Monday, March 28, 2011

Monday market update: feeling down?

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

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

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

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

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



Introvert said...

I think it's because Victoria is different!

Watching and waiting said...

don't tell these sellers that sales are declining:

wasn't this house listed for $535k last year on MLS? Then they posted on usedvic a few months back at $559K then recently upped to $579K.

Like their ad says" PRICES ARE HEADING UP.... !! 7 to 10% by years end...." all I see going up is their asking price.

a simple man said...

Prices will be sticky coming down and people will hold on to things as long as they possibly will be those who have to move that will create change as they will have to price to the market, which is down, despite weird sales to the contrary.

Watching and waiting said...

@ simpleman

Agreed. Prices will be sticky and as we have seen to date, anything that is priced right seems to go at or above asking which ultimately sets the price point for that area.

Prices will be pushed down - I like to use North Oak Bay/Henderson area as my petri dish when it comes to watching one home's selling price beget another. Copperfield Village (Glanford) is another classic example of prices gradually heading downwards given the similarity of the homes and their price sales/reductions of late.

Like the adage goes, there are three words that are music to a realtor's ears: debt, divorce and death. These can definitely influence home prices.

Note, this adage is not to be confused with "bark mulch which is a realtor's best friend":)

Robert Reynolds - HMR Insurance said...

Talking with a Realtor friend maybe 2 weeks ago, and she said that lots of places are pricing under value, with hopes to get a bidding war, and ultimately higher sale price. This is apparently how most so-so quality listings are getting sold quick. The ones that are priced "right" sit, and get stale, and eventually sell for a little under asking months down the road. While the under priced homes get a load of attention out of the gate, and grab a better price in only a few days on market.

This seems to reflect much of what I have seen lately in the low end SFH market under 500K.

It also leads me to believe that the fish (buyers) aren't biting as much, the Realtor has to throw blood in the water to start a feeding frenzy. Otherwise they get skunked. I interpret this as the school of buyers is drying up or getting wise.

Next step should be the dieing off of the bidding wars on the intentionally under priced homes. When these listings do eventually sell they will set the new normal, and prices might slowly fall.

Sorry for all the fishing analogies, it is finally getting nice out and I cant wait to get a good day to go out on the boat.

Marko said...

I have a number of qualified buyers I am working with and my impression is that there is a lack of quality products out there despite 3900+ inventory. Certainly a lot of garbage out there.

HouseHuntVictoria said...

Marko, agreed. I've been watching this market very closely for 4+ years and it's clear to me that this is a chronic issue here. There are a large amount of fixer-uppers and rental-worn homes in this city. Quality properties priced at market value are rare commodities it seems.

jesse said...

"sales price data is definitely disconnected from sales volume data right now"

A housing bust starts with lower volumes and higher inventory and follows with falling prices. I hope you see how falling prices lagging lackluster sales makes sense.

Johnny-Dollar said...

Realtor Jane Johnstone has an interesting take on selling prices and bidding wars on her blog under Pricing Your Home - The Challenge.

I hope the link works.

If not just pop over to her blog under The Briar Hill Group - Pemberton Holmes.


a simple man said...

With more reflection, I tend to agree with Jesse. The low sales levels and some crazy sale prices are classically indicative of the top of a bubble.

This may be it. Lower prices are on their way - but it will take time for them to get there.

Leo S said...

Gotta love Seattle. Late to the party, but they're determined to catch up!

Phil said...

Regrettably some nasty numbers today.

BC consumer confidence tumbled 9.3 points in March.

Then there's the poor people to the south of us with their Case-Shiller numbers just released. Looks like the northern cities are now falling the fastest. Seattle's latest monthly reading was -2.4%

"The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery," said S&P's David Blitzer.

"Keeping with the trends set in late 2010, January brings us weakening home prices with no real hope in sight for the near future," he said.

a simple man said...

and Seattle is just a short ferry ride away. What makes us so immune in Victoria? Certainly government intervention during the last recession - but it did not fix the problem, just exacerbated it.

Waiting said...

It will be interesting to see what happens after the election. Things could get ugly fast or just continue on...

Introvert said...

and Seattle is just a short ferry ride away. What makes us so immune in Victoria?

A Simple Man, declining home prices is not a virus that jumps on a ferry looking for a new host.

What makes us so immune in Victoria? In other words, what makes our market different than Seattle's? Well, let's see. Victoria is in Canada and Seattle is in the United States. Canada does not equal the United States. And in terms of that "short ferry ride away," when folks from here visit Seattle or when folks from Seattle visit here, 99 percent of them are not visiting for the purpose of shopping for their next house. Another reason why the "short ferry ride away" distance argument is a flop.

Johnny-Dollar said...

Victoria is also a much smaller market than Seattle and somewhat isolated from the rest of Canada being on an island.

In the last 30 days there have been 27 home sales in the City of Victoria. That would be a catastrophe if it happened in Seattle. So while 27 people bought houses last month, 83,000 other people did not.

So imagine an almost filled bus on its way to Reno - and that would represent all of the house buyers in Victoria City for the last month.

There are very few people left playing the real estate game. They are the people that have flipped and moved up the property ladder trying to buy into the "dream" home myth. They represent the thinning crowds as the casino gets ready to close. Fewer players but higher stakes.

No market can survive with falling sale activity, be it Beanie Babies or real estate. And that includes governments that rely on property purchase taxes.

Eventually, the market has to hit the re-set button and like in the casino, it will be the $2 tables that will fill the room with people and the $500 tables will be once again empty.

The only winners will be the ones that are getting off the bus.

Johnny-Dollar said...

When money is cheap, people buy incredibly stupid things. But that doesn't mean that banks lend on incredibly stupid things.

There is this tiny group of houses along Gordon beach, way out along West Coast road. These are small homes on small waterfront leasehold lots with costly monthly lease rates. Most people use them as summer cottages, because you would freeze your manhood off in the winter. And it is near impossible to find a bank that will lend on these waterfront properties that could disappear in a serious wind storm. So you have to have cash or you have to tap into your home equity to buy one and then fork out another $500 a month to keep it. And that's why they have had little appreciation over the last dozen years.

Like the one that just sold for $167,500. Back in May 1999 it was bought for $122,500. I think this is a good example of how cheap mortgage financing has ballooned our prices. Because of the difficulty in getting financing for this type of property, the property's value has only increased at the level of inflation or roughly 36 percent in a dozen years.

Back in 1999, a South Oak Bay home was around $275,000. Allowing for inflation that would be a value of $375,000 today, not the $750,000 that the homes are fetching.

There is a long ways down to go, when this market corrects and I don't think anyone can actually grasp how bad things can get.

a simple man said...

Seattle is not in Canada?

Johnny-Dollar said...

We are setting new records at the margins for properties.

In the last week, we have had one of the lowest prices paid for a detached home in Sooke at $280,000 for a 1200 square feet rancher on a little less than an acre of land in French Beach.

Almost 25 years ago, this same property sold for $50,000 when interest rates were 13% or $550 a month in mortgage payments versus $1,500 per month today. So while monthly payments have tripled, the price of the home has almost increased six fold.

Again, the low interest rates have ballooned our market to the point where we are paying twice what we should be for housing.

SJ said...

Seattlites thought they were immune too. I find Victorians are some of the more stubborn and ego-centric in their beliefs, but we’ll eventually catch on.

Here's a fascinating 15 minute Dateline documentary. Imagine how many Canadian resources went into building these 64 million vacant condos.

Leo S said...
This comment has been removed by the author.
Leo S said...

Well, let's see. Victoria is in Canada and Seattle is in the United States.

A housing downturn is not a virus, you're right. But it is also not something that a border guard can stop from coming over.

In the end, fundamentals are fundamentals. For a while after the downturn hit the bubblier cities, Seattle thought they were immune. After all, they have a good economy. They are living in a nice, west coast climate. They didn't have a significant number of ninja loans. They have a stable market underpinned by good equity, lending to professionals with good incomes.

And yet, the market started declining anyway. At first it caught itself pretty quickly, but by then sentiment had already turned against real estate and it was too late. So now the second dip is picking up steam, and it looks like it might go on for a while.

A downturn doesn't need irresponsible lending, doesn't need overbuilding, doesn't need non-recourse mortgages. All it needs is for fundamentals to be out of whack, and a change in consumer sentiment.

Johnny-Dollar said...

Well the property on Centre street in Fernwood has sold for $430,000 after being bought in January 2006 and substantially renovated.

But how much extra value did the sellers get for their renovation?

Well since 2006 the median price for homes has jumped from $453,500 to $615,000 or 36 percent. That would mean that the old handy man special bought in 2006 would sell today as an old handyman specical for $347,000. That's a difference of $83,000 less sales commission of $17,800 or $65,200. Of course when they originally bought the home they had property purchase tax and sundries of say around $5,200 leaving $60,000. Then they paid a premium over rent for five years, then of course the cost of the renovations.

At least they didn't have a mortgage penalty.

I'm betting that they probably would have netted more cash if they had never picked up a paint brush in those five years.

K said...

Rosenberg comes around...

a simple man said...

Wow - Rosenberg had changed his tune somewhat...I guess we are always free to shift our opinion when underlying data changes.

Victoria real estate is ***toast***

a simple man said...

Building lot in North Oak Bay for $470K...prices are coming down..

Johnny-Dollar said...

Well, if Rosenberg is right and housing starts are down say in Victoria we'll have a problem with a rising unemployment rate. Perhaps in cities where construction related jobs were not responsible for most of the new jobs created would a city dodge the bullet, but not Victoria.

Our fastest growing and highest paying industry for the last decade has been construction. We loose construction then were back to government and pension pay days.

Every day I have a roofer or contractor burn by me on the highway with his new truck the size of a small country, I think that there are going to be some awesome trucks coming up for sale.

Cash is King

K said...

I just find it strange that he changed his mind based almost entirely on supply, and brushed off debt concerns. Given that he was probably the most respected bear in the country,and had been consistent the last 3 years, this is quite a shift. It's like he's just throwing in the towel.

a simple man said...

@ cycle - I agree - this is a strange shift for him - I really can't see what is behind it.

@ JJ - I, too, think that Victoria is far more susceptible than most Canadian cities. Construction is a massive part of our economy and any negative effects will ripple significantly.

HachiRoku said...

I heard anecdotally through a friend in construction that he's got trades people falling all over themselves (lowering their prices) to get work from him.

What are others hearing?

a simple man said...

I have heard the same from a few sources, except Marko.

a simple man said...

Victoria ranked second best place to live in Canada. Apparently, first place was a lock until the cost of housing was taken into consideration.

The best defense of the high prices here was that at least we were cheaper than Vancouver.

***Victoria RE is toast***

SJ said...

Rosenberg’s been completely wrong for years - housing, stock markets, almost everything. To the point that if he thinks Canadian housing is now stable, it’s a great indicator it’s not.

His argument in the Globe that builders haven‘t oversupplied the market is completely off base. The starts have only recently fell in our areas, in the last few months. That extra supply won’t be fully added to the already puffy levels of specuvestor homes until next year. There may be areas back East near Rosenberg’s castle where he‘s prescient.

I CAN’T believe he stated ’demographics in favour of real estate'.. ’in 2009, net international immigration to Canada surged 13 per cent.’

Correct me if I’m wrong, but I see a 57% drop in international immigration from last year:

The only province you could make a case of migration stabilising their housing is Manitoba:

Rosenberg has lost his freaking marbles!

Marko said...

"I heard anecdotally through a friend in construction that he's got trades people falling all over themselves (lowering their prices) to get work from him.

What are others hearing?"

We are building a brand new home right now and prices are maybe a bit lower but certainly no one is desperate.

Electrical labour is down a small amount but wiring is up substantially over last year, so end result is quotes for electrical on the new house came in about the same as last year.

Really good tradespeople are never desperate because there is an absolute shortage.

Unfortunately, you have a lot of people out there calling themselves trades people but they aren't. Those are always desperate unless its a boom.


a simple man said...

Marko - agree with you 100%.

Unknown said...

"Electrical labour is down a small amount but wiring is up substantially over last year"

Wiring is up substantially? Gee, I wonder why?. It couldn't possibly be related to the Bernanke exporting inflation via money printing that results in comodity price speculation (and Middle East revolutions), because we're on an isolated Island dontcha know?! And gosh darn it, it's different here!

n.y.k. said...

"I heard anecdotally through a friend in construction that he's got trades people falling all over themselves (lowering their prices) to get work from him.

What are others hearing?"

I work in the trades and when we put an ad for a framer or labourer or multi-trade guy or whatever we get a million phone calls. There are a lot of guys out there not working right now.

Let's just say we don't have high school dropouts threatening to walk off the job and push a broom for $30 an hour on Bear Mountain any more.

Those days are O-V-E-R.