- According to published incomes on government job opportunities web pages, pay is highest in Edmonton, and then Regina. Victoria pays, on average, 10% per year less for the same job in the public sector when compared to Edmonton.
- According to median income data, Edmonton is $76,300, Victoria is $61,700, Regina is $59,100.
- Clearly, Regina's private sector employment prospects are quite probably less inviting, however, in the case of Ms. HHV's employer, job classifications do not change with regions, which means should she transfer to another province, her pay will remain the same.
- In Edmonton, there are 983, 3 or more bedroom, 2 or more bathroom SFHs for sale under $400K, in Regina 375, in Victoria, 32.
- Edmonton is approximately twice as populated as Victoria.
- Regina is approximately half as populated as Victoria.
First, Edmonton: $314K
Second, Regina: $280K
And Victoria: $335K
We haven't come to any conclusions yet. But all of our research is leading us to this question: just how much of our future are we willing to leverage to live in Victoria?
57 comments:
From previous thread "Sorority Showdown" who knew UVic cheerleaders had that kind of coin?!
MLS: 250245 $1.8 Million
Delta Beta ThetaMLS: 258566 $3.5 Million
Kappa Theta Xi
HHV,
I grew up in Saskatchewan and lived in Regina and Saskatoon before moving to Ottawa. If you are considering a move to an area where they have snow then consider Ottawa. It beats both Saskatchewan cities in so many ways.
If you are considering Saskatchewan then take a look at Saskatoon. Prices are about 50K higher but Saskatoon is a much nicer city.
Metaldwarf: Hmm, they were filming at Dreemskerry last week so perhaps the it might not really be a sorority popping up there. The realtor sign still didn't have a sold sticker.
The dozens of sorority girls on the film set were a lovely sight. Well I hope I'm wrong. I can only dream!
You know what's funny, that Victoria house you referenced in your post was the scene of a "major crime investigation"
From the actual MLS listing it is described as "suffering from extensive deferred maintenance and is being sold in "as is - where is" condition"
Maybe not a good comparison house in that price range
JennyD, it's the only comparison in that price range, which is the point.
Jenny, my point is there are only 32 houses for sale in Victoria under $400K. I'm making a very clear point that your money goes significantly further, as does your income, if you choose to not live in Victoria. You will also have greater choice of houses and less risks (because you owe less). I know these other cities are not Victoria, but what is the price you are willing to pay to live here rather than "there"?
At the bear get together last week there was some discussion about what happens in five years when it is time to renew the mortgage.
Let's take a look at a 400K mortgage with a five year fixed @ 3.75%. At renewal time we can expect that rates will be back to typical levels. What happens to the payment?
25 Year Amortization..
35 Year Amortization..
You can clearly see the payments are jumping up by hundreds of dollars. This will come as a nasty shock to many owners. In the case of the 35 year mortgage if renewal is at 8% the payments will jump from $1705 to $2678.
So if someone is determined to buy they should be prepared to make extra payments every month, starting from the first instalment. This will reduce the principal faster and establish a baseline payment so that they can handle future rate increases. Here are the calculations if you think 8% will be the renewal rate.
25 Year - Extra Payment..
35 Year - Extra Payment..
You can see from the calculations that anyone using a 35 year amortization in order to make the minimum payments will probably be in a financial squeeze in five years. I suggest that if you can't pay around $2200 ($550 per 100K of mortgage) per month then you shouldn't be considering this much debt.
BTW - Your commissioned mortgage broker, bank loan officer or realtor probably won't do these "what if" calculations for you. For some reason they prefer to focus on todays monthly payments.
Roger, your payment calculations line up perfectly with my post on May 9th. If interest rates jump to 7% in five years using a 35 year amortization, then payments jump 42% on renewal. History has shown that this level of payment increase will cause the price of real estate to take a major correction.
If rates move up to 8%, then we will see payments increase by 57%. That would make the price correction of early 80's look tame.
Reid,
Yes your earlier blog article and my post are both in sync. When rates have nowhere to go but up and 5% down with 35 year amortization is being advocated disaster is on the horizon.
There is always talk by the RE pumpers that anyone taking a 35 year amortization would be making extra payments. I certainly hope so for their sake. If not when renewal time comes up they will be refinancing for 35 years and starting on the perpetual mortgage.
Roger, I have come to the conclusion lately that we are setting people up for a disaster. A friend of mine was pre-approved on friday for 6.2 times her income in mortgage debt.
This is no longer funny and as you suggest no one is telling the prospective home owner to analyize the situation, build in financial buffers or make sure their retirement is taken care of.
I now feel that we bears should try and take this on. If there is enough of us out there across the country, we should lobby and propose that people cannot buy a house with CMHC insurance unless they pass a personal review from a qualified financial planner. If this is not possible at least lower the cost of the CMHC insurance for those buyers that do. This review would address the issues I identifed above and hopefully lay out a financial plan so these buyers are not set up for failure.
This would ensure these 5/35's at least understand what they are getting into. The risks are too high. Forget about us bears getting cheaper housing, this is a very serious problem.
If interest rates rise to 7% or more, we could well have a crisis on our hands. If only 2% of Cdn homes went into foreclosure because of rising interest rates, CMHC could be left pay banks upwards of $15 billion and guess who will be paying this.
Bleech and eeeuyuck to all three.
Isn't there anything in that price range built after 1948?
Sheesh. Guess there was an upside to ghetto riots in the US....
anyone read the actual report by cmhc. Cmhc is predicting 4.75-5% on a 1 year term and 5-6.75% on a 5 year term in 2010. That is pretty well near crash range.
Roger, I have come to the conclusion lately that we are setting people up for a disaster.Oh, so you're a mortgage broker or realtor, then?
I now feel that we bears should try and take this on. If there is enough of us out there across the country, we should lobby and propose that people cannot buy a house with CMHC insurance unless they pass a personal review from a qualified financial planner.Well, there's only a few hundred of you at most, so I suspect the law makers would just tell you to go pound sand. Or perhaps you're a "qualified financial planner?"
Reid said:
"This is no longer funny and as you suggest no one is telling the prospective home owner to analyize the situation, build in financial buffers or make sure their retirement is taken care of.
I now feel that we bears should try and take this on."
Back in 2007 and 2008 I did (with other bears) try to take this on and got pulverized. No one wants to hear bad news. They only want to hear that they have made the right decision by buying real estate, it only goes up, get in now, buy anything you can now and then move up, blah, blah, blah. I know we've heard it all before.
S2
Maybe you are right. Why rock the boat, just let it happen. Nowhere else in Canada do the home owners have so much debt realtive to income as in Victoria, so when rates rise, Victoria will get hammered harder than anywhere else.
It is basically a foregone conclusion the market will melt down once rates rise.
HHV, just leave for a few years, rent and then come back. The meltdown here will exceed that in Edmonton on Regina as people here are far more stretched and have far less buffer to deal with the coming shock.
"Never believe that a few caring people can’t change the world. For, indeed, that’s all who ever have" - Margaret Mead
For all those who believe / are told one cannot make a difference, just ask bloggers such as Krugman, Mish and Calculated Risk. Or look at how governments look at and respond to each letter written.
A few good commentaries in the TC/Sun/Globe/National Post/Ottawa Citizen re-iterating what Reid, Roger and everyone else have written - in terms that the average joe and the average politician can understand, will get read by the most senior levels in each government. Particularly if it is stated in terms of risks to the gov't or taxpayer finances.
Roger - thanks for your post. This allows me to look at the risk/benefit profile of waiting for a given price drop to a reasonable house that we can afford vs. buying the same house at a higher price now, but with a lower initial mortgage rate.
The part of the equation that is missing is the probability that house prices will remain at current levels given the low interest rates and buyer heroin injections by pumpers. To this we would need to add economic risk of medium to high unemployment sapping the new buyer market. We'd also need to wait until the July numbers come out to see how this year's price trends match the seasonality of the spring in other years.
My bet is that prices continue to drop once this hit of heroin is gone from the system.
It is basically a foregone conclusion the market will melt down once rates rise.
Hmmm. A few months ago, the story was Victoria would crash because "we're lagging the US market" or "the oil-rich Albertans will stop buying." Now, it's interest rates. Let's face it: you're blowing smoke. You're paralyzed with indecision over the housing market, and you are forgetting that without risk there is no reward. Hence, you'll never benefit from the housing market because you'll always be waiting "a few months" for the market to drop some more. Then one day you'll wake up and realize the market hit bottom six months ago and you missed the boat. It's so predictable.
B&F, do you have anything constructive to add, or are you simply going to continue with your drive by poking? It's a bit old and tired. If you don't like reading "indecision" why do you keep coming around?
Please add something constructive. Rather than repeating what's already been said, why not tell us why "we are wrong," show some backbone, load-up and toss your cards so maybe people can learn something constructive.
HHV - committed bears such as yourself will never be convinced by anything I bring forward. I only hope to show fence-sitters that perhaps the bear perspective is too shifting, inconsistent and risk-adverse to be very credible.
"Victoria would crash because "we're lagging the US market" or "the oil-rich Albertans will stop buying"
That stuff happened, and the market is down over 10 percent YOY. I know a lot of people who are underwater on speculative condos right now. They would have gotten better advise from this blog than just buying the hype.
"Hence, you'll never benefit from the housing market because you'll always be waiting "a few months" for the market to drop some more."
Their are some like that. But most people who write on this blog seem very rational. They understand that over time Real Estate values are governed by fundamentals. They can stray for a few years but the fundamentals will always return in a free market system. People who aren't sheep and understand this will buy when prices are back in the normal range, saving a lot of money and having a better quality of life.
B&F, I'd like to think I have a lot to learn. And I'd like to think I can learn much from someone who is able to engage in a constructive discussion. I'd also like to think that fence-sitters can see through facts and fictions be they bear-facts or bear-fictions or bull-facts or bull-fictions.
What I've seen you do is drive by pokes that don't rely on one iota of fact, rather they rely on pointing out the missed predictions the regulars have actively been discussing for the past three months. I've acknowledged that I misread the impact of the lowest interest rates in 50 years on the local market. How does discussing their future rise mean I'm blowing smoke?
The only smoke I see is the smoke of your tires as you peel away after another one of your drive by pokes. Please add to the discussion with something constructive. Tell readers why waiting for a correction to play out is a bad thing. Please try to back that up with numbers and graphs like Roger does.
Until you do, you're just spewing smoke. Of course, perhaps that's your point--obfuscate enough and you'll poison this blog's commentary and turn off all readers. It's a classic style of argument typically employed by people who find themselves underwater on an issue--or in your case, the mortgage of the home you bought this time last year ;-)
Dumb Canuck said:
This allows me to look at the risk/benefit profile of waiting for a given price drop to a reasonable house that we can afford vs. buying the same house at a higher price now, but with a lower initial mortgage rate...
The trade off between falling house prices in a rising interest rate environment is an interesting topic. Lets assume a purchaser can pay $2500 per month on their 25 year mortgage. The $2500 includes the regular payment and an extra amount towards the principal.
Here is a table that shows the mortgage amount vs. interest rate with the goal of reaching the same outstanding balance at the end of five years.
25 Year Amortization..
One can see that for every 1% rise in mortgage interest rate the mortgage has to drop by 16K or 4% (using the 400K example).
Follow up to previous post...
So if someone waits a year and the 5 year fixed interest rates jump up from 3.75% to 5.25% they need to see the price of real estate drop by 6% in order to break even with buying today. If they fall more than that they are ahead of the game.
Another reason to be a patient bear..
BnF,
Awesome Straw man! Ascribe to us positions which are untenable and then refuse to even refute those. You truly are a master debater.
HHV - committed bears such as yourself will never be convinced by anything I bring forward. I only hope to show fence-sitters that perhaps the bear perspective is too shifting, inconsistent and risk-adverse to be very credible.Oh please! You assume that all bears have the same strategy and analysis yet when we examine the current RE market, it's the bulls who all recite the same arguments.
Leave the bears alone; they are such a small portion of the RE market that agents like yourself can still decent money off the FTB's, downsizers, and upsizers despite what the bears say.
Balance is a good thing. The bulls are the early adopters and the bears are the pragmatic thinkers. We can live in peace.
Roger,
Thanks - though most buyers wouldn't pay off the full $2500 per month, but instead would spend the remaining (or don't have the remaining, which is what is problematic with a probable future interest rate rise).
What I'm really after in the long term is the probability distribution of different outcomes of the combination of house price drops and interest rate rises over different periods of time. It could be done in a simple spreadsheet matrix approach (i.e. modify the three variables assigning probabilities of each), or in a much more complicated Monte-Carlo simulation.
Knowing the risk profile then allows one to make an informed decision (i.e. what is the probability that the outcome of buying at time x at price y with interest rate z is a rational choice given ones personal risk tolerance).
My personal feelings on each variable:
- interest rate very low for two to three years and afterwards very hard to forecast (could be much higher, could be long-term stagnation)
- house prices start to drop substantially when there are no more surprise interest rate drops to pull the next set of FTBs in and others start to hit unfortunate economic times and need to sell
- house price drops in 2-3 years followed by stagnation
This would lead a rationale answer to lowest price/interest rate combination in 2-3 years, but what is the answer combining in rent, opportunity cost, repairs, etc.?
The difference between bears and Shitting Pretty:
Bears eventually buy like everyone else. They time the market, get very close to the real bottom, buy and make the best deal.
Puffers like Shitting Pretty, on the other hand, are always liars about the situation. No matter how dire things are, real estate is always going to rise.
That's a lie. Bears aren't saying real estate is always going to fall; not by a long shot. They only say that it's falling, WHEN it's actually falling.
Shitting Pretty on the other hand; Is ALWAYS lying, real estate is ALWAYS going up (even when it isn't), and it will ALWAYS go up (even when that's demonstrably and obviously completely impossible.)
That's the difference between a realist and a lying con man with an agenda to sucker more clueless in.
"Let's face it: you're blowing smoke. You're paralyzed with indecision over the housing market, and you are forgetting that without risk there is no reward. Hence, you'll never benefit from the housing market because you'll always be waiting "a few months" for the market to drop some more. Then one day you'll wake up and realize the market hit bottom six months ago and you missed the boat. It's so predictable."
B&F, in my case you are wrong (you directed this at my comments). I have bought many millions of dollars worth of real estate and have made substantial money at it. I am far from risk adverse as you suggest and I am sure that I sit a lot prettier that you. The fact is that the fundamentals supporting housing prices looking forward support price reductions. What has happened over the past 28 years is we have seen five year interest rates drop from 21% to 3.5%. Combine this with 5% down versus 25% then and 35 year amrotizations and the change has been unprecidented and all of this has driven real estate values to rediculous and unsustainable levels.
I like other bears were caught off guard by how low five year rates have gotten in the last three months and the impact it would have on the market. But this impact exactly correlates with what has happended historically when rates drop and with what has been posted on this site. If you make more money available to the buyer (either through lower interest rates or longer amortizations) real estate prices rise.
There have been lots of great posts here supporting this change in funamentals and why housing prices should drop. These are supported by facts and history. In my opnion it is a foregone conclusiton that real estate prices in Victoria will drop but this will not happen until interest rates rise and/or job losses in town climb.
I would love to see you write something that supports your thesis based on fact and fundamentals. If you cannot, then I suggest we bears all stop wasting time on someone who appears to either be financially illiterate or lives in total denial.
Dumb Canuck,
The reason I chose $2500 is that you need to constrain the variables or there is no basis for comparison. In this example I chose to compare paying the same monthly amount under different scenarios (i.e. interest rate, principal)
The problem with your approach is that there are two many variables to consider. Assigning probabilities to the variables makes the whole analysis unwieldy and I doubt there is much to be gained. Especially when government can change the rules of the game at a whim like they did with down payment and amortization requirements. Perhaps on a personal level you might find it informative.
Let me say this before the bulls and the trolls start up with their taunts. Buying a home, for most people (not patriotz), is different than buying a stock for investment purposes. It is a personal decision that is based on financial and emotional considerations and with the view of living there for many years. Stats are a useful tool for market research but do not dictate when to buy for most people. If one is comfortable with the payments, feels financially secure, likes the property and considers the RE market outlook acceptable buying may be right for them.
Reid,
I think that you are wasting your time responding to many of the trolls and bulls that drop by this blog. Every time the market plateaus or has a slight rise in a given month we get the same taunts. Several of us have tried to converse with these folks using facts, stats or reasoned arguments and we just get more taunting back.
Why do they show up here? Realtors continually need to reassure themselves that the market will go up. Otherwise they have to accept that they are selling their clients a declining asset and that commission cheques will be getting smaller. Homeowners are nervous when they read about a falling market and will latch onto a spring bounce or monthly upturn in the stats. When you are paying thousands per month in payments it is disconcerting to read about falling prices especially if you paid 5% down and are underwater on the mortgage.
And then there are just those that troll the Internet, with nothing better to do than start flame wars. Not worth responding to these losers.
Roger, I agree.
Landcor released their British Columbia 2009 Residential Sales Report this morning. You can read the summary and download the report by clicking here..
what we knew was coming
From the Landcor report:
For Q1 2009, property sales indicators confirm the market may be nearing bottom given the clear upswing in residential sales. Lower prices and lower mortgage rates are moving more potential property buyers off the fence and into the market. This sales rebound is forecast to continue into the summer months, as property buyers increasingly recognize that the economic recession is likely in its later stages and property sales have turned the corner and are gaining moderate strength.
With that, and the 0.8% (yes, that's less than 1%) drop in median detached house price on Vancouver Island from 1Q 2008 to 1Q 2009, I'd say the jig is up for the bears. No Oak Bay waterfront mansions for you at 25 cents on the dollar!
With that, and the 0.8% (yes, that's less than 1%) drop in median detached house price on Vancouver Island from 1Q 2008 to 1Q 2009, I'd say the jig is up for the bears. No Oak Bay waterfront mansions for you at 25 cents on the dollar!that's realtor talk for "I have an entire week of training, I am a profesnal". Look stupid, if they are such a good deal go buy one yourself.
You bears talk about facts well... There they are staring you in the face. You have to look yourselves in the mirror now and think long and hard about your decision here. You've based your entire financial future on market timing and it hasn't worked at all. So far you have lost out on one of the largest real estate appreciations in history. Worse yet it appears as though this trend will continue. So what is a bear to do? I think the only answer is to buy or leave.
I think the bears have been smart to wait. Comparing renting to owning they've done well the last few years.
Fundamentals are on their side going forward.
^ Hey Maniac, I've been watching the market and waiting to buy for about 26 months now. I haven't lost a dime. In fact, I've saved a considerable amount of money. Meanwhile, those that bought in the last two years are either paying penalties to get out of mortgages for reduced payments, paying excess interest costs while watching their equity erode or?
Bears expected to see a spring bounce. We also expect to see a fall decline.
It's amazing how quick everyone is to call bottom around BC. 2 months does not a trend make. We'll see where we are at come October. I'll bet Landcor and others who've gone public with the word "bottom" will be backtracking their way out of it with phrases like "no one saw this coming."
Um, not really. This is one report, did you mention the cmhc report put out yesterday or the scotia or TD reports put out very recently? Guess not. This is the only report that is positive, yes even including your own projections from the crea are for a down trend in this area. Every one is calling for further reductions, except this one. We aren't like you realtors and do read and discuss all reports. None of the #s from any other reports line up with this one.
You say market timing hasn't worked, yet the houses I am looking at are about $200k down in the last year and I saved over 30k in the difference between owning and renting in the same time. What part am I missing?
hhv- could you check ip addresses here, I suspect we are dealing with the same poster.
No different posters. I'm just saying that some of you bears are a little too confident here. You are making PREDICTIONS which could be WRONG. You won't know if you're wrong until it's too late either. So far it looks like you've been wrong too. So maybe it's time to re-evaluate? That's all I'm saying. I'm a bear too but I think it's foolish to be 100% confident about what's in store for the future. Recent developments have proven that you can't predict what's going to happen.
BearDespair, Maniac, YouCantPredict theFuture are all manic78. Just place your mouse over the ID or click and see the same ID. This guy never has much worth saying so he tries to use multiple ID's to reinforce his drivel.
Sigh....
You can't predict the future:
You are correct is that you cannot predict exactly what will happen becuase there are many variables that will drive the price of real estate.
Real estate prices are tracked very closely with the mortgage debt made available (see earlier posts). The recent uptick in demand in Victoria aligns perfectly with the lower interest rates we got. What we got wrong was how much unemployment would hit Victoria and how low the interest rates would go. The consequences of what has taken place over the past 2-3 months are 100% in line with bear expectations.
I cannot predict exactly what the five year mortgage rate will be in 3-5 yrs, but I am fairly sure it will be higher than it is today. This will limit the number of buyers as many buyers today should have been buyers for the future but these low interest rates have brought them onto the scene earlier. Add to this a lot more sellers who simply will not be able to handle their mortgage resets and price will drop.
If after interest rates rise as the CMHC report suggests to 6% +/-and if Victoria real estate prices are still continuing to climb over today's levels, then I will admit I was wrong. But everything that has happened recently has been in line with my expectations as interest rates dropped.
Bears will have to wait longer that most would like to see this think unfold, but I think the crash will be harder than what we would have seen in 2009 if interest rates did not drop to these levels.
BearDespair, you're out of your mind.
I bought in '88; I'm STILL way ahead of the game.
And a bloody genius for not buying the last three years, thanks to this blog and a handful of others.
And even MORE of a genius for not buying now, when we're only halfway to the bottom, if we're LUCKY.
If we're unlucky (and I think the economy will bear this out) we're only a third of the way to the bottom.
THAT'S why they call it a Depression.
That's pretty funny stuff about maniac claiming to be different people.
So far you have lost out on one of the largest real estate appreciations in history.David Lereah, is that you!?!?!
I read from a foreclosure website that in BC, if your home gets foreclosed and the house sells for less than its price + interest + foreclosure expenses, then you are liable for the difference.
Can anyone confirm that this is true?
If it's true,then it's another thing to consider when buying a house during these times, when job security is uncertain.
My understanding of foreclosure in BC is that yes you are liable for all that. However, if you are bankrupt they can't get blood out of a stone and tend to leave you alone. Most people who are/will be underwater on their mortgages will have cmhc insurance that protects the lender for 20% of the loan, so that I believe is deducted from what you owe.
It is the speculators who signed the precompletion deals on the condos who have the most to lose.
Most people who are/will be underwater on their mortgages will have cmhc insurance that protects the lender for 20% of the loan, so that I believe is deducted from what you owe....
Man, are YOU ever wrong. CMHC insurance protects the lender, and the lender only, from default. The borrower is responsible for the whole amount of the loan.
You belief is surprisingly widespread BTW.
BearDespair, Maniac, YouCantPredict theFuture,Joe Dirt etc are all manic78 = trailer park trash.
Don't waste the energy to respond to his garbage,he owns jackshit anyhow.
Roger - Thanks - there are two things that I'm interested in:
(1) when to buy (a combination of rational thinking and best personal time to buy)
(2) what the market will actually do
Re: "You can't predict the future"
Here's Bob Hoye's crystal ball:
http://www.safehaven.com/article-13365.htm
What do Banks do when house prices continue to fall and they need to pump the market? In the UK they put pressure on Mom and Dad or friends to help the FTB buy that dream home.
Savings held hostage..
Forecasters divided on future of BC real estate market..
Real estate expectations fall in Vancouver Sun
Here is a Canadian site with a mortgage search engine. Compare rates and conditions.
RateBot Search Engine..
Why don't some of the bulls post useful links like this?
@ the poster who lamented the 1940s houses:
The Edmonton and Regina houses are both squarely in the mid-60s.
Both probably are tongue & groove cedar siding; cedar framing, sub-floors and joists; full basements (typically 1100-1200 square feet to match exactly the part you see above ground; modern plumbing, no worse than 60s-era wiring (panel might need upgrading but cables will be fine if undisturbed); and guaranteed no mould issues.
And in the case of the Edmonton house - no rats.
They compare to the Victoria house like the sun compares to the moon.
On the other hand, they're in Edmonton and Regina. Both are sh!tholes where residents suffer 9 months of winter (anybody catch the Victoria Day snowstorm on TV; that's pretty much an annual event).
We sold on the Prairies and have rented in Victoria for 7 years. We live in a modest house in a modest neighbourhood with an ocean/mtn view, and (let's face it) no actual winter by any Canadian's reasonable definition of "winter." For exactly the same monthly rent as we paid for our mortgage.
We chose to live in Victoria rather than die in Alberta. Whether we could afford to own the property we lived in was never on the agenda. Ever.
I honestly feel bad for anyone who would move away from here to the Prairies in order to "afford" a house. That, more than anything I've ever read or heard from "bulls" defines our society's addiction to real estate.
Perhaps the ultimate irony of this blog.
Best of luck.
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