Average and median prices both dropped. Prairie Boy's predictions were right on the money, almost to the cents.Property sales throughout Greater Victoria in the first month of the year got off to a modest start amid continuing concern by buyers and sellers over the economy.
A total of 247 homes and other properties sold in January through the Victoria Real Estate Board’s Multiple Listing Service® (MLS®) up slightly from the 239 sales in December. There were 464 sales in January of last year. Last month’s sales were the lowest January sales in over 18 years. There were 3,678 properties available for sale at the end of January. That represents a 22 per cent increase compared to January of last year but a further decline from the 3,824 properties available for sale at the end of December.
Victoria Real Estate Board President, Chris Markham, says the uncertain economic climate continues to have an impact on the local housing market. “It’s clear that many people are holding off on the decision to buy or sell unless they have to and are waiting until they have more confidence both in terms of their personal financial situations and in the market as a whole.” Markham cites the decline in the number of active listings over the past three months as further evidence of a “wait and see” approach among sellers.
The slowing market has also had an impact on prices, especially for single family homes and condominiums. The average price for single family homes sold in Greater Victoria last month was $526,148, down from $548,025 in December. The six-month average was $545,984 and the median price in January was $475,000, down from $507,500 in December. Markham noted that the softening in prices has led to improved affordability, “Forty-two per cent of single family homes last month sold for under $450,000.”
The overall average price for condominiums was $259,742 last month compared to $280,487 in December. The average for the last six months was $297,649. The median price for condominiums in January was $255,000. The average price of all townhomes sold last month was $393,982 up from $389,371 in December. The six month average was $405,718 while the median price in January was substantially lower at $382,500.
MLS® sales last month included 141 single family homes, 62 condominiums, 32 townhomes and five manufactured homes.
I must admit I am surprised to see the number of active listings have dropped month over month, especially considering that new listings account for over 1000 of the 3824 total active listings. The sales to new listings ratio is approximately 24 per cent.
I'm not sure what this will mean for overall price trends at this point, but I'm guessing they will have zero impact at this stage because we still have 15.5 months of inventory. Looking forward to Roger's updated stats analysis and graphs.
More BCREA predictions can be found here.
There is nothing positive for any "true believersTM" to be found in any of these news releases.
174 comments:
From Roger in previous post:
January 2009 Statistics - Monthly Analysis
December 2008 shown in ()
MLS Sales - 247 (239)
MLS listings - 3678 (3824)
SFH Average - 526.1K (548K)
SFH 6 mo. Avg. - 546K (556.5K)
SFH Median - 475K (507.5K)
All SFH Sales - 141 (140)
Condo Average - 259.7K (280.5)
Condo Median - 255K (253.8)
All Condo Sales - 62 (53)
Town Average - 394K (389.4K)
Town Median - 382.5K (368K)
All Town Sales - 32 (28 )
Year-over-Year Analysis
GV - Greater Victoria
January 2008 shown in ()
MLS Sales - 247 (464) - Down 47%
MLS listings - 3678 (3027) - Up 22%
GV SFH Average - 526.1K (606.4K) - Down 13%
GV SFH Median - 475K (530.2K) - Down 10%
GV SFH Sales - 138 (228) - Down 39%
GV Condo Average - 259.7K (349K) - Down 26%
GV Condo Median - 255K (304.5K) - Down 16%
GV Condo Sales - 62 (125) - Down 50%
GV Town Average - 394K (423.3K) - Down 7%
GV Town Median - 382.5K (393K) - Down 3%
GV Town Sales - 32 (41) Down 22%
The low condominium and townhome sales are of concern as these sales form a large portion of buyers for February's homes. So, I'm not expecting any significant increase in sales in February from January. Definitely bad news heading into a 'spring' market.
February will be another month of price reductions and low sales.
Avg condo prices have dropped 21% YOY... I guess there will be no equity for moving up the ladder anytime soon...
Avg condo prices have dropped 21% YOY
You mean 26%, no?
yes i could be suffering from negative number confusion
GV SFH Average - 526.1K (606.4K) - Down 13%
GV SFH Median - 475K (530.2K) - Down 10%
To quote Scrooge from 'A Christmas Carol'...
I am as light as a feather, I am as happy as an angel, I am as merry as a schoolboy. I am as giddy as a drunken man!
Interesting that on the 30 of January twice the normal amount of sales were processed.
Mmmmmm, is someone worried over at the board about the low volume and were trying to cram a few more sales into the month.
I'll put my tin hat away now
the grassy knoll
B.C. housing market in a deep freeze
Developers worry about how to keep companies going during hibernation that some predict won't break until after the Olympics
VANCOUVER — Ward McAllister has been through five housing-market crashes since he finished university in 1982 and started working in development. But he and other B.C. developers have never seen anything quite like this one.
"I wouldn't call this a crash. It's like a market freeze. It's like everything's been held in suspended animation."
What ticks me off though is the lies fed from the local realtors, and then parroted by the local media such as the times colonist. I wonder if we should all start a capaign of our own reminding the TC of it's stories and pointing the need for journalistic standards. Some sort of research should be done, refer to realtors as realtors and present a balanced and neutral story.
I am in the middle of updating all the slideshows with today's stats. I thought readers might like to see how far we have dropped form the April 2008 peak.
% Drop from April 2008 Peak
You can see that median and average prices are down 15% in 9 months! We are back to the prices last seen two years ago.
I'm really enjoying this month's numbers and analyses, and I'm also enjoying the more anecdotal evidence of the bubble bursting. See this CL posting by desperate-sounding landlord who seems to be in need of cashflow...
One of the (six) listed properties (the 3bed at Vancouver and Richardson) is in my neighbourhood. He started out trying to rent it for $2,200 on Dec. 17, then lowered it to $1,900 on Jan. 16, and to $1,800 on Jan. 31. As of yesterday, still no luck. :(
Last minute discount... Let's make a deal!
"Looks like the market is on fire and the bears are suddenly all worried. Interest rates are at record lows and more and more buyers are flocking to Victoria due to the mild weather and red hot economy. It's good to be an owner."
"SFH Median - 475K (507.5K)"
How sweet it is to be a NON owner,saved myself $32,000 last month alone.
Thanks for all the numbers postings guys.
Thanks womp for the Casey stuff,those companies displaying he probably is pumping and most likely has a truckload of free shares.
A fellow named Bernard is a local crown land consultant. He has a blog that analyzes VREB numbers every month. This month he was pretty bearish...
Each month the Victoria Real Estate Board releases data on sales in the area. I have just been looking at the data for January 2009 and it looks really, really bad. I think we can not officially say that the Victoria real estate market is the worst that it has ever been.
People involved with real estate are professional optimists. Everyone from the agents through to the home inspectors to the mortgage specialists and even CHMC is pretending we are not in our worst market. They can not admit how bad it is.
Take a look at his latest post:
Real Estate Doom & Gloom in Victoria
so much for shortage of rental properties. I am so happy to hear these type of stories because the cost of many rentals in this City is criminal.
Went to UBC with Ward, I remember being told (I mean nicely asked) to leave Shaughnessy Golf Club because we were both wearing jeans. Oh, how times have changed.
All of the developers have been fed the same lines from agents as we have heard over and over. When you surround yourself with these people you only get the information you want to hear or what they think you want to hear.
Our market should have peaked in late 2005, but government intervention revamped the cycle and pushed prices to new heights. We believed the myths about everyone wanting to live here. When in fact everywhere was here, as prices were going up in every city in Canada. Did you get that "every city in Canada". Someone should have caught on - that if everyone was moving "here" then prices should be falling there. In fact we were robbing future buyers and bringing them into a market that these buyers were not financially or emotionally ready for.
Now we are up the creek without a paddle having robbed future demand and only time will get us through this real estate market. The next large group of buyers are now in elementary school, so you have sometime to wait.
In past markets, there were always potential buyers, those that were of age, but not yet financially secure in their jobs. This time we lack the actual number of bodies to buy real estate. No matter how much stimulus you add, you can't make this next group of buyers older.
Just my opinion, I have been wrong many times in the past.
just jack
Like hhv, I'm wondering what's up with the low number of listings. 3678? What the junk?
Last month, the Properties in Victoria website showed 4100 listings at the end of the month (before expiries), and VREB reported 3824. This month we were at 4192 before expiries, and we get 3678??
Something is fishy there methinks, along with the sales.
Wait...I was wrong. December was 4500 before expiries... it must have been 4100 *after* expiries.
That seems a bit more reasonable.
In any case, PiV is still showing 4081 properties available today...
Stats are out now for Vancouver Island. 265 SFH sold in Jan 2008 and only 115 sold in 2009. That is even down from Dec 2008 when 137 sold.
MOM Price declines of 4.5% across the area.
http://www.vireb.com/assets/images/pdf/01-january_09_sales_summary.pdf
VG , who is that quote from, and does anyone have a link to Carla's last piece about things picking up. I wish the realtors would be held financially or legally accountable for what they say.
anonymous,
that quote was from the previous thread.
I just see Gordie Campbell is planning on cutting 20% of all government management positions. What a pack of liars, did the Liberals just not say a month ago they wouldn't touch the civil service.
Carla can keep pumping til her cows come home but the preverbial hack and slash to the local job market has just hit with a vengence. Spin your RE BS now TC.
VG,
Good to see you back posting again. You were MIA last week.
Do you have any public source for this comment:
I just see Gordie Campbell is planning on cutting 20% of all government management positions.
If this is true there will be a big effect on real estate in Victoria. These jobs are considered "secure" by those that hold them.
VG,
I found this news report on the civil service cuts:
B.C. to run two-year deficit; will cut executive ranks,
The senior executive ranks also will be cut by 20 per cent.
I wonder how many "senior executives" they are considering?
they're "forced to suspend the law"
wtf?????
roger,
you have to think 20% is a fair chunk of management. I wonder how many will be union management types ? that could filter down to bumping etc which always hurts the little guy at the lower rungs. At any rate it hits those with the higher wages who won't be spending big anytime soon.
Been busy working lots lately so haven't had time to post much but followed the great debates on here when time allowed. Looks like I popped back when the shit is hitting the fan at full speed.
Time to rant.
VREB doesn't seem able to do simple math. In their report http://www.vreb.org/pdf/vrebmss.pdf :
1. In Sidney, 2 houses sold with an average (and median) of 390,658. Two times 390,658 is 381,316 - not 781,275 as reported.
2. Two waterfront houses sold with a total price of 2,210,000 and an average of 1,105,000. The median is reported at 1,410,000. But in a set of two data points, the median always must equal the average, so what is reported is an error (it could be the higher of the two, but this is incorrect mathematically)
3. For other area waterfront, 0 houses are listed as sold, but a total, median and waterfront are listed (at 245k). This value is used to calculate the total volume of sales, as well as the average price (which is divided by the 3 reported sales, not including this 4th ghost sale, thereby significantly skewing the estimate which should be either 491K or 429.5K - NOT 572.9K).
4. One sale listed for Shawnigan Lake/Malahat - total and average at 466.1 K, median (which must be the same) is reported at 468K.
5. Langford Condos. 2 sales listed (who in heaven's name bought them?), average of 55.9K, total of 111.9K, but a median of 274.9K.
6. Once again, negative prices and sales - this time under lots/acreages.
Five errors and one questionable method of presentation from the categories with three sales or less. My guess is that there are 4 to 5 times more errors throughout, meaning that the data presented is highly questionable.
There are three possible reasons for this:
(1) careless error in data transcription (most likely)
(2) inability to perform basic math
(3) intentional mis-statement (very unlikely)
Roger, Greg, HHV, Just Jack - does anyone have the detailed Nov. or Dec. sales report so I can back-calculate what the MLS report for those months presented?
thanks for listening to my rant...
Sidney should read 781,316, not 381,316... (such are the errors of data transcription)
It's pretty pathetic and useless to discuss median and average prices when considering one or two sales per area IMO.
Anon 9:14 - agreed (and thanks for the abuse). Discussing the drop to 475K median is a bit misleading as well due to the low number of sales as well. But one data error found in accounting usually means multiple ones - and a much greater check of the accounts by an auditor or investor. This also leads one to question the accuracy of the overall report.
Garth is on a roll over on his Greater Fool Website
Here is what he had to say about BCREA's Cameron Muir:
Just a week ago, the chief economist of the BC Real Estate Association was forecasting a shallow recession and a robust recovery, led by a visit to Abbotsford by Elvis. Now he says sales will drop by 9% in 2009 and prices decline by 13%. Says Cameron Muir: “The global financial crisis and worldwide recession will continue to take their toll on the B.C. economy this year.”
So, should investors have believed him a week ago, or believe him now? Actually, the correct answer is: Never. Economist Muir, I suspect, knows this depressing recession will likely shave a third off the inflated and unaffordable price of homes in his province, as it will in the GTA by the time things stabilize. But, being a paid shill for the industry, he’d have a hard time saying so.
Further to the BCREA predictions: let's look at sales.
In 2007, 4464 SFH were sold. In 2008, 3355 SFH changed hands.
I know, I know, 2007 was an "anomaly." Let's look at 2006 then.
In 2006, 4008 SFH were sold. So the changes, presented as percentages are:
2008 compared to 2007 = minus 25%
2008 compared to 2006 = minus 19%.
This means that we need to sell about 3150 SFH this year in order to see sales only fall 8%.
In other words, compared to last year, consumer confidence is actually predicted to improve YOY.
I wonder how many will be union management types ?
The story says "senior management". I would not be at all surprised if many of them are rehired as "consultants", which of course makes the payroll look smaller.
Gotta keep up the impression that it's only the big guys who are going to take the fall.
The cuts to union level positions will happen after the election, not before.
Developers are starting to head for the exits over in Surrey. Take a look at these 130K discounts over on the Housing Analysis blog.
Out in Langford they had a total of 20 condo, townhouses and SFH sales last month. Will developers follow suit there in the near future?
Excellent post, just jack.
Sorry Dumb Canuck, that wasn't directed at you. I was commenting on your source - feel free to hack away at such pathetic reports. One sale $466,100 and they report the mean? I wonder what the average is. What will they do next month when they have to divide by zero :-)
The retirement going on in all levels of government in the next 5 years will leave a huge management hole that they are not prepared for - news like this will make it all the worse.
This "retirement" is an attempt to sidestep a time bomb and will likely come primarily from attrition. And yes, costs will go up not down.
"So, should investors have believed him a week ago, or believe him now? Actually, the correct answer is: Never. Economist Muir, I suspect, knows this depressing recession will likely shave a third off the inflated and unaffordable price of homes in his province, as it will in the GTA by the time things stabilize. But, being a paid shill for the industry, he’d have a hard time saying so."
roger,
most of us saw through this shill two years back as he suggested credit cards was an acceptable way of coming up with a down payment. Maybe Garth should be reminded of that one article. I believe it is one for the history books.
I also recall the bulls all over me for calling this shill for what he was, the pump machine mascot for your road to poverty.
Well the TC has managed to do it again. Rather than report on VREB stats as they usually do... they give us them buried in a puff piece under the title: Real estate to rebound in 2010. Thanks TC.
patritoz,
the problem is there is a hiring freeze on any contractors so being hired back as a consultant won't fly for the next long while. I am sure at one point they will return at $100 an hour.
On the flip side (as anonymous pointed out), there has been this past year a massive campaign to hire and influence young people to apply with the government with the retirement gap coming. This is not a situation I believe attrition will be able to satisfy,it's a matter of not enough employees to have a functioning civil service.
Why do we need people to replace those retiring? Without the baby boom population bubble no longer there, do we actually need some of those positions?
I don't have much sympathy for companies saying they can't find employees. I see no attempts to retain, train and mentor young people into these retiring positions. They just expect them to be there.
With enough failed condo buildings, government might just have the answer to cheap/affordable housing dropped into their lap. Now if only they'd take advantage of it.
-Village
hhv,
note the Markham comment Tony Joe could never admit.
"I think we were running too hot for too long."
Also note the article is all hyping the return of higher "sales" in 2010,not prices.
Funny how not one article can ever say prices were just too ridiculously high and still are.
I just came here to see if the "real estate to rebound during 2010" article had been posted yet.
I just about fell off my chair when I read the TC and then decided it wasn't that much of a shock since what else did I expect.
S2
I emailed this to the TC Editor this morning (it won't change their approach one bit, of course):
Dear Editor,
This is just too rich to ignore. The Victoria Real Estate Board's own statistics indicate that this city's single family home average prices have plunged by 13 percent and the median price by 10 percent between January 2008 and January 2009. Average condominium prices have collapsed by 26 percent and medians by 16 percent. So, what does your paper's headline read? "Real estate to rebound during 2010", complete with the usual inane commentary by the discredited paid shill economists at the B.C. Real Estate Association, and the scary stats buried in the final paragraph.
Honestly, the only reason I continue to subscribe to your biased and journalistically inept paper is to get a good laugh from your real estate commentary.
Sincerely,
VicREBear
So... let me get this straight. You have the worst sales in 18 years. YOY price declines of 10-15%. And we get the following two articles from the TC this month:
Real estate activity starts to pick up
and
Real estate to rebound during 2010
Really? Nothing else you'd like to report on?
Here is what the folks saw as the headline in the Nanaimo Daily News today:
B.C. house prices to plummet 13 per cent: forecast
British Columbia is tipping into a recession that will see average house prices fall by 13 per cent in 2009, rather than the nine per cent initially forecast, the B.C. Real Estate Association reported Monday.
Association chief economist Cameron Muir, in his forecast updated from last fall, foresees average prices falling to $396,600 in 2009, with overall sales declining to "levels we haven't seen since the mid-1980s."
Victoria average prices should decline 10 per cent to $435,000 in 2009, with unit sales to fall eight per cent to 5,680. Vancouver Island average prices should decline 12 per cent to $290,000 in 2009 with unit sales falling nine per cent to 6,200 sales.
Readers need to know that BCREA average residential prices are calculated by dividing total sales volume by total sales. They are not the average price of any particular class of housing (condo, town, SFH). And the averages quoted are annual averages based on all sales in a given year.
Let’s get this straight again, BCREA change the drop from 9% to 13%, and TC saying to rebound.
The results,
1.No credit for these garbage forecast, for amusement only, and
2.slashed on the face of TC,
3.TC get my excuse for the dirty money, rumors are they are going bankruptcy.
The TC is part of the CanWest chain of newspapers and they are in trouble. They need advertising revenue and it is dropping due to competition from the freebie news papers and the Internet (Craigslist, Kjiji, Used Victoria).
The real estate advertisers were spending big money until recently. Did you see the Homes section in the last couple of weeks? There were hardly any big ads by developers and builders. Even the real estate classified section was smaller as commission starved realtors stopped advertising. So they are trading journalistic integrity for cash. Should we expect better? NO.
On a positive note... Today they shrunk the width of the paper and now it is a perfect fit for the bottom of my birdcage.
My office is right around the corner from a local "Mortgage Center" outlet. They used to have the names of ten mortgage brokers on their door; in the past three months, four of those names have been scratched off, the most recent today. They also have started to put a sandwich board reading, "Mortgage Broker on Duty!" out by the entry to the plaza. Smells like desperation...
Yet another industry that doesn't add any real value to the economy. Good riddance!
Credit card delinquencies jump
http://tinyurl.com/bqtut7
A surge in missed credit card payments late last year could be a warning signal of trouble ahead in the Canadian lending market.
Canadians tend to let payments on their plastic slip before falling behind on other loans including mortgages and car payments
Who would have thought?
Considering the number of people I personally know that have next to no wiggle room in their finances because they went and bought $500K/600K homes with average incomes over the last few years, I can only see this kind of news become more and more frequent...
These BCREA predictions actually seem to make sense even if using annual averages.
The annual average for Victoria in 2008 was 583k and using that 13% figure means that 2009 yearly average should be 507k. January's average is already down to 526k and more of the sales will be sooner in the year when prices havent dropped as low as they will in December. I suppose there would have to be really low prices later in the year to make the 507k average as there are less sales then. If the Dec 09/Jan 2010 averages are around 460k, then that would be a 13% drop YOY. But that is still only ~1% a month.
Well, we all know up island is going to be hit big but Victoria is immune. :-)
S2
S2 said: "Well, we all know up island is going to be hit big but Victoria is immune. :-)"
It's so funny to read the different real estate boards throw each other under the bus. Winnipeg says they're not as bad as Calgary. Calgary says they're not as bad as Vancouver. Victoria says they're better off than Nanaimo, and vice-versa. All it confirms is that they really have no clue.
the REA of each province, and each branch of each province spin so hard that it is almost a chaos now among themself.
anon said:
the REA of each province, and each branch of each province spin so hard that it is almost a chaos now among themself.
There is no chaos; quite the contrary. The sole goal of these RE boards and associations is to convince buyers and sellers that everything will be fine so that sales continue to be made. Sales means commissions to the realtors, more dues for the real estate board and more fees for the MLS system.
The credit card missed payments directly contradicts what the gov't and realtors have been saying, and is closer to what I have read earlier.
As of February, 2008, outstanding credit card balances in Canada were at more $80-billion, Deloitte said, citing newsletter The Nilson Report. Since 2004, credit card balances have risen by 40 per cent.
Canadians' household debt-to-disposable income ratio has risen to 130 per cent, putting it higher than the 120 per cent level in the U.S.
To change the subject; my PCS is VERY busy with new listings and price changes. Not much for sales though.
I just finished updating the Victoria RE Stats Gallery with a slideshow using the latest January stats. There is a lot of trend info in this month's edition. Readers should use the Pause and > buttons to single step through the slides.
GV RE Stats Analysis
Readers will note the following (click for details)
- Inventory is much higher now than in previous years.
Sales continue to drop and are at multi-year lows.
Price trend for houses has been dropping since April 2008.
Sales to Active Listings Ratio has been trending down since 2005 and is now below 8%
The Vancouver Island Real Estate Board just released their market commentary for January 2009.
VIREB - Jan-09 Commentary (PDF)
Sales were down 56% and listings were up 29% YOY. Prices were down 6%.
Did this stop the "spin". No Way!
“We are seeing the impact of global economic concerns, no question. It’s clear some buyers and sellers are taking a wait and see approach,” says VIREB President Ray Francis, noting persistent snow on the ground and cold well into the New Year also slowed things down.
“Lately I’ve been hearing from some REALTOR® members that their business has been getting noticeably busier,” he says. “I’ve also heard from a few mortgage brokers who have seen an increase of first-time home buyers getting pre-approved.”
“I feel there is some pent-up demand building up out there, so I over the next 2 or 3 months I would anticipate that we will start to see increased activity.”
Of course you will see increased activity. It always gets busier in the spring. But this spring there will be few buyers so down go prices!!
Thanks again, Roger, your work on these stats is much appreciated. I'll have to print some off and leave on the bulletin board at work. :)
Roger,
Love the graphs! Keep it up!
It is going to be hard for all those retirees in Alberta to sell their house and move to Vancouver Island.
Calgary's MLS sales take nosedive, down 50%
No matter how you look at it Calgary's resale housing market took a beating in January compared with a year ago.
MLS sales plunged by a staggering 50 per cent sending the average sale price of a single-family down by over nine per cent and 13 per cent for condominiums, according to the Calgary Real Estate Board.
Edmonton's real estate report for January released
The 730 sales recorded last month was also down considerably from the 1,227 a year earlier.
Does anyone know why the # of MLS listings changes each time I refresh my queries (e.g. between 550,001 and 600,000) in either Firefox or IE? This evening I've got least a dozen of my queries getting different results each time I run them. For 550 to 600K, it has ranged between 131 and 137 listings. Weird.
LOL, how is this for honesty in a house ad : "SELLER WANTS SO BADLY, TO GET AN OFFER"
he,he
I'm so fed up with a basic 3 bedroom rancher being listed for a half a million dollars. We aren't San Diego.
If the seller wants an offer so desperately then lower the price dramatically.
"Let’s get this straight again, BCREA change the drop from 9% to 13%, and TC saying to rebound "
The TC has now lowered themselves beyond comprehension,talk about bush league reporting.
You would think by this point they would have no choice but use the new numbers to tell the REALITY. Instead they use the FANTASY of someone's crystal ball with no facts or stats to prove any recovery is even possible and use it as a headline on the most important day of the month for reporting the FACTS.
But don't worry folks, 2010 is the real deal,we have the Recession/Depression Olympics coming up to save us....and don't worry about the massive debt thingy leftover when they all leave,we'll create a new bank or hole in the ground or something to take care of it.
Canwest: losing money while helping you lose yours in real estate...
I'm so fed up with a basic 3 bedroom rancher being listed for a half a million dollars. We aren't San Diego.
Actually San Diego is cheaper than Victoria, That's what you get after a 40% price decline.
Piggington
Scroll down to "Higher-Priced Homes Feeling the Pressure" to see the price categories.
Yup, San Diego is getting CHEAP, and still falling. And its sunny and warm almost every day.
http://sandiego.craigslist.org/nsd/reb/1018368704.html
Oh, don't worry. We'll catch up with San Diego soon enough, and then some.
Or, actually, maybe that should be catch down.
Ye gods, that rancher the seller wants so badly to get an offer on looks like a newer factory "manufactured" home... a glorified trailer.
Want an offer? Here's one, in public... $50,000.
The 13% price drop is now on CBC. But it added "The good news is 2010 is officially forecast to be a year of stabilization in the economy and the housing market"
Now the CBC is under fire. Go cbc.ca/bc for details under comments.
Is Canadian media under the control of some gangs?
Yikes - re: the 3-bed rancher, it's just off Keating, looks like a trailer and has a 1990s nightmare interior. What would it rent for, $1500? So it's generously worth $225k. Less than half asking. I wouldn't personally go near it for any price, however.
I forgot to add, the listing says "lots of exotic easy-care plants". OH, RIGHT. So half a million, then, if you throw in the plants.
HHV
Here is a graph showing Single Family Home Prices for the last 30 years. The BC Real Estate Association (BCREA) prediction of a 10% drop to 528K has been added.
Single Family Detached Over 30 Years
The reason I prepared this graph is to show prospective buyers that there is no urgency to buy now for several reasons:
- The price drops we have seen since April 2008 will continue according to the BCREA. Prices are not going to rebound in the spring.
- Historically, when prices hit a bottom they plateau for several years before they start rising. There will be plenty of time to buy during the plateau period.
Prospective buyers should also consider the following:
- Interest rates have reached lows not seen for decades. Once the economy starts recovering rates will rise rapidly to counter an increase in the Consumer Price Index (CPI). This will increase financing costs and lengthen the plateau period for housing prices. If the CPI starts to exceed the Bank of Canada limits the BOC will increase interest rates in order to bring things under control.
- Interest rates will undoubtedly be higher in 3-5 years when many buyers will be re-financing. Recent buyers will see their monthly payments increase as a result. Many will have negative equity due to falling prices and some will sell which will put downward pressure on the RE market.
In a nutshell - patience is a virtue. Prices will be lower at the end of the year and mortgage costs will not be much different than today. Why not wait and get a better deal?
I made some changes to the graph in my previous post.
Single Family Detached Over 30 Years
- updated 2008 SFH price with latest VREB data
- updated BCREA forecast based on revised VREB 2008 SFH price
- added BCREA 10% drop text
Please feel free to distribute this graph to those that might be interested.
B2B... OK, well then THAT explains it.
It's obviously a moneymaking grow-op.
Line up folks...
I was hoping someone would pick up on the San Diego. What am I saying? It is real estate bears. Of course you would pick up on that.
I notice lots of ads now that have some form of desperation in the listing write-up. Ah, the sweet smell of victory in the morning.
S2
S2 said:
I notice lots of ads now that have some form of desperation in the listing write-up.
And we are only at the beginning.... Now that BCREA has capitulated and VREB has accepted reality things will accelerate. Will agents want to accept an overpriced listing and spend advertising dollars when they have little, if any, commissions coming in the door? Many will take the listing, put it on MLS and hope for a greater fool. After a few weeks they will put pressure on the seller to reduce the price.
What about sellers? How will they react as the weeks turn into months with no offers as they watch the TV reporter talk about anaemic spring sales? Denial will give into fear.
And then we have the potential buyers. Now that the sales are down by half the real story is out there. BCREA has told them about falling prices this year. The recession has now been confirmed and the provincial budget will come out in a few weeks. All this results in more buyers glued to the sidelines.
Inventory will balloon in the coming months and demand for houses will be much lower than previous years. Result - falling prices.
Roger,
Re: Detached Bungalow over 30 Years
That is an excellent graph. It would be very interesting to adjust it for inflation. That is, put the entire graph in 2009 dollars. The plateau periods would then be declining in value.
HP said:
That is an excellent graph.
Here is the another update with BCREA's prediction for 2010
It would be very interesting to adjust it for inflation. That is, put the entire graph in 2009 dollars. The plateau periods would then be declining in value.
I have done this several times in the past on this blog. Here is a link to a slideshow with assorted charts. I have not updated for 2008 but it still shows the bubble.
Inflation graphs.
Roger,
Thanks for the inflation-adjusted house price chart.
From your chart, if you purchased a house at the 1981 peak, it took 11 years to break even, after inflation. Also, after the 1981 peak in Victoria house prices, the drop was more than 40% (after inflation).
Definitely a good time to be patient.
HP,
Your question got me thinking so I put together another chart which shows SFH data to 2008, BCREA projections and inflation factors in one graph.
Single Family Homes & Inflation
Readers will note that prices cycled above and below the inflation + 2.7% line until 2005. Prior to this date people bought a home as an alternative to renting and as a hedge against inflation. It was around this time that owning a home started being portrayed as an "investment vehicle". Things really got rolling as down payment requirements were reduced and amortization terms were increased to 40 years.
So where do we go from here? Prices peaked in April 2008 and have been trending down since then. BCREA has made several changes in their predictions for 2009. Their current conservative forecast is 10% for 2009 and 2% for 2011. I don't think it would be a big stretch to see at least a repeat of the early eighties with a 26% drop in nominal prices and then a typical plateau for several years.. This would result in an annual average of 445K. The actual month where we hit bottom would be less (due to averaging) and could be 430-440K depending on the rate of correction.
Too funny not to share. The Financial Crisis Sound Track.
Makes one wonder what the Victoria Real Estate Sound track might sound like! hehe
Roger,
That inflation line is interesting. I understand that historically (in the past few hundred years) the price of real estate has actually tracked inflation, and has only gotten out of whack in the 1970's (as your graph clearly indicates) due to the boomer population effect.
That said, do you think its likely that due to the end of this credit cycle in combination with the beginning of the dying off of the boomer population, that real estate prices will eventually revert to their hirstorical norm at inflation levels?
Yet another great chart Roger. Thanks. According to your data, it would seem as if we wouldn't see a "bottom" (as defined by housing returning to the 1978 average inflationary adjusted price) until 2016 with an aproximate price of $250,000.
Alternatively, if housing continues to be considered a great investment (I don't see how after all that's happening), the average could reach about $450,000 in mid 2011, then flatten out for 5-7 years or so.
I have a feeling the truth is somewhere in the middle... with your average price going down to $350,000 by 2013 or so.
This price range would also coincide with a 2003 time frame, which is just a little after the bubble started.
VREB had this to say in the January stats news release...
The average price for single family homes sold in Greater Victoria last month was $526,148, down from $548,025 in December.
A local REALTOR, Fred Carver made this comment on his blog about average prices....
The Total MLS Sales for January in Victoria= $104,025,990, with a Single Home average selling price Down Slightly to $526,148.
Down slightly! What does it take to be down significantly?
And agents wonder why people don't trust anything these guys say..
Olives said:
That said, do you think its likely that due to the end of this credit cycle in combination with the beginning of the dying off of the boomer population, that real estate prices will eventually revert to their hirstorical norm at inflation levels?
Given that people are living longer and the first boomers are only 63 it will be quite a few years until they die off. Many are not downsizing because they enjoy their current home or their children or grandchildren are moving back in with them. What has slowed down considerably is the purchase of second homes like condos or cottages due to the stock market and economic conditions.
In the graph I posted it showed that inflation has tended to cycle around inflation plus a premium of several percent. I expect that once this recession is fully underway that prices will fall towards this trend line. Once the stock market anticipates that we are pulling out of the recession it will rise quickly and money will quickly flow back into stocks. Wage pressure and the cost of goods will result in an increase in CPI and the BOC will raise short term rates. Fixed rates will also rise as we return to a normal yield curve. That will put pressure on today's buyers when they refinance and some will opt to sell putting more inventory on the market.
So in the short term house prices will continue to fall as the economy deteriorates. The idea that buying a condo or a house is a "great investment" will fade away. Once the economy is back on track the stock and bond markets will be considered the place for investing. Interest rates will rise once again and the credit crunch will result in stringent loan conditions and reasonable mortgage terms. House prices will stabilize constrained by affordabilty, wage/rent ratios and a steady supply of inventory from aging boomers and overextended owners.
In a nutshell, the boom is over and will not return for many years. I predict house prices in Victoria will return to inflation plus modest premium levels. However, I am just a fuzzy bear sitting on the sidelines looking in a murky crystal ball.
This week Remax is holding a big convention in Victoria. I wonder if they will be discussing this subject:
Re/Max offices, broker investigated
Many are not downsizing because they enjoy their current home or their children or grandchildren are moving back in with them.
That's downsizing. The same people who had multiple residences now occupy just one.
The Depression is here, the govs are just fudging the figures so it doesn't look like it.
The stock market and all paper investments are suckers' bets. The market will continue crashing and won't recover for several decades. Both governments of the US and Canada are making the same exact mistakes made during the Great Depression, only at far worse speed and amounts.
There will be no recovery to recent boom levels. Not in real estate, and certainly not in the stock market either. Not in any of our lifetimes.
It will be a good time for those in cash, and those who are able to trade that cash for hard assets before the currency itself crashes, which at this point is inevitable.
Some of Roger's and Womp's charts would be great as an extra handout at the Remax conference...
Dumb Canuck,
Remax is welcome to copy and distribute any of my charts without restriction. If they ask I will even prepare a custom Powerpoint presentation. :>)
This just came on TV a few minutes ago. TC now carrying the story.
Canwest considers sale of CHEK TV
VREB and BCREA should consider buying the station. Then they could really pump real estate!!
Well Roger, if you're going to do a powerpoint presentation, then we would need your curriculam vitae. And that would ruin your anonymity.
We, does not mean that I'm Re/max but there are other organizations that may be interested. Actually, it would be interesting to have a blog panel do a presentation. I think it would really shake up some of the real estate people to find out how the every day guy and gal know more about real estate than the so called experts.
JJ,
I've wanted to do a real estate hotstove (like Hockey Night in Canada's one) for a while.
We could live blog the whole thing and readers could e-mail in questions. Getting a REALTOR to agree might be difficult, but I'd be willing to do it completely anonymously. We could just identify people by their roles in the market.
So let me put this out there: 1 REALTOR, 1 mortgage broker, 1 Roger and I'll moderate...
Anyone interested?
There will be no recovery to recent boom levels. Not in real estate, and certainly not in the stock market either. Not in any of our lifetimes.
It will be a good time for those in cash, and those who are able to trade that cash for hard assets before the currency itself crashes, which at this point is inevitable.
Those two paragraphs contradict each other. If the currency crashes, that means hard assets such as RE get a lot more expensive. That's the definition of a currency crash - your money buys you less.
Roger,
Wouldn't something like wages be a better way to track home prices? So if wages rise at 2%+inflation, then houses would follow that trend. After all, higher wages drive higher prices.
MSR,
Interesting comment. Comparing wages to house prices is done by economists like the Royal Bank. Periodically they publish reports with affordability numbers for various cities in Canada.
I don't do it because I am already spending quite a bit of time preparing the current graphs. My slideshow hits are going down now that most folks have realized that the boom is over. It won't be long before the monthly drops are old news and there won't be much interest in detailed stats updates.
When currency crashes in a Depression and no one has any work or cash and is up to their eyeballs in debt (if they're lucky enough to GET a loan) to buy food, Patriotz, housing prices ain't gonna go up either, hyperinflation or no.
As you so frequently put it, real estate is only worth what people are willing and ABLE to pay for it. I guess it is hard to imagine bread costing a thousand dollars and yet a one-bedroom hovel rent going for $15 a month and real estate prices similarly keyed, but it happened in Weimar Germany and it's about to happen to the entire planet.
Detroit is ground zero, we're not even officially in a Depression yet, and they can't GIVE houses away.
That is the future. For everyone. North America is on the fastrack to third world status, and nothing is going to stop it.
I just happen to believe in the worst-case scenario. Times a thousand. Your mileage my vary.
At the end of every boom the most negative bears emerge from hibernation and declare that the world is coming to an end. They're peddling gold, beef jerkey and generators. This is a sign the bottom is near. Good time to buy pretty much anything other than gold.
So if wages rise at 2%+inflation, then houses would follow that trend.
Wages have been lagging inflation since 1982.
Gives you an idea how far out of whack with ability to pay we've gotten.
So what has been fueling house prices and consumption - DEBT. Well that party is over.
Yet another area where "it's different here" BC looks just like the US.
anon 7:52... I sure hope you put your money where your mouth is and do exactly that (buy anything but gold). So the rest of us can laugh at you as you lose your ass.
Just like the real estate zombies before you.
Wiemar Germany. WIEMAR GERMANY! WIEMAR GERMANY!
Economy jettisons 129,000 jobs in January
Canadian employers slashed a record 129,000 jobs last month, impacting every region and almost every industry.
Canada has never seen a monthly job drop like this, Statistics Canada said Friday, not even during the recessions of the early 1980s and 1990s. The unemployment rate soared to 7.2 per cent, from 6.6 per cent in December.
The carnage was everywhere. Ontario shed 71,000 jobs, half in the manufacturing sector. British Columbia and Quebec were also hit hard with losses of 35,000 and 26,000 respectively.
It's "Weimar".
There will be no recovery to recent boom levels. Not in real estate, and certainly not in the stock market either. Not in any of our lifetimes.
Oh dear. As said above, when people are foaming at the mouth like this about generators and the end of the world, it's a good bet we're near a bottom. Warren Buffett recently said that American companies will be setting new profit records 5, 10 and 20 years from now. He said "my money and my mouth both say equities".
Now, should I listen to Warren Buffett, who was born in 1930 and has seen myriad booms and busts, or some anonymous blog poster who's saying the End is Nigh? You will have to agree, I would be a moron to listen to any other than Mr. Buffett.
Follow on to last post:
The national unemployment rate was 7.2 per cent in January. Here's what happened provincially (previous month in brackets):
-British Columbia 6.2 (5.3)
And what about "insulated" Victoria's unemployment rate?
September 3.2%
October 3.2%
November 3.4%
December 3.7%
January 4.0%
Still low but climbing every month.
Anonymous said...Feb 4,09 8:34 AM
Yup, San Diego is getting CHEAP, and still falling. And its sunny and warm almost every day.
http://sandiego.craigslist.org/nsd/reb/1018368704.html
Catching up on my reading and I don't want to throw a bunch of cold water on this Anon post but this listing is no where near San Diego...it's in Winchester, CA. I just got back from a holiday down there and just happened to get lost on my way back from San Diego and ended up driving through Winchester. It's a little town, kind of like Port Alberni -- but without the jobs.
That said prices seem to be all over the map down there. We spent quite a bit of time in Palm Spring and went and looked at some model homes for kicks. I saw a 1 million dollar place in Rancho Mirage (think Uplands) with a valley and mountain view that was way nicer than any 1930's drafty "character" crap box in Victoria.
We also saw some listed Condo's. At one point we were looking at two side by side identical units...one offered at $225K and the identical twin at $110K. Obviously one owner was out to lunch but neither of them were selling. It's a stalemate down there right now.
My favourite flip is back on the market!
MLS®: 258338 (used to be 250314):
~ 1 million 1.5 yrs ago (bought)
250-300K reno cost
95 K carrying cost (5%/yr)
45 K agent fee (assuming 1.5M sale)
20 K staging cost
1,410,000 Total Cost
~1,790,000 list in the summer
1,675,000 (first week of Oct).
1,595,000 (list shown Nov. )
January 1, 2009 - taken off market, lock box on door
1,495,000 February 6, 2009 re-listed (same agent as well!)
??? sales price
16.5% list price drop
??? % drop to sales price
weekly open houses, some lookers, stopped late October. movers brought in furniture early November. now staged, lights on in evening, etc. Lock box on door for whole of January.
UP, UP, UP UNEMPLOYMENT.
DOWN, DOWN, DOWN HOUSE PRICE.
SPIN, SPIN, SPIN REALTORS.
Olives & S2,
Some folks might not believe graphs posted by an independent analyst like me. So here are some graphs (pdf) produced by VREB. Why not distribute them to anyone who might want to buy right now.
VREB Average Prices
Single family average prices are back to Jan. 2007 levels and still dropping. Condos average prices were last seen in February 2006 with lots more room to fall.
I'd love to see a Roger vs. REALTOR debate, I'd even buy a ticket. :)
I think it would be an interesting experience for an audience to see an informed voice who doesn't subscribe to the mainstream view. I was at the Garth Turner lecture and he completely blew people's minds just by saying that the market hadn't yet begun to fall.
I overheard a realtor at a restaurant downtown at luch. She was saying the market is full of lowballers, lowballers who are making the offers subject to the sales of their own houses. They want last years prices on their own homes mind you, so they can never get the subject removed. She was of course talking about the complete waste of time they were. Could this be the mythical "things are picking up"?
With things as slow as they are, I won't be accepting an offer that is conditional on the buyer's home selling. It's just not worth the time. Although conditional and usually there is a 48 hour clause should there be other offers, I find that people stop looking if they know there's a conditional in place.
I'd rather tell them to come back and see if it's still available - this is probably in the buyer's interest as well. If you wait and make a relatively unconditional offer you'll probably save a few thou.
OMC had an interesting post on what is going on with some deals in town.
I have been following PCS in Victoria and up island and have seen very few sales this week. Listings in Victoria have been coming on strong, especially condos.
What happened with all that "activity" we heard about a few weeks ago? Have any of you seen sales on your PCS accounts?
Ozzie Jurock was on TV this week. He really surprised me this time. Why? Because he thinks it is a good time to buy - lots of deals out there. He said developers won't be offering these deals next year.
Watch the video here (after commercial)
Ozzie on Global
roger,
I've seen 5 sales in 2009 on houses priced under $425K with suites or suite potential. there have been 15 listings and one price change. 1 sale in Feb.
There have been about 40 new condo listings and 3 sales of 2-bed condos under $250K. No sales in Feb.
6 months ago, this end (the low end) was holding up quite well. The downwards pressure from above is getting very heavy.
We aren't looking yet, there may be enough blood in the water come november for us to wet our feet. When we do the conditionals don't scare us at all. Most chances are they will be unable to complete and it does give us an idea how low they will go. We will just come along and offer the same or less with a deposit cheque attatched if we are interested. It also helps that we could complete any time.
Our PCS has been amazingly quiet for sales this last week with tons of "new" (same old over priced crap) listings.
HHV,
You are seeing the same thing as me. If things don't start firing up soon February could be a real bust. The weather has been OK so that excuse won't be available for the next VREB report.
Anyone else with a report?
roger,
with the flurry of sales processing over the last few days of jan, I'm actually surprised there wasn't some spill over into feb?
hhv & roger,
I'm actually pretty disappointed in my Matrix activity this month. Not only are there no new sales showing up, but there's very few new listings coming on.
My two searches are 3Br+ under $500k, and a townhouse search for anything under $450k.
With things as slow as they are, I won't be accepting an offer that is conditional on the buyer's home selling.
Unless you are selling an entry level property, this will knock out all potential buyers except the vultures with cash.
Take it or leave it.
Our PCS is 500k - 1.3mill (just to see what we could lowball)for fairfield, oak bay and areas of gorden head such as ten mile point. 5-6 "new" listings a day during the week. Could be a new source of pressure from this end. There is far better value here than in the sub 500k range. Houses that would sell in the low 8s are selling in the low 6s now.
We are 'vultures with cash' and we do not plan to make any offers for a while. Why bother. Prices are still about 50% too high on houses in need of MAJOR renos. Who needs a $700k fixer. Absurd.
Anyways, no one HAS to buy a house - and this market has a long way to fall.
What I'm watching are asking prices for the starter Victoria core houses in the low 300K range to break through into the high 200K range.
There has been a lot of downward pressure in the other income groupings, but the starter houses seem not to have had the reduction in asking prices like these other groups. Consequently, not many have sold in the urban Victoria core.
That seems to be one of the reasons for the anomally that all starter homes, in all areas are at a similar pricing. Something that intuitively should not occur as Colwood land values are much lower than Victoria's.
just an observation
just jack
We know our market quite well as we have been in the position to buy for 2 years now and have been watching. There are 2 flipper houses in our immediate neighbourhood that were taken off the market in December, they are still empty and not yet BOM. my impression is that the tactic of listing before the spring has failed, so the spring will be very busy.
For those looking at specific price ranges; adjust your PCS well above that price. If you are looking for sub 500k go up to 800k so you can see the lowball offers being accepted very close to your price range. I just did a search under 500k and if that was all I could get I would rather camp in one of our parks. Honestly, for another 50k you get 2X the house in a MUCH nicer neighbourhood. By the summer, who knows?
omc,
I just did a search under 500k and if that was all I could get I would rather camp in one of our parks.
Yes, and this illustrates all the problems of this market perfectly. Amazing the denial still out there though - I'm still stunned when I hear about people dismissing the crash (which happens about three times a week).
Honestly, for another 50k you get 2X the house in a MUCH nicer neighbourhood. By the summer, who knows?
Or just buy two 4BR + swimming pool houses in Arizona for wintering you and your entire family, and just camp out here in the summer ;)
Sunriver Estates in Sooke is now offering a teaser mortgage - 1.95% for 3 years, 35 year amortization, with 5% down.
Here is the ad in today's Times Colonist
What financial circumstances will the buyers face in 3 years when the mortgage is up for renewal? What are the chances of being in a negative equity position if they decide to sell?
They're in a negative equity position as soon as they buy. These mortgage interest buy downs are just schemes to inflate the true market value, and if CMHC had any brains (which it clearly doesn't) it would refuse to insure such a mortgage.
Properties like these will be the first to foreclose when TSHTF.
It's not a teaser mortgage, it's actually 1.95% for the entire term. There is also (though not advertised) a cash option of $15,000 or more in upgrades. The mortgage is max $385,000 and their typical house will be over $450,000.
Is a buyer in negative equity when they buy? I guess if you consider the 1.95% in lieu of the cash. However, it would seem that the market value is what a buyer is willing to pay. Look around the rest of Sooke, you'll find the prices comparable for the value offered. Perhaps 2/3rds of the buyers up there are not first time buyers.
What happens in 3 years if someone wants to sell will depend on how smart the buyer was and whether or not they got in over their head.
Now before you start your rant on Sunriver and the developers maybe have a walk around and talk to a few neighbours. Perhaps as many as 25% of their sales in the past couple years have been to existing owners upgrading. With very few exceptions the owners are happy with their purchases and Sunriver is considered a very desirable area of Sooke.
Hmmm... Someone with a vested interest I presume.
The ad didn't state the mortgage was max $385k, it simply stated based on 5% down. If you took the cash back you would have actually put less than 5% down, 3.05% actually. So a $13725 downpayment is a good idea on $450k home?
This isn't the states where you get a full 25 year mortgage at that rate, you are saying a 3 year term. If they needed to use the teaser rate the chances they will be in forclosure in 3 years when they renegotiate and the rates are much higher are, let me take a guess here, pretty damned near 100%. Property values will plunge in that place.
This isn't a rant, you are being very irresponsible.
No vested interest in Sunriver other than being a homeowner, and I'm not advocating the "deal". Just stating the facts as I understand them.
There is $65,000 between $450K (likely minimum cost on a SFH) and $385K, not $13,000 and change. The advertised deal appears to be for one of their townhomes which are not selling (actually neither is much else.)
Just to clarify, the cash option as I understand it isn't "cash back", it's a reduction to cost or free upgrades, which is reflective of the market, and is perfectly legitimate IMO.
The $385 max on the mortgage will be in the fine print.
It's not a teaser mortgage, it's actually 1.95% for the entire term.
Come on off it, a below market rate for less than the full amortization is a teaser, by definition.
There is no question that it has a monetary value being a below market rate and at $385K the value by the end of the 3 year term (assuming normal rate is 4.2%) is perhaps $25,000.
My definitian of a "teaser rate" is one that is only for the first say 6 months of a 3 year term. This is not the case.
Maybe we should search the term and see if this is the generally understood definitian.
Never mind, Wikipedia has it for us here:
Teaser Rate
What Does Teaser Rate Mean?
An initial rate on an adjustable-rate mortgage (ARM). This rate will typically be below the going market rate, and is used by lenders to entice borrowers to choose ARMs over traditional mortgages. The teaser rate will be in effect for only a few months, at which point the rate will gradually climb until it reaches the full indexed rate, which will be a static margin rate plus the floating rate index to which the mortgage is tied (usually the LIBOR index).
Sorry, I really don't mean to be a downer. But the "deal" is exactly the same as a subprime. A subprime had a reset to higher rates usually around 2 years and the "deal" will fnd the buyer looking for a new mortgage in 3 years.
I don't consider my self a bear, but I am bearish on the housing market. If you go by reports by the major chartered banks they are all predicting significant losses in the housing sector followed by a longer period where they are stable at the new lower prices. So the new buyer will find themselves with significant negative equity in 3 years. The mortgage rate will be much higher and they most likely would only get financing as a subprime because of the negative equity. Very high interest rates.
With 1/3 of the buyers in your neighbourhood first timers I would be very scared.
and yes it's definition, not definitian. My apologies.
Yes OMC, but now you're talking about the market as a whole, and I agree there will many people in all of our neighbourhoods that may be in deep trouble in the coming years.
To think about it a bit clearer and considering my immediate neighbours that I am familiar with, the first time buyers may in fact be less than 10%. Most of us are middle-aged government workers, teachers, principles, military and lower level executives (and yes many retirees.)
Call it a teaser or a mortgage buydown - whatever you like. The simple fact is that in three years when it is time to renew the mortgage the rate will be much higher. I would hazard a guess of 6% and payments that are much higher than the current offer.
Sooke is attractive to many folks but to new residents one of the main reasons for moving there is lower housing prices. The commute on the windy road is not fun for some and one of my colleagues lasted a year before moving to Langford.
And what will the home be worth in three years? Much less given that houses are dropping in price all over the CRD. As more affordable options closer to town become available and gas prices rise again there will be much less interest in moving to Sooke.
Follow up to previous post....
So lets look at the MLS stats for Sooke:
Oct. 2008 - 10 houses sold with an average price of 387K and a median of 400K.
Nov. 2008 - 5 houses sold with an average of 484K and a median of 500K. 3 sold over 500K and 2 under 350K.
Dec. 2008 - 7 houses sold with an average of 380K amd a median of 385K. All but one sold under 400K.
Jan. 2008 - 7 houses sold with an average of 366K and a median of 390K and all were under 400K.
How many are available to choose from? 140 in the following price ranges: 50 under 410K; 50 from 410K-650K and 40 over 650K.
In Sunriver alone there are 12 houses to choose from. List prices range from 375K to 510K with 10 over 400K.
Sales Summary - In the last 3 months only 19 houses have sold in Sooke and 16 of them were under 400K. Only 3 sold over 400K and there are over 80 to choose from. Watch for price reductions and prices to keep rippling down the price ladder.
"The simple fact is that in three years when it is time to renew the mortgage the rate will be much higher. I would hazard a guess of 6% and payments that are much higher than the current offer."
Thanks for the inof. Again the reference applies to all current buyers (and those who have bought in the last 2 years.) All neighbourhoods will suffer the same fate.
Let's take a look at Langford.
Nov. 2008 - 14 houses sold with an average of 482K and a median of 492K. 6 sold over 500K and 8 under 500K.
Dec. 2008 - 15 houses sold with an average of 522K and a median of 550K. 9 sold over 500K and 6 under 500K.
Jan. 2008 - 15 houses sold with an average of 440K and a median of 417K. Only 2 sold over 500K and 13 under 500K.
MLS house listings as of today for Langford - 160 with 58 under 500K; 52 between 500K-600K and 50 over 600K.
Summary - In the last three months 17 houses sold over 500K and there are over a hundred to choose from. Median and average prices dropped significantly last month. Watch for price reductions in the high end. By spring this will ripple down to the under 500K market as well.
Roger, that's a great breakdown by neighbourhood.
you mean January 2009, right?
Olives said:
you mean January 2009, right?
Yes - Jan. 2009. Takes me a few months before I catch on that it's a new year. :>)
BTW Olives. Did you see Mish's latest post on the job losses in the US? This graph is shocking!
Time for a little Case-Schiller style analysis.
Recent a condominium sold in a large complex that had been one of the most notable properties for water problems in the mid 1990's
That property recently sold for $243,000. The same property sold in May 2005 for $235,000. This is one indicator that suggest that condominium values have now rolled back to the summer of 2005.
How about a nice 1970's Westshore home that just sold for $432,000. The same house sold in August 2007 for $435,000. This suggest that home prices have rolled back to the summer of 2007.
As expected condominiums are leading the way in price declines as prices roll back quickly.
It was only a few months ago that VREB had a full page optimistic ad in the TC. On Saturday they had a much smaller ad and I don't think this one had anything in it to encourage buyers. Makes ya wonder why they even bothered.
VREB ad
Sales down, inventory up from last year and prices down (below six month average). What a difference a few months makes...
How many times have you heard that the "boomers are coming here to retire"?
Well if there really is a crowd on the way they are going to be delayed.
Freedom 55? Much too early
OTTAWA -- Freedom 55? Not likely. A recent survey shows almost half of working Canadians intend to work a decade later than that, and then some.
The Sun Life Financial survey shows nearly a majority of people in this country intend to work beyond the age of 65.
Part of the reason for this -- which Sun Life said is a departure from average retirement age of 61 in recent years -- is that people are unsure whether they are financially secure enough to retire comfortably.
Thanks Roger. Keep 'em coming. You all help make the waiting bearable.
S2
That graph is shocking Roger, particularly because aren't Canadian jobs stats now falling at double the rate of the U.S.?
Olives,
Yes, we are falling faster than the US. We lost 129,000 jobs in January while they lost 598,000 - four times as many. But their population is ten times greater.
But this isn't the end of the bad news. The job numbers were seasonally adjusted by StatsCan. The actual number lost is closer to 340,000 (yes 340,000). You can read about why they seasonally adjust in this article which was written when they only expected a SA loss of 40,000.
Jobless data bleak; true picture's worse
I received the detailed Victoria stats and updated these slideshows:
Condo Bubble Burst?
CMHC Single Family Detached
You can use the Pause and Single Step (< >) buttons at the top of the slides to manually control the speed. Click the big X and run full screen.
Here goes Mr. No Credibility of CREA with another real estate forecast for 2009 & 2010.
CREA Forecast - Feb 09
OTTAWA – February 9th, 2009 – National MLS® home sales activity is expected to decline in 2009 before rebounding in 2010, according to a new residential housing forecast prepared by The Canadian Real Estate Association.
“The national housing market is recalibrating due to weak sales activity,” said Klump. “Supply will take time to adjust to lower demand, but sellers unwilling to accept offers below their expectations will remove their home from the market,” he added. “Fewer active listings reduces buyer choice, and in time puts a floor under prices,” CREA’s Chief Economist added.
Average Annual Price Forecast
MLS Sales Forecast
Thanks Roger on the condo graphs.
Looked at the hot sheet and one of the sales is of a condominium in a not so quick to sell complex that just sold for $233,000. But, previously sold for $238,500 in May 2005.
Sales of condominiums so far this month are a quarter of what they were in the first week of February, 2008.
The foregoing initially suggests that the condominium market has gone over the cliff. I think that we have an over supply of condominiums much worse than we had in the mid 1990's condominium market.
Does not look good for the whole market. As fewer condominium sales means fewer potential house sales.
Lower interest rates are not going to get this market going. And I suspect neither are lower prices. In my opinion, we just do not physically have the buyers.
Wow, that guy is an idiot.
Just Jack,
Thanks for the update on the condo sales. It looks like this could get ugly fast. Developers are hearing the economic news and it won't be long till they start unloading with big discounts like their counterparts in Vancouver.
You said... In my opinion, we just do not physically have the buyers.
Lets look at the buyer pool.
Specuvestors & Flippers Smart ones long gone from the market. A few fools remain.
First time buyer Many have already bought and the recent 5% down payment requirement has drained the pool.
Retirees Stock market meltdown and low sales/prices elsewhere in Canada has forced them to change their plans. You can really see he effect up island in the Comox Valley and Parksviille-Qualicum.
Move-up buyer I bet conditional offers have been made based on selling their current house at last year's price which isn't happening.
Vultures & Bears Sitting on the sidelines reading how prices will drop at least another 10%
less and less buyers some how means a floor for prices.
I guess I should get my money back on the economics classes I did in university because I sure didn't see that one coming. I would have thought that prices are sticky because the sellers have to get used to seeing the new prices, just like buyers in an upward market.
"....that just sold for $233,000. But, previously sold for $238,500 in May 2005."
Totalling in keeping with Roger's condo graph which shows current average condo prices at the same level as early 2005. That was quick.
Carla Wilson wrote this story in today's TC.
Island's new home construction falls 47 per cent
Vancouver Island housing starts slid by 47 per cent in January compared with the same month a year ago as fall-out from the economic downturn continues to spread throughout the country.
Last month Island builders started 169 housing units, down from 317 in January 2008.
Within Greater Victoria, just 30 new homes were started in January.
Looks like the smart builders have figured it out and hunkered down. Looks like they didn't buy what was in their own full page ad two months ago.
Just saw in the news that Canadian consumer bankruptcies are up 50% year over year.
"We're in a consumer-led recession," said Benjamin Tal, senior economist at CIBC World Markets.
"The level (of bankruptcies) is still relatively low compared to previous cycles," he said. "Unfortunately, this is not the end of it."
I wonder how many people will go bankrupt in bubbly cities like Vancouver and Victoria? Especially those who took out home-equity loans...
If demand is stable to increasing then reducing the number of listings would have a price floor affect. However, in our case, demand is declining! You would really have to hack away at the number of listings to shore up the market.
If OPEC can't do it, how can a real estate board!
Without a return of consumer confidence in the marketplace our economy will continue to spiral down. That means we would have to get the country charged up over something.
Original quote from David Frost but revised for today:
"In 1918 we fought the Germans and won.
In 1945 we fought the Germans and won.
So why in 2009 are we fighting the terroists and loosing when we could be fighting the Germans and winning?"
"Consumer led recession". Up yours Benjamin Tal, grow some balls.
Another news story on the Cdn. real state market.
Housing market 'correction' in full swing
As the recession digs in and the unemployment rate rises, economists say nervous consumers are standing still when it comes to buying and selling real estate.
The results are increasing numbers of dwellings on the market, dropping prices and a slowdown in construction.
"The Canadian housing correction is in full swing, having a wide impact across the country," BMO Capital Markets economist Robert Kavcic commented today.
Gregory Klump, chief economist for the association, said that although there were some incentives for home buyers in the recent federal budget, "they won't take hold until there is an improvement in buyer psychology."
CIBC economist Benjamin Tal said he is forecasting a sales drop of about 15 per cent and price decline of about 10 per cent nationwide this year.
Tal said the Canadian housing market is in a "correction, not a free fall." However, "the recovery will not be very quick."
Scotiabank economist Adrienne Warren said the home market is in ``retrenchment mode."
"It's no surprise that home builders are pulling back, facing slowing demand and increasing amounts of unsold inventory," Warren said.
"What you are also seeing now is that the condo market has finally cooled off."
"Reduced sales and increased listings in the existing-home market have led to reduced spillover demand in the new-home market," stated Bob Dugan, the Crown corporation's chief economist.
"Western Canada in particular continues to see activity fall off a cliff, with starts in B.C. at the lowest level since 2002, and in Alberta the weakest since 1996," BMO's Kavcic wrote in a note. ``Both provinces are seeing activity at half year-ago levels."
Global(?) had a brief fluff piece on Real Estate at noon. I missed most of it, but they ended it with the usual.
"If our office is any indication, Real Estate is on the upswing."
(paraphrased)
Oddly enough, it is spring and will be busier regardless of how bad things are.
-Village
Here is an example of what I would like to call "forced reduction". It is perhaps the only way sellers will realize they are priced too high and can get some sense knocked into them.
Property 1
This place was listed at 220k for quite a while and recently reduced a whopping 5k to 215k. 624sq ft.
Property 2
This one originally was 240k but now 220k after a 20k haircut. 797sq ft.
These places are quite new so the only difference would be sq ft.
So let's see you can get 20%+ more sq ft for a measly 5k! There is no way in hell the smaller one is going to get anything remotely close to the asking price as the selling price of the larger one will most likely be less than the smaller's asking!
In terms of $/sqft, the smaller one should be listed at 170k! It will be interesting to see what kind of "forced reduction" will occur.
By the way, only 8 out of 258 condos sold in Nanaimo in January. (30MOI+)
"Lower interest rates are not going to get this market going. And I suspect neither are lower prices. In my opinion, we just do not physically have the buyers."
Eventually, lower prices will lead to sales. Supply and demand will balance out; it's inevitable. However, that won't happen until prices are low enough to lure new buyers. That means FTBs and investors. Investors won't buy until properties will be cash-flow positive. FTBs won't buy until buying is cheaper than renting, and even then it may take a few years because the bubble caused a lot of FTBs to jump in before the were ready, borrowing demand from the future.
I agree that the minor price declines we've seen so far won't kick-start the market. However, when prices drop far enough it will. I can't imagine spending $400,000 for something like Centenial Walk. But $100,000? Of course I would. Therefor, prices will continue to fall until they're low enough to lure buyers.
The following article doesn't apply to Victoria because we are "insulated" from any downturn. But in the rest of Canada One quarter of Canadians fear layoffs
About 24 per cent of Canadian employees have the job jitters, with workers in the private sector especially concerned, according to Ipsos Reid's better workplace syndicated study, based on an online poll of 1,100 employees last month.
The angst comes as the economy continues to shed jobs. Canadian employers cut 129,000 jobs last month, the sharpest monthly plunge on record, Statistics Canada said Friday. Economists expect the jobless rate, now at a four-year high of 7.2 per cent, to climb further this year.
Another reason sales are down in 2009.
Lower prices should lead to sales. That's the way the market is supposed to work. But what happens when lower and lower prices do not stimulate demand.
What if we have robbed so much of future demand, that there is not enough willing prospective buyers left to buy properties. Is that possible? Or is demand for housing unlimited at lower and lower prices. If a houses only cost $10,000 - how many would you buy? If homes only cost $10,000 would a rental market exist?
Our apartment vacancy rate is very low and this would suggest that there still are prospective buyers for homes as the prices come down. I suppose if our apartment vacancy rate was high, then maybe the argument for exhausting the amount of buyers would be stronger. Yet there are over 1,000 listing for rent on Craiglist and home ownership for Canadians is the highest it has ever been in history at around 70 percent. Who's living in these lower rent apartment units? Are they transient workers who will vacate with the loss in jobs and therefore are not prospective purchasers at all? Of the 30 percent of Canadians that are renting do they all want to own a home. When I was in my twenties, I didn't want a mortgage, I wanted to travel and ...
Is this happening in the USA now? Could this happen in Victoria? I don't know the answer to these questions. There never has been a real estate market like this before.
anon 3:29 said:
Our apartment vacancy rate is very low and this would suggest that there still are prospective buyers for homes as the prices come down.
True enough. But how many have the 5% down and can carry a monthly payment (mortgage & taxes) of $1200 for a small condo or $1800 for a starter house?? That 5% down is probably the biggest barrier right now.
The zero down, 40 year amortization mortgage really pulled future buyers into buying last year.
Our apartment vacancy rate is very low and this would suggest that there still are prospective buyers for homes as the prices come down.
The apartment vacancy rate tells you there is a shortage of appropriately priced, professionally managed rental properties. Check Craigslist any day and you'll see that there is no shortage of rental housing in this city, but a lot of it is overpriced.
Actual supply and demand, in terms of the number of units vs the number of people to live in them, should determine market rent. If there is an oversupply of housing, rents should fall. And in a balanced market, prices should be in line with rents.
It doesn't matter whether people who are currently renting will buy or not; if they don't but prices aren't out of whack, investors will buy and rent to those people.
Interesting sale in Oak Bay.
MLS 252082, 1717 St. Anne St.
BC Assessment $600k (2007 and 2008)
Sept. 2/08 listed at $695
Oct. 30/08 reduced to $599.9
Jan. 2/09 reduced to $549.9
Feb. 9/09 SOLD at $505
Final price was 8% under last asking price, 27% under original list price and 16% under the BC assessment.
Neighbors won't be happy...
Anecdotally I heard the WWE event this past weekend was a very positive for the RE market here. I overheard many wrestling fans from Vancouver and elsewhere talking about buying condos in Victoria. The more events that come here the more hope for change in the market there is.
But what happens when lower and lower prices do not stimulate demand.
Look people, lower prices do stimulate demand.
How many people do you think there are who are willing and able to pay 100K for a house in Victoria. Loads of them. Not just in Victoria of course but elsewhere.
That said, the question is how low do prices have to go so there is enough demand to clear the supply.
The march to reality continues:
2120 Fair St,Oak Bay
Asking 409.9K, Jul 1, 2008 assessment 483.3K.
If it sells, will undoubtedly go for under 400K. When's the last time a house on a 7000 sq ft lot went for that in Oak Bay?
I have some questions for those who are either in the real estate biz, or who are experienced home sellers: What, if any, conclusions can I draw from the fact that any particular property is having repeated open houses?
I think it's safe for me to assume that the vendor wants to sell the property, but beyond that, do repeated open houses indicate anything useful to a potential buyer?
Can I conclude that the vendor is open to offers 10% or lower than the asking price?
Can I conclude that the vendor has so far received few or no acceptable offers?
Can I conclude there has been little interest in the property so far?
I guess I'm looking for some insight into how OHs are used as a tactic by sellers and their agents. I've so far assumed that OHs are a pain for the seller and so to be avoided unless necessary, but I'm not sure that's valid. I do see quite a few places having repeated OHs these days, so I'm trying to assess what that can tell me about the attractiveness of various properties at their current prices in the current market.
But what happens when lower and lower prices do not stimulate demand.
Look people, lower prices do stimulate demand.
That said, the question is how low do prices have to go so there is enough demand to clear the supply.
Interestingly though, and perversely, up until recently higher prices were stimulating demand. This is like, e.g., Chinese stocks shooting up, which stimulates retail demand, but now post-crash everyone is afraid of equities and doesn't want to buy Chinese stocks even though they're on sale and the story remains the same.
As we've discussed, then, prices will have to go extremely low before the "burned" (or "once bitten") phenomenon stops keeping people away from RE after the crash. You can imagine the illogical conversations: "I'm going to buy a house, we're at the bottom" "But RE is a terrible investment, just look at the crash we've had!" "Yes, but it yields a good income now that prices are way lower" "I don't care - RE is the worst investment you can make!"
People are making similar arguments against equities right now, as in previous crashes, in the face of advice from folks like Buffett to buy. "Look, GE is almost trading at book value - great buy" "Nah, look at what a terrible investment it is, it's gone down huge" "But that means it's on sale - lower prices are better" "Nah, equities are terrible investments, I'm buying gold/art/staying in cash".
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