Monday, May 12, 2014

It's looking awful fishy out there

MLS numbers update 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.


May 2014May
 2013
Wk 1Wk 2Wk 3Wk 4
Unconditional Sales229



659
New Listings572


1428
Active Listings4512


4783
Sales to New Listings
40%



46%
Sales Projection719


Months of Inventory
7.3


More listings piling on and lower sales/list than last year.  Seems the market is equalizing again or as Marko says "a whole lot of boring".

End of month numbers are no different.  The more data we get, the more it seems the decline went from 2010 to 2012, with flat afterwards.  It took a big shift in sales mix to keep median prices flat during the inventory spike after the 2012 CMHC changes, but stay flat they did.  I wonder what the sales mix is like these days?


117 comments:

Seth Perry said...

What Google searches reveal about Canada’s housing market

Chart
Google trends to track how many Canadians had searched the term “mortgages” between March 2012 and March 2014


How does BC stack up?

http://i.imgur.com/M0e6GaZ.jpg

Seems pretty accurate. With the projection algorithm on it looks like more of the same for this year and 2015.

Marko said...

Thanks for the updated charts. I pull them out on my laptop during listing presentations....starting to look flatter and flatter as time goes on.

koozdra said...

The Canadian Housing Market

Me: I would like to borrow half a million dollars to buy a house.

Bank: How much savings do you have?

Me: We've saved up 25,000 dollars.

Bank: Are you crazy? The housing market fluctuates. With only five percent you would be underwater if we had even a "soft" correction.

Me: I know this guy, CMHC, that said that if I pay them twelve grand they'll vouche for me. Basically if I ever stop making payments they'll give you the total amount of the mortgage.

Bank: Ooooook, that sounds really sketchy. I though you said you only had 25 thousand? Where are you going to get another ten grand?

Me: I was hoping that I could also borrow the ten grand along with the half million.

Bank: Well, if the government says it's ok, I guess it's ok. Would you like to borrow more money then? Why not, right? Interest rates are super low right now.

Leo S said...

Thanks for the updated charts. I pull them out on my laptop during listing presentations....starting to look flatter and flatter as time goes on.

NP. Yeah when I added the April numbers I looked at the charts again and suddenly it looked more like flat since 2012. Before then I saw it more of a continuation of the declining trend with flat only in the last year.

koozdra said...

We begin the race to the bottom.

Mortgage rates in Canada just fell below 2% for the first time ever

"Investors Group is rocking the mortgage world with what appears to be the deepest discount in Canadian history on a floating rate loan, offering a deal that takes an effective mortgage rate down to 1.99%."

reasonfirst said...

Pretty hard to argue with these findings. Personally it is still worth waiting to buy as renting for me is cheaper and easier.

Just Jack said...

1.99% interest rate! Very few people could refuse that rate. This has to draw in the last of the buyers that have been holding out.

Especially after so many flat years of pricing.

How long can you stare at the candy store window without buying!?

CS said...

Overall, the market may be flat, but in N. Oak Bay it appears to be at an all time peak.

Here's the latest spec. new build. The lot is maybe 75 feet and was purchased last year, with a house for, I think, $650 K. The listed price is a cool two million, or about $320 per foot over and above the lot price.

2714 Lincoln sold for $861 - 15% over assessed lot value - and is to be torn.

And side by side houses on Lansdowne have been torn down, with new construction now underway. One, on the site of an interesting 1930's architect-designed bungalow that went for $950K, looks like a Big-O tire store. The other may prove to be more appealing. Each will presumably net the builder well over two million.

patriotz said...

1.99% interest rate! Very few people could refuse that rate. This has to draw in the last of the buyers that have been holding out.

It's a floating rate, which means that you have to qualify on the 5 year rate.

I suppose that there are a few people out there who would qualify and have been waiting to buy, but not a lot.

koozdra said...

Scooting around Metchosin/Colwood/Sooke yesterday. I counted five developments. This doesn't include the building orgy in Happy Valley.

Who are they building these houses for?

My personal favourite is the development on La Bonne Rd.

The house at the end of our street that's been for sale since we moved out here has a new ®USED®HOUSE®SALESPERSON® and a higher price. Now it will sell for sure.

Jack and Cate said...

Just Jack said...

1.99% interest rate! Very few people could refuse that rate. This has to draw in the last of the buyers that have been holding out.
-------------------------

Not too hard to hold out at all. Prices keep dropping and financiers keep fighting for our dollar. $100k drop in price is preferential to a few years of .8% drop in rates to get us in the game.

We wait.....

koozdra said...

Canadians Getting Mixed Messages on Debt

CIBC World Markets Chief Economist Avery Shenfeld weighed in on the debt debate in a report released Tuesday entitled “Debt is Not a Four-Letter Word.”

The new normal.

Just Jack said...

It's a six letter word...

F$#@ed

koozdra said...

Canada's 'Real Estate Agent Bubble' A Sign Of A Deep-Seated Economic Problem

Dustin said...

What's the general consensus behind the Townhome spike in the media price graph?

Leo S said...

Too few sales makes for noisy data I guess

Arnold said...

I actually enjoyed reading through this posting. Many thanks. singapore properties

patriotz said...

Decline is back at Teranet after a brief respite:

Index Period Apr 2014
Index Level 133.88 ©
% change y/y -0.71%
% change m/m -1.03%
Year to date -0.03%

Phil said...

This has to draw in the last of the buyers that have been holding out.

I see there being way too many bears (buyers) on the sidelines who sold over the last ten years planning on getting back in after the crash that will now continue to slowly give up... not to mention all the genY and immigratn buyers. The tabloids are partly to blame with covers of burning houses, et cetera over the years. Not that this page is a representative sample but count the # of bear posts above. We 'll say Leo S is a flatfish. I count about 12 bear posts to 2 bull posts.

reasonfirst said...

Re: Teranet.

Just when I was about to capitulate and live with "flat", Teranet changes my mind (but doesn't change my plans).

Axis said...

My property managers stopped by to see if I'd sign another year lease a few months early, no rent increase. For me there are more productive uses for my money than trading it all (and borrowing) for a house.

I'd qualify as Gen Y and other than a handful of co-workers who've already bought none of my friends are anywhere close to buying with the exception of two that are underwater on a condos and trying to 'move up'.

It's a beautiful day and I'm off to buy a bike.

Marko said...

My property managers stopped by to see if I'd sign another year lease a few months early, no rent increase. For me there are more productive uses for my money than trading it all (and borrowing) for a house.

I'd qualify as Gen Y and other than a handful of co-workers who've already bought none of my friends are anywhere close to buying with the exception of two that are underwater on a condos and trying to 'move up'.

It's a beautiful day and I'm off to buy a bike.


My tenant was happy to sign another one year lease....with the positive cash flow I can buy a cheap bike every month.

I think I might be Gen Y? Born mid 1980s. I've bought three properties so far and haven't sold anything. I don't have any co-workers my age (realtors on average are old) but the majority of my personal Gen Y friends have purchased properties and are enjoying home ownership.

People are too focused on rent versus buy in terms of finances. There isn't a big difference in my opinion on a cash flow basis.

Somehow I have a feeling if I get to 5 rental properties in the next few years and I amortize over 15 years to cash flow neutral that in 15 years I'll probably be ahead than many people being 'productive' with their money in other ways.

I think RSPS and TSFA should be priority #1 in terms of investment, but beyond that I don't mind real estate. If my TSFA and RSPS are maxed out I personally lean towards a rental property versus the stock market.

The rental property has to make sense, people buy the dumbest rental properties all the time.

Phil said...

I think I might be Gen Y? Born mid 1980s.

You're probably the leading edge of Gen Y - the first of the 3 +s on this year's age pyramid.
With the average first-timer age 36 in Canada, combined with the zoomers now retiring for the next 15-20 years (the 4 +s on the pyramid), I don't believe could lose in a retirement town like Victoria, at least for the next 15 years. I suppose it could stay flat if we don't get many retirees.

Axis said...

To each their own for sure. I was offering myself as an example that not every bear is a captive buyer. I think things are overpriced, not sure if that passes the bear test.

If buying rental properties and making money was easy everyone would do it and yield would approach zero.

I'm always trying to have less stuff and less to deal with. Nor did I mean productive in a real estate vs. stock market sense. Lock the door and hop on a plane to (your country of choice) because you always wanted to go there is a productive use of it in my opinion.

Just Jack said...

If your betting on retirees buying your home in 15 years, you better make sure you have the right kind of property.

If the past is any predictor of the future that property would be a new condominium.

Because I can tell you who will be buying your home 15 years from now. They'll be just like you - but 15 years younger.

Marko said...

If your betting on retirees buying your home in 15 years, you better make sure you have the right kind of property.

Not making a bet on re-sale. Making a calculated bet that I'll have paid off income generating asset in 15 years. Re-sale value who knows.

Marko said...

If buying rental properties and making money was easy everyone would do it and yield would approach zero.

I'm always trying to have less stuff and less to deal with. Nor did I mean productive in a real estate vs. stock market sense. Lock the door and hop on a plane to (your country of choice) because you always wanted to go there is a productive use of it in my opinion.


A lot of people just don't have the means or discipline to buy a rental property. Just look at TSFAs as a good example. It's free, it's easy, it's a no brainier from an investment standpoint but very few people take advantage.

I can lock my door and hope on a plane too?

Less and less stuff to deal with is a lifestyle choice. I prefer more and more stuff to deal with...keeps me busy.

caveat emptor said...

@axis

the freedom and mobility that come from renting are an under-rated benefit for sure.

As a long time homeowner and now renter I think I can say fairly definitively that owning your primary residence is either a time suck (do everything yourself) or a money suck (pay someone to do it) and will most likely correlate with less travel and less getting out of town.

Investing in rental properties (as Marko suggests) is a totally separate question from owning or not owning your principal residence. It has its "advantages" for sure - one being the high leverage that is available to anybody.

Just Jack said...

The point was that if you are intending to be selling to retirees in the future you would have to determine what type of property will be in demand 15 years from now.

The no step rancher?
A new condominium?
One level town house?

I doubt that it will be a 120 year old home with stairs. Or a rental property either. It might not even be Victoria as the city will have changed so much by then.

What drew retirees in the past was the small quaint English town feel of the city. You might as well be living on the mainland in Surrey or Langley by then.

We sold out to developers and it cost us our unique identity as a city. This isn't the Victoria of 20 years ago and it won't be the same city 20 years from now.





Phil said...

Bedazzling are the Teranet differences right now,
I don't think I've seen a city difference of 13.5% (laggard to leader)

Calgary: 1.5 per cent, 10 per cent
Edmonton: 0.6 per cent, 4 per cent
Halifax: 0.7 per cent, –3.5 per cent
Hamilton: 0.7 per cent, 5.3 per cent
Montreal: 0.8 per cent, –0.4 per cent
Ottawa: 0.7 per cent, –0.4 per cent
Quebec City: –0.5 per cent, –2.4 per cent
Toronto: 0.3 per cent, 5.8 per cent
Vancouver: 0.5 per cent, 9 per cent
Victoria: –1 per cent, –0.7 per cent
Winnipeg: 0.4 per cent, 2.5 per cent

http://www.theglobeandmail.com/report-on-business/economy/housing/home-prices-showing-early-signs-of-accelerating/article18655781/

Seth Perry said...

"I think things are overpriced"

You're not alone. Perceptions are changing.

Cheap credit is keeping this baby afloat, barely.

I hear lots of concerns out there, the news headline aren't exactly rosy.

Here are a few comments from close friends who own right now.

Friend #1
Purchased a second home (crappiest house on the nicest block) last year.

"We've spent more than double our budget ($75,000) and we are still not done".

Friend #2
Moved up to a home from townhouse 4 years ago.

"If we sold everything, we would just break-even".

Friend #3
Purchased first home 2 years go. One year later...

"We wished we waited, the home down our block is much nicer and $xx,xxx cheaper. We've noticed prices coming down".

Friend #4
Purchased first home last year, just had a baby.

"I had no idea it would be this much work / money. We had to... and then.... The work on our home is all we do now."

Friend #5
Purchased a second home last year who seems happy. I just learned that they spent over $200,000 more than they had budgeted. Purchase price was over $800,000

"It was the most we could get".

Friend #6
Built a new home about 3 years ago. Another one, who is highly leveraged.

"It was the most we could get from the bank. The home cost more than we thought". Luckily they have renters to help with the payments?

All these people are late gen x's or early y's.

Family Member
Purchased first home last year.

"The reno costs and time is more than we thought it would be. Even with a low purchase price our mortgage us still double our old place (rental)."

My older friends, 40+ seem pretty happy with their homes and financial situations. Perhaps because they purchased before the boom.

dasmo said...

Victoria of 20 years ago was not nicer than now. North of Victoria was though...

Seth Perry said...

What could a 1 percentage point increase do to a national RE market?

Just look to our southern neighbours.

US mortgage applications tumble to a 13-year low
"The drop-off follows a 1 percentage point increase in mortgage rates from historic lows last spring. The average for a 30-year mortgage is 4.47 percent, according to mortgage buyer Freddie Mac."

U.S. mortgage applications fall as refinance hits five-year low: MBA
"Mortgage applications have fallen sharply since this summer on a jump in home finance costs as benchmark Treasuries yields eventually rose to a two-year high."

"Following the Federal Reserve's taper announcement, mortgage application volume dropped again last week, with rates increasing and refinance application volume falling to its lowest level since November 2008," Mike Fratantoni, MBA's vice president of research and economics, said in a statement.

Even with historically low rates..

Low Mortgage Rates Fail to Ignite Mortgage Applications or Home Sales
"Mortgage rates are still low by historical standards, yet the latest data suggest cheap financing alone is no longer enough to lure more people to apply for mortgages."

dasmo said...

Lending is still tight down south. Anecdote time... Chicago. A pal who has plenty of cash, a paid off house, a second home with a low mortgage, kids out of the house, long term business owner and a wife that has a 6 figure income. They wanted to buy a rental house for 150k and the bank wouldn't give them the money. It was an extremely cash flow positive investment even...

Seth Perry said...

Does "number of Americans applying for mortgages" mean approved OR approved and declined?

I'm assuming it means all those applying, so all applicants regardless of their credit worthiness.

Although the term is not well defined, your comment has merit. Those with poor credit might not apply.

reasonfirst said...

the majority of my personal Gen Y friends have purchased properties and are enjoying home ownership.

What's wrong with this statement:

a) Confirmation bias
b) Post purchase rationalization
c) anecdotal information
d) all of the above

Pick one

Marko said...

What's wrong with this statement:

a) Confirmation bias
b) Post purchase rationalization
c) anecdotal information
d) all of the above

Pick one


I responded to an anecdotal information post with anecdotal information. Yes or No? Pick one.

Seth Perry said...

Full disclosure, all my posts are biased and most anecdotal. That's a fact.

Leo S said...

Insurance renewal time.. ~10% more than last year.

Leo S said...

If rates ever increase it will put a big crater in the market. The only thing that might save us is that we've declined while the rest of the country went gangbusters.

Leo S said...

Lending is still tight down south. Anecdote time... Chicago. A pal who has plenty of cash, a paid off house, a second home with a low mortgage, kids out of the house, long term business owner and a wife that has a 6 figure income. They wanted to buy a rental house for 150k and the bank wouldn't give them the money. It was an extremely cash flow positive investment even...

So plenty of cash, successful business, dual large incomes. And they can't swing 150k for a good investment?

Hmm, yeah I don't think we're getting the full story here.

dasmo said...

I guess I should have asked "why didn't you buy it cash?" but I didn't... But knowing the family, i too found it strange they were turned down. They obviously weren't too passionate about being landlords otherwise I'm pretty sure they would have found a way. Point was that money has tightened considerably. It might happen here but if it does, better hope you have cash. This is why the rich are doing very well with the situation down south....

koozdra said...

When we recount the anecdotes from the peak of the bubble, statements like these will make us shake our heads.

"Somehow I have a feeling if I get to 5 rental properties in the next few years and I amortize over 15 years to cash flow neutral that in 15 years I'll probably be ahead than many people being 'productive' with their money in other ways."

Marko said...

\If rates ever increase it will put a big crater in the market. The only thing that might save us is that we've declined while the rest of the country went gangbusters.

By the time rates increase we'll have been in a flat market for 10 years or more and that could offset any rate increases, if any, by way of increasing incomes.

koozdra said...

Average house price rises 7.6% to $409,708 in Canada

The bigger they, the harder they fall.

Seth Perry said...

Canada's housing market still 'quite balanced,' realtors tell Harper

"Canada’s realtors told Prime Minister Stephen Harper that the country’s housing market is essentially balanced, as they kicked off a lobbying effort in Ottawa that saw them make appointments with more than 160 MPs."

It looks like they want the The Home Buyers’ Plan to be indexed to inflation, which essentially means bumped up again.

“Already we see that the value is diminishing steadily,” Ms. Crosbie says. “So the ask, or the suggested solution to the government, would be that we index it. And the idea is that in 2016 they would bump it up by $2,500 and then again in 2020.”

"To make their case, the realtors have been pointing to the number of jobs and economic spin offs that stem from home sales."

reasonfirst said...

I expect higher standards from a realtor.

Seth Perry said...

So Then I told Harper...

Dave said...

So depreciation reports became mandatory last year correct? When will they start kicking in? I mean in terms of stratas doing their budgets and increasing (if necessary) the fee as a result of the report findings?

Anecdote - Friend's building's insurance was thought to increase. The strata budgeted for a 50% increase. It went up by more than 100%. I didn't ask particulars, but that made me wonder about other buildings. Is anyone seeing fees increase for stratas?

Dave3

Just Jack said...

From what I understand, a lot of the condominium complexes have opted out of the depreciation report or ignored the requirement to have one performed.

And that a good portion of those that have had the study performed have just shelved the recommendations.

Personally, the "depreciation reports" are a bit of a gong show as different groups like engineers, building inspectors, accountants and other analysts interpret the regulation in the way that benefits them.

The problem starts right from the beginning with the word "depreciation", these reports are a reserve fund study to assist the strata council to be fully funded for normal maintenance issues. Not for "shocks" like building envelope failures. Using the word depreciation is misleading as it isn't someone telling you that the boiler has to be replaced in 5 years. This is study of how the strata council should budget for expenditures while protecting the investment of the home owner.

The study should also be sympathetic to market value. It might not be feasible to jack the strata fees by $500 a month and have the market values of the condo owners drop by $50,000 to $100,000. That means the study has to have options where it may take some stratas a longer time to become self funded.

Personally, I think the strata councils should tell the government to F%$^ Off with these reports. They are unnecessary and may only lead to the banking institutions black balling specific condo complexes that don't comply.

Most loans officers don't read them and those that do read them don't understand them. It's just a box to tick off when lending.

I say, let the market take care of itself and keep those ugly government paws out of the free market system.

CS said...

Insurance renewal time.. ~10% more than last year.

Have you tried Lloyds, available through Coast Capital Credit Union? They were several hundred dollars cheaper than whomever we were using last year.

Supernova said...

Just Jack... I usually agree with you, but less so with your last comment. Rather than looking at it as 'another box for the lender to check', don't you see it as useful info for prospective purchasers to get a better idea of what they may be buying into? If a major upcoming repair has the effect of temporarily dampening prices in a building, well that's just the "free market" as you call it at work. In this case "those ugly government paws" are simply adding a degree of transparency to the "free" market. Thoughts?

Leo S said...

>>Have you tried Lloyds, available through Coast Capital Credit Union?

Have not. Settled on TD last year because they were the best of the bunch I checked but will get another quote. $957 is what TD wants this year

dasmo said...

975 doesn't seem bad. Unless the coverage sucks.

koozdra said...

"To make their case, the realtors have been pointing to the number of jobs and economic spin offs that stem from home sales."

We need home construction to continue outpacing household formation... for the economy.

Just Jack said...

Supernova, the mistake is the name of the report. Depreciation Report - it isn't a building inspection. You are still going to have to get your own building inspector to look at the property.

Lots of graphing, lots of spreadsheet analysis. The report is not going to say this is a "good" or "bad" building it will just lay out a plan to build up an adequate reserve for normal expenditures.

It will not tell you that it is a "leaky" condo or make allowances for hidden or unapparent conditions. You are still on your own for these shocks that may require a Special Assessment in the future.

And just because the study has been done - does not mean the complex has been following any of the recommendations.

A new roof can fail in 20 years or it can fail in 5 years depending on how it was installed. No study can predict this.

So what did you think that study would tell you? Or how it would help you? Because it will not tell you that one building is better than the next one.



David said...

”We need home construction to continue outpacing household formation…”

Housing starts are actually down alot past couple years from looking at CMHCs graph, especially in BC.
http://www.cmhc-schl.gc.ca/en/corp/nero/nere/2014/2014-05-08-0816.cfm

Unsure, but builders may not be keeping up with household formation.

Just Jack said...

As it is now, the number of persons per household in Greater Victoria is lower than the national average. Victoria City is about 1.7 and the national is 2.5

I would think that if there was a shortage of housing the number of persons per household would be higher than the national.

Seth Perry said...

I tried to include just the highlights but there are lots of good points.

Is the Canadian Housing Bubble About to Burst?

"On the surface, the market still looks healthy. The largest lenders, like Royal Bank (TSX: RY)(NYSE: RY) and Toronto Dominion Bank (TSX: TD)(NYSE: TD), are raising dividends and hitting new highs. Nationwide, the price of houses continues to creep higher, hitting a fresh all-time high every month."

"Although the entire nation’s real estate prices are up, some of Canada’s major centers are experiencing weakness. The average house price is down in 2014 for Montreal, Ottawa, Quebec City, Regina, and Victoria. "

"These teaser interest rates signal that mortgage growth just isn’t there anymore, meaning companies have to use bigger promotions to grow their bottom line."

"Canadian consumers simply can’t afford to continue borrowing. Canada’s debt to personal income ratio roared past 160% a few months ago, and hasn’t looked back since. In most countries, consumers actually paid off debt during the Great Recession and the so-so economic times shortly after. Canadians gorged on low interest rates, using them as an excuse to take on even more debt."

"At this point, debt service ratios aren’t a huge concern. Most Canadians can afford the monthly payments on their debt. But what happens when interest rates start to go up? As the United States Federal Reserve continues to lay off its monetary stimulus, the market’s natural reaction will be to let interest rates rise."

"Where’s housing demand going to come from? Many Canadian homeowners have borrowed significant home equity to consume, leaving them unable to afford a larger place. Stories of first time buyers who feel as if they’re priced out of the market forever are common."

"It’s next to impossible to predict the top of a bubble. Trying to time it is a sucker’s game for most individual investors. We’re far better off simply avoiding a sector or company which appears overvalued. "

"But if I were looking for a sign that signaled the top, mortgage rate wars would make me extremely interested. If the market was doing really well, there’d be little sense to undercut the competition in such a significant way. At some point, this party has to come to an end."

caveat emptor said...

I agree with JJ. The one depreciation report I have looked at basically was a several thousand dollar report to say that down the road you are going to have to spend a bunch of money. True of course, but not sure how useful that is to owners or potential purchasers.

A report that paid more attention to the specifics of the building and the near term needs (<5 years) might be more useful.

The report I read also recommended building a MASSIVE reserve to pay for those future repairs. As we discussed on here before I think a solid reserve is prudent, but really big stuff is better paid by special assessments.

Entrusting a volunteer condo board to the long term management of literally millions of dollars does not seem wise at all. Too much worry about fraud or incompetence.

caveat emptor said...

As it is now, the number of persons per household in Greater Victoria is lower than the national average. Victoria City is about 1.7 and the national is 2.5.

1.7 per household doesn't mean 1.7 per house though. Those renters living in your basement count as another household. Given the prevalence of secondary suites that could be significant here.

Leo S said...

>> Victoria City is about 1.7 and the national is 2.5

As one would expect any city Center full of condos to contain smaller households than te nation as a whole. That alone doesn't signal we are overbuilt.

David said...
This comment has been removed by the author.
David said...

Not to mention full of widows, nerdy techies and studious single students.

DavidL said...

@Seth Perry
My older friends, 40+ seem pretty happy with their homes and financial situations. Perhaps because they purchased before the boom.

I think that you make a very good point with this. Anyone who purchased prior to 2004 and has not sold (or :traded up") is probably thanking their lucky stars. With the low rates of the past 10 years, they have likely paid off a big portion of the mortgage already.

These Generation X-ers have done okay for themselves. It is the overextended Boomers (with less remaining earning years) and Generation Y-ers who are having a tougher time.

DavidL said...

@Leo S

Regarding house insurance, last year I spend about $940 ($350K house replacement cost = $700K total, 10% deductible for earthquake). The policy is underwritten by AXA Pacific, sold by Megson FitzPatrick. A few years ago, I tried shopping around for a cheaper policy - but couldn't find one.

Incidentally, in 2010 the same house insurance coverage cost $740, Back in 2002, it cost $470 - so a 100% increase in 11 years. Who says that annual inflation is just 2%!

Leo S said...

David, sounds pretty comparable then except we had 5% earthquake deductible. So maybe fine as is. We compared megson last year and decided against because TD was cheaper at the time (860 something)

DavidL said...

In 2011 and 2012 I was able to get the 5% deductible, but after the New Zealand earthquakes it seemed that only 10% was offered. Is TD still offering a 5% deductible for earthquake coverage?

Marko said...

Anecdote - Friend's building's insurance was thought to increase. The strata budgeted for a 50% increase. It went up by more than 100%. I didn't ask particulars, but that made me wonder about other buildings. Is anyone seeing fees increase for stratas?

They must have had water related claims or similar for it to go up 100%....I am seeing 10 to 20% in most budgets I've been coming across.

Marko said...

The report I read also recommended building a MASSIVE reserve to pay for those future repairs.

Most depreciation reports provide funding models and let the strata decide. Usually you have four funding models a/ statutory minimum b/status quo c/alternative d/progressive

Haven't seen any strata go with a progressive approach yet.

koozdra said...

If the property market starts to lose five to ten percent per year and people start off-loading their investment properties, will we be over built then?

The US wasn't over built till their real estate market crashed.

Over built is a term that takes on different meanings in different contexts.

The context of the current low rate and easy credit environment, we are not over built.

Phil said...

Koozdra, you may want to consider Rob Carrick's article if comparing us to the US. I never thought I'd actually see Rob Carrick agree with Shenfeld.

http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/a-reassuring-flip-side-to-canadians-high-household-debt/article18669756/
__
"There's no reason to raise alarm bells over household debt," Avery Shenfeld wrote.
The most-often quoted gauge of Canada's indebtedness is our average debt-to-income ratio, which hit 164 per cent as of the end of last year. Mr. Shenfeld said that's high compared with U.S. levels both now and in 2006, before the housing market crashed. Still, he thinks debt levels in this country are not a big worry.
One reason is that debt in Canada is generally held by people who can afford to pay if off. "The problem in the U.S. was that too much debt was issued to people who couldn't afford it," Mr. Shenfeld said.
The affordability of debt in Canada can be seen in the fact that delinquency rates on lines of credit, loans and credit cards have been low and falling. The number of mortgages in either default or arrears (payments missed for more than three months) has also been heading lower."

Phil said...

Today's most read article in the Sun is worth a ponder.
http://www.vancouversun.com/business/Metro+Vancouver+baby+boomers+sitting+billion+property/9844270/story.html

"With Greater Vancouver's over-55 demographic sitting on $163.4 billion in clear title housing, what will be the impact of that equity in the hands of an aging population in our marketplace?" he asked.
The answer, he suggested, is that over the next 15 years, they will be increasingly helping their Gen-X and Gen-Y children buy into housing while looking to "move down" into a smaller footprint."

Just Jack said...

I suppose it depends on how we define overbuilt.

If the new condominiums are all being purchased by either home owner or investor then we don't have a glut. In contrast if the units are not being purchased then there is a glut.

As such you can't have a glut until there is downturn in the market as the number of sales form part of this definition.

But surely there must be some other way to measure if we are building too many or too little condos or are we forever doomed to repeat the boom/bust cycle.

Just Jack said...

The only ways for those house rich boomers to help their children and grand-children is by downsizing or taking on mortgage debt.

How much are you willing to give your children or how large of a mortgage are you willing to have for your kids to buy a condo?

I suspect that a decade ago, the boomers were more likely to help their demon spawn when prices were going up. However, today is a different market and the boomers are older and likely less reluctant to part with money they may need in their not to distant retirement years.

Love for their children may be unconditional - but not real estate.

koozdra said...

Phil,

House prices nationally have been booming because of a huge population boom. Err.. no wait that's not it. Let me try again.

House prices nationally have been booming because of a huge jump in the average wage. Dammit.. no, that's not it either. One more try..

House prices nationally have been booming because of historically low interest rates and government insured sub prime mortgages. Yeah, this is the one.


You are correct that the situation is different in Canada. I argue, however, that the situation is worse.

Alexandrahere said...

I agree with J.J. and Caveat Comptor re depreciation reports. They are just about creating employment in a down market. Once a strata has opted for the depreciation report, they must continue to get further reports every I think, three - five years. They can not opt out. How can a government force people into this?

Most stratas have professional managers such as Brown Bros. Each year at the AGM, the management companies put out a "Projected Future Capital Expenditures Report"
This lays out likely repairs, maintenance and replacement that will have to be done over the next 10 yrs and their projected costs. With this report they also list past work done & the costs. For example, Roof replacement in 2010 at the cost of $70,000 and in a few years a new roof replacement will be added to the future capital expenditures with an estimate of costs.
Personally, I would rather pay unexpected costs by special assessment. I rather manage my own money than let the volunteer council manage it for me.

On another note further to David L's comments...I think many boomers left the workplace early, sometimes 10 years or so early, because they were relying on a minimum of 8% on their investments to help fund their retirement. Instead, if they are ultra conservative investers, they are now getting less than 3%. When the market crashed in 2008, many of them had their savings in mutual funds....they got panic stricken, cashed them all in with a loss of say 40%, and put them in GICs, bonds etc.

patriotz said...

The number of mortgages in either default or arrears (payments missed for more than three months) has also been heading lower.

Of course they are. In a rising RE market people who can't meet their payments can simply sell and walk away with cash.

The mortgage arrear/default rates in the US reached a bottom after the price peak, something the writer apparently didn't bother to find out.

Seth Perry said...

@phil

Rob Carrick's article

What he says is, because we can service our debt, we are okay. Good god.

According to the theglobeandmail (same source of your posted article)

Debt-to-income ratio:

Add up your total debt (including mortgage debt, loans, credit lines and credit cards) a.k.a your debt burden.

Next find out what per cent that is of your annual after-tax income.

For example, if your total debt is $120,000 and your after-tax income is $85,000, your debt-to-income ratio is 141 per cent.

On average, we are at 164% or...

Median family income in Canada: 76,000
Average debt would be: 124,640

For those gen y's and x's purchasing / leveraging half a million dollar homes in the past 4 years with close to 0% down... lol.

Sure we can service (make minimum payments) but so can people who have a pocket full of maxed our credit cards.

It's not like the average house hold is using their debt to become more productive or increase their income. I'm guessing they are spending it at Costco, Home Depot and at the Honda Dealership. The latter can only drive the economy for so long.

I think we are due for a big deleveraging.

Referenced of measuring household disposable income and household debt.
http://www.statcan.gc.ca/pub/13-605-x/2012005/article/11748-eng.htm

caveat emptor said...

It's not like the average house hold is using their debt to become more productive or increase their income. I'm guessing they are spending it at Costco, Home Depot and at the Honda Dealership

Buying a car certainly has the potential to increase productivity. Some jobs require a car, and at the very least having a car expands the range of jobs you can take vs if you could only take jobs that were accessible to you by bike, bus or walking.

caveat emptor said...

@Seth

as discussed here previously the average indebtedness ratio sounds very un-alarming. $125K of debt is not necessarily an onerous burden on a $76K household as long as it isn't credit card debt of course. The vulnerability is the percentage of households that have a much higher debt to income ratio and are vulnerable to even a modest increase of payments.

The absolute levels of income and debt are important too. 400K of debt for a 200 K income household is relatively easily handled despite the "high" debt to income ratio. *0 K for a 40K household, maybe not so much.

dasmo said...

My debt to income is closer to 300% and I have no problems???? This measure is meaningless IMO. My primary is paid off, the debt is on a rental, I have enough liquid assets to pay off 80% of my debt. I'm fine and yet I'm off the charts by this particular measure....

Seth Perry said...

"the average indebtedness ratio sounds very un-alarming. $125K of debt is not necessarily an onerous burden on a $76K household "

Just another 125K straws on the camel's back.

We've been stimulating the economy with cheap credit and at some point we'll need to deleverage.

Our ratio is high when compared to other developed countries.

Household Debt-to-Income Ratio, USA vs Canada

Global Household Debt to Income Ratios

Nation wide job losses, major businesses closing, artificially cheap interest rates because of a fragile economy.

The only thing we have going for us right now is cheap credit. Lets hope China hangs in there.

RE: Vehicles as tools for productivity. Point taken.

Here is a work van

Here's what I see wiz by me on the pat bay or tailgating me in the slow lane.

Seth Perry said...

@dasmo Are you including your rental income in the ratio?

It just looks like you are leveraged with a rental property. That might be a good long term strategy for you.

I'm thinking most Canadians can't pay off 80% of their debt with liquid assets. Most would sell their home or refinance if they had issues serving debt.

It's a benchmark debt level, it's not the window into the future. If debt-to-income were 100% (or lower) then Bulls would be toting it as an indicator of stability.

Seth Perry said...

If I don't stop commenting on this blog, I'm going to have a 300% debt-to-income ratio too.

Love you HHV!

speaking of love, where's Introvert?

caveat emptor said...

@Seth
"Here's what I see wiz by me on the pat bay"

Agreed - there seem to be WAY to many Beamers, Audis and Mercedes in Victoria given the relatively modest income figures here.

And as an over generalization I'll say that I have observed some truth to the "BMW drivers are jerks" meme. Anecdotal? Yes, but there is research to support it http://theweek.com/article/index/248281/its-not-your-imagination-bmw-drivers-are-the-biggest-jerks

dasmo said...

The way I see it is debt has been very much encouraged so it seems an obvious side effect - increased debt levels. I personally was very anti debt in my early years. Having none at all until I bought my first house in my 30's. Now at these rates I have bought in to the cheap money. To the point where my behaviour has changed dramatically. Before, My #1 priority was paying off debt. Now I would much rather invest any additional income than pay off debt. So...I also see the potential calamity of this free money environment and I think it has had a major effect on increasing house prices and binging on borrowed money in general. This sucks for a number of people but the low rates will also allow many people to reduce debt much faster. I don't condone the environment but have chosen to take advantage of it. Does this mean I would recommend overextending oneself to buy a home right now. Absolutely not. Renting is not a problem IMO and favours to the positive financially. There is no evidence of a boom coming to this town anytime soon so why not wait until the right deal comes along. OR just be happy with the advantages renting gives and look to other ways of creating wealth.

patriotz said...

Buying a car certainly has the potential to increase productivity. Some jobs require a car...

An Escalade doesn't increase your productivity any more than a beater.

Almost all the outlay for private automobiles is just consumption.

patriotz said...

the average indebtedness ratio sounds very un-alarming. $125K of debt is not necessarily an onerous burden on a $76K household

The majority of homeowners in the US had no mortgage or had no trouble paying the mortgage.

So how come there was a crash?

caveat emptor said...


@patriotz
"The majority of homeowners in the US had no mortgage or had no trouble paying the mortgage.

So how come there was a crash?"


That was the other part of my post which you missed.

"The vulnerability is the percentage of households that have a much higher debt to income ratio and are vulnerable to even a modest increase of payments."

My point was simply that the average indebtedness level itself is not at all alarming. It is the vulnerable sub-population that will be the issue if there is a crash here.

In the US it was the folks with NINJA loans, interest only loans, and the subprime sector generally.

caveat emptor said...

"An Escalade doesn't increase your productivity any more than a beater.

Almost all the outlay for private automobiles is just consumption."


Most of our economy, and that of the rest of the developed nations is "consumption". Is that a problem?

As for "beaters" - there has to be a steady supply of new cars to provide a steady supply of beaters in the future.

Dominic Cane said...

Not being disingenuous here but can someone tell me clarify something about condo living....

Suppose I live in a 10 unit building and we receive a special assessment for an emergency repair costing $50,000. I and two of my neighbours promptly write a check for $5,000 but the other 7 owners claim to be tapped out and will not now or evermore have a spare $5000. What happens?

patriotz said...

Stratas have legal power to foreclose on owners who do not pay assessments.

AFAIK assessments are senior to mortgages. It's a condition of mortgages that assessments be paid (like taxes) so lender would likely foreclose on owner before the strata.

In your example where 7 out of 10 won't or can't pay there is likely to be a protracted battle for control of the strata.

Wanna buy a condo?

StalJ said...

Condos shall be king next 15 years. No astrophysics required :P
As Rennie said in article posted above^^ “..over the next 15 years, they will be increasingly helping their Gen-X and Gen-Y children buy into housing while looking to "move down" into a smaller footprint." So about 10 million stepping onto the property ladder and 10 million about to downsize give or take. Its clear form the graph what's about to happen.

Marko said...

I don't come across to many people downsizing in my day to day business. A lot of 65 to 80 year old are riding it out in their Broadmead/Oak Bay/etc homes.

Leo S said...

Downsizing or not, condos are not supply limited. They will simply build more if necessary

Just Jack said...

So how big of a mortgage are you willing to take out at age 65 to give to your kids?

And will that money be unconditional? Or are you going to put restrictions on what your kids can or can not buy?

I can remember one meeting I had with a boomer and his kid. The boomer was giving the kid a down payment for a house that needed big time repairs. Half way through the meeting the kid said: "Dad, I don't want a house"

His dad's reply was:

"shut up, I'll tell you want you want"

You take money from someone - there are always strings attached.
I felt sorry for the kid knowing that he will always be indebted to his dink of a father. Instead I could hear the tinkle of his Balls as they fell off and rolled under the table when he picked up the pen.

Marko said...

My favourite is when kids have a parent that comes along for showings that is a "contractor," as in he or she has a table saw in his or her garage :)

Just Jack said...

Another issue is co-signing your kids mortgage.

If your kid starts missing payments, the banks come after the person with the money. That's the co-signer.

Which reminds me of another story about a banker in Kamloops. One of his mortgages went sideways on him so he called in the co-signor to make payment.

10:00 AM the next morning this heavy set Italian gentlemen shows up and he's told that as a co-signor he must make the payments. The fella opens his wallet and pays the mortgage in hundred dollar bills and starts to go, when he stops and turns to the banker and says..

"This dead beat- does he have life insurance?"

patriotz said...

condos are not supply limited. They will simply build more if necessary

Should be: they will simply build more.

The market doesn't care whether something is "necessary", it just cares whether there's a buyer, and there's always a buyer at some price.

dasmo said...

They aren't always buildable at some price....

Just Jack said...

Vancouver's shadow inventory of condominiums.

http://nyr.kr/1p4EbdU


patriotz said...

They aren't always buildable at some price....

True, materials and minimum wage set a floor on construction costs. There's not much of a floor on land costs because the land owners have no one else to sell to.

Builders always manage to readjust to price declines in the finished product. Just look south of the border.

dasmo said...

Ya, they build cheaper. This is one reason there is still building going on here....They can make money building better buildings. Watching the Era be built illustrates this. No a cheap build...

Marko said...

True, materials and minimum wage set a floor on construction costs. There's not much of a floor on land costs because the land owners have no one else to sell to.

In terms of residential land that is the one market segment that hasn't seen any sort of correction in the Victoria core due to limited supply. There are 4 lots for sale in Oak Bay ranging from 625k to 8 million. In Victoria there are only 4 lots for sale too and none are really that desirable.

In terms of land that condo buildings get built on in the core they are usually revenue producing.

200 Douglas = Old apartment building.
Duet = Revenue generating parking lot.
Sovereign = Revenue generating parking lot.

etc....so I don't buy "there is not much of a floor." No one is going to give away a revenue producing parking lot with condo tower development potential.

Other thing you have to remember is land is actually a small expense when it comes to building a condo tour unlike residential SFH construction. You'll have a $80 million project and the land is maybe $5 to $6 million.

When it comes to building a house in Oak Bay you often see 700k for land and 700k for construction costs, for example.

Just Jack said...

The valuation of infill vacant lots in Oak Bay and Victoria is challenging as the lot value is extremely site specific. Unlike in a subdivision where two or more near identical lots can be purchased.

Because of this you find very few are built by contractors with out a firm contract. In otherwords very little "spec" housing. The homes that are being built are under contract. The owner realizing that building new is not economically justifiable and if they had to sell they would sell below cost. But they want a new home on that street and they will pay whatever to have it.

There have been some "spec" housing built but most of it has languished on the market. Eventually the listings being cancelled. If the contractors knew before buying the lot that they would be stuck with a home, would they have bought the lot at that price originally?

And that means that while you may have to pay $750,000 for a building lot in Oak Bay - that doesn't necessarily mean that its market value is $750,000.

The best way to estimate market value for infill housing is using a development cost method. Superimposing new construction on the lot. Estimating the value as if completed and deducting soft and hard costs from the hypothetically completed home price. Comparing vacant lots to properties with nominal houses doesn't help much.

When you do this, you derive a substantially lower land value. The builder gets pissed off - tells you that he can't find a lot in Oak Bay for this price, set his dog agent and loans officer on you and then builds the house anyway.

And you get new homes like on Morely and Ryan left finished and vacant for months and months waiting for that one badly informed buyer from Alberta to come by.

"Price" goeth before the fall

Marko said...

In otherwords very little "spec" housing.

199 Olive St - Spec
2648 Cedar Hill - Spec
316 Lillooet Hts - Spec
1058 Monterey Ave - Spec
893 Victoria Ave - Spec
3315 Cadboro Bay - Spec

Etc...

There are also quite a few specs builds that have sold without going to MLS®. I've sold three spec builds for my father where we never uploaded to MLS®.

There have been some "spec" housing built but most of it has languished on the market.

And you get new homes like on Morely and Ryan left finished and vacant for months and months waiting for that one badly informed buyer from Alberta to come by.

It comes down to price. My father built a spec just a few blocks over from the Morely homes on Shakespeare and we had over 40 showings and sold it before we had occupancy or landscaping finished. There is certainly no languish in the core for a new spec home if you have a good product at the right price. The Morely homes started out over $1.1 million which was pushing it for the area. I've been through them and they are well built at 999k they will have more interest.

The reason you sometimes see new homes "languish" is it is relatively cheap to carry them and you also usually have little competition so you just hold out until you get top dollar. It's not like 5 other spec homes will go up in the vicinity (unlike Langford).

I think Gardiner's Green is a perfect example of slowly and steady sales -> http://www.gardinersgreen.com/site_map.html

CS said...

The homes that are being built are under contract. The owner realizing that building new is not economically justifiable and if they had to sell they would sell below cost...

If so many houses are being torn down and rebuilt under contract, it surely makes sense for a contractor to tear down and build a spec home. A house that's already built, after all, is going to be more attractive to many people than a house you have to finance for 6 to 12 months or more during construction. And, in fact, there have been several spec houses built in N. Oak Bay recently including Heron St, Dewdney Avenue and Cadboro Bay Road in the Uplands.

Latest tear-downs in N. OB include Nottingham at Dorset and a house on Lansdowne that backs onto Uplands Park (two other re-builds under way on the opposite side of the St.). Side by side houses on Lincoln Road are now scheduled for tear-down.

Far from there being a lack of demand, there seems to be a mania for new houses in that part of OB.

Marko said...

Tuesday, May 20, 2014 8:40am

MTD May
2014 2013
Net Unconditional Sales: 406 659
New Listings: 909 1,428
Active Listings: 4,578 4,783

Please Note
Left Column: stats so far this month
Right Column: stats for the entire month from last year

koozdra said...

Millions face becoming ‘mortgage prisoners’ as rise in interest rates could trap to 2.3m homeowners

Rates rising? I'm glad we don't have worry about that here.

Just Jack said...

Let's see if we can find the Oak Bay Mania for new homes.

Currently there are 11 homes for sale in Oak Bay that were built after 2009.

There have been a total of 19 sales in Oak Bay of homes built after 2009. That's 19 out of a total 39. And that's over 4 1/2 years. With most selling $100,000; $200,000 and $300,000 less than the original asking price.


Take the last sale in Oak Bay along Monterey Avenue. Originally listed at $1,995,000. 596 days listed and finally sells at $1,400,000. How can a contractor misjudge the market by that much!?

When you build a house you have to declare a value for the building permit. BC Assessment has that information when its compiling the rolls. So it isn't difficult to guess which homes are selling below cost.

No mania. Yo want to see what mania is - go out to the Westshore.

Marko said...

Let's see if we can find the Oak Bay Mania for new homes.

Currently there are 11 homes for sale in Oak Bay that were built after 2009.

There have been a total of 19 sales in Oak Bay of homes built after 2009. That's 19 out of a total 39. And that's over 4 1/2 years. With most selling $100,000; $200,000 and $300,000 less than the original asking price.


Take the last sale in Oak Bay along Monterey Avenue. Originally listed at $1,995,000. 596 days listed and finally sells at $1,400,000. How can a contractor misjudge the market by that much!?

When you build a house you have to declare a value for the building permit. BC Assessment has that information when its compiling the rolls. So it isn't difficult to guess which homes are selling below cost.

No mania. Yo want to see what mania is - go out to the Westshore


What the homes sell below original asking price is almost completely irrelevant. You are making a false assumption that if something sells $200,000 below original asking the builder has lost money.

For example, if the Morley homes sold hypothetically for 950k you would note that the price dropped 200k; however, I would note that 950k would be the highest selling price ever in the neighbourhood by 100k.

The declared value of the permit is the a useless in terms of gauging anything.

This is how things work in real life. Permit fees = huge. Permit fees = based off a percentage of declared permit value in the majority of municipalities. How accurate do you think the declared value is?

Just Jack said...

I'm making the assumption that if the properties sells below assessed value the builder has sold at a loss.

How accurate do I consider the declared value? My assumption is that the declared value would be on the low side. Still reasonable - but on the low side. And that just underscores my reasoning that if the property sells below assessed value - it likely sold below builder's total cost.

Those large differences between list and sale price point more to an inexperienced real estate agent and/or builder.

But - I'll make it easy for you. Not including subdividing a lot into 2 or 3 lots because then your just trying to F%^ around.

-You can't buy a property in Oak Bay today, build a spec home and sell at a profit. If you could, then the builders would be burning diesel and crushing the old shacks street by street.

And that just ain't happening.

Marko said...

Using assessments is pretty much useless in my opinion when it comes to new homes.

2529 Shakespeare - sold for $859,900 and assessment $731,000.

2636 Scott Street - sold for $821,500 and assessment is $752,000.

Both have identical lots and land value component ($366,000) but 2636 Scott Street has a higher attributed improvement value when in reality 2529 Shakespeare has the superior improvements (reason it sold for almost 40k more).

You could throw 100k in custom millwork at a brand new home and the improvement value would not change.

The other variable you can't count on with brand new homes in the near term is you don't know if the assessment is reflective of a 100% completed home or maybe they did it when it was 50% or 60% completed.

You can't buy a property in Oak Bay today, build a spec home and sell at a profit.

I disagree with that. Just look at 893 Victoria Ave. If you wait for the right teardown there is potential to make money. There isn't enough of a margin to tear down anything livable but there is on run down homes.

Leo S said...

Take the last sale in Oak Bay along Monterey Avenue. Originally listed at $1,995,000. 596 days listed and finally sells at $1,400,000. How can a contractor misjudge the market by that much!?

Totally agree. It doesn't mean they lost money at $1.4M, but they definitely didn't expect that price. They didn't list their house for half a million too much because they enjoy carrying the financing for almost 2 years. The market sucks and maybe some people are making money on a few individual builds, but the idea that there is a mania is laughable.

Marko said...

and for that Monterey example you have Cadboro Bay. Asking $1,998,000 and sold for $2,000,000 under construction. Builder won't have to carry any financing post construction.

Marko said...

I do agree with Jack that in probably 50% of situations owner-builders don't allow prices on tear downs in Oak Bay to drop enough to the point where a builder can make a decent margin spec. I think that is why we see a mix of custom and spec.