." Nope. It said something along the lines of this:

Vancouver real estate market is hot. Listing increased its price today from $1.7M to $2.2M.

Face, meet palm.

There's three things far more logical to connect with a listing price increase than evidence of a hot market:

A seller who believes their home should fetch $2.2M instead of $1.7M (despite not selling it for $1.7M yet, in other words... face, meet palm)
A REALTOR® who took over a listing renewal by telling the vendor the reason why they hadn't sold their home at a lower price was because they were targeting the wrong market (H.A.M. types don't spend less than $2M in case you didn't know)
It's a slow morning, and a not yet two cups of coffee thinking one to boot, so the REALTOR® in question found himself hanging out at StartBucks, iPhone4 in hand, trolling for clients, and thought he'd drum up some high priced listings business by tweeting out to his 2,439* followers (2,429** of which are other REALTORS®) something that may or may not be true and something that the majority of people wouldn't think to question the truthiness of anyway.

Let me bring this a little closer to home. I'm checking out a Facebook page. Over on the right is a link from a REALTOR® promising me access to stats I can't get elsewhere. You can see where this is going: I have an addiction to real estate numbers so, despite my reservations, I clicked the link and ended up on the REALTOR®'s blog. OH, THE HORROR! Here's what I found:

A strong economy drives employment, and employment drives immigration. Of course, these new residents need a place to live! With the recovering world economy and emerging asian markets on a real tear, BC is in a great position to take advantage of the next decade.

Apparently H.A.M. is being tossed around in Fernwood, Fairfield and Oak Bay too, not just the west side of Vancouver and Richmond. But the best part of these "statistics" I received after I clicked the Facebook ad was the link that was offered as their source took me to this story here, a story that doesn't mention Victoria specifically, doesn't talk about immigrants, says BC's unemployment rate is up post-Olympics and that Saskatchewan is the shining light of the West with Saskatoon and Regina growing fast due to their proximity to the economic engines of oil and agriculture.

* I made this number of followers up.
** I made this number up too, but if you're on Twitter and follow REALTORS®, you can be forgiven for thinking this is true.

Frothy February

2011-02-28T17:36:00.000-08:00

Here's your February market update, MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands. These numbers are not the official February totals, which should be released late morning March 1, 2011.

UPDATE: I've updated the numbers below with the official data wherever possible.

Month to date February 2011, last week's numbers in (brackets)
Net Unconditional Sales: 488 (315) +
New Listings: 1,276 (919) + 357
Active Listings: 3,714 (3,526) +188
Sales to new listings ratio: 38% (34%)
Sales to active listings ratio: 13% or 7.6 MOI approximated (8% or 8 MOI approximated)

February 2010 totals
Net Unconditional Sales: 621
New Listings: 1,460
Active Listings: 3,280
Sales to new listings ratio: 42.5%
Sales to active listings ratio: 19% or 5.3 MOI

Two things stand out for me in these numbers:

Prices won't be falling in February. Despite a significant drop in sales volume (25% or more), the lack of new listings volume doesn't put enough pressure on the marketplace for noticeable price drops, yet, though it's definitely building.
Sales built consistently as the weeks of February went by. Especially in the entry level SFH category. This is in harmony with what we expected considering the coming mortgage rule changes. I expect this category of housing sales to be short lived into March.

If this was the sales flurry that all the pundits predicted would be brought forward by the CMHC mortgage rule changes, then the bears have dodged a bullet. You can expect the usual suspects to be absolutely ecstatic in the media tomorrow, but the truth is these numbers have to be disappointing for everyone. Sales volume is down, but the listings volume is down too, almost one for one.

That said, it's obvious from our weekly updates that sales volumes didn't meet expectations and the "mad rush" to get in before the 5% down 35 year amortization buyer crowd became priced out forever was short and underwhelming (but not over yet).

FURTHER UPDATE(s) yes I've since added to this...
The spin doctors are in high gear over at the VREB and they didn't even blame the weather. Apparently, the sales volume drop can be explained by saying something that isn't true:

Fimrite added that although February’s sales were below the sales totals for February of a year ago, the beginning of 2010 was marked by an unusually strong market that softened as the year progressed .

2010 wasn't "unusually strong" it was actually normal. See for yourself:

Here's the truth:

Percent changes YOY
Net Unconditional Sales: - 22%
New Listings: -23%
Active Listings: + 13%

Percent changes MOM
Net Unconditional Sales: + 31%
New Listings: + 8%
Active Listings: + 12%

Listings aren't jumping very fast for this time of year. I think it's safe to say potential sellers aren't showing a marked increase in confidence in the market right now. OMC in comments says we're experiencing normal new listings volumes for this time of year. When I use the 2010 experience as "normal" we're not, but when you dig back a few years, it's obvious we are. 4500 total active listings by the end of April is definitely within sight, and that's high volume.

This line of spin we're being force-fed that low sales volume is indeed normal isn't even true when you go digging back to the 1990s. Take a look:

When looking at these numbers we need to realize that the number of dwellings and the number of people have grown exponentially in Victoria since then. Obviously the market in Victoria in the early 1990s was very hot, even when we compare it to the 2002-2007 period of craziness. It was actually more active, but those sales represent higher per-capita and per-dwelling sales activity than current numbers do. In other words, 488 sales in February 2011 is a substantial drop in market activity from 488ish sales in 1996.

Fighting a losing battle? Skip a payment.

2011-02-26T10:22:00.000-08:00

Perma-bulls in the real estate world often use snippets of anecdotes to counter the data-driven arguments of the real estate bears who say current price levels are not supported by fundamentals.

One of the key points the bulls often fixate on is usually expressed in the form of a question with a barely passable answer attached:

"If Canadians are so stretched financially and can barely afford their homes, why aren't mortgage arrears showing up higher than they are? After all mortgage arrears are still lower than they were in the early 1990s and our Canadian financial institutions are prudent."

It's this kind of rhetoric that makes the real-estate-always-goes-up crowd breathe heavy on their finger nails before polishing them against their designer shirts in gleeful gloat mode because at this point, in their own minds, they've won the argument.

"It doesn't matter what your data tells you, my data tells me this time it's different. And that's a fact."

Unfortunately, and you knew this was coming, that "data" provided as the bull's argument knock out punch, ignores the financial reality: it's only through mortgage product innovation that mortgage arrears aren't at record highs, despite the fact they're already double what they were just a few short years ago:

From 2006-2008, it was the 40 year amortization that allowed more over-extended Canadians to avoid falling behind. The government eliminated new origination's of 40 year mortgages in October 2008, but the banks found a way to allow the effects of them to continue: can't afford the increase in payments? Skip one. Every year. For as long as your term allows.

In 2010, the mortgage market was tightened ever so slightly by requiring CMHC-insured mortgages to be qualified at the discounted five year rate. You qualify for slightly less money, but you still have the flexibility of the 35 year amortization at the discounted variable rate to over-extend yourself into real estate financial Armageddon. The "prudent" banks are only too happy to oblige you because your mortgage is insured by the CMHC and they're turning around and selling these loans into the mortgage backed securities market faster than they're writing them anyway. In other words, the banks have zero risk in this game.

In 2011, just 20 short days away from today, the CMHC will stop insuring 35 year amortized loans. The banks have already found their solution to this little issue, it's been working for them for a few years now: let Canadians skip a payment and roll the interest back into the principle. It's a little accounting trick that nets the debt holder more money as long as the mortgage doesn't default--Sh&t it's as close to a win-win-win as the Canadian mortgage game can generate: debtors don't have to pay their debts on time, banks don't have to default on the loans and the pension funds that eat up the MBSs being sold by the CMHC don't see any risk to their investments as long as the tax payers keep backstopping this ~~prudent~~ smoke and mirrors financial practice.

This skip-a-payment thing is offered by almost everyone in the mortgage game. If a household exercises this option once a year, as most mortgage contracts allow them to do, for a full five year term, it has the same effect on lowering payments as a five year extended amortization. So yeah, the 40 year amortization still exists. After March 18, 2011, the 35 year amortization will still exist. Just not in name. Case in point:

Current mortgage payment: $1500
Skip-a-payment proceeds: $1500
New "effective" mortgage payment: $1375

30 year amortization of $310,000 mortgage at 4.2%: $1500
35 year amortization of $310,000 mortgage at 4.2%: $1400

The more I become aware of what the banks do, precisely because there are few economic consequences to them thanks to Mr and Mrs Canadian taxpayer, the more I believe there is only one solution to this problem: privatize the CMHC. Prudent Canadian financial institutions my a$$.

Who's making the cake?

2011-02-24T10:16:00.000-08:00

There's something like 1300ish REALTORS® in Victoria. Less than 1% of them are advertising "commission sharing" online, some are offering other discounts to get clients, and then there's a bunch of 'em (who make up a small percentage of the total) who wake up in the morning and climb out from under their cash-stuffed silk duvets.

In 2010, not a great year but not a bad one either in the big scheme of sales volume, $2,794,122,181 worth of real estate changed hands in the VREB MLS®. It's not easy to calculate total sales commissions on this number because we don't know the commission structures of each deal and we do know they would not have been uniform. I've seen 5% as average commission on individual deals before, but it's not accurate, for example:

Average home price: $600,000
Commission: $6,000 + $15,000 = $21,000 (6% on first $100K + 3% on >$100K)
5% = $30,000

So we won't assume that 5% of the two billion seven hundred ninety four million one hundred twenty two thousand one hundred and eighty one dollars went to REALTORS®.

I'm in a giving mood. Let's be generous to the industry today and guesstimate that the total commissions collected added up to just 2.5% of total sales volume (I wouldn't be surprised if it was closer to 3% in fact). That means there was very likely $83,823,665.43 in commissions for the region's 1300 collectors to divvy up for an average $64,479.74 pre-tax, pre-expenses income. The industry is an expensive one to participate in: you've got heavy desk fees at the big-boy brokerages, Lexus leases, Gucci watches, Armani suits, Jimmy Choo shoes and Luis Vuitton leather listing binders to pay for if you want to project success. I'd be surprised if the average REALTOR® didn't spend half that $65,000ish on expenses related to securing their real estate riches dreams.

Makes you wonder why anyone would spend the $10,000+ to study up, buy insurance and have a 6-month expenses float to break into the business doesn't it? (Probably why a great many would-be agent goes into it part-time).

Real estate trading services is, despite the fact the industry has been ~~colluding on commissions~~ charging what the market will bear, a very competitive business. It's a dog eat dog world out there and we all know there's some big dogs in this little town. The VREB showers recognition on the big dogs each year and sales managers in the brokerages try to motivate as many of their little dogs into the big dog pit as possible.

You've seen the recognition program, the MLS® Gold, Silver and Bronze Awards, I'm sure. Every agent ever to win one is sure to plaster it across their cross-armed-leaning-up-against-the-wall-coolly, hipster vinyl photo on the back of the #14 bus to remind you they're far superior to their peers--"Use me, more people do!"

So what are the thresholds? Well, they change from year to year. It's not about hitting a firm dollar target, it's about measuring sales volumes against the performance of the group. They do it in percentage brackets. Magically, the 2010 brackets appear for us here:

Final Gold Threshold: $6,075,500 (top 10%)
Final Silver Threshold: $4,079,500 (top 20%)
Final Bronze Threshold: $2,827,625 (top 30%)

What do these numbers mean in terms of commissions collected? Again, it's tough to say with absolute certainty, but here's the best guess:

Gold: $200,000 +
Silver: $140,000 +
Bronze: $100,000 +

These numbers were calculated assuming standard commission rates of 6% on first $100,000 and 3% on > $100,000. The majority of the deals aren't double ended, and sales revenue is credited based on commission-able earnings meaning if the average home sells for $600,000 generating $21,000 in commission split equally ($10,500) then each REALTOR® is credited with $300,000 in sales revenue towards the MLS® Awards.

A REALTOR® has to get in on about 9.5 average-priced SFH deals per year to be a bronze winner. I'm going to stop there because the deals done are too diverse to make an even remotely accurate average assessment of deal volume. But I'll leave you with this thought: It's highly likely the taxable income of a bronze winner is somewhere between 60% and 70% of the estimated commissions collected. This means that its likely the top 30% of Victoria's REALTORS® get in on enough deals to earn what I calculated as the "average" above.

There's an old adage in the sales world: 20% of the players take home 80% of the cake. It appears this may be true in the local real estate market.

Raindrops and roses

2011-02-23T09:24:00.000-08:00

It's snowing Victoria, in February, after Ground Hog Day, when the daffodils are just set to bloom. Twitter is all abuzz with the #YYJ #Snowpocalypse. And Cameron Muir "forecasts" home sales will rise in Victoria this year by 7% over 2010 sales volumes.

What a leap of logic that is!

Let's see:

Harder to get a mortgage? For some folks this is true. More accurately though is the mortgage you can get in March will be more expensive than the one you can get today (although I'm hearing that some banks aren't doing 35 year amortizations on new approvals already, just honouring pre-approvals at 35 year ams).
Interest rates a-rising? Most certainly they're trending that way, albeit only slightly right now.
Sales volumes a-slumping already? Most definitely: January sales volume was down 19% YOY and February looks like it'll be down anywhere from 20% to 30% YOY. Remember sales were supposed to be pulled forward into the first two months of this year because of mortgage rule changes. If they're not jumping now, how does anyone see them jumping later?

I bet you dollars to donuts the local rag gives old Cameron a free pass on his ~~economic forecast~~ wishful thinking. UPDATE (Bet won, H/T to LeoS for link, please don't click it, you'll regret visiting that dirty rag). It must be nice to live in a world where you can make sh&t up and never get called on it by the folks whose job is to weed through the bullsh$t (I'm looking at you news media).

Prediction: Cameron Muir and the BCREA will revise their forecast in April, down, and the media will give them another pass.

Stuck in the middle: the Victoria townhouse experience

2011-02-22T13:55:00.000-08:00

I've often thought that townhouses have the potential to be Victoria's perfect property for a fair number of people. As time goes on, I'd think more people would be attracted to townhome living. No shared hallways, very little yard work, affordable "full size" homes without the need to suite your house out, certainly these are a few advantages for busy working couples/families and early retirees?

The trouble with Victoria townhomes, especially at the entry level price point, is they're typically old, typically on busy streets or near busy highways, typically have high maintenance/strata fees and typically have restrictive strata councils that make them less appealing than buying an entry-level duplex or house with a suite. Oh, and they're almost always extremely overpriced--I'd say more so than any other product on the market today.

I checked out a couple of open houses the other weekend. The house had a 1 bedroom suite in it, and a smallish 3 bedroom 1 bathroom main living area for the owner to occupy. It will likely fetch around $450,000 when it sells, assuming no structural or significant cosmetic work is necessary (I didn't see evidence of either). I also looked at a townhouse listed for close to $350,000. Both neighbourhoods were comparable, but the townhouse actually had the location advantage.

Let me do a little first time buyer comparison here: assuming a 5% down, 30 year amortization mortgage at 3.49% for a 5 year term.

House
Price = $450,000
Mortgage = $422,500
Monthly payment = $1889
Suite rental income = $800
Taxes + maintenance/month = $300
Total cost to own = $1400/month estimated

Townhouse
Price = $350,000
Mortgage = $332,500
Monthly payment = $1487
Taxes + maintenance = $400 (est $125 tax, $275 strata)
Total cost to own = $1887 estimated

Currently, townhouse owners, and the few people buying them at the entry level, believe you should pay a premium to own a place with no direct claim to land and little ability to influence financial decisions directly affecting your monthly budget (for example, increases in maintenance fees, special assessments for parking lots, siding, roofs etc). It's no wonder then why those townhouse owners trying to sell are having an especially hard time right now.

Here's January's townhouse market snapshot:

Total sales: 38
New listings: 132
Total active listings: 297
Sales to new listings ratio: 29%
Sales to active listings ratio: 13%
Days to sell: 80 (up 116% from January 2010)
Average price: $445,628
Median price: $418,050
Price change year over year: -2%
Price change month over month: flat
Months of inventory: 7.8

42% of all townhomes sold for under $400,000
Victoria/Vic West recorded 10 townhome sales (current listings volume make this 5 MOI)
Saanich East, Sidney and Central Saanich were the townhouse buying municipalities of 2nd choice, with 6 each
SE MOI is about 7, Sidney MOI is about 3.5 and CS MOI is about 3.
Saanich West is a different story altogether, recording only 2 sales and having around 20 properties listed making the MOI about 10
Langford and Colwood combined had 2 sales, with almost 80 properties on the market right now, they're showing a bare-mountainous MOI of 40. And they're still building out there!

It's a strange market for sure, these Victoria town homes. I desperately want you available listings to be more appealing, but your insane asking prices relative to your demand and your entry level duplex and SFH competition I just can't get past. Lucky for you, all you have to do to make yourself more appealing is recognize that dropping your asking price by 20% or more will bring the buyers shopping for condos and entry level single family homes straight into your empty open houses.

Can we get to 500?

2011-02-21T14:32:00.000-08:00

This is panic buying month. The news media tells us so (Times Colonist link warning). With mortgage rule changes less than 30 days away, those buyers desperate to use the 35 year amortization should be out snatching up properties as if they're not making any more land. Coupled with creeping interest rate rises, you'd think the feeding frenzy on homes in the provincial capital would be incredible right now. But it's not. In fact, it's far from a feeding frenzy out there. It's down right eery how quiet the local market is.

Here's your Monday market update, MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

Month to date February 2011, last week's numbers in (brackets)
Net Unconditional Sales: 315 (195) + 120
New Listings: 919 (637) + 282
Active Listings: 3,526 (3,435) + 91
Sales to new listings ratio: 34% (30%)
Sales to active listings ratio: 9% or 8 MOI approximated (6% or 8.8 MOI approximated)

February 2010 totals
Net Unconditional Sales: 621
New Listings: 1,460
Active Listings: 3,280
Sales to new listings ratio: 42.5%
Sales to active listings ratio: 19% or 5.3 MOI

We've been averaging about 105 sales per week this month. If the trend continues, we'll hit 440 sales in February 2011. The last time we had February sales this low was near the bottom of the mini-crash in 2008/2009. We don't have the listings volumes and the sky-is-falling-consumer-sentiment now that we had then, so prices are much stickier and "the deals," if you can call any individual sales that right now, aren't nearly as good as they were.

Keep in mind that everyone agrees the mortgage rule changes are pulling buyers forward, not scaring them away. If this turns out to be true, this foreshadows a dismal spring shaping into a potentially troubled year in the local Victoria real estate market. It would seem potential sellers agree with this outlook: they're not listing their homes at a normal rate. That said, no one should claim current inventory of over 3500 available units for sale is anything other than untypically high volume, perhaps 20% higher than what was the February normal for much of the past decade.

Albertans move to the West Shore?

2011-02-17T18:00:00.000-08:00

Apparently they do. Case in point, "The Browns" who started asking some area-specific questions about Langford, Colwood and Metchosin.

Here's the map:

The boxes are rough approximations of the three municipalities in the West Shore. I know the Westhills development has a 20 year plan to put more people into tighter spaces than Victoria has ever seen, all the while calling those spaces "single family homes." They'll soon overwhelm that blue box. The red box is a mix of old and new. For the most part, that east end of the west shore is the most "affordable," if you call paying $450,000 for an 1800 square foot BC box built in the 1970s and likely painted once between then and now affordable. The new housing units in this area are nice, no question. But I do question the quality of anything built in the last 5-7 years in the Victoria area. I've heard too many horror stories not to question.

I can't say anything bad about Metchosin. If I didn't have to do anything other than get up and work my land, this would be the place I'd do it in Victoria. Back when I was a teenager, we used to have the occasional friend who'd start dating a Metchosin girl. We'd call voyages to pick her up on Friday nights "road trips" and they almost always included a stop for gas at least once. Of course, back then, there weren't such things as "highway overpasses" and "expressways" to "speed up" the traffic flow. Nope, the trip took 45 minutes round trip, not each way like it does these days. At least the cars are more efficient nowadays.

All kidding aside, we city folk like to poke fun at Langfordians. We have to, we pay way more to live. Or do we? Let's look at the numbers for West Shore single family homes shall we?

January 2011

	Average Price	6 month avg	Median price
Langford	$489,956	$516,134	$447,500
Colwood	$433,813	$525,669	$416,250
Metchosin	$798,475	$604,608	$677,000

From first glance the numbers look good for Metchosin and not so much for Langford and Colwood. Of course, average and median numbers tend to get skewed by abnormally low sales volumes, so we should dig a bit deeper:

4 single family homes sold in Metchosin in January 2011
1 was "luxury" priced somewhere in between $1.25M and $1.5M
1 sold for a "good deal" at under $600,000
1 was exceptionally fire-sold at under $450,000
Colwood doubled up on Metchosin and moved 8 SFH properties
The highest priced Colwood home sold for less than $700,000
The other 7 SFHs sold for under $500,000
1 sold for under $350,000, talk about a value!
Langford smacked its Westshore neighbours in the sales ring: 23 SFHs sold in January
15 of those sold for less than $500,000, but more than $350,000
6 of the rest sold between $500,000 and $650,000
And the last 2, tried as they might, couldn't get more than $800,000 when they changed owners

It's really tough to give you sales ratios because the VREB doesn't provide localized listings volume, preferring to keep the active and new listings breakdown to their region as a whole. But I've craftily used the REALTOR.ca website to give you a rough approximation of what the numbers could have been. Here's the active SFH listings as of today on the web:

To be generous, and err on the side of caution, let's "assume" the month end listings volume in the three areas was 250 SFHs. Metchosin obviously has a fraction of the other two, the prices listed above seem to point to this as well. I'll give you the data combining all three areas:

Total active listings = 250 (questionable assumption)
Total sales = 35
Months of Inventory = 7.15
Sales to active listings = 14%

As far as neighbourhoods go, I'll admit bias. I grew up on the other side of Victoria and have been taught to avoid Westshore living and it's inherent commute to get anywhere lifestyle. Every time we visit Costco, which I'll admit is getting less and less because of the traffic volume, I question why so many people choose to live in an area that hasn't had too many non-strata homes built in the last decade. I'd wager few "choose" to move from the east side of town to the west. I'll bet household finances dictate the move for locals heading west. And I'll bet that a good portion of people coming from away buy homes in the Westshore because it reminds them of what they're used to back home.

If you've lived in Edmonton or Calgary, outside of the core, you'll feel right at home in Langford, with it's box stores, chain restaurants and houses built with five feet between them. But you'll soon come to loathe the drive into town, wondering why the heck there's traffic lights in the middle of what feels like the Crowfoot or the Whitemud. Yes, it really is like that.

Monday market update

2011-02-14T15:05:00.000-08:00

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.

Month to date February 2011, last week's numbers in (brackets)
Net Unconditional Sales: 195 (78) + 117
New Listings: 637 (334) + 303
Active Listings: 3,435 (3,312) + 123
Sales to new listings ratio: 30% (23%)
Sales to active listings ratio: 6% or 8.8 MOI approximated (2% or 10.6 MOI approximated)

February 2010 totals
Net Unconditional Sales: 621
New Listings: 1,460
Active Listings: 3,280
Sales to new listings ratio: 42.5%
Sales to active listings ratio: 19% or 5.3 MOI

Saanich East Single Family Home market snapshot
Saanich East continues to be an area of high demand for SFHs:

36 homes sold in January 2011, exactly double the number of Victoria and almost 40% more than it's nearest rival of Langford
That's also 7 more units that sold in SE in January 2010
The median price of a SE SFH was $630,000, up 1.5% from $620,000 in January 2010
Average price ($630,115) was down slightly year over year ($640,107) and 6% below the 6-month average ($666,286)
The "luxury SFH market" in SE recorded 4 sales above $1 million
58% of SFHs sold in SE were recorded below the January 2011 average reported price for the area
33% of SFHs sold in SE were priced between $650,000 and $900,000
Saanich East sales amounted to 20% of the total VREB dollar volume transactions, 9% more than the next highest area, Victoria.

It's almost impossible for me to give you a breakdown of the days on market, price to ask and active/new listings versus sales stats isolated for SE. Here's the SFH numbers for the entire VREB area:

	January 2011	January 2010
Days on market	71	48
Price to ask ratio	97%	99%
Sales to new listings ratio	37%	44%
Sales to active listings ratio	17%	29%

The trouble with price to rent ratios

2011-02-13T20:44:00.000-08:00

Occasionally I get e-mails from readers. I got one not too long ago from a couple who had come across the blog in their house hunt. Its contents highlighted a big issue I've had for a long time in the way we calculate price to rent ratios in our market. I understand, without question, the need to compare apples to apples when we use this fundamental metric to track the market. The trouble I have with it though is rarely does it apply in actual purchasing circumstance.

Case in point, this couple who e-mailed me:

HHV, long-time readers, never posted, but felt the need to share our buying experience with you anyway. If you decide to write about us, please keep our names out of the post.

Done. I'll call these fine young folks Mike and Molly.

We bought a home. We didn't buy it reluctantly, we're really happy now that we've moved in and we've spent our first Christmas in our own place. But we didn't buy a home lightly, we did a lot of research and we looked at a lot of places before we bought. We know we made the right decision for us.

When we started looking we quickly recognized there was going to be a considerable change in our lifestyle. I'm (Mike) a journeyman mechanic and my soon-to-be wife (Molly) is an office assistant in a doctor's office. Together we earn about $65,000 a year. Our families are both on the island and our jobs are here in the city. It's a priority for us to live close to work.

When we went to the bank last spring, we were both shocked to find out how much money they were willing to give us. We didn't have a lot of debt, Molly had about $4,000 left on her student loan, we had $2500 on a credit card from a Mexico trip we took the previous winter and we have a $350 per month truck payment with about three years left before it's paid for. Our last place we rented was a 3 bedroom home, just the main floor, near the Gorge, for $1250 per month plus utilities of about $150. The bank offered us nearly $350,000. We had just a little over $15,000 in my RRSP I planned to use for the down payment. Molly had saved almost $5,000 in a TFSA for the closing costs.

So we started shopping. And it was stressful. We quickly learned we weren't going to be living in a house any longer. We tried to find a townhouse, but the only places we liked close to our budget were in neighbourhoods we didn't, out in Langford or Colwood, far away from where we work. We wanted to remain a one vehicle household, so we needed to be an easy bus ride to Molly's office or, better yet, within walking distance. So we started looking at condos.

Here's where I'll jump in to try and turn this long e-mail into a bit more manageable blog post. Long story short, Mike and Molly bought a condo. They bought it in September last year, moved in December 1 and have been happy with their choice. But these lines really caused me to take a step back and consider their circumstances with how we "figure out" market values in Victoria:

We never saw ourselves living in a condo. Quite the opposite really, I hated the idea at first. But after living in rental suites while I was working on my apprenticeship and while Molly went back to school to do her certificate, we were getting really tired of living in places that weren't ours. Our parents were encouraging us, our friends were all buying or had already bought, my boss at work was even trying to convince me to take the plunge. We didn't like that all we can realistically afford is a condo, but that's the way it is here in Victoria and we're not willing to gamble on the market changing anytime soon. We went from a house to a condo, but because it's ours, we're OK with it.

I don't think Mike and Molly's experience is unique. I think most people don't buy what they rent.The trouble is, is that they end up comparing what they pay in rent against the cost of buying whatever they can get for the same or very similar money. Their next paragraph confirms this theory for me:

We were OK paying about $1400 a month for our rental home. When the banker showed us how the payments would work on the $350,000 they were willing to give us we decided to spend less. We weren't comfortable with $1700 or $1800 a month by the time we included property taxes and strata fees. So we set a budget of $250,000 to $275,000 to keep the total payments at $1400.

See what I mean? While we are here, doing the math on apples, the Mike's and Molly's of Victoria are out there comparing apples to oranges and coming up with the same amount. They know they're not getting the same thing in the end, but that's not what's driving their buying decisions. They can "afford" to buy a home and keep their payments in a range they might be comfortable with today, but they're doing it at the expense of their lifestyles. Some of them may be happy in the long run, others may regret the decisions that led to the changes. But it presents a real issue that makes price to rent comparisons problematic: we isolate apples, compare them with apples, discover apples are X-factor overpriced compared to what someone willing to rent said apples will give us each month versus total cost of apple ownership -- all the while Mike and Molly are out there saying we don't want to rent an apple when we can buy an orange.

Bidding wars on condos?

2011-02-09T22:09:00.000-08:00

That ~~piece of baloney~~ press release that led to an even bigger festering pile of poorly researched and written advertorial in the local rag yesterday got me thinking. I'm over calling out the crappy local written journalism, so that's not what I was thinking about, but I was thinking "do people really want to buy condos in such volumes that there are actually bidding wars right now?"

The answer is no. ReMax took the one manufactured bidding war caused by underpricing a home to the market (assumed) and held it up as evidence that people are tripping over themselves to buy affordable Victoria condos. And the media didn't even bother to cast a shadow of doubt on their number one source of advertising revenue (assumed).

Here's the data:

At the end of January 2011, there were 808 condos listed on the VREB, an increase of 13% from the 715 listed last year.
90 units sold in January 2011. That's almost 9 months of inventory. Hardly a "seller's market" that produces bidding wars.
Coincidentally, that volume of sales is off 20% from a year ago too.
It's true that average prices rose slightly year over year, 3% to be exact.
But to get a sale, sellers had to wait 68 days, 20 more than they did a year ago.

So just to reiterate, demand down, listings up, and we're meant to believe there's bidding wars on condos in Victoria priced under $350,000? When we dig a little deeper, it turns out that the desire to own a condominium is extremely low outside of the area of Victoria most of us call downtown:

Of the 90 condo sales in the VREB reporting area, 56 or 62% sold in Victoria/Vic West
3 sold in Oak Bay
4 in Esquimalt
7 in Saanich West
3 in Saanich East
9 in Sidney
7 in Langford
1 in Central Saanich
the other municipalities didn't sell any... including that new development on Conard near VGH in View Royal

Even more interesting is the breakdown of the kind of money being spent on condos in Victoria. Downtown condos are typically marketed to the newly weds and nearly deads Victoria is so famous for. It's understandable that these demographic pools wouldn't have, or be looking to spend, a ton of dough on a shoebox in the sky. The price point numbers seem to support this:

Almost 69% of all condominiums sold in the VREB area last month sold for under $325,000, roughly the average reported selling price of all condominiums.
There's roughly 200 active listings in the core priced under $325,000, about 40 sold, making this market segment fairly healthy at 5 months of inventory, some consider this balanced territory, but you'd be hard-pressed to find a credible analyst claiming these market conditions lead to anything other than flat, stable prices.
When we look outside the core, only 6 condos sold for more than $325,000, there's over 250 available, making the MOI a staggering 41 - hardly the makings of a bidding war environment.
The next biggest chunk of the pie are downtown condos priced between $325,000 and $400,000, making up a grand total of 9 sales out of about 72 active listings (8 MOI).
5 sold outside the core in that price range of the 130ish available, giving us another doozy of an MOI at 26.
15% of the condo sales volume last month we could reasonably call "luxury" market sales: 13 of them in total, 1 in Sidney, 1 in Esquimalt and 11 in Victoria/Vic West.
1 condo sold over $1 million dollars, in Sidney of all places.

No wonder there was no real data in that press release or the subsequent "news article" (please read that slowly again with a Dr. Evil voice and use your fingers to make quotes in the air). If there was, we'd all recognize it for the steaming pile of dung it is.

Monday market update: slow start to February?

2011-02-07T16:07:00.000-08:00

What are you seeing out there?

From the No Sh&t Sherlock files: rate hikes "could" spark house price collapse

2011-02-03T09:53:00.000-08:00

The G&M has an interesting piece today (Kabloona posted link in comments from previous post).

Any move by the Bank of Canada could “easily” cause house prices to collapse, Capital Economics warns in a bleak report that suggests the Canadian housing market is likely to suffer the same sort of crash that has plagued countries such as the United States.

As the bank raises interest rates, mortgages will become more expensive for Canadians. Add inflation to the mix, and Capital Economics predicts prices could fall 25 per cent over the next few years.

Said economist David Madani: “If the Bank of Canada does resume its monetary tightening this year, this could easily prove to be a tipping point for a house price collapse.”

Capital Economics also warns that a crash in prices could cost Canada Mortgage and Housing Corp., which insures high loan-to-value mortgages, to lose as much as $10-billion.

To be fair and balanced, Capital Economics is in the business of selling market research, mainly stock market research. Are they trying to beat the real estate isn't the investment you think it is drum? Shoebetcha. Are they right? Time will tell. But their research aligns with plenty of other independent research calling into question the dubious claims being made by "economists" who's incomes are tied to the ongoing performance of real estate markets and real estate debt products.

There's a commonly held fallacy in many people's minds these days: "if interest rates climb it means the economy is doing well and inflation is upon us; if inflation is upon us then our home's values are increasing despite rising interest rates, it's a can't lose scenario". If only it were so simple. And if only these true believers could point out one time in history where this held to be true for longer than a year.

I invite you to read Reid's post from a while back where he shows you exactly what happens to mortgage payments in a rising interest rate environment.

Canada is at a cross roads never before seen by her citizens: all time high real estate market values, all time high debt levels plus all time low interest rates. How anyone can point to history and say we've been down this path before and came out of it OK is far beyond "stretching the truth."

It's official, January sales volume was meh, and it's a buyers market

2011-02-01T12:10:00.000-08:00

The spin continues though: stable market, stable market, history, history, historical, blah, blah, blah.

Fact is, January saw less sales than December, typically the slowest month on the calendar. Single family home prices bounced around like a cat on the 'nip too. It's a buyers market by any definition you want to use.

Here's the VREB release.

Here's the breakdown, including a month over month comparison.

January 2011
Net Unconditional Sales: 339
New Listings: 1,187
Active Listings: 3,283
Months of Inventory: 9.7
Sales to new listings ratio: 28.5%

January 2010 totals
Net Unconditional Sales: 418
New Listings: 1,211
Active Listings: 2,793
Months of Inventory: 6.7
Sales to new listings ratio: 35%

December 2010
Net Unconditional Sales: 349
New Listings: 522
Active Listings: 3,252
Months of Inventory: 9.1
Sales to new listings ratio: 67%

Percent changes YOY
Net Unconditional Sales: - 19%
New Listings: + 8%
Active Listings: + 15%

Percent changes MOM
Net Unconditional Sales: - 3%
New Listings: + 44%
Active Listings: + 1%

You've probably noticed I'm placing less importance on reported price changes lately on the blog. It's not that I don't care, per se, OK, actually it is, but regardless, here's what the VREB has to say about their own reported average prices:

The use of average price information can be useful in establishing trends when applied over a period of time, i.e. six months or longer. The Victoria Real Estate Board cautions that an average price does not indicate the actual value of any particular property. Those requiring specific information on property values should contact a REALTOR.

So even they think the numbers are pretty much useless when you want to apply them to a purchasing decision. Until Victoria gets tracked by a Teranet-style home price index that compares apples to apples, I'm not going to waste much time trying to analyze a number that fluctuates widely based on a whole slew of mitigating factors that few, if any, people can list or even scratch the surface of understanding on. But for those that do care, here they are without any commentary:

January 2011
SFH: avg = $603,401 med = $576,000
TH: avg = $447,792 med = $418,050
Condo: avg = $323,002 med = $293,000

January 2010
SFH: avg = $636,345 med = $585,000
TH: avg = $453,013 med = $399,250
Condo: avg = $313,337 med = $299,900

December 2010
SFH: avg = $647,063 med = $565,000
TH: avg = 434,783 med = $415,000
Condo: avg = $301,671 med = $285,000

If you're out there active in the buying pool, word to the wise, don't believe the industry spin and don't get caught with your pants around your ankles just because you can't fathom the idea of living another year paying someone else's mortgage. There is no fire. No need to run when you can crawl.

Brace yourselves: January 2011 sales underwhelming

2011-01-29T12:27:00.000-08:00

Just Jack gave us this run down of January sales volumes since 1999 in the last post. It needs to be highlighted, for more than just its comic relief!

1999 - 260 - the market is idling at the start line
2000 - 254 - market is still idling
2001 - 289 - starts creeping forward
2002 - 461 - the tires are smoking up
2003 - 437 - this ain't your dad's Buick, hold on Alice

2004 - 428 - its a friggin' Bugatti Veyron
2005 - 432 - with Nitrox Oxide
2006 - 431 - and no brakes
2007 - 387 - switching tanks
2008 - 406 - to the moon Alice
2009 - 255 - hit the brakes Alice, I think there's a brick wall ahead
2010 - 361 - nope it was a mirage
2011 - January estimate of volume of sales is... 273 - "for Christ's sakes Alice, we're outta road, jump!"

Change of tune?

2011-01-26T07:59:00.000-08:00

You know it's really getting sad when the media equates a reduced rate of credit growth in Canada to "people getting the message" on changing their spending habits. Instead of pointing out many Canadians just can't get any more credit, they try to make Canadians think they've heard the message and they're voluntarily slowing down their free-money spending binge. OK, sure, whatever.

Key points:

Mortgages outstanding are still rising at almost 7 per cent, year over year, but a monthly trend indicates the rate seen during the recession.
Mortgage arrears appear to have peaked, though they're stabilizing at twice the pace in the recession. That's still below the rates of past slumps.
Lines of credit are growing at 0.3 per cent a month, the slowest since 2007.
Debt is still rising at a pace that eclipses income, but not assets.
Debt interest payments now represent 7.2 per cent of disposable income, the lowest since mid-2006. (Think this might be because interest rates are the lowest since mid-2006? Rocket meet scientist)
Consumer bankruptcies are "in a clear downward trend."
There's a similar trend in delinquencies on consumer loans.

Emphasis mine. There's a reason why spending and borrowing are still growing, but at a slower rate than a year ago: the taps are slowly being turned off, interest rates are very slightly higher than they were one year ago and the pool of spenders are at or near the maximum in terms of their available credit. The situation isn't "getting better" because tapped-out consumers are "heeding the warnings."

In the interest of balance, it is true that asset growth is outpacing debt accumulation. You can thank a very robust stock market and a rebound in housing prices for this--both markets grew abnormally fast over the past 12 months, so this little indicator should be taken for what it is, not used to justify current debt accumulation trends.

The last few puffs into a balloon always seem to feel slower than the first don't they?

Back to the data: Monday market update

2011-01-24T11:58:00.000-08:00

MLS numbers courtesy of the VREB via Marko Juras.

Month-to-date January 2011
Net Unconditional Sales: 233
New Listings: 879
Active Listings: 3,120
Months of Inventory: 13.4
Sales to new listings ratio: 27%

January 2010 totals
Net Unconditional Sales: 418
New Listings: 1,211
Active Listings: 2,793

Sales are off to a slow start in 2011. They may well end up being even slower than December 2010. While REALTORS® manufacture bidding wars on tear-downs over on the mainland with a little help from asleep-at-the-wheel journalism (H/T Mr.4AM), Victorian's aren't going goo goo for the ga ga of available properties quite yet. With looming mortgage changes in the near term, the question remains: will they?

Originally I'd thought they might. Now, I'm not so sure. I'm beginning to think there might not be an early heated "spring market" before the implemented CMHC changes. There's been a big shift in the market over the early weeks of 2011, and it's demand driven, or I should say lack-of-demand driven. For as long as I can remember, single family homes priced below $500K were in high demand. Now? Not so much. The sheer lack of sales in this category this month has me scratching my head. Where did those buyers go? More importantly, are they just taking a breather or are they finally exhausted?

UPDATE: Demographia's most recent survey released today shows Victoria as Severely Unaffordable with the median house price requiring 7.1 times annual median household salary to purchase. We're more unaffordable than San Jose, San Diego, Los Angeles and Santa Barbara, California, heck, we're even more unaffordable than New York City! New York City? Yep, even that town that gave the world thin and runny salsa is more affordable than us. Congratulations Victoria, you've earned it!

The buying consensus

2011-01-20T22:59:00.000-08:00

Look, if you absolutely must buy for the first time, right now, for whatever reason, you should be pricing in 2011 changes today. If you can't get a deal like that, you should be really, really, strongly inclined to walk away until you can.

With the mortgage rule changes, even focusing entirely on the periphery, pundits are saying that price declines across the market of 7% (that's seven percent) are completely reasonable.

If you're buying an average condo, your final price should therefore be: $301K x 0.93 = $280K

If you're buying the average town home, your agreed-on price should be around: $434K x 0.93 = $403K

And if you can still get qualified for one of them old-fashioned 5% down, 35 year amortization, 7% cash back mortgages, you might be able to successfully bid on an average single family home in Victoria for: $647K x 0.93 = $601K.

My advice is worth what you paid for it (in case you're scratching your head, you paid nothing, so it shouldn't influence you in any meaningful way).

CAAMP gets it

2011-01-19T07:53:00.000-08:00

And they're trying to push that when prices start falling it's a result of the government making it too difficult for a small subset (the fringe) of potential home buyers.

CAAMP said 79% of mortgages in Canada have fixed rates and most of them are locked in for terms longer than five years, meaning only 21% of people with mortgages are vulnerable to a spike in rates.

First off, I doubt it if this quote is accurate. The most popular mortgage product in Canada is a a five year term, so I don't see how "most of them" are "for terms longer than five years." I can't find it anywhere in CAAMP's actual report.

Nor can I find these two statements that appeared in CAAMP's fall consumer report; statements which can't be taken back empirically, and statements which shouldn't be ignored in light of CAAMP's renewed vigour against policy changes that make it harder for their members to make a buck:

16% of Canadians with a mortgage could not manage an extra $300 increase in mortgage payments.
In addition, 11% of households would run into financial trouble if mortgage rates rose only 1.5%.

That's a sizable issue for Canadian financial policy makers. And CAAMP just "forgot" to mention these folks in their latest report.

Remember, these rule changes don't prevent lenders from offering flexible mortgage terms to the 79% of prudent Canadian borrowers (as per CAAMP). These rule changes just mean the fringe won't benefit from subsidized interest rates through CMHC insurance anymore unless they can meet marginally more difficult terms, today.

CMHC insured mortgage changes

2011-01-17T08:02:00.000-08:00

Full details here.

Here's the coles notes:

Mortgages with amortization periods longer than 30 years will no longer qualify for government-backed mortgage insurance, which is required for buyers with less than a 20% down payment on a home. The previous limit was 35 years.
Maximum amount Canadians can borrow against the value of their homes, lowered to 85% from 90% on a refinancing.
Federal government backing for home equity lines of credit, or so-called HELOCs, is removed.
Adjustments on amortization and refinancing limits coming into force on March 18.
Government backing on HELOCs will be removed as of April18.

Interesting that the Department of Finance is spinning this as a "savings" move for consumers.

From the DoF directly:

The new measures:

Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent. This will significantly reduce the total interest payments Canadian families make on their mortgages, allow Canadian families to build up equity in their homes more quickly, and help Canadians pay off their mortgages before they retire.
Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. This will promote saving through home ownership and limit the repackaging of consumer debt into mortgages guaranteed by taxpayers.
Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. This will ensure that risks associated with consumer debt products used to borrow funds unrelated to house purchases are managed by the financial institutions and not borne by taxpayers.

These changes are actually more drastic than I'd expected. Especially on the HELOC side of things. IMO removing insurance on HELOCs is a direct hit on homeowner as second property speculator. Others will call that an abhorrent change that prevents people who can't manage their consumer credit from rolling their high interest debt into their homes. Because that's what a home is there for and all that...

I still expect a short term but subdued buying rush in the market. That may include a listings frenzy too as sellers try to sell before the rule changes in March. By mid-February I suspect there won't be a big bank in Canada still doing CMHC insured 35 year amortizations.

UPDATE: The effects of the mortgage rule changes will be felt in the sales stats. MLS numbers courtesy of the VREB via Marko Juras.

Month to date January 2011
Net Unconditional Sales: 144
New Listings: 560
Active Listings: 3,007

Sales to new listings ratio: 26%
Sales to active listings ratio: 5%

January 2010
Net Unconditional Sales: 418
New Listings: 1,211
Active Listings: 2,793

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