Believe it or not

You really should read this. I know it's American, and I know it's different here, except it's not. Because it never has been. And likely never will be. Click here for a better view of above image rather than the image itself. Blogger was acting up tonight.

Bravery?

More of a question than a statement: if you're bearish on the RE market (we are, surprise, surprise) are you also bearish on the equity market (I am, she is indifferent). I'm not rushing to sell anything right now, but as VG pointed out in an earlier comment, some of the insiders are.

I watch my stocks fairly closely. It's easy 'cuz I only hold a couple outside of funds. When the insiders in those stocks start selling, I get a bit antsy. But not antsy enough to sell yet.

So here's the real question for today: if you don't own a house, but could, and are exercising bravery at not getting into the market despite crazy gains, because you believe a correction is coming soon, and coming hard, are you looking at the stock market with the same glasses on? I am. I'm trying to decide which segments may be recession proof, or at least not get hammered so hard. Financials? Oil and Gas? Mining? Tech Stocks? Pharmaceuticals? I don't know if anything is really recession proof.

WORDS that sell

If you follow politics or any other marketing-based hogwash closely enough you'll invariably notice that words tend to lose their meanings in short order. CondoHype has a whole blog dedicated to picking apart the Vancouver condo marketing paradigm. I know very little about the person behind the machine, but I can only assume there is a disgruntled writer/wordsmith in there somewhere.

This post is dedicated to the misconstrued meanings that have really come to the forefront during this last few months of crazy real estate marketing times. I truly believe that a year or two ago, homes did sell themselves. I remember being at a party where a good friend of mine announced he and his wife had just bought their first home. They paid $5K more than list on the advice of their realtor because it was the house for them and there were multiple offers in on the first day. Another mutual friend, a RE appraiser at the time, laughed at them. A deep belly, open in-your-face type of laugh. It wasn't pleasant to witness this. It was funny though when those two had the talk about how the owner made 90% in two years when he sold that house.

But those times are over. Very few places have multiple offers on opening day. There's a lot more choice now. So RE marketers have to get creative to convince potential buyers to come check out their wares. Fair enough.

In that light, We present our list of favourite words and their new meanings as told to use by those said RE marketing pros:

1. Open-Concept: My dad has open concept kitchen, dining room and living rooms. They total over 1000 SF. Now we see open concept used to describe one room that happens to serve three purposes, usually kitchen, living and dining. We used to call that small.
   
2. Penthouse: once reserved for the uber-rich, now to be had by the first time buyer. If you're old enough to remember that classic 70s/80s show that made the catch phrase "what chew talkin' 'bout, Willis?" standard playground speak, you'll remember what a penthouse suite should be: one that comes with a cook and a butler downtown and is bigger than your house in suburbia. Apparently penthouse now means top floor 800 SF condo on Balmoral.
   
3. Charming: can a house charm you? I know I've been in some houses that are attractive. Heck, I've even been in some condos that are well-appointed and nicely decorated. But doesn't charming require an interaction? Maybe the RE agent meant to say: "let me show you this property and I'll charm you into buying it"?
4. Character: I could be wrong, but I always thought character meant a property that was built at a time long ago, say turn of the century or so, that uses techniques and products that are simply not available or duplicated anymore. Apparently a character home/suite now means it has wood in it somewhere.
   
5. Harbour/Mountain Glimpses: I guess anyone in this town can make that claim. I mean you can pretty much stand on any property, on a clear day, and if the wind is blowing hard enough, and your neighbour's property leans far enough in said wind, there's a good chance you'll catch a glimpse of a harbour, or a mountain or maybe a tree. Whatever the case, it's a view, in a glimpse.
   
6. Luxury: My favourite over-used de-legitimized word. You pay for luxury. Luxury makes you feel luxurious. I've stayed in some nice hotels. I've worked in "luxury hotels". Luxury hotels have cornered the market in making people feel luxurious. Even the guests that aren't staying in the big rooms with the harbour views. How do they do this? By treating them the same as the guest who is staying in the penthouse harbour view suite complete with butler. OK, well almost the same treatment anyway. It seems as though developers have caught this train too. Seems if you use stainless appliances (it doesn't matter that they're Kenmore brand and not Wolfe), install wood floors (apparently laminate now counts as wood), paint in "modern" colours and actually use anything other than melamine as a counter top, you can claim the "luxury" descriptor for your property. Square footage, location and actual luxury items are irrelevant in this day and age. Apparently my generation has an issue with saving and obtaining luxury status later in years; we want it all, we want it now, and we want it in Quadra Village.

What are some of the words you've seen used and abused?

How's the Planning?

Victoria has a long-held and aptly-earned reputation of a community catering to the newly-wed and nearly-dead. In a recent (how?) Q&A published by the city, officials tried to dispel that "myth" with this response:

"Newly wed and nearly dead" no longer accurately describes our city. Slightly more than 43% of residents are single; the average age of all residents is 42.6 years.

If that truly is the case, are city planners and politicians making good choices when it comes to building housing for residents already here? Or are we building housing meant to attract the kind of residents we want to come here for the long-term sustainability of the city?

This city has some long-standing chronic issues that will not go away. Namely its fixation with homelessness and harm-reduction drug strategies. Granted, in the big scheme of things, these are relatively minor statistical issues with a ridiculously loud footprint. I do not mean to downplay the significance of these issues, I'm simply suggesting that the true number of individuals that these strategies serve is relatively small compared to the number of people who go under-served by the city to which they pay taxes to. Or more accurately, the city to which their landlords pay taxes to.

Victoria is fixated on density right now. Geographically, it is a relatively small parcel of land. And accurately too, they just aren't making any more of it. So buildings must go up and not out. Fair enough. But we do have height restrictions, and we should. We also have a fixation on urban dwellings and revitalizing the north end of downtown. As we also should. But are we building the right dwellings for the type of people we have here?

I think its important to assume that the old adage, if you build it they will come is patently false. The reality is people are attracted to living in Victoria. It is the mildest climate in Canada without question. We also have one of the lowest unemployment rates. But what kind of jobs are we offering? Or more importantly, how much are they paying? And are we actually building places for people who come here to work, or just people who come here to retire?

The city itself continues to publish this number as the average family income in Victoria: $56,179. It's a 2003 number that is lower than the provincial average and the CRD average. Let's assume that number has grown with inflation by about 2.5% per year. Now its just a few pennies over $60,000. That's average, not median too. And it includes those rich retirees that developers seem so fixated on.

Housing. Given the current costs, few people can afford more than a condo in Victoria. That's what they're building though, so we should be good right? Except there isn't a new condo development in Victoria available for under $300K. $60K does not a new condo buy. So these "average" people will have to rent. Good thing that Victoria doesn't approve any developments with rental restrictions anymore.

Again the city uses dated numbers, in this case 2004, for its publication. We'll factor rents went up with inflation: now that $750 for a 2-bed apartment is $787. I question this. I doubt very many people have this rent anymore. Rents are limited to 4% increase per year. My guess is most landlords in town, in this market run up have increased their rents to that limit, but much more if their suites became vacant in that time too, because there are no limits to vacant suite rental increases.

This town is not building housing for people here. It is building houses for people there. Where "there" is, is anyone's guess, because I don't think the city has a clue when they approve a development. Developers hire marketers, marketers figure out where to advertise, but in the end, it's the buyer that decides where "there" was, and no one else.

If this town wants sustainable growth, then it needs to address housing affordability issues. This means we need to densify, but it also means we need to demand developers drop the "luxury condo" bullshit and return to building the types of buildings that went up in the 70s and early 90s, minus the leaks. But until the buyers stop demanding the granite counter tops and gold-plated fixtures in their 485 SF condos, this trend will continue with death and taxes, and may only get worse and not better.

An Intriguing Dilemna; and a bit creepy

Received this email from a regular reader this week:

This past weekend, on Saturday, the house I rent had a showing. There are two of us that live here, me in the top, and a single 30-something woman in the suite below, and both of us were out at the time. The person who looked at the place, a single male, was quite enamored by the woman in the pictures that are scattered about the suite downstairs. He inquired with the agent if she was the one who lived here, and he said yes.

The next day the man came back on his own, came into our back yard, and left her flowers with a note saying something like ‘you are beautiful, I’d love to take you to dinner’. Neither of us know the man, and she's pretty thankful she was not here when he came by. Maybe he’s a freak, maybe not. I personally believe he must at least partially get his ideas about women from porno movies to think a woman would react positively to this. What kind of idiot thinks something like that is OK? It blows my mind.

While I’m a little weirded out that a stranger trespassed into my yard while I was away, she [is]pretty upset. She called the agent, reamed him out and he apologized. Neither she or I think that is enough. It’s my personal opinion that the agent should be at the very least severely reprimanded for giving out personal information about the tenant to one of his clients. If I was his boss, I’d fire him, frankly. I realize he just didn’t think and he meant no harm at all, he just wants to sell the house. Should she cut the agent a break and just forget it?

All we know for sure is that the listing agent confirmed that it was her in the pictures. We don’t know if the flower guy was told or just guessed that the woman is single and lives alone, or if her relationship status didn't matter to him. I honestly can’t think of how he could confidently guess that she is single.

My question is this… should the agent’s boss be made aware of this in a formal letter of complaint? She is incensed, and I’m fully supporting her. It would be quite easy to let this go in some ways, and she gets enough strange men that make inappropriate advances that I suspect she will let it go as well. However I really do believe the agent acted in a very unprofessional and disrespectful manner.

Talked to Ms. HHV about this. She was a bit weirded out by the whole thing, although in her beautiful, rational mind pointed out several interesting things:

1. The agent obviously doesn't have much in the way of common sense nor "street smarts". Regardless of whether or not he is a listing or buying agent, he should have "seen" what was going on by these questions and protected the resident. That said, he can't be held responsible for the actions of the man.
2. The listing agent (not sure if it's the same) should have spoken to all tenants in the rental house and suggested that personal effects be put away during showings. Most agents want this done for selling purposes. But in a rental home like this, it should have been strongly suggested for this very reason. It's to protect the tenant first and foremost.
3. The Guy. There's no excusing his behaviour. Someone did not teach him what is an appropriate way to approach someone. This is definitely not an appropriate way of introducing one's self. We both agreed that if he was really that "smitten" a more appropriate way of "introducing" himself would have been to patiently wait outside the property... even that is stalking though and would be creepy regardless.

We think the real issue is not between the woman tenant and the guy. Hopefully she never is forced into a face-to-face confrontation. The real issue is between the landlord, tenant and listing agent. The listing agent did (we assume) not due his/her due diligence in protecting the tenant, and by extension of that relationship nor did the landlord.

The agent in question is an obvious dolt; let's hope that survival of the fittest in the RE marketing business will swallow this one up soon. Will a formal letter of complaint result in much? We highly doubt it will result in much other than a talking to, but more likely a gentle ribbing at the water cooler.

Over to you dear readers...

Comment Spotlight

Wise words from Roger:

Folks I want to prepare you for the VREB numbers to be released later this week. Last month the average price went up to 568K from 542K and the median price stayed flat at 489K. Lots of readers on this blog were discouraged with the average price jump and discounted the flat median price. You need to look at price trends to see what is going to happen.

When the May numbers are released I believe the average price will be slightly lower at 560K and the median will remain around 489K. This is significant for patient trend watchers.

If you have been following the stats on Needs Analysis you will have seen a sharp increase in the 3 month rolling average of Greater Vitoria average and median prices. The 6 month averages have been much more gradual. If my May predictions are correct you will see a drop in the 3 month rolling average and a flattening of the 6 month averages. We will be at the market peak and heading into the summer sales season with rising inventory and fewer sales (see extrapolated graphs for details).

I know many people want a crash now but it won't happen until the media wakes up and smells the coffee. Many agents are already awake, sipping coffee and recommending price reductions. By the fall our old friend Ken Lowball will be back in town.

Just in case you were wondering

Just doing some late-evening blog reading and happened upon this post over at Langley financial planning... anyway, it got me thinking, what exactly is the ratio of US numbers to Canadian numbers when we talk about housing-related market info between there and here?

We know that Canada exports 86% of its total to the US. So when a mill closes in Northern BC, should we in Victoria give a damn? The island has lost mills many times over and housing prices have continued to skyrocket and mill workers have gone on to find alternative work. If you live anywhere near Northeast BC, you should have no trouble finding work regardless of your skills what with the oil and gas boom going on up there.

But is this just the start of a much larger trend?

Canfor said the cutbacks are due to a market downturn spurred by falling housing starts in the United States.

The company's interim president and CEO, James Shepard, said Tuesday he had been directed by the company's board to cut costs "and position the company to weather this market downturn, which is the worst this industry has seen in decades." emphasis mine

Let's play with some numbers shall we? US housing starts as of January 1, 2007 were just over 1.4 Million. That number is the lowest it has been since 1995. In Canada, where it is different, we're at 248,100 in January. That number is Canada-wide and represents 17% (roughly) of the US total. Consider the two numbers: exports at 86% and our housing starts at 17%; eerily similar gap there, don't cha think?

How about population then? US = 301,919,275 Canada = 32,917,579 or in % = 11%. Seems to my rudimentary economics understandings, we're awfully dependant on the US markets for our economic well-being.

I'm not sure where I'm going with this analysis, but it seems to me that the inter-connectedness of our markets should not be overlooked. The next time someone says: "it's different here", do what Mohican suggests, and tell them a different story.

LIVE LINKS

Just making some links from comments live.

1. SF Chronicle: The Wealth Effect (VicGuy asks: is this us?)
2. Thank Goodness for Shiller and the S&P
3. Even Credit Unions sing the Bubble Jingles: from the TC. My Favourite line is Condos and the applainces that go in 'em. 3 years ago that would have read: Houses and the applainces that go in 'em.

Keep up the good hunting people. As always post your links in comments. I will add them here. If you cut and paste instead of linking to the source, don't forget to add the http:etc so I can create a "live link" to the original. Cheers.