Tuesday, April 21, 2015

April 21 Market Update

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.



April 2015
April
 2014
Wk 1Wk 2Wk 3Wk 4
Unconditional Sales102
264
479
664
New Listings223561879
1521
Active Listings375838703894
4404
Sales to New Listings
46%
47%54%
44%
Sales Projection--726810

Months of Inventory
6.6


Real lack of new listings coming on out there.   Last year at this point we had somewhat fewer sales (436) but quite a few more listings (1073).    A year ago sales flagged a bit and I thought maybe it was the beginning of the end of the trend of YoY improvements, but here we are a year later with no sign of it stopping yet.

255 comments:

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CS said...

And now you get 10k a year in your TFSA!

Until after the next budget when the Trudeau government will, as promised, cut the allowance back to 5K.

Unknown said...

How much for home maintenance?

Here is one approach.

1. Depends on condition.
2. Generally $1,000 per year for maintenance and $.67 per square foot for capital reserve on average for a single family.

http://www.biggerpockets.com/forums/48/topics/143797-how-do-you-determine-estimated-maintenance-costs

Marko said...

Playing condo king in an overvalued market based on record low interest rates is not the safe game some people make it out to be.

Have to take calculated risks to get ahead.

Unknown said...

"Have to take calculated risks to get ahead"

Yep. Emphasis on calculated.

dasmo said...

How are you calculating your risk / chance of failure?

Marko said...

How are you calculating your risk / chance of failure?

Not calculating risk of failure until 35 yrs old. I figure right now even if I went completely bankrupt I would be totally fine as long as my health is fine.

After 35 I'll start considering risk of failure.

Marko said...

If mortgages went up to approx. 9 to 11%, I wasn't unable to unload any of my assets, and rents remained static, I think the longest I could last is about two years before bankruptcy. However, every year the risk decreases as the equity builds.

Introvert said...

I'm sure Marko really appreciates all the concern and advice he's receiving!

nan said...

I looked at it a little differently than Marco does. My goal was to accumulate $250,000 in unleveraged liquid assets by 35, and not ever lose it.

In a diversified equity portfolio compounded out @ 7% for 30 years, it equals $2,000,000 in real dollars that yields about $80,000 in income @ 4%. Add CPP to that and I'm spending $100,000 every year in todays dollars from 65 until I die. Maybe I'll save more and retire earlier.

So I ended up making that number and beating it by about 30k by 35 (last year). My retirement is now paid for so I can focus on home ownership for the next 5 years and then burn everything I make between age 40 and 65 on education for my kids and fun stuff while I'm young enough to enjoy it.

With my plan, bankruptcy would kill. As a consequence, I own no leveraged real estate investments.

Anonymous said...

Tough to get a diversified 7% in a world of negative bond yields.

ie. We may endure another decade like the 2000s of -.35% per year or a -3.4% total real equity return for ten years.

Anonymous said...

At least with RE we achieved near 100% real returns.

Anonymous said...

Whoops, I meant near 1000% returns as they were leveraged.

nan said...

"Tough to get a diversified 7% in a world of negative bond yields."

Why would anyone buy bonds? the S&P is up over 200% in the last 5 years. Factor in the decrease in $CAD and it's even greater. Unleveraged. On top of that, great companies peel out dividends as well which are on top of capital gains. Total return on average over 30 years has been 7% after inflation over the last 200 years. There is no reason to believe that this won't continue.

On top of that, this is a Victoria blog. Unless you bought in Victoria before 2008, you haven't made anything. leveraged or not.

When I picked my wealth accumulation strategy 8 years ago I felt that the probability of house prices going down was high and that the probability of the stock market going up was also high. This was a calculated risk.

I used my brain while most people let themselves be dominated by fear and greed and unthinkingly borrowed their brains out before they "were priced out forever". This was not a calculated risk.

Fortunately for the house buyers out there, that trend was so pervasive it put the government in a position where it had no choice but to support housing.

Without outsized government support and artificially low interest rates, house prices would be much closer to what they are in the US. I would still have won big in stocks but housing wealth would have been decimated by a truly (CMHC) free market.

I think Van and Vic would still remain relatively high as did Sanfran and other "nice places to live' in the US, but Winnipeg and other marginal Canadian cities would have dropped by half.

I see no value in bragging about luck like many who "won" in housing due to factors that were out of their control.

My wealth was accumulated as a result of solid decision making, disciplined saving, hard work and calculated risk taking. As a result, at 35 I know I will retire by 65 without any trouble and I feel really good about that.

Unknown said...

You should feel good about that. You did very well and you have a lot of security for your future at a young age.

Leverage in housing does give higher returns unless it goes the other direction - then is dramatically worse than savings plus time and compound interest.

Justrenter said...

Wow, Nan, this is exactly what we have done!And have the same plan as you!Can you believe it, they say that renters are losers!!!

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

As a result, at 35 I know I will retire by 65 without any trouble

I'm not sure you should be that confident if you're only at 280 by 35. Our generation could live well past 100 and you don't want to be eating alpo later in life.

My wealth was accumulated as a result of solid decision making

And yet you haven't considered holding bonds. Were you aware that many bond markets have outperformed Canadian & world stock markets in the past 5 years, 15 years, and likely your entire lifetime.

nan said...

@ Chris - a 4.0% withdrawal rate will last 30 years under 95% of pre existing 30 year stock market periods which will bring me to 95 and probably death.

The probable range for a 4% withdrawal rate and $2,000,000 starting nest egg at the end of a 30 year retirement is between ($800,000) and $11,300,000, 95% in my favor.

This means that had I retired in a randomly selected year over the past 145 years, I would have run out of money in only 5% of possible 30 year periods. I would have had plenty of money left in 95% of possible stock market sequences.

A 4% withdrawal rate would fail in only 6 of 115 cycles. Again, another calculated risk.

At a 3.0% withdrawal rate, the portfolio will last 50 years under 100% of possible scenarios.

What does all that mean? I can say with as high a degree of certainty possible that based on all currently available information today that with my current net worth and market prospects that there is a 0% chance I will be eating anything less than human food in retirement.

see: www.firecalc.com

Oh and I do have some bonds, but just for emotional reasons to help with market volatility. With interest rates where they are, there is little interest or capital appreciation available in the bond market today. It just makes me feel better to see the 5% of my portfolio that is in bonds go up when the stock market stumbles a bit. I have a bit of gold & silver, some preferreds and some REITS too for the same reason - diversification is important for emotional resilience in a volatile world.

That being said, you should know that bonds (especially long ones) get destroyed in rising rate environments, which is almost a certainty any more than 2 years from now. So maybe take a look at your own portfolio?

Also, you might want to read a bit more to flesh out your understanding of personal finance - I would worry that with your spotty knowledge and loud mouth, you might be influencing others into making inappropriate financial decisions, which I would also tend to discourage.

Leo S said...

As a result, at 35 I know I will retire by 65 without any trouble

I'm not sure you should be that confident if you're only at 280 by 35. Our generation could live well past 100 and you don't want to be eating alpo later in life.


I don't think you've done the math, while clearly nan has.

As for $280,000 by 35, that is ahead of the vast majority in Canada. Probably the majority of people don't have that much by 65 and rely almost entirely on CPP/GIS/OAS.

Leo S said...

To back up that last statement. The median family between the ages of 55 and 64 (close to retirement age) has assets of $237,000 outside their principal residence.

Anonymous said...

I can say with as high a degree of certainty possible that based on all currently available information today that with my current net worth and market prospects that there is a 0% chance I will be eating anything less than human food in retirement.

Sounds lovely. Just wanted to make sure you had your numbers crunched.

spotty knowledge and loud mouth

Come now Nanny, no need to get your spotty knickers in a knot.

Unknown said...

Well, $237,000 outside of principal residence means $687,000 net worth.

That is a far cry from $237,000 without a paid-off residence, but nan has 30 years of compound interest coming.

My bet is nan will have the two million and a paid off house by retirement.

Unknown said...

Should be $687,000 in Victoria - less in other areas.

Leo S said...

Well, $237,000 outside of principal residence means $687,000 net worth.

$617,300.

And you can't live off the house. A $500,000 paid off house has a return of only about 2-3% in avoided rent.

CuriousCat said...

Wow nan! Good for you! You are in an enviable position. If only I had started paying attention to this stuff 10 years ago, who knows where I'd be now. Turning 38 on Monday and feel like I've gotta play catch up! I *just* opened up a Questrade account and invested my first $5k in a TFSA. This blog is the direct reason I've had my eyes opened to diversification, learned about garth turner's blog and feel like I've taken control of our future! Thanks and keep the good stuff coming!!

Unknown said...

I used $550000 as the figure.

You can sell, rent out, suite and rent out or reverse mortgage a home. It is an asset that should be counted. Without it you are in a far different position.

Sell and invest with your principal amount and you are getting $28,000 a year plus OAP and CCP. Enough to live.

Without this asset you are paying rent and can only withdraw approx. $8000 a year. Very different lifestyle.

caveat emptor said...

A $500,000 paid off house has a return of only about 2-3% in avoided rent.

3% after tax return since Canadians aren't taxed on imputed rental income. Not great, but not terrible either considering prospective returns of other asset classes

freedom_2008 said...

I had only $20K to my name when I turned 35, I still managed to retire at age 52 (have no pension). Had owned 3 houses during that time, but no suites. Had gained some on house selling, but nothing major, and what we gained just made up for stock market losses (when high tech markets crashed).

What I am trying to say is that, if you are a good saver and have a good paying job, you would be just fine to start fresh from your mid 30s, and you don't must wait until age 65 to retire.

dasmo said...

Good work Nan! I've always thought it better to hold of on a mortgage before 30 to maintain flexibility. No rules are hard and fast though.

Marko said...

I looked at it a little differently than Marco does.

Earlier in the thread I noted...

I think priority should be maxed out RRSPs and TSFA, beyond that real estate not a bad option.

If you start young and max out your RRSP room and TSFA room every year $250k unleveraged by 35 can come from those two registered accounts.

All I am saying, is beyond the registered accounts right now due to ridiculously cheap money combined with tight rental market I am leaning towards real estate versus unregistered investments.

Key to it all is to start young. I've had so many friends blow their savings on their weddings, cars, etc., versus getting the ball rolling. Once the ball is rolling it becomes a easier to accumulate wealth.

Unknown said...

I agree.

RRSPs are good because of the tax break on employment and investment income and TFSAs because of the tax break on investment income. Given that we are going to retire early withdrawals will be tax exempt or taxed at a low rate in future.

For me RE makes more sense for unregistered investments due to the leverage factor combined with low interest rates.

Also, I like it. I pay attention to it and manage it. I don't have the same interest in stocks - at all.

I prefer something tangible that I can add to with strategic improvements. I read about RE for fun and I enjoy seeing progress.

I don't, as many others do, have the same feeling about the stock market.

caveat emptor said...

Key to it all is to start young.

Or you could travel the world and do crazy jobs while you are still young and then work hard later.

It's all about priorities.

dasmo said...

What caveat said...

patriotz said...

Generally $1,000 per year for maintenance and $.67 per square foot for capital reserve on average for a single family.

I assumed $3K/year maintenance when estimating the ownership costs for my house, and it's not an old timer and it's not rented out.

I think $1K/year for a rental house is dreaming. Unless "capital reserve" means paying for major maintenance items like a new roof, furnace, etc. and still I think it's a bit low.

Unknown said...

$1000 is for maintenance and .67 per square foot is for capital reserve.

I think they mean what I would call a replacement reserve for larger capital items that wear out periodically.

http://www.bchousing.org/Partners/H_S_Op/Financial/Replacement_reserves

On that note, BC Housing has a free detailed spreadsheet available on their website for calculating appropriate replacement reserve amounts.

They do it the same way I do - based on component useful lifespan.

Introvert said...

Unless You Are Spock, Irrelevant Things Matter in Economic Behavior

Marko said...

Or you could travel the world and do crazy jobs while you are still young and then work hard later.

Spent three months travelling in Europe when I was 21 and just spent 5 weeks in Europe last year driving a M4 around the alps and sailing in Croatia amongst other fun acitivies, and I've gone out of country for more than a month four times between 21 and last year’s trip...getting started young in terms of being financially prudent doesn't mean you have to live in a cave like a hermit.

I think the biggest thing to getting ahead fast financially was living at home from 21 to 25. On my VIHA income I was able to start investing when the market tanked in 2008/2009, paid for my master tutiton, travelled, and started up my real estate business.

Where I saw a ton of people go sideways is they secured a 60-80k job and then they rented a place for $1,200/month, car lease $400/month, expensive hobbies, don't have enough money to upgrade schooling or invest (therefore their income remains static), or they do something stupid like they save up 50k and then they blow it all on a wedding instead of buying a house first.

Marko said...

Monday, May 11, 2015 8:00am

MTD May
2015 2014
Net Unconditional Sales: 270 714
New Listings: 521 1,509
Active Listings: 3,984 4,672

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

reasonfirst said...

"Spent three months travelling in Europe when I was 21 and just spent 5 weeks in Europe.."

rookie :-)

Johnny-Dollar said...
This comment has been removed by the author.
kabloona said...

Garth weighs in on what's driving Victoria real estate prices:

http://www.greaterfool.ca/2015/05/12/the-frauds/

"....In fact, one of the few real estate boards collecting data on buyer origination (as I have referenced before) is just across the ditch, in Victoria. No, it’s not Vancouver in size, price or demographics. But it does give us an accurate snapshot of where area buyers are coming from. And it ain’t Guangdong."

Curly Fry said...

yikes!

nan said...

Garth is usually astute enough and quite funny but that Van/Vic comment is simply ignorant. He might as well be comparing Vancouver with Portland, Oregon.

caveat emptor said...

Foreign buyers aren't a factor in Vancouver becuase they aren't a factor in Victoria. Stunning logic Garth.

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