A typically slow time of year

is even slower than typical. No sales in my filtered PCS in December.

The last SFH with suite potential in the Saaniches, Colwood, Langford, Esquimalt and Victoria sold on November 18. It sold for $60K under its new asking price ($665K) once the adjoining lot was added to the property (original price $415K).

The last two-bed condo in the same areas sold for $50K under asking price on November 24.

I was walking through the electronics department of the Bay the other day. The salesman said to me, "even if it doesn't have a sale sign on it, it's on sale. Every TV."

"How much I replied?"

"Oh, give or take 25%" he replied. "Depends on the model. You interested in anything specific?"

"Not yet. Your prices are competitive. I think I will wait until they are compelling."

HHV to MSM: yer turn, I think they're hearing it

H/T to Anon for graphics (please don't make me H/T anon anymore people, I like to give credit where credit is due)

Real estate forecast grim. When I started this blog, I never, and I mean never, imagined I'd read an article with a title like that in the TC. One choice tidbit:

Greater Victoria will lead the country in real estate declines next year as both average price and the number of sales tumble

Re/Max, without using the words, have stated very clearly, that Victoria real estate is the most over valued in the country.

What I find most telling about this article is that Re/Max states that despite the fact that our economic drivers are more insulated from the overall market our home prices will fall further. I question the insulated lines, but here it really is irrelevant.

Forgive me for feeling a deep sense of vindication today. Victoria real estate bloggers and regular market watchers and commentators, you've been confirmed by Re/Max today.

November numbers

Cautious Buyers Lead to Decline in November Sales

December 1, 2008

The number of property sales throughout Greater Victoria declined in November as buyers remained cautious due to concerns over the economy and direction of the market.

A total of 268 homes and other properties sold in November through the Victoria Real Estate Board’s Multiple Listing Service® (MLS®) down from the 316 sales in October. There were 623 sales in November of last year. November’s sales were the lowest monthly sales since December, 1999. The number of properties available for sale at the end of November was 4,459. That represents a 40 per cent increase compared to November of last year but a further decline from the 4,680 properties available for sale at the end of October.

Victoria Real Estate Board President, Tony Joe, says it’s clear the uncertain economic climate is having an effect on the housing market. "More people are taking a ‘wait and see’ approach and are less inclined to buy or sell unless they have to given all the uncertainty we hear about almost every day. Despite this, so far there has only been a modest effect on prices for single family homes and townhomes." Joe noted that the average price of single family homes in Greater Victoria last month was $524,128, down from $565,741 in October; the six-month average was $562,772 though the median price in November at $500,000 was up slightly from $495,000 in October.

Condominium prices were most affected last month. The overall average price for condominiums was $273,890 last month, posting a significant decline from $323,028 in October. The average for the last six months was $308,133. The median price for condominiums in November was $258,450. The average price of all townhomes sold last month was $447,370 up from $389,731 in October due in large part to two sales, one in Victoria for over $775,000 and one in Sidney for over $950,000. The six month average was $425,086 while the median price in November was substantially lower at $372,250.

MLS® sales last month included 153 single family homes, 77 condominiums, 20 townhomes and seven manufactured homes.

Thank you Tony, your credibility went up from last month's lows, at least in my eyes. Overall, these numbers are not great for impatient bears, nor are they great for the "this time it's different crowd." More of the same from last month really.

Highlights not shared: April 2008 average SFH price was $626K, this month $524K, an approximately 17% decline.

Tony to Bob: yer turn, I think they're hearing it

Just maybe not buying it yet, me thinks...


Some "mythical" highlights, courtesy of Bob; and some debunking, courtesy of me:

• BC's housing starts hit 39,000 units in 2007, significantly higher than our 20 year average of 30,000.
  

Too bad our rate of in-migration is unchanged at just under 1% per year and that in 2008, sales plummeted to a ten-year low: must suck to be a builder with units to sell right now, especially when you are overbuilding by almost 30%.

• Home ownership in BC is high at 70%

Which means there are no first time buyers left to get into this market: must suck to be a first time owner trying to unload that crack shack/lottery ticket you thought was a "sure thing" last year.

• BC has the lowest rate of mortgages in arrears in Canada, which already has a historically low rate. This is much different than circumstances in the US.
  

But not unlike the US, the debt servicing ratio is at an all-time high in BC right now; in plain language, that means more BC'ers owe more on their homes as a percentage of both their incomes and the current market value of their homes. This is a ratio that will increase, not decrease, as the market value of BC'ers homes falls leading to a higher rate of underwater homeowners, mortgages in arrears, and inevitably defaults.

Bob, your message then turns to utter bullsh$t: can someone please tell me when prices are falling at an annualized rate of 26%, how this can lead to "More potential for increased equity in the home." Bob, do you really think BC'ers are that stupid?

Now Bob, just to be fair, I do like your use of Warren Buffet's quote. Too bad it has nothing to do with real estate markets, nor is it well-timed because Warren himself always chooses to wait until everyone is "fearful" before he starts getting "greedy." He also uses easy to understand ratios of value to pick his buying opportunities: like price to earnings, or in the the land of real estate, price to rents. Considering I can rent a luxury condo or SFH in this town for less than 60% of its ownership costs, I think Warren would advise me to put the safety back on my buying gun for the time being. Clearly, you and the people you represent, and the people who sell on your behalf, are still in the "greedy" stage--though I can smell your fear starting to get stronger.

Bob, I give you an "C+" for effort, at least you got the TC to agree to run your ad without having to clearly disclose it is an advertisement.

I've purposely left a few choice garbage bombs for reader comments... have at 'er.

Hanging ten on the boomer wave

I've been looking a lot lately at demographic stats in an effort to understand future trends. I take issue when people tell me that because real estate has "doubled every ten years" over the past while in Victoria, that it will continue to do so in the future. I ask these people why? They say, because it has. I say, you need to understand why it has in the past in order to predict what it will do in the future.

Apparently I'm not the only one subscribing to the theory that the past 30 years have been an anomoly in real estate valuation cycles. Two academics in California published a paper early this year that made some news, and created some waves.

78 million Boomers are about to enter the years when people tend to become sellers rather than buyers. And as a result, they expect "many more homes (will be) available for sale than there are buyers for them."

"The Baby Boom generation was born over a period of 18 years, and once its sell-off commences, it could dominate the housing market for up to two decades," they say.

This theory is known as an age wave in economic circles. We can't argue that this won't happen. What is up for discussion is how it will impact local real estate price trends and whether or not current immigration/migration rates will replace the demand the boomers represent and the supply boomers will create.

My own thoughts, at least at this point, are they won't. I don't see a bright, expansionary future for real estate here in Victoria. I see a return to the pre-1970s eras of logical, sustainable, inflation-equaling growth (albeit cyclical); but only after we see a correction that will at least equal the one--as far as total percentage (maybe not rate of decent)--of 1982.

To me, my house, when I buy it will be a hedge against inflation, not a retirement plan in and of itself. Which is all a house should be. If you want to get rich in real estate under those conditions, you'll have to return to cash flow positive real estate investing, which means having a downpayment and a rent that exceeds your carrying costs by at least 10%.

What do you think?

coming soon

to a homeowner near you. (H/T to S2 for the link)

Putting credibility on the line

You have to admire the attempts, really. It takes a lot of guts in a time when a growing majority of people hold a contrarian viewpoint, to put not only your personal but your professional credibility on the line. I know, when I started this blog I was confronted with the age-old bear blogger dilemma, anonymity or permanently risk personal and professional reputation?

Because I make absolutely nothing from this blog, and at the time I started it I was finishing school, seeking work in the google-age and the generally accepted belief was real estate can only go up you're crazy for thinking differently, I chose anonymity (since I have done CBC radio using my real name while referencing this blog and I'm almost positive that Tony Joe knows who I am).

Last week, we had this advertisement in the disguise of an op-ed, newspeak for opinion based editorial. It was a good attempt, and while it may give Dallas Chapple better name recognition, her factless opinions serve, in the opinion of not only HHV, but the vast majority of the commenters on the TC piece, to undermine her professional credibility. I suspect, in the longterm, this will prove not to be good for business.

This week (H/T to anonymous commentor in previous post) we have this advertisement, which despite it's professional communications release look and feel, states advertisement right on it. Perhaps the TC learned something from its experience with the comments last week and decided Tony would have to pay for his advertorial this week.

Throughout my life, I've tried to maintain composure in trying times. These are trying times. BC home sales are plummeting. Canada-wide, the real estate market is slumping faster than anytime in the past 26 years (as far back as 1982, one of the biggest housing crashes in Canadian history). I understand how hard it is for the local real estate industry players to maintain composure.

They have been drinking from the kool aid fountain so long, they actually believe the MSM is giving them an unfair shake right now. They believe this so much, they are now paying to correct the "misperceptions" the TC is "creating."

I have no doubt that Tony Joe and Dallas Chapple are ranked high amongst their peers for their ability to sell high priced homes, or volume, or both. But one's ability to sell a product does not make one a product market expert. And we are seeing evidence in their statements:

"Victoria continues to be a destination of choice with a diversified and strong economy... Given that our population is growing by thousands of people each year at a time when we have the lowest vacancy rate..."

Tony, you are right. What you fail to tell people is that these are not new factors, and had little to do with upwards price pressure to begin with. Throughout the last two decades, Victoria has had consistent population growth of just under 1% per year. This hasn't changed. The last census showed no increased rate of growth over the previous census.

The vacancy rate is a misleading statistic as it does not account for all of the new rental properties created in this past building boom as there have been few new institutional rentals added, however, I can tell you there has been an epidemic of secondary suite construction and substantial speculative buying, which led to new rental products not counted by CMHC.

Tony, you tell us that median prices haven't changed, even when you average out the the yearly growth, which is a marked difference from how you've reported VREB statistics for as long as I've been watching them. You've moved the yardsticks to hide a 8-10% downward change in median prices. Even if I accept your numbers, which are misleading, you can't hide the 3-4% decline in prices caused by inflation. If you bought a property in 2007 and find yourself in a must sell position in 2008, you will lose almost 10% of the money you tied up in the property when you account for REALTORS' fees, taxes and inflation.

Tony, your 1998 year claim of a "strong and stable market" is bunk. 1998 was not a strong and stable market, in fact, according to CBC, that period was a "crashing market," a time when construction workers were being laid off and developers weren't developing.

Tony, you talk about a ballon, it sounds like you could use a communications professional to let you know that using any kind of bubblicious word in a rapidly deflating market, completely, pardon the pun, deflates every word you wastefully paid for in your advertisement disguised as "market outlook" or whatever your group is calling it these days.

I'd love to hear REALTORS out there start speaking out (Al, you have not gone un-noticed here). In fact, if we get a Paul B type here in Victoria who starts building business from a different tune, I bet you'll have great success with the fence sitters when they start hopping back into the game in the years ahead, because it is about credibility.

Every day, more and more people are questioning the credibility of the VREB and it's spokespeople. Someone, please, jump into the credibility gap, be patient and secure a future for yourself and your family, and for the good of those of us who just want to buy a home without losing ours.

Credibility: by way of the Cappy Cap