April 18 Market Update

Weekly stats update courtesy of the VREB.

April 2017
Apr
 2016
Wk 1 Wk 2 Wk 3 Wk 4
Unconditional Sales 255 464
1286
New Listings 419 681
1590
Active Listings 1661 1652
2594
Sales to New Listings  61% 68%
81%
Sales Projection 990 875
Months of Inventory

2.0

A significant dip in the sales rate last week, that’s probably due to the long weekend, which in a government town is 4 days long so we only really had 4 business days in there.   I would expect quite a few sales to pile up today.   We are approaching a third fewer sales than this time last year, which along with the approximately third less inventory makes conditions quite similar to last year.

Inventory is down from last week again.  Inventory gains were very low last year as well, but the difference was that sales were 32% higher and we had some more properties on the market to cushion the blow.  This year we will be moving into the fall market with essentially nothing for sale.   Compared to a more normal year like 2015, we have added only about a quarter as many properties to the market in the spring season as we usually do.


Continue reading

Fear and loathing in Victoria

No I’m not talking about a pot fueled housing tour (although there’s an idea…), I want to discuss the impact of fear on the housing market.

If you’ve been tuned into the news, hardly a day goes by without a high profile warning about our national housing prices.   Obviously the focus is on Vancouver prices that amazingly seem to have returned to growth, and Toronto prices that increased 33% last year.  No matter how important we think we are in Victoria, on a national scale we’re about as interesting as Hamilton: just another town caught up in the maelstrom of a bigger bubble.

There is no doubt that various levels of government are hyper focused on the problem right now because the anger it is creating has the potential to unseat them from power.   So what happens if the legs get swept out from under the Toronto and Vancouver markets?  How might it affect us here in Victoria?

If a policy change is introduced it could take out foreign buyers or first timers or speculators.  But what if Vancouver and Toronto simply collapse under their own weight?  It won’t change the fundamentals in Victoria but it will radically alter market sentiment.   Suddenly the belief that housing only appreciates goes up in smoke.  Greed turns to fear.  And fear can have a powerful effect on the housing market.

We last saw this in 2008 during the financial crisis.  Despite the financial crisis not having a big effect on local employment, the market completely dried up as the double digit daily declines in the stock market hit the news.  In the end all that was left were those sellers that had no choice but to sell becoming ever more desperate to unload their houses in an environment that felt like the end of the world.   Over 8 months the median detached house lost some $70,000 (12%) of it’s value while the median condo lost $50,000 (16%).   

Of course it bounced back just as quickly as it dropped, once the market realized that nothing had actually changed in Victoria, and now mortgages could be had for half price.   This is as close as the housing market gets to a flash crash, and it played out over 18 months.  Plenty of time for a brave investor to recognize the opportunity and be greedy while others were fearful.

I believe that when Toronto and Vancouver turn downwards dramatically (I’ll avoid the word crash), it will be felt here in Victoria.   Will it be enough to change the rosy perception of housing as an investment for longer, or will it be another blip?  Will it be another opportunity for investors with foresight, or will it be a bull trap now that the world is weary of quantitative easing?   I only know it’ll be entertaining to watch.

Happy Easter everyone.

April 10 Market Update

Weekly stats update courtesy of the VREB.

April 2017
Apr
 2016
Wk 1 Wk 2 Wk 3 Wk 4
Unconditional Sales 255
1286
New Listings 419
1590
Active Listings 1661
2594
Sales to New Listings  61%
81%
Sales Projection 990
Months of Inventory

2.0

Holy moly 470 comments on that last post.   That’ll teach me to leave the same post up all week.

Thanks to everyone that came out for the HHV meetup last Friday.  Pleasure meeting you all.  As the event tagline promised, there was beer, housing, and lots of bullshit.    Let’s do it again sometime.

We are now getting extremely close to the conditions of last year.   While we still have some 36% fewer properties on the market, sales are down 23% as well, so the months of inventory are about the same, and will likely match last year by the end of the month.   We are also no longer posting stronger sales/list ratios compared to last year.   It seems there is a limit to the level of activity that can be sustained, and this is it.

Marko Juras mentioned at the meetup that activity is down somewhat in multiple bid situations.   Places are still going for big over-asks, but now there might be half as many bids as last year.   Buyer exhaustion?  Or just a response to the higher asking prices?
Continue reading

March Update

March numbers are out and things aren’t getting any better out there.  Let’s look at the headline numbers for sales, inventory, and new listings.

In short:

  1. Inventory is at a record low.  We’ve never seen a March with this few listings available for sale.  Nevermind the dregs.
  2. New listings are about average.   A bit below average perhaps for this time of year but not catastrophically low.  With all the stories about how people are afraid to list their houses, it’s good to keep some perspective.  New listings were significantly lower every March from 1996 to 2005.
  3. Sales are down 17% from last year, but still abnormally high.  We are off the huge sales pace from last March, but it’s the second highest on record.  Last seen at this level in March, 2005.

It all adds up to months of inventory at record lows and the resulting predictable effect on prices. Continue reading

Foreign buyer tax still working as expected

The foreign buyer tax has been in effect for 8 months now, and despite a lot of hand wringing from the real estate and construction industry, as well as fear from Victorians that it might push international buying activity to our market, it seems to be working as intended.

The government has stepped up the timeliness of the data and they are now no longer 2 months behind publishing stats their property transfer tax transactions.   So here is the latest data for Victoria and Vancouver.   In percentage terms, we can see that outside of the spike in October, foreign buyers have settled in around 4.5% of the market.   Not insignificant, but also not a huge number (there were only 25 foreign involved transactions in February).

Looking at the sales volume, the picture is much the same, considering that the sales volume should be decreasing into the winter so the decline is likely more seasonal than indicative of a slowing of interest. Continue reading