TC analysis is out and it's surprisingly balanced.A total of 602 homes and other properties sold in March through the Victoria Real Estate Board’s Multiple Listing Service® (MLS®) up a significant 49 per cent from the 403 sales in February. There were 707 sales in March of last year. Prices, meantime, remained very stable with modest increases in some sectors. There were 3,859 properties available for sale at the end of March. That represents a seven per cent increase compared to March of last year and only a minor increase from the 3,844properties available for sale at the end of February.
Markham noted that prices remained strong and stable in March. The average price for single family homes sold in Greater Victoria last month was $534,689 down slightly from $542,396 in February. However, the median price rose to $503,751. The six-month average was $540,244. The overall average price for condominiums was $294,393 last month up from $286,985 in February. The average for the last six months was $288,661. The median price for condominiums also rose in March to $266,500. The average price of all townhomes sold last month was $405,003 up from $381,383 in February. The six month average was $398,320 while the median price in March was $356,450.
MLS® sales last month included 343 single family homes, 163 condominiums, 64 townhomes and 11 manufactured homes.
My thoughts? Are any of us who watch the market really all that surprised? Here's what we see happening:
- sales volumes are up month over month
- sales volumes are down year over year
- sales prices are basically flat month over month
- sales prices are down year over year
Despite this buying effect, prices are not climbing. This simple fact should be a cause for concern to the market. Houses, especially with suites, priced at $550,000 or less are still firmly in seller's market territory in Victoria. And prices aren't going up because that price point is at the extreme limits of mortgage helper supported mortgage payment affordability. When prices in this segment don't rise, the move-up market disappears, albeit slowly.
I'm still "seeing" a flat market until June, then a steady downwards pressure on prices for the rest of the year. The days of increased prices in Victoria are gone. And they could be gone for a long time, even up to 10 years. Right now the market is fighting itself: will prices drop drastically, or will they flat-line for a decade until they get back to the inflation trend line?
89 comments:
VREB has released their stats package. Click HERE
March 2009 Statistics - Monthly Analysis
February 2009 (last month) shown in ()
MLS Sales - 602 (403)
MLS listings - 3859 (3844)
SFH Average - 534.7K (542.4K)
SFH 6 mo. Avg. - 540.2K (544.4K)
SFH Median - 503.8K (485K)
All SFH Sales - 343 (223)
Condo Average - 294.3K (287K)
Condo Median - 266.5K ( 250K)
All Condo Sales - 163 (109)
Town Average - 405K (381.4K)
Town Median - 356.5K (360K)
All Town Sales - 64 (47)
Year-over-Year Analysis
GV - Greater Victoria
March 2008 shown in ()
MLS Sales - 602 (707) - Down 15%
MLS listings - 3859 (3591) - Up 7.5%
GV SFH Average - 534.7K (597.2K) - Down 10%
GV SFH Median - 503.8K (529.6K) - Down 4.9%
GV SFH Sales - 324 (374) - Down 13%
GV Condo Average - 295.6K (329K) - Down 10%
GV Condo Median - 266.8K (300K) - Down 11%
GV Condo Sales - 162 (170) - Down 4.7%
GV Town Average - 406.3K (457.3K) - Down 11%
GV Town Median - 357.9K (407.6K) - Down 12%
GV Town Sales - 63 (66) Down .5%
Again, no rebound at the top of the market - only 8 waterfront homes, compared to 12 in March 2008 - and average price on those homes down around $400,000. The top of the market is completely dead, no matter how much kool-aid they're pouring at the bottom.
Thanks Roger. What is the drop in median and average SFH since the top in April 2008?
I am surprised by the slow listings growth. Listings are only up 7.5% year over year and almost nothing month over month.
Overall, the MOI for SFHs is pretty low. It's hard to see median prices dropping much in that environment.
Disappointing to see the SFH median back over $500K. Still hoping this is part of the "churn" downward.
- StargazerXL
Thanks again for posting the numbers Roger. I know I'm not the only that just skips the VREB press release.
It is particularly fascinating to watch what gets reported as much as how it gets reported. To what extent is the MSM in Canada filtering news to settle the nerves of a frightened populace and reduce the risk of a self fulfilling panic?
In Victoria, it is primarily the how. News is generally reported and then spun. The TC treats press releases from the RE Board as if it is an AP wire and prints it with little or no critical comment.
In Calgary, on the other hand, the MSM have decided to simply ignore bad news altogether. Good luck finding stories on the layoffs, which are occurring as I write this. A number of major oil & gas firms recently cut 10% of their entire staff. This trend will continue across the industry.
These are white collar, head office, fat jobs numbering in the hundreds at each and every outfit. Not a whisper is to be found in the local media. The impact of those losses is only just beginning and will obviously have major implications for RE in Western Canada.
Instead, the Herald leads with "Calgary housing market picks up speed." The "market" is really the entry market. Low interest rates and fallen prices are attracting buyers to that segment.
The full picture is not reported. Calgary, like Victoria, is seeing the upper end of the market stagnate. What is that telling us?Is that segment a better leading indicator of the underlying trend or just a momentary blip that will correct as the market warms?
If editorial boards are indeed choosing to soften the message as part of a desire to provide a measure of "balanced" reporting I would have expected more nuance. Perhaps it is asking too much.
In any event, bulls better be temperate in their criticism of the bears here and in finding comfort in this month's statistics. All the macro indicators suggest that this recession is going to be drawn out like none before it in the past century, with the sole exception of the Great Depression.
Consequently, I'm with the bears and continuing to rent. While the Crash was in October of 1929, house prices did not reach bottom until 1936. I know I won't be able to convince my wife to wait another five years. However, I'm betting there is some room left to fall and I won't be waiting for the MSM to tell me that.
Link correction to last post..
MLN said;
Thanks again for posting the numbers Roger. I know I'm not the only that just skips the VREB press release.
I also have my report as a graphic if you want to pass it on to others.
Victoria Stats Analysis
http://i44.tinypic.com/2hz73ex.png
And while the MSM fails to report critically, our school system fails to instruct individuals how to think critically. Many take the news as gospel, and given the inability by the MSM to present a balanced article, the lack of critical thinking skills among the public make it all the more lamentable.
I must chuckle at those who think that 'reporting bad news' makes things worse. Things are the way they are, failure to report leads to any proactive ability to mitigate or solve the problems.
CHEK news must have some bears on staff. The news just had a report on VREB March numbers. They didn't buy the VREB spin. What they said.
- Sales down from last year 602 vs. 707
- Average price drop YOY. No mention of median
- Condo average price down YOY
You can catch it again at 6 and 11
I meant to say failure to report limits the ability to be proactive and solve the problems.
1070 also did not spin too much and mentioned the fact that sales and prices are down YOY despite being up month over month.
"CHEK news must have some bears on staff. The news just had a report on VREB March numbers. They didn't buy the VREB spin. "
Maybe CHEK reads the HHV Site. ;)
Was refreshing to hear him say " ...and the numbers are not good".
I was prepared for a hype job like the VREB and most likely what is to come from the TC. Kudo's to CHEK for responsible reporting.
"Last month’s substantial increase exceeded my expectation and provides us with renewed confidence that the market is returning to a healthy and balanced state," he added.
Markham noted that prices remained strong and stable in March. "
One month doesn't make a year buddy. This is the type of sappy spin that gives agents a bad rap.
That was bad grammr :(
It's clear that house prices in Victoria have only one way to go guys.... UP!
In about twenty years.
How prescient of you dialing...
I have looked more closely at the SFH sales numbers for March and it describes two markets:
• SFH sales under $650k were up dramatically from February 2009 and basically identical to March 2008
• SFH sales under $500k were actually up over March 2008
• SFH sales over $650k were about the same as February 2009, but down about 50% over March 2008
• SFH sales over $1 million were down way more than 50%
The lower average and medium prices are being impacted by the lack of higher end sales in 2009, so the % price drops on these lower priced homes that are being bought are not as much as these buyers think. They are getting hosed!
My main concern is how could there possibly be more buyers of entry level houses right now with all the knowledge of the global financial crisis than this time last year when we were truly in a bubble and the economy was operating at capacity? This is mind boggling and demonstrates the true level of denial that exists in this town.
But the facts I see show that the entry level market is hotter than it was this time last year and that the MOI are lower in the more desirable locations. As a matter of fact using March 2009 sales there is currently about 1.0 months of inventory for houses priced under $500k in Victoria, Esquimalt and Saanich East. A 1.0 MOI is about as strong a sellers market as you are going to see.
Based on these facts, I do not see the price of entry level SFH’s dropping soon. The FTB’s have to wake up and back off before things stabilize.
Meanwhile above $650k and in particular above $800k you have huge MOI (with many far in excess of a years worth of inventory) clearly showing a strong buyers market.
The high end of the market is dead; down 50%. A high percentage of the buyers for these higher priced homes are out-of-town buyers and these people are not living in denial and are simply not buying. I am sure many mid-priced home sales we are seeing are people selling their entry level homes at overinflated prices to misinformed FTB’s and then buying a far nicer home for way less premium than in the past four years.
Well, if you owned a condominium and saw the inventory would you not want to sell and buy a home?
I think you should change first time buyer to first time house buyer. Then it will make more sense how these starter houses are being bought.
Well, if you owned a condominium and saw the inventory would you not want to sell and buy a home?
Yes, I would sell the condo now and buy a house for the same price two years later. :-)
I think what we are seeing is the expression of pent-up demand, and the desperate hope that this little dip in sales volume and prices will be the bottom. People can be very delusional in their thinking when they really, really want something, and our culture programs people to really, really want to buy their own homes.
To resist this programming, they either have to educate themselves (as through this blog and, as another poster said, critical analysis of the information available through MSM), simply not have the resources to get financing, or actually prefer renting. It appears that the group who fall into one of these three categories is statistically small in terms of the entire population. Therefore, as one other poster has said often, before we see serious change in buying patterns, we will have to see "blood in the streets" in terms of job loss, fear, etc.
It appears that in the higher end, people with more money, who would buy these houses, are either finally getting it, or are actually too scared to commit themselves. I live down the street from a house that has been on the market, hovering at $2 million asking, for more than 2 years. Refuse to budge on price, obviously, and willing to wait, how long, forever? to get their price.
Get their price. That seems to be the sellers' mentality. One lady I know, who owns an enormously huge old crap house, a house that has been actually moved from one site to another, informed me last year that when "she could get her $2 million out of it" she would sell, and that we were "close, but not there yet." I observe that she still owns the house.
Delusional thinking on both sides, buyer and seller, keeps this market where it is. Unfortunately, there is nothing individuals can do to speed up the process, and in the long run, a number of waiting bears will capitulate. Depending upon their time frame and personal circumstances, they may or may not kick themselves later.
Since I am a late boomer, and not that terribly far from retirement age myself, I am rethinking if it will be appropriate for my family to re-enter the market ever. Essentially, I am thinking that I will just keep saving, and if prices drop to where I can pay cash for a property without damaging my long-term financial plan, then, maybe. Right now I am thinking how to advise my four kids, the oldest of whom are in university, about how to look at real estate. My husband and I may not buy until we get that retirement condo when our kids have moved out. Right now, we just stay snug in our big Rockland rental.
My thinking has radically changed from waiting, waiting, waiting for our "opportunity" to get back in the market, to now, just observing from a much more disinterested, academic point of view. One thing this financial crisis has done is make me very grateful that I don't have a lot tied up in a depreciating asset. Suddenly, renting seems very comfortable, and comforting. Thanks to everyone on this blog who provides information that helps others clarify their own thoughts and positions.
Reid,
That was a very detailed analysis of the market by price range. One wonders when the mid to high end sellers will capitulate.
in the long run, a number of waiting bears will capitulate.
Why? Every month that ownership costs are more than renting they are coming out ahead, and have that much more money for a down payment when they do buy.
Buying when prices make sense is not capitulation, it's victory.
patriotz,
I think what was meant was that some bears may buy before waiting for signs that the bottom has been reached, or that some experts predict recovery is underway.
Since VREB practically does that every month anyway, picking the actual bottom as opposed to the trend in prices may not be that easy in the long run. Not for knowledgeable bears - rather, for Joe Q Public, who reads the TC, Joe may never realize we are still going down or that we are at the bottom or that we are going back up again.
For this reason, I'm having less faith lately in the efficacy of the market to correct in the market segment I can afford (think cheap central Victoria sfh).
I have a price point I'll pay, where the payments are still affordable to me - its hasn't really changed, but the kind of places I'm seeing now have changed.
I'm kind of in agreement with HHV - while we will see big drops in the houses listed above $500,000 in the next couple years, I'm not so sure how that will translate to the lower part of the market, as that's the most likely jumping up point for those lucky enough to unload a condo or to have a job that allows first time buyers to get started with a house. On that basis, I think some of the entry level places in the better neighbourhoods will hold value better than elsewhere (think Burnside, Quadra, Tillicum Colwood etc). Not the mid or high priced homes in those areas - just the low priced ones. And in the future, there will be more low priced ones and more people in lower priced homes. Does that make sense?
So yes, I am a likely capitulating bear. Not that I disrespect waiting longer, it's just when the time comes I'm going to capitulate.
Did I mention I've stalled my wife for almost 2 years? Okay, I guess emotions are getting the better of us....
Wish us luck!
I'm not so sure how that will translate to the lower part of the market, as that's the most likely jumping up point for those lucky enough to unload a condo or to have a job that allows first time buyers to get started with a house.
The problem is that the entry level SFH market is largely made up of people selling condos, and if the condo market tanks, those people are not going to be able to trade up. And the condo market is already tanking.
All segments of the housing market are interconnected and it's not possible for one of them to take a big hit without affecting the others.
Also if the high end takes a hit and the entry level doesn't, a lot of owners of entry level houses will want to trade up. But this is itself will depress the price of the entry level houses.
Property prices are a ladder and it's not possible for one rung to move independently of the others. They never do. Some segments may move a bit more than others, but that's about all.
Greg and other bears,
If you are thinking of buying this year have you really considered moving somewhere else? Sometimes we just get stuck on having something and don't look at alternatives.
Family ties and friends are important but not at the expense of a family's financial and mental well being. There are lots of other nice places in Canada where a young family can have a great life and not be chained to a mortgage and little disposable income. You also get a lot more for your money.
I am taking my own advice and am actively looking outside of Victoria (Up Island and elsewhere)
Property prices are a ladder and it's not possible for one rung to move independently of the others. They never do. Some segments may move a bit more than others, but that's about all.
Patriotz -
I'm thinking its more of a pyramid than a ladder - what I'm getting at is we have a pyramid that has been turned upside down - so lots of medium and high priced homes can subside, giving the appearance of driving prices down significantly (and they are, for mid and high priced houses), however if they drop down into the mid and lower range, you may not see the lower priced homes dropping as much - since they are now more affordable, more buyers enter the market - the base of the pyramid gets larger - are those buyers at that level all move up buyers in the current market? Some will be, but not based on price appreciation.
I know me talking like this is alarming some other bears. All I can say is it ain't over until its over. If I buy a place, will I pay too much? Hmmm, I already waited two years and I'm concentrating on the bottom of the market in the best areas. I think my downside risk may not be as great as for others....
I could be wrong...
Roger - I've considered moving, but not seriously. I lived in Port Alberni in the 80s, economically speaking, its not a situation I would ever want to revisit. I think Comox and Nanaimo and Campbell River are going to do better than that, but culturally, its not the environment I want for my kids, either.
Either give me a real rural area (Port Clements, anyone?), or a medium to large city. Resource towns are not my favourite, and places that hope to feed off tourists in replacement of resources, same thing...
Did I mention a flood of Alberta seniors into an area is not exactly a selling point either? You get the idea...
People in Victoria are temporarily feeling rich. The Global Meltdown hasn't really hit here yet but we are benefiting from the deflation it's causing. I think it's a trap because sooner or later the pain most other places are feeling is going to come here to. Also because we will be last to feel it we will likely be last to grow out of it.
In the interest of full disclosure, I always figured a target for the median was around $375,000-$400,000, at the bottom, followed by a significant time period before prices start to appreciate again in nominal terms. The kind of places I'm looking at are basically in that range or slightly higher - so I'm not jumping in too early, those prices could be achieved by the end of the year... ...or at the end of 2010 at the latest.
Some people have to be the buyers who lead the way down to those prices - in other words, some buyers will pay those kinds of prices ahead of the curve.
That's what I'm attempting at the moment.
Roger,
Moving has been on my mind a lot lately, as I suspect it has for others.
IF this upside trend continues, and I am unable to move to a satisfactory SFH, after what has been termed the biggest economic disaster since the 1930's, I can only conclude that I will NEVER be able to afford a SFH in Victoria.
Though I have a "dream" job here that is very satisfying to me, I may not be able to stand either renting forever or getting way over my head in debt until well past retirement.
- StargazerXL
I think there are a lot of clueless FTBs because they just don't pay attention to market conditions and they listen to their friends, co-workers, and relatives rather than researching for themselves if it's the best choice.
I was almost a foolish FTB last spring and what a horrible mistake that would have been!! I am in my mid 20s and just assumed buying was better than renting so I started the process of looking for a condo. At first I thought 40 year mortgages were the norm because that's what the brokers would talk to me about automatically without mentioning other options (I didn't know they started those only a year or two before). Once I saw what I could afford with a 40 year mortgage (which was a crappy box), I got cured of house fever and started to research.
I eventually ended up at this blog and others and have been reading them ever since. I'm so glad I didn't listen to other who said buying is always good because it's not. I'm going to continue to rent cheap and pile up a big down payment. I now know more about the restate market than almost everyone I talk to.
Love reading the blog and the comments!
Here is my thought.
What is happening is that the banks have restricted what people can get in terms of money. This means that the average couple has less money to spend. In Victoria that translates to around what we are seeing the Median/Average price level.
What is interesting is the breakdown by price category by Reid and then a look at the houses that are selling.
A year ago you couldn't find anything at all, not even a tear down, in Oak Bay for less than 650. Fairly crappy houses were 750-850. If you now look houses that you can live in are now selling in Oak Bay for 500-600k.
As the pressure continues to mount in the upper price ranges due to the restricted lending I think what we are going to see is people still stretching themselves to buy houses around 500k but as people start to notice that you can buy in Oak Bay for that price pressure will start to crop up for "lesser" areas at the low end.
So to sum up the lack of a huge drop in the average and median price is hiding the fact that people are getting way more house and/or land in a nicer location for the same money they were spending.
We are dropping faster than people realize, it is just hidden.
StargazerXL said: "IF this upside trend continues, and I am unable to move to a satisfactory SFH, after what has been termed the biggest economic disaster since the 1930's, I can only conclude that I will NEVER be able to afford a SFH in Victoria."
I'm about at the same point. At current prices, I figure I need to be making at least another 20k a year to be able to afford something decent, and I already make about 20k over the Victoria median income. However, like you, I love my job and would find it very tough to move, so in some ways I'm a bit stuck. I may just bide my time, rent and build experience at my job and look for a comparable job elsewhere in a couple of years...
greg said: "On that basis, I think some of the entry level places in the better neighbourhoods will hold value better than elsewhere (think Burnside, Quadra, Tillicum Colwood etc)."
The first time I read this part of your post, I thought you meant that Burnside, Quadra and Tillicum were better neighbourhoods and I almost did a spit take all over the monitor...
We are not seriously going to start looking to buy for at least a year to two years from now.
We have a certain type of house and a certain price point we are looking at.
If in two years we get the house we want at the price we want we will buy and not care what else happens price wise.
If not, then we just wait it out longer in our rental.
Moving could be an option also but we will revisit that in 2 years time.
S2
Good luck fellow bears.
Pondering,
That is exactly what I have been seing over the last year. We are looking at homes now that we could have never dreamed of last year, and we aren't even considering getting serious until at least this winter.
OFF TOPIC - PCS STUFF
I let someone show me a property using my PCS account and ended up getting my history erased. I had a pretty good record of houses sold and relisted for the last year. It is a pretty good tool to have when dealing with lying realtors. Any way, it got me thinking that maybe we should be including some sort of data base by address on one of these sites.
In the mean time I was wondering if anyone else has a fairly complete PCS history that they could press the adress button to arrange by adress, copy and paste to a word doc and email it to me. I was looking at Oak Bay, Fairfield, 10 mile, queens wood, rockland..you get the idea - single family homes. Thanks
stinkymalinky(at)hotmail.com
"My main concern is how could there possibly be more buyers of entry level houses right now with all the knowledge of the global financial crisis than this time last year when we were truly in a bubble and the economy was operating at capacity? This is mind boggling and demonstrates the true level of denial that exists in this town."
Gotta buy now before you lose your job because you'll never get approved for a $500,000 mortgage when you're unemployed.
If bears are interested, I will post more complete MOI by area and price range. Let me know.
greg said: "On that basis, I think some of the entry level places in the better neighbourhoods will hold value better than elsewhere (think Burnside, Quadra, Tillicum Colwood etc)."
The first time I read this part of your post, I thought you meant that Burnside, Quadra and Tillicum were better neighbourhoods and I almost did a spit take all over the monitor...
Glad I could be of assistance. Laughter is the best medicine, even if it does taste bad and lead to "spit ups". I often re-read stuff I coughed up unproofed earlier and recoil in horror. Sloppy copy-editing, fractured grammar, atrocious spelling - all hallmarks of my annoying literary style.
If anyone thought I was naming those as the better neighbourhoods, I apologize. Then I apologize again to anyone I just offended with those statements about those neighbourhoods not being the best neighbourhoods...
;-)
greg said: "Glad I could be of assistance. Laughter is the best medicine, even if it does taste bad and lead to "spit ups". I often re-read stuff I coughed up unproofed earlier and recoil in horror. Sloppy copy-editing, fractured grammar, atrocious spelling - all hallmarks of my annoying literary style."
No, not at all, my own fault for trying to read quickly on a coffee break. :) Keep up the good stuff, both here and your blog.
Of course some bears will buy early, way before the bottom is in... from those prescient sellers that realize they had to lower their asking price 50% to get a quick sale.
THOSE properties, along with the POS, will be snapped up quick briskly by even the sleepiest of bears.
But not by the clueless who aren't ever paying attention.
Reid,
would you be interested in posting some of your analysis on a guest basis here?
email me if you're interested, link on mainpage.
I am taking my own advice and am actively looking outside of Victoria (Up Island and elsewhere)"
roger,
funny you mention that,we are no where close to wanting to buy but we are considering moving up island in the Courtenay area. The deals on what you get there versus here is like night and day. You can actually have a small piece of land and nice pad for under $400,000. They have the big box stores up there as well as building new hospitals and I think is the place to be as Victoria just gets more and more congested with people and traffic. The beaches and scenerey are awesome up there too.
That's one thing we can agree on vg... the peninsula is whacked. They actually think they're the island, that there is no more land.
Nutjobs.
I'm hoping to be a FTB, and over the last year, I've been educating myself and waiting to buy a house using information from this blog and other sources.
Compared to 1 year ago, I'm not finding myself depressed over real estate that I see on MLS. I still think it's over-priced, but not ridiculously over-priced like it was a year ago. Just today, I saw a few places that if they accepted my bid with 10% off, I'd probably pull the trigger. I guess I'm one of those eventually capitulating bears, but aren't we all?
Anyhow thanks for the posts and the info over the year.
"In the mean time I was wondering if anyone else has a fairly complete PCS history that they could press the adress button to arrange by adress, copy and paste to a word doc and email it to me. I was looking at Oak Bay, Fairfield, 10 mile, queens wood, rockland..you get the idea - single family homes. Thanks"
OMC:
If you're seriously looking at buying, what are you looking for in terms of a SFH in Fairfield (price, bedrooms, suite?) And what price range are you considering?
JD
Buying in Victoria right now is tremendously risky. I think the downside risk to prices far exceeds the risk of price appreciation in the short-medium term. The cautious bears - the ones who are willing to watch and wait at least another 2 years probably have it right. The early rising bears are going to find that they will buy 'just past the peak' and arguably will be worse off than they would have been had they capitulated in 2006/07. It's all early days and the uncertainty is truly astounding.
Things that make Victoria risky:
-Pending May election...we don't know what government is really going to do yet, and this is a government town.
-Increasing competition from potentially better retirement areas (think California and Phoenix, better weather and cheaper houses) as such the reliance on the local market is likely to increase...and Victorian's pockets really aren't that deep.
-Interest rates - in the short to medium term likely to remain low, but once they start rising to historical norms may start to trigger increased rates of bankruptcy and possession of sale putting further downward pressure on prices. It might be a double-double dip recession...
-Less money available from parents and savings for downpayments (the equity market has taken a real chunk of savings out of the system), potentially lower incomes in general from job losses. People in general (not just bears) may have to delay home buying decisions just as many are delaying family starting decisions.
- Inadequate savings and EI benefit rates to prevent a significant portion of bankruptcies from occurring (could you make due on $1700 before tax per month?, how many people can cover 6-12 months without a steady income?).
- Significant savings to be had by renting. People will realize that having to have to buy is a fallacy, there is a viable option in renting. Furthermore, I see the pool of available rentals expanding as people are unable to sell their properties for the price they think they should get. This may even put downward pressure on rental prices (but only after vacancy rates rise to a more realistic 2-3%).
The fundamental 'legs' of this market have been taken out. The only question is how fast and how far to the floor. I think that we're looking at at least a 30-50% drop from the peak and an average SFH price for greater Victoria between $300k and $350k before bottom is reached. This means that a reasonable 3 bed 2 bath detached home in a reasonable neighbourhood (Fernwood/Cedar Hill) should be able to be had between $300k and $350k. In the condo segment, I see the average 2 bedroom falling to a range of 125k to 175k. The bottom is a return to 2003/04 prices.
Just Janice
your thesis is well-reasoned and reasonable. I hope you're right.
I'm one of those capitulating bears willing to "pull the trigger" if someone will accept my 10% off offer on the right place.
Don't know if I'm worse off for that, but at this point, still nobody willing to take that kind of offer on the kind of places I'm willing to buy.
So even though I'm a willing to capitulate bear, looks like I'll be following the market down awhile longer.
Bears, am I the only one who still thinks that if:
A) you can honestly afford it (as in prepared for an income change)
B) you like it and will live in it long-term (as in 10 years +)
that you're fine to buy whenever you find the place that fits those criteria? Granted, those are extremely difficult criteria to meet right now.
Just Janice,
Very well thought out points. I would like to add something to the mix. In today's TC we have another article on BC real estate.
B.C. home sales take huge leap
There is a consistent theme to the recent articles.
- Prices are down everywhere in BC, including Victoria, on a year-over-year (YOY) basis.
- Sales are down YOY throughout BC
- There have been big increases in sales month-over-month (MOM)
The last point is what is generating all they hype in the press and by the real estate boards. Sales are always up MOM in the January to May period because it is the peak selling season. This year the recent low interest rates have pulled the market out of the doldrums. But sales are still below any year since 2002. So what happens in June when sales drop off from May? Not much left to hype!!
Also next month prices will be compared against the peak prices which occurred in April 2008. Even if prices stay flat or rise somewhat next month's dramatic YOY comparison in the press will have an effect on sellers and buyers.
I also expect we will see inventory increase over the next few months. Owners that have been reluctant to list will be drawn into the "hot market" hype.
In summary a "dead cat bounce" and then down we go again.
hhv -
I exactly agree with your criteria. Problem is, there are not very many places we can "afford" in the areas we want to live in.
I've been waiting two years because I've been so picky about the area, type of street, distance from schools, and of course, price. Meanwhile, there are places available that meet the criteria - but hardly any.
I've been watching prices crash down into our price range, and there are now hundreds of homes available - in all the wrong areas.
Is it schadenfreude to continue wishing for a further correction? Maybe, but I'm getting sick and tired of competing with clueless FTBs using 35 year amortizations and 5% down to trump my solid but conservative offers. Someone please pull the rug out from under these buyers!
Funny thing is, I'm not looking to play the trade up or the flip game, I'm one of the few FTBers who will probably buy - then downsize in 10-15 years.
Personal note: made an offer recently (it was refused), and making small talk with the realtor, he mentioned how you just have to bite the bullet, and use places (like the one I made the offer on) as a stepping stone to bigger and better things (ie, repeat business). When I menitoned I wasn't going to be doing that, the realtor poker face appeared. I can only imagine what he thought of that.
Anyway, of course I am getting sick and tired of the general situation here. For gosh sake, crash already and get it over with!
Even if prices stay flat or rise somewhat next month's dramatic YOY comparison in the press will have an effect on sellers and buyers.
Roger - you and I both know that this statistic will get zero play in the reports next month on market conditions. As long as sales volume goes up by 1+ on properties compared to March 09, that's all we're going to hear.
Sale prices were down this month from February 09 and also year over year, and this fact got no play in the TC - aside from the printing of a graphic showing the prices. It was basically ignored in the press release from VREB and also in the shill piece by the TC.
Just Janice:
Good post. I have given more thought to the low price home sales and have to conclude that prices will remain strong while the following conditions exist:
• Banks providing easy and large credit (I thought people were going to see lower credit, but the impact in Canada has been minimal if any)
• Ridiculously low interest rates
• Reasonable unemployment numbers in the city
It seems that everyone wants to buy a home (I guess that is cultural), so under the above conditions it allows many to justify the acquisition and it is more affordable that last year. So the things that could drive down pricing would include:
• Rising interest rates which will lower credit availability and what people can afford to borrow (likely a year ore more away)
• New regulations on banks credit limits (possible something could happen as a fall out of G20 meetings in London, but our banks feel they are properly regulated)
• There are some real job losses in Victoria that wake people up (the biggest an soonest possibility here would be large public service job losses after the summer budget – hard to call impact. Rest of community likely impacted by local spending (spending in Victoria appears to be strong) and tourism levels)
• Bankruptcies and foreclosures rise. If unemployment rises and income levels drop we will see more properties hit the market (but this may not really pick up until this fall and beyond) and this should scare many FTB’s (this I feel would have the greatest short term impact
• Mid to higher priced homes start to depreciation because there has been a serious lack of buyers for these homes and this pushes down the prices of the shi*boxes
So my sense is that we are not going to see a lot of price reduction until at least the summer and likely the fall, but as you said one should probably wait two years as then we should see higher interest rates. Unfortunately, patience may start to get the better of those sitting on the fence and many bears may start to buy this summer and fall which will help to further prop up house price longer.
-Increasing competition from potentially better retirement areas (think California and Phoenix, better weather and cheaper houses)
I don't think this is significant because of immigration and health care issues. The real competition for retirees is from the rest of the Island and the southern Interior, which are really big places and where about the only thing they have to keep people working is building more houses.
And apart from the occasional culture or architecture snob I don't see why anyone would be willing to pay more for Victoria than these other places.
Not to mention that BC is very uncompetitive for retirees from Ontario due to much cheaper alternatives closer to friends and family.
I think your other points are right on the mark though.
What gets me regarding the MSM (and many current homeowners) is that idea that RE prices increasing = good; RE prices decreasing = bad.
I have a really hard time understanding how unaffordable and/or extremely high RE prices benefit the vast majority of Canadians.
Obviously, current homeowners who have realized a substantial increase equity might be happy enough with their new-found, increase in net-worth. However, every FTB, now and for future generations, and to every homeowner that wants to upsize to a larger home, it simply means they'll have far less disposable income, which means less spending into the economy, which obviously has negative consequences for everyone.
Why is this aspect rarely talked about?
I'm not the smartest guy on the block, but it's not too hard to see a couple of close friends that have bought in the last couple of years struggle with the high cost of home-ownership. Sadly, with their 40y,almost nothing down, they'll be in this situation for a quite a while (unless, of course, their salaries sky-rocket, which is looking less and less likely, given the economy).
Why is this aspect rarely talked about?
Because people have become a bunch of short-sighted greedbags.
Sad but true. Apart from us, of course. :-)
I have a really hard time understanding how unaffordable and/or extremely high RE prices benefit the vast majority of Canadians.
I don't. My suspicion is that high home prices makes people feel rich, and hence they will spend as if they were rich, and this is something that the government wants to maintain (at all costs, it seems).
If interest rates were raised, this would really benefit FTBs over the long term given the downward pressure on house prices. On the other hand, current homeowners would have less money in hand month-to-month (if they have variable mortgage rates) but also they would feel poorer, and would spend less.
What I am amazed about is how ignored is the effect on property taxes that high home prices has. I would think that would be a major negative but no one in the MSM seems to mention that...
- StargazerXL
My thanks to both Victoriana and Just Janice for their comments.
Many residents of Victoria are so caught up in the 'status' of home/car/stuff ownership and consider anyone not living by that model to be 'losers'. I prefer to hold onto my cash, flexibility and security.
I personally know of 3 households that have up to 5 student borders -and we all 'know' how great that must be (not). I also know a 60 yr old couple in Fairfield that have taken out 2 home equity loans on their 100 yr old dump in the last few years. They now want to downsize to reduce their monthly payments! And they have lived in the house for 30 years!!
My point? Alot of the 'wealth' we see here is just an illusion. Wait a little longer and prices will come down to realistic levels.
Oh yeah. Yesterday my realtor (well, just PCS provider), told me that on April 1 Victoria had the highest number of new listing EVER come on!! Many were from developers (I guess 40 were from "The Falls"), but this is still significant.
DXX
JD
We aren't serious about buying at this point as prices are still dropping and there are far too many unrealistic sellers out there. We have a very sizable deposit, but haven't even looked at an open house.
Fairfield is only one of the neighbourhoods we are considering. It has its advantages; location and a more diverse mix than Oak Bay, but its disadvantages are to do with schools. I don't know if I like the middle or high schools in that area.
When the time comes we are pretty open about alot of things, except no suites. Houses with suites are fetching far too high a price. We will be probably buying in the 6-800K range, we could afford more and of course would like to pay less. I am assuming we will be around $800 as there is no value in the lower end at all. I spent 10 years in the trades and would almost prefer to find one needing renos as much of the work I have seen done lately is of very poor quality at silly prices. We have a cheap rental that we could keep for a while if needed.
We will reevaluate in the fall. A distressed sale or oldy going to a home.... We can wait.
Funny about the illusion of wealth, we were always wondering where these people go the money; it turns out they didn't really have any.
OMC if you're willing to do some work why not buy something really cheap and pay it off quickly and get on with your life instead of paying 800k for a house? Just saying.
That's kind of my plan. My family and I will live in a lesser of a house and pay it off quickly so we have the freedom to do the things we really want to do. Top of the list is to spend a winter in Belize or Panama. Another is to go on a really long cruise (like over 20 days). All these things will be possible if I don't have to pay rent or mortgage.
The Metro out in Langford just popped into my PCS. On their website, they have prices starting at $285K. They've dropped prices all at once to $219K for a 1027 SF 2bed 2 full bath unit.
A new asking price point has been established in the Westshore condo market. Obviously not enough people are buying, even at these prices.
As frustrating as it is to watch the SFH low-end market remain tight, it sure is "fun" to watch the condo market implode.
They've dropped prices all at once to $219K for a 1027 SF 2bed 2 full bath unit.
I think they had made a mistake - it's apparently been changed to $319K.
Anon 3:32
I would love to spend less for a house but the level of house available for less than $600K is a joke. We aren't the type to move often and are looking for the very long term, say 25 years. The thing that the realtors say about moving up is BS as you end up paying them and the government each time. For an extra $200K you get 3X the land in a much nicer area with 4X the house. Houses in that range have fallen far more, and I believe will still fall far more than the other end of the market. No albertans to save them.
No I know what you're saying. I'm just saying that for some people lowering expectations might be good. That's my plan. Just stay in the "starter home" (3 bed 2 bath) forever, pay it off quick and then enjoy a secure financial future.
Dub, there goes my fun... again. Sigh :)
hhv,
I don't care whether I personally can afford something, a bad deal is a bad deal. If I had enough money to buy the house I want, cash, at today's prices I still wouldn't, because I'd be throwing away 30%+ just to get into it a few years sooner. The only way I'd do that is if I had so much money that a couple hundred thousand is pocket change.
As it is, the money I would lose on depreciation over the next couple years is money that would take me a decade or more of saving to make back. That's one of those life-altering decisions, in a bad way. Even if I made $150,000 and could afford the mortgage on a $600,000 house, buying would cost me more than just money. It would mean I have to work longer, or have to stay in a job I don't like rather than earning less in a job I enjoy, or give up vacations and experiences because all my money is going toward the mortgage.
I just spent the afternoon with a financial representative at a major Canadian bank. He handles car, line of credit and mortgage loans. Here are some of his comments:
- Loan standards are tightening. Even some 10K car loans are now being sent to the credit approval office for review. This was not the case six months ago.
- FTBs that would have been given mortgages 6 months ago are being rejected. Good credit history and work history are now required.
- In order to get a 35 year variable rate loan you need to be an excellent credit risk. 25 year amortization is the max in other cases.
- Appraisals are much more common. Sometimes a driveby will do but full inspections are much more common now.
- The majority of pre-approval applicants are young FTBs that want to get into the market.
Now I understand why some deals are falling apart and are back on the market again. With 5% down and a falling market the bank doesn't want to have mortgagees that re too deep into negative equity.
Ryan,
please don't take this as me arguing with you.
"As it is, the money I would lose on depreciation over the next couple years is money that would take me a decade or more of saving to make back."
Doesn't this assume that the paper loss becomes a permanent loss?
Let's say you bought a house today for $500K. Your mortgage payment would be about $2500/month. You could likely rent it for about $2K/month. You're going to stay in it for 10 plus years (or life if you were me).
My assumption is that inflation will eventually mean that my house will be worth what I paid for it at some point in time in the future regardless of what occurs here in the near-term. But here's the kicker: I'm paying off debt sooner by buying now and likely I'm likely going to be mortgage free sooner than if I were to wait. Which is my primary home-ownership goal.
Now, if we could say with certainty that 2 years from now you could buy that same home for $400K, it would make sense to wait. But we have no price-certainty around waiting.
I'm not going to buy anytime soon. I believe, personally, that median prices will drop to be pretty close to $400K. But I have no idea when that will be.
I have a iron-stomach for risk tolerance when it comes to investment. But I recognize that many don't. For a lot of people who feel secure in their jobs, with solid down payments and good emergency funds, buying soon may make sense if they can find their life-long-home and they know they can handle a loss of income for a significant period of time (8-12 months).
I'm only trying to acknowledge that some bears who plan to buy sooner than later are better prepared and more rationally motivated than the FTBers out there who are trying to prop up the market.
My goal is to buy in the fall. I'm looking for a 3 bdrm, 2 bathroom, preferrably around 1600 sqft in Victoria, Saanich or Esquimalt (no suite). I hope to pay around $400K and avoid the fixer-upper. I think I can get 10%off the asking prices of today then, since I figure those sellers will ask for the same discount when they move-up.
I've been renting, saving and waiting for 5 years in Victoria, and the thought of waiting another two years doesn't appeal to me. We're close to getting enough money to have a 20% downpayment, and I don't think I'll ever be able to time the market perfectly to buy at the bottom. Do I wish that I could get that house for $350K? Yes, but I also wish I could still pay 49 cents/per litre at the gas pump, and despite the world recession, we're still paying 99 cents or whatever, and for some reason that feels reasonable.
I applaud those that can wait longer, but I guess we each have our own circumstances.
Lastly, what are people's impressions of Esquimalt. Is it a good place to raise family. I keep hearing there's good pockets and bad pockets, but I'm not sure where to try to avoid. There's a nice house on Greenville right now for sale. Is that a good pocket?
Any help with that would be much appreciated?
I would personally stay clear of any part of Esquimalt with kids. You may be able to find a nice pocket but it's the community at large that is the problem. You quite literally cannot walk the streets at night.
Not that other areas don't also have their problems but Esq would be my last choice, IMO.
Doesn't this assume that the paper loss becomes a permanent loss?
Of course it's a permanent loss.
If you buy a house today for 600K, and two years later the same house could be bought for 400K, you are permanently 200K poorer than if you bought at that price.
Actually you are permanently poorer more than that, because the amount compounds over time. By the time you retire you could be a million dollars poorer.
Right?
to Fozzie at 7:03pm
Grenville is a cut through street to rat run from Esquimalt Road and avoid the light at Admirals (and vice versa), so personally if I had children it would not be my choice.
I lived in Esquimalt for over 20 years, raised my family, and would still be there if I could have found a townhouse in my price range when I sold my house.
If you are thinking of "nice" pockets in Esquimalt, I doubt that you will get the house you want for the price you want.
Houses in Saxe Point for instance, even those that are 50+ years old are still well over $450,000 and don't turn over that often.
As for Esquimalt not being safe, it was a fabulous community to live in with an easily accessible town core, lots of activities for children, fabulous parks (and beaches).
to Fozzie at 7:03pm
Grenville is a cut through street to rat run from Esquimalt Road and avoid the light at Admirals (and vice versa), so personally if I had children it would not be my choice.
I lived in Esquimalt for over 20 years, raised my family, and would still be there if I could have found a townhouse in my price range when I sold my house.
If you are thinking of "nice" pockets in Esquimalt, I doubt that you will get the house you want for the price you want.
Houses in Saxe Point for instance, even those that are 50+ years old are still well over $450,000 and don't turn over that often.
As for Esquimalt not being safe, it was a fabulous community to live in with an easily accessible town core, lots of activities for children, fabulous parks (and beaches).
to Fozzie at 7:03pm
Grenville is a cut through street to rat run from Esquimalt Road and avoid the light at Admirals (and vice versa), so personally if I had children it would not be my choice.
I lived in Esquimalt for over 20 years, raised my family, and would still be there if I could have found a townhouse in my price range when I sold my house.
If you are thinking of "nice" pockets in Esquimalt, I doubt that you will get the house you want for the price you want.
Houses in Saxe Point for instance, even those that are 50+ years old are still well over $450,000 and don't turn over that often.
As for Esquimalt not being safe, it was a fabulous community to live in with an easily accessible town core, lots of activities for children, fabulous parks (and beaches).
"As for Esquimalt not being safe, it was a fabulous community to live in with an easily accessible town core, lots of activities for children, fabulous parks (and beaches)."
I absolutely agree, it WAS all of that. Now it is a menace and a dangerous place. It's just simply changed.
Here is an interesting page which features detailed analysis on the Courtenay market which some people here are interested in. It has just been updated to include March stats.
http://tinyurl.com/cg7rb8
Readers will find many interesting things noted on the page which include:
18MOI for SFH
5 out of 283 condos sold
Increasing inventory, lower sales, lower average
I love their line: "Expect significant improvements in April, we think the worst in sales are over. Prices are still coming down though."
There is no way that market will rebounding anytime soon.
Ryan said:
"or give up vacations and experiences because all my money is going toward the mortgage."
But, but, but isn't that what credit cards and lines of credit are for?
S2
To Libresprit and others ...
Thank-you for your feeback on Esquimalt. While likely foolish, part of the reason I also want to buy a house in the fall is to move-on about thinking about it, analyzing the market, figuring out which neighbourhoods to buy in, looking at PCS each night etc. I know that I'll get a new set of challenges that I don't have with renting: fixing this, fixing that, mowing lawn, painting, new hot water tank etc, but at least I'll be dealing with different things ... some variety ...
Anecdotal but, I have seen probably 30 or so new SFH listing pop up on my PCS watchlist in April so far.
Anyone got real numbers?
I suspect the anonymous poster commenting on Esquimalt doesn't live there.
I've been living in the Westbay area of Esq for 7 years and have a family with small children and we love the area. Only a few blocks to school, shopping, a new library, and a renovated rec center (the least expensive in the region, too). We can get downtown in minutes and there is no rush of through traffic like many parts of town (except the main road and Admirals a couple of times a day for navy traffic). The view of town from the nearby marina rivals any scenic view of the harbor.
When we first moved here we were somewhat uncomfortable based on the reputation of Esq from the 80s and 90s. Now we're thinking of moving up to a bigger place and hope to stay in the area.
I work in Etown and I wouldn't say it has gotten worse in the last few years, I would think more the other way. In the future I would think that it is going to gentrify more, it is too close to town and the land is too nice. I wouldn't kid myself about the scuz factor though just take a drive down esquimalt road in the afternoon. Teenage moms and other harder types.
I'd still prefer there to places like tillicum or the western communities.
656 GRENVILLE AVE in Esq. sold for $455K. Obviously, I wished it had sold for less, but I'm not surprised it sold fairly quick. I'm starting to develop a fairly well trained eye in the under 500K part of the market, and I can tell usually when a house will sit a long while and when it will sell. The only one in recent memory that fooled me completely was 3107 Balfour Ave, in my mind, I had it selling at around $425K vs. the $464 it sold for.
Prime & omc thanks for the comments on Esquimalt. I don't think I can ignore looking there for the reasons you both mention.
Well here is little bit of mind twisting on a saturday. I thought I would look at how each neighbourhood is desirable in relation to another as measured by the price people pay to live in these neighbourhoods. The median price is over a two year period in order to get enough data.
VICTORIA
burnside 420,000
central park 460,000
downtown 520,000
fairfield 640,000
fernwood 459,000
hillside 426,000
james bay 601,000
mayfair 425,500
sears 429,000
rockland 787,000
OAK BAY
estevan 690,000
gonzales 1,350,000
henderson 636,000
north oak bay 645,000
sounth oak bay 770,000
uplands 1,225,000
And I thought I would throw in Esquimalt for the last reader.
ESQUIMALT
esquimalt 452,000
kinsmen park 501,250
old esquimalt 443,500
I also live and work in Esquimalt, and will definitely consider buying in the area.
I used to rent in Oak Bay (grew up there too) and would honestly prefer most other areas of Victoria to it. Too out of the way, shops close at 7 PM, very few younger families, etc etc.
mln,
yup, Oak Bay has its down side. Our neighbours can't fathom that we aren't completely smitten with the place. You forgot taxes and the the sewage upgrades to come. When the big bills hit for the sewers Oak Bay will take the biggest hit with the worst condition of infrastructure, no businesses or industry and the highest taxes to start with. Also they closed the only elementary school in south OB, so you might as well be in Sooke in that sense.
Can't deny the plusses though. It is also getting far more affordable here now compared to gordon head, and eventually all those retirees will start coming back. Last year if you would have asked me I would have said I wasn't considering it, now I am not so sure.
Sure are alot more homes up for sale here than last year. Or at least up for sale at the same time as the crazed retirees snapped up any mold box witha bit of tweed on it last year.
Just Jack, could you do a neighbourhood price comparison for Saanich as well? Thanks.
"
Doesn't this assume that the paper loss becomes a permanent loss?
Let's say you bought a house today for $500K. Your mortgage payment would be about $2500/month. You could likely rent it for about $2K/month. You're going to stay in it for 10 plus years (or life if you were me).
My assumption is that inflation will eventually mean that my house will be worth what I paid for it at some point in time in the future regardless of what occurs here in the near-term. But here's the kicker: I'm paying off debt sooner by buying now and likely I'm likely going to be mortgage free sooner than if I were to wait. Which is my primary home-ownership goal."
Like Patriotz said, if you overpay for something it's not just a paper loss, it's money that is gone forever. And inflation only means my house would climb back to the purchase price in nominal terms, which is great for deluding yourself so you can sleep but not so great for actually crunching the numbers.
Your second point is well taken, we have no idea what the market will do and obviously if we are currently at or near the bottom it doesn't benefit you to wait. However, I don't believe we are anywhere near the bottom, and I'm confident that when we do hit the bottom it will not cost more to buy than rent. Landlords don't give discounts, so if I can rent a place for $2000 the mortgage payments should be less than that, because the rent should cover maintenance and property tax as well. Rent is the market price of shelter as determined by supply and demand. Until prices are back in line with rents, I am willing to bet the farm that they have further to fall, and in a way that's exactly what I'm doing.
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