Timing the Market?

Is it possible to determine the best time to buy or sell in the Victoria real estate market? Obviously, personal finances play a huge factor in terms of down payment, affordability and risk. If you the have the luxury of waiting – is it worth it?


Unlike the stock market, housing prices are slow to react to interest rates – with sale prices often taking months to years to reflect rising or dropping interest rates. A sustained period of lowering interest rates (such as 1990-93 and 2001-04) caused prices to rise. Conversely, a sustained period of increasing interest rates (such as 1981-84) causes prices to drop. The past 5 years of interest rate (and economic) uncertainty has resulted in a relatively flat market. When a glut of new listings come on the market, there is a delay in any price drops – particularly if owners are reluctant to sell for less than what they paid. (Perhaps this is what we currently see in Calgary?)

A first-time buyer approaches the market differently than an owner who wants to sell their current residence and then buy a new place – moving up the “property ladder”. When moving “across” the market, does it make sense to ever wait? How about someone who is selling their home in a city with “peak prices” (such as Vancouver or Toronto) and moving to Victoria where prices remain comparatively low? Maybe then is makes sense to hurry up and sell?

Hindsight is always 20/20, so it’s easy to look back and see when there were good buying opportunities (1969, 1986, 2002). The question is …

Is it possible to look ahead and predict a good buying opportunity? What do you think?

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99 thoughts on “Timing the Market?

  1. JJ is ABSOLUTELY right. Mentality right now is trying to buy before someone else buys it; based on family incomes leveraged to the max.
    I’ve been personally following new homes in OB and prices range from 1.2MM to 1.8MM on standard size lots and these homes have been on the market for 90 days plus, just re-listed again so it seems fresher.
    Don’t kid yourself, property right now is extremely expensive no matter what metric levels you compare them to. It is relatively “cheap” compared to Vancouver and Toronto; but that is about it. 99.999% of the world’s real estate is cheaper than Victoria.
    BTW, predictions of South OB being next West Van, that is a fallacy; the lots in West Van are larger and have great views. South OB and Uplands has a bunch of homes in the 1.2 to 1.6 MM range that haven’t moved @ all.
    Victoria is, was, and will always be a local + retirement market. It will always be a solid investment BUT WILL revert back to the normal deviation of prices. Prices might go up another 15% to 25% in the next 3 years; but IMO that is interest rate driven. 15% YoY appreciation over 10 years is not going to happen.

  2. I don’t know about ROE but ROI is calculated as your overall return on your initial investment.

    Financing costs are deducted from profits but leverage is not segregated out – you get to keep the gains on everything. There is no artificial inflation, only the bottom line return on your initial investment which is not just mortgage pay-down but appreciation on the asset as well.

    This investment scenario is much more attractive than other investments because of the return on the leveraged portion. Conversely, sell at the wrong time and your return could be much worse as the losses also accrue to the leveraged portion.

  3. So what were you expecting for $117,000? A penthouse at the Erie?

    You’re getting a place to live in one of the best locations for the cost of a tricked out Dodge Ram truck.

    And you’re concerned about when the original lease ends in 50 to 60 years from now!

    You’ll have been in the ground for decade before these buildings are demolished.

  4. The ROE would be limited to mortgage paydown less some costs of disposal. But what you’re doing is some creative financial engineering by using debt to inflate the ROE. Thereby making the investment appear to be more attractive when the ROE is stated in isolation from other similar investments. However, relative to the industry your ROE might be shit.

  5. I think there are some very cheap places to buy in the city. Great locations in Fairfield and James Bay for under $200,000. Some with panoramic water and city views from the 14th floor.

  6. Most people will care about 14% tax free compounding on their money each year over a 10 year period assuming $120,000 down on a $600,000 home and 4% lost opportunity costs (after tax) on your $120,000.

    I’d take a $600,000 increase over ten years.

  7. Doesn’t really matter if the market doubles in 10 years if you paid twice as much as you should have today.

  8. I wouldn’t assume many south OB buyers require financing. Who knows, the buyer could be the seller of the (4.1M) Van house in the link above. I overheard something walking downtown yesterday that I haven’t heard in a long time “I can’t believe how cheap property is here.”

  9. There are only 5 homes listed within a half kilometer radius of this property. On average for the last six months 5 homes in this area have sold each month. At the same time another 27 were listed. Days on market are 23.

    That’s less than a month of inventory and a new listing to sales ratio of 27:31 or less than 1:1 and a DOM of 23.

    That indicates an irrational market that leads to multiple offers and bidding wars.

    In this kind of market you’re not buying based on the worth of the home. You’re buying just to beat out the other guy from buying. It’s the person with the better access to credit that gets this home. The modern day equivalent of two cave men lifting up their loin clothes to see who gets the cave.

    This is a free world we live in. You can bid as much as you like. As long as it is your money to spend.

    The problem comes with bank financing. If a prudent banker had knowledge of how irrational the market for homes in this area had become, then she would increase the amount of the down payment from say 20% to no less than 30% because of the increased risk of a loss on the property when market conditions returned to a balanced position.

    Of course her client could get up and walk over to the competition and she loses the deal. But her competition would get a riskier loan on their books.

    More bankers should be telling their clients to keep their loin clothes down or come up with a bigger down payment. That might shrivel the enthusiasm.

  10. Location and timing the market. I wonder if the buyers of this house will consider they timed the market well or badly in the future. It’s a nice house in Oak Bay with a high end kitchen, but selling at $925,000 and just over $160,000 above assessment, it’s a lot of money to pay. The Seller/s must be laughing all the way to the bank right now.


  11. All the factors are quantifiable and measurable, but the intangible ones are harder to asses the affect on price. For example, one person may think that a large set back from road is great while another person thinks that it is a wasted front yard. Some people love the morning or afternoon sun blasting though their windows; others don’t. The age of house compared with neighbours may be considered and asset to some and a detriment to others. The intangibles all come down to what you personally value in terms of a location.

  12. Good point. I remember reading a study about J.D. Powers and their Sales Satisfaction Index. It turns out that the more money spent on a car, the higher the satisfaction – regardless of the number of recalls, cost of services and malfunctions. It seems like a matter of justifying the expense …

  13. Rising interest rates often lead to dropping prices, but sometimes the opposite is true. A good example of this were the rising prices and dropping interest rates after the introduction of 40-year mortgages, between 2006 and 2008. I took a detailed look at whether housing prices follow mortgage rates a month ago,

    BTW, I’ve never heard a bear bleat, but it’s something that baby bulls (calves) may do! 😉

  14. Don’t get too excited. It only applies to legal secondary suites. A very small percentage of the suites out there. Oak Bay and other expensive areas where secondary suites are illegal are completely unaffected.

  15. I guess they want to keep thing inflated until the economy itself can support prices. This is a surprise. Unnecessary since suites are probably only really prolific in expensive areas… Will they bring back 30 year mortgages next?

  16. The chart for the prime lending rate (which affects variable-rate mortgages) that you linked to differs a bit from the average 5-Year Fixed Rate Mortgage, which follows the pattern that I mentioned in my original post topic.

  17. It just got a little easier to buy a home with a suite. CMHC would only allow 50 percent of your suite rental to be used in qualifying for a mortgage. Well soon you’ll be able to use all of it.

    That’s good news for home owners with suites as it will likely raise the price of your homes. For prospective buyers they have a little time left to buy something with a suite before higher prices negate any of the temporary benefit.

    Real estate agents raise your prices!

    I can hear the chant on Parliament Hill from my office window
    “Four more years, four more years”

  18. Aren’t all of those factors tangible? You can measure them and they are real physical things. I thought the intangible factors affecting neighbourhood desirability/economics might be social status/overall location image, social norms, media, nostalgia, and aesthetics?

  19. Surprising to see west end condos go up 68% from ’09-’14. I know some areas of Van have hardly seen any appreciation.

    Goes to show how incredibly important location is when investing.

  20. One of the cheapest houses I ever bought was for the potential of its location. It only took the removal of about 5 trees for others to see what a great location it was. When I sold it I did use the cheesy catch phrase location, location, location and got more than triple what I paid for it, mind you when I bought it there were squirrels living in it.

  21. I’m not saying that you won’t pay more for one location over another because of the amenities in the neighborhood.

    What I’m saying is when you hear the phrase location, location, location you’re hearing someone justifying a bad decision they made or someone trying to flog a property that has little redeeming features about the house itself. The home is too small, too old, or too unkempt for the price – so you must be buying location. And the worse the house is, the more locations get added.

  22. For instance I bought in Vic west because I could give two craps about social status. My house was a lot cheaper and it was a good move for me. As I like to say it’s the nicest shitty neighborhood in the world. I’ve been watching it gentrify but I’m not sure it will ever have the social status of a neighborhood like Fairfield. VicWest has good bones but not as good bones as Fairfield…

  23. Social status is another element of it. Birds of a feather flock together. The mayor living in Fernwood probably does actually help property values there. To deny these things is foolish. You have to consider them if you’re giving value to something. Otherwise your job would be easy JJ. Not all locations are created equal. Sooke has its thing to offer. This is why a waterfront property next to East sooke park will be worth more than a small lot has an 80s crapper house close to downtown Sooke…. Both have locations. true, but even with your stick in the mud you have to admit that one of these locations is better than the other…

  24. The one attribute common to all real estate is location. Every property has one.

    The phrase location, location, location is something different. It is meant to show social status. That seems to be very important for some people. It’s also a way to rationalize an expensive purchase to yourself.

  25. If, as a homeowner, you are not using ROI as one of the factors to determine value for your primary residence that is a personal choice that may be based on a value system that looks at “home” as a non-investment, or may be based on lack of knowledge or focus on the longer term.

    Objectively, a primary residence is likely the biggest investment you’ll ever make if you buy in Victoria. It also comes with the best financing terms you will ever get. Try borrowing for an investment property or business to see the difference.

    I never stated appraisers use ROI as a valuation of residential real estate, although they may choose to apply some commercial techniques to homes with suites.

    I stated that neighbourhood location factors are used as one determination of value by appraisers and that this is not simply a personal choice with no impact on valuation. I also stated that ROI is a measure of the location location location impact over time.

    Purchase price is not the location factor I pay attention to as you need to buy in today and affordability comes into play – there is only the deal today. A house in Fairfield might be more expensive than Sooke for the same place, but I still have to buy now. The higher purchase price is because of location but that is a potential negative to me unless the ROI is also higher over time.

    The real question for me is what is going to get you the best ROI where you want to live? In Greater Victoria a place with a better location at the same price point will imo (looking at all location factors) and if it has a suite you will have less trouble renting it out. Location is one important measure of desirability. Appreciation rate is correlated with this to some degree.

    However, if you are looking for a pure investment property based on ROI, Victoria is not the place to be.

  26. There is also that. Good locations can go bad and bad good. Nothing in this world is forever…. Fernwood is a great example. The price is reflecting its rising desirability. It still has its scars but the village rejuvenation did wonders for the area. Fernwood village is better than Cook Street…. Strong community feel, walk to town etc…

  27. Yes except I was talking about INTEREST RATES and their correlation with housing prices that all bears bleat about.

  28. Location, location, location is very simple.
    The highest prices per neighbourhood determine if it is a good location or not
    Could be some outliers, but there are reasons why some of the aforementioned neighbourhoods have always been more expensive then others. The only exception is Fernwood; 30 years ago it was viewed as less than desirable? Central and Vic High vs OB/GH/FF schools? Suddenly it is hip again, but Central and Vic High ranks in the bottom quartile of schools by the Fraser Institute.

  29. The price fetched tells the tale… No one is pumping Fairfield more than Sooke and falsely setting the price high to create desirability. Like I said it’s a reflection. It’s established, wonderful character, great tree lined streets, safe for kids, character homes, close to parks, ocean, beaches, great village, walk to work, flat so you can bike to work, etc. these are quality of life things that humans desire and are quantifiable. People even want to rent there. No problem renting out my shitty house….

  30. You can make an asset or even someone like Taylor Swift more desirable just by marketing. If you tell people over and over again, they’ll start to believe it.

    But only 23 families bought in Oak Bay so far this month. Even though there were over 80 houses listed for sale. It’s pretty clear that not everyone wants to live there. And it wasn’t the price that was keeping them from buying because just as many expensive properties sold outside of Oak Bay than in Oak Bay this month.

    As for Fairfield there are 27 homes listed for sale starting at $550,000, but only 2 have sold so far this month. How desirable is that?

  31. “The ROI’s basic assumption is that commercial real estate purchasers are primarily concerned with securing the right to receive a series of future cash flows, and therefore these cash flows are the key to determining the value of the real property. But residential properties are typically owner occupied and are purchased for their amenities rather than their income producing potential.”

    What this means is that determining an ROI for residential is crap. All you’re doing is finding ways to justifying the purchase to yourself. There is no validity to the use of an ROI for residential properties. You bought the house because you liked the school in the neighborhood or the color of the walls not on what you could get for rent.

    This is explained in the Sauder School of Business text book “Residential Appraisal Basics” Section 2.42 copyright 2008 by the UBC Real Estate Division.

    It’s not my opinion it’s the position of every real estate professional development course from the International Valuation Standards to your local real estate agent’s course.

    Yes you can go through the mental exercise but there is no validity to your findings. It’s just a form of mental masturbation to make yourself feel good about your purchase.

  32. The price/desirability argument again–ah, the memories! An analogy: Honda outsells BMW, but BMWs are more desirable.

  33. The price is set by the market so it is a reflection of desire. A detached home in Fairfield is more scarce and more desirable than a house in Sooke so it sells for a lot more. Plain and simple….

  34. The thread is about location and that means different things to different people.

    In finance, assets can be classified as tangible or intangible. I would argue that “location” can include tangible and intangible factors.

    Tangible location factors:

    • proximity to busy/noisy traffic,
    • nearby new residential construction,
    • shopping opportunities,
    • commute time,
    • schools, etc.

    Intangible location factors:

    • set back from road,
    • house orientation (sunlight),
    • age of house compared with neighbours,
    • nearby parks,
    • presence of homeless people.

    I expect that the tangible location factors affect pricing more than the intangibles.

  35. “But that goes back to my original point there is no location, location, location it all depends on personal life choices and that is different for everyone.”

    Exactly Jack. You buy where you want to live because you want to paint your walls purple or have your own hot tub or build your own man cave, not for ROI, that’s an afterthought and nice if it happens. Most people will be happy that the price doesn’t go down after they buy, especially when you are at the end of the cycle and a frenzied market where you most likely just over paid.

    The thinking patterns here are much too deep. Most humans are much simpler and just want to a place to hang their hat and do what they want with the place. Those assuming ROI is a given are in a for a rude awakening,nothing is guaranteed.

  36. I agree that can be read as a personal attack and it was a bit frustrating to read that response from someone who is an appraiser.

    The real estate appraisal professional standards do not rely on personal choice to analyze the impact of location on a particular sub-market. The CUSPAP rely on detailed market analysis factors, among other things. http://www.aicanada.ca/about-our-profession/cuspap/

    My assumption was that JJ is wanting to create a reaction. Perhaps I was mistaken.

  37. @totoro
    A difference in opinions is fine, but please don’t resort to personal attacks. It degrades the whole conversation…

  38. Yes, as I’ve been repeating, price is not the measure really – it is ROI. Well, ROI as limited by affordability and market timing (for selling primarily).

    It is not about you or any other one person you talk to – it is about the big picture – yes the S word. Stats. Thank goodness for individuality but when we are looking at markets we are looking at overall preferences for the majority. If you are in the minority you will be able to find something that fits you and you may have more choice – but you also might have lower ROI.

    This trend will, IMO, increase over then next 20 years. Fairfield will continue to appreciate faster and hold its value longer in down times than Sooke. Does not make you a happier person if you buy in Fairfield but it might mean an earlier retirement if you plan on selling and downsizing. Or having rental income.

    Your personal life choice to want a farm simply doesn’t match the large cohort who want to buy in Fairfield for other values – which pushes prices up to bidding war levels while your farm may have fewer buyers and lower ROI over a ten-year period.

  39. Enough people work in town so they are willing to pay more to live in town close to all the urban issues. That doesn’t make the downtown location more desirable – just more expensive. If you don’t have to work downtown then there are better locations to live and you don’t have to pay high prices.

    That some on the blog are measuring locations as better than others simply by the price they have to pay is too simplistic. But that goes back to my original point there is no location, location, location it all depends on personal life choices and that is different for everyone.

    Location, location, location can mean waterfront in Sidney or farm acreage in Saanich or a downtown penthouse.

    If they were all the same price – I’d take the farm in Saanich

  40. So what. Again, it is not about purchase price but about ROI. Purchase price is tied to affordability for the same size home but not ROI. Location influences ROI JJ. It is a financial and statistical analysis not your personal opinion. Your views about location are theoretical jibber jabber completely based on no data to show anything.

    Aren’t you a RE appraiser by trade?

  41. You’re missing the point.

    The thread is about location and that means different things to different people. It’s my opinion that just because Fairfield is expensive that does not define it as the “location” where all people want to live any more than any other location. Clearly more people want to live somewhere else than Fairfield. More people buy in Saanich East than Fairfield despite the fact that the prices are similar and the new listings to sales ratio are about the same.

    A lot of people just don’t desire to live in Fairfield. You could actually say that more people don’t want to live in Fairfield than want to.

    If home prices were higher in Sidney – would you want to live there? I don’t think so – because there is a lot more to why you chose to live where you do now, other than the price.

  42. Yes, mostly silly but JJ is right about the Prince Rupert buy if we are switching to pure investor hat and LNG goes through.

  43. ROI is different that purchase price. ROI is the return on your down payment and the money you invest over time. This is affected by, among other things, location.

    See how much money you make after 10 years of owning a $300,000 home in Sooke vs. a $700,000 home Fairfield. And you still have to qualify for the loan even if you have 5% down. And in a market downturn try to sell them both and see how you do.

  44. It’s not that complicated. Location, location location – it may be vague as to what is desirable to different people, but it is clear that certain things are undesirable. Social and urban issues are complex, and although many of us like to think we seek fair and respectful solutions to some of these problems, the vast majority of people want to live away from them if possible:

    -Busy roads, or proximity to busy roads, highways and intersections, especially where vehicle speeds are high
    -Areas near other sources of obvious noise (busy bars/nightclubs, sports stadia, etc.)
    -Distant locations from a city core, especially more than 45 minute commute (sure it’s nice to live in the country, but most people need to work in town)
    -Proximity to real or perceived hubs of criminal activity (homeless shelters, areas with lots of drug use, drug use garbage, crack houses, gang houses, known prostitution – fairly or unfairly, people want to avoid these areas)
    -Streets dominated by poorly maintained properties (could indicate renters, general poverty, squatters – again, no judgment, but these tend to decrease value)
    -areas near gas stations or heavy industry (usually because they are busy/noisy, but also because of contamination, truck traffic, smells, etc.).

    So the opposite of these things – safe, fairly quiet, convenient locations that have mostly well-maintained homes – these are the most desirable overall.

  45. Come on JJ don’t be silly now… There are 2087 house listings in Sooke and 354 house listings in Fairfield. So me thinks there is a much stronger sales to listings ratio in Fairfield than Sooke….

  46. As a teenager in the early 80’s, I remember most weekends hopping on a bus and roaming around downtown Victoria. Yes, there was some panhandling and a few winos near Douglas and Yates … after sunset, the prostitutes would frequent lower Government Street. However, it was generally a safe place for a kid and I don’t ever recall being worried about my personal safety.

    With the systematic shut down of many BC Mental Health facilities during the 1990’s – the displaced population became homeless transients living “on the street” in Vancouver and Victoria. It’s no wonder that “among the 200,000 people in Canada homeless every year, two-thirds have a history of mental illness or substance abuse.” [article: Globe and Mail]

    To have such a large homeless population in Victoria shows that we, as a society – have failed our fellow citizens. “Fixing” the issues is not easy and will take considerable money and time. Just Jack, I think that your proposal to avoid a permanent tent city by rotating the homeless through various parks is a great idea (for the short term). Totoro, I totally agree with your suggestion that “It seems the only long-term solution that could work would require more federal funding for housing and services. It probably would save money given the health and policing costs of homelessness.It probably would save money given the health and policing costs of homelessness.”.

  47. Location is entirely subjective.

    291 houses were bought in Sooke in the last 12 months compared to 113 in Fairfield. Which area is more desirable? More people have chosen to live in Sooke than in Fairfield. Since all you need is 5% , the difference in the downpayment from buying in Fairfield and Sooke is minor.

    Your mistake is using price as the measure of desirability. It’s a bias that you have in believing that if something is expensive then it has to be more desirable The more expensive something becomes then the greater the number of people that must want it.

    Hong Kong is the most expensive city in the world, therefore you should be willing to give up Victoria for Hong Kong with no hesitation.

    if offered the choice would you live in Hong Kong for the rest of your life? You would be living in a much more expensive home than the one you have in Victoria.

    You probably wouldn’t – because location is not just about what a house costs.

  48. Looks like construction of the first LNG project (36 billion!) will start in September. Get ready for a big dose of HMM alongside our HAM.


    Marko’s bang on. I always look for the smelliest shacks in the best location. Another to look for is where the money’s flowing… there’s over a billion in major projects proposed or started in downtown Vic. Condos or houses within walking distance to city hall will do well.

  49. Actually, frequent sales do hit wealth accumulation. The transaction costs are high. Buying well the first time and staying in the same house or converting a primary residence to a rental may be better strategies long-term.

  50. In the Millionaire Mind (a book about America’s wealthy)


    The author studies characteristics correlated with the accumulation of wealth in North America. A reasonably important element of wealth accumulation is real estate. The author describes the ideal neighborhood for accumulating residential real estate wealth as being essentially Oak Bay/ Fairfield/ Gordon Head/ Fernwood. Wealthy residents, older houses, desirable amenities, established community, quality public schools and what’s important – zero speculation as to what the neighborhood could/ will be.

    The book points out that buying into an established neighborhood is usually a better vehicle for wealth creation than the discount you get on a newer house in an unestablished neighborhood over time because of all the downsides that are ignored when buying something based on “the hope that it will be great later”.

    For instance – everyone knows that the last place that sewage treatment plant is going is anywhere near any of the neighborhoods I mentioned. Why? because those neighborhoods are established. If you just bought into a subdivision out in Langford, don’t be surprised if your house backs on to some undesirable public infrastructure at some point.

    So if we’re talking location, location, location and what that actually means, to me at least one of those comes from statistical wealth accumulation prospects due to the house being in an established neighborhood. The second definitely comes from personal proximity to quality amenties (schools, grocery stores, restaurants, rec centers etc). For me the third one is probably the ability to easily get away from my house and out of the city but I would bet for others, the third one is probably status (i.e. the reaction on friends faces when you tell them where you live).

    Once I have paid for all those things, I can’t afford new anyways but I grew up in a 70 year old house and I don’t remember it being any different than any of my friends houses. What I did remember though was a great neighborhood with lots of kids my age with everything within a bike rides reach and parents that were home everyday at 530 after a short commute who retired after selling their house. So maybe my views are somewhat biased but it seems to make sense to me.

  51. Location is not subjective when we are looking at stats and, more particularly, ROI which is measurable.

    It is not “what does it mean to you”. It is what is desirable in general and will be in demand going forward. It is a big picture kind of thing.

    Compare Sooke and Fairfield for example. Just because some people will prefer Sooke and it has many desirable aspects doesn’t mean that the supply does not outweigh the demand, particularly in tough markets. And within Sooke there will be more and less desirable locations.

    As long as I’ve lived in Victoria the demand has always outpaced supply in Fairfield. This is because the location is more desirable to more buyers even though part of it is in the red zone for earthquake liquefaction.

    And buying the worst house in the best neighbourhood can work very well. You can improve most houses quite dramatically with some effort if the big expensive things are ok (foundation, roof, drains). You can’t improve location with your effort.

    Of course if you are not looking at home purchase as an investment, even though it is perhaps the biggest purchase you’ll make, and you plan to stay forever, then it doesn’t matter if you buy purely on personal preference for something with low resale value to someone else.

  52. Then tell me what location, location, location means to you.

    Because it is different for every person. For some it’s waterfront, others acreage, being close to downtown, or in a quiet neighborhood away from downtown.

    Some it’s living in the country, others Oak Bay, others Vancouver and others New York.

    It’s one of those phrases that everyone knows the answer to and none of their answers are the same.

    But the one thing it does do- is sell real estate from Colwood to New York. Because it is meant to reassure the buyer that they are making a good choice. And that’s the same as the phrase as buying the worst home on the best street. Because how the hell else are you going to get someone to buy a place with low cash flow and needing lots of repairs.

    Because they’re building “sweat equity”.

    What the prospective purchasers is being sold is the sizzle and not the steak.
    Because it ain’t steak they’re buying – it’s hamburger. Really expensive hamburger.

  53. Yikes … all that moving gets expensive! I’m obviously not normal – having lived in the same house for more than 20 years.

  54. Agreed.

    And there are many largely predictable aspects of real estate valuation: location being the biggest one of them. It is not a catch-phrase. It is reality. It is not some hocus pocus who knows what will happen next thing – of course unless there is an earthquake… Even if there is, it happened in San Francisco and valuations are through the roof today.

    This is why when the city wants to establish a permanent tent city for the homeless in a residential neighbourhood there should be backlash. We have OCPs and bylaws for a reason: homeowners are investors and property tax payers, often putting everything they have on the line for this purchase, who are entitled to some degree of predictability about how a municipal elected council will act in relation to their investment.

    If they are going to act in a manner inconsistent with park designation and the OCP they should be paying compensation to residents for devaluation as they do in the case of expropriation.

  55. I’ve bought fixer upper houses in great locations. I don’t wait 20 years to improve them. I do it right away or as fast as I can afford it. A HELOC will eventually make this possible if nothing else will.

    And who lives in a home 20 years? It happens but it is not the norm. The average family owns 4.5 to 5.5 homes, selling every 7 years or so. 28% of homeowners move every 5 years.

  56. It is common sense in my opinion. A two bedroom, one bathroom crappy home in Fairfield for $500,000 on a 5,500 sq/ft lot, for example, will perform better over 20 years compared to a $500,000 brand new 1,800 sq/ft Westhill homes on a 2,800 sq/ft lot.

    And I’ve been following building lots/tear downs in the core on a weekly basis since 2009 and it is the only market segment I did not see correct between 2010 and 2014.

  57. I use 30 days back dated one week.

    That shows 220 house sales in the core districts up from (205) from last year. 108 in the Westshore (88) and 47 in the Peninsula was (37).

    Condos in the core at 167 (120), Western Communities at 20 (18)and the Pen at 16 (13)

    The clear winner is sales activity is condos in the core with prices up 4.25% from this time last year. While the number of house sales in the core is up slightly, the prices are up 7.25% from this time last year.

  58. Sales per day have been picking up each week month, but listings have been dropping. Sales to new listings has jumped up to 63% in the past week.

    I’ve revised my prediction algorithms (I’ve developed three in additional to Leo’s “original”) and am about to declare my “three weeks trailing” based on average daily sales model the “winner”. Using that model, I predict 800 sales through the end of this week. Being a holiday weekend, I expect that we’ll have to wait until Tuesday August 4th to find out for sure. 😉

  59. You should re-think that real estate myth a bit more.

    That may be true in a rising market as the demands on vacant land increase from a wider selection of prospective purchasers. You’ll have demand for starter homes from first time buyers, builders, investors and middle income households looking for a lot to buy and build a home on. Even groups of speculators will buy these homes and keep them empty just to drive up prices.

    During an economic recessions that demand dries up and you’re left with a starter home that few people want. That starter home is now between a rock and a hard place. Too expensive for a person starting out and too little of a house for a middle income family.

    Land does not depreciate because its utility never diminishes. But it can fall in price as demand lessens. And land values can fall more and quicker than construction costs. That would mean in a falling market you would want more value in the house than the land.

    Like you said do you want to live in a crappy house for 20 years until the market comes back? No you don’t. And neither do other prospective purchasers.

    There are so many myths and catchy phrases used to sell real estate. They are gimmicky sayings that are easily understandable but can also be very misleading. There are no absolute truths in real estate because there are so many factors that have an effect on value. Even if everything could be exactly the same, the outcome would be different because you’re at the beginning of a cycle or nearing the end of one.

  60. “If you in the market for the first time buy the best location you can afford, because in a downturn, housing in less desirable areas will fall the fastest and furthest and recreational properties, except waterfrontage, will become unsaleable at any price.Good luck.”

    The best possible investment is typically a crappy house on a big lot in a solid location, for example, crap house in Fairfield/Oak Bay/etc. However, you can’t buy just based on investment for your principal residence. Is it really worth living in a crap house for 20 years just to derive a great return? Sure, that newer house on a smaller lot/inferior location will depreciate more over 20 years in terms of improvements and the return won’t be as great but you’ll have lived in a more comfortable home for those 20 years.

  61. I don’t think it’s fair that Victoria is being singled out for a tent city. This is a problem for all the municipalities to face together.

    You can’t have one or two parks in Victoria become permanent tent cities. The solution is to rotate the tent use through out the urban core. To allow for clean up of each park and other health issues that may arise on a regular basis.

    Keep the people moving every two days or so. Monday and Tuesday it may be Topaz. Wednesday and Thursday it’s Windsor Park, then Lambrick Park, then Gorge Vale.

    Don’t let any one park become a permanent tent city and share the costs with the other municipalities.

  62. Permanent tent city in Topaz park? Anyone looking to buy in this area should reconsider imo.

    There is no way this will not affect property values. This is not a NIMBY issue – this is akin to expropriating peace of mind for an entire residential neighbourhood and should not be permitted as a solution without a timeline.

    Without a budget to deal with shelter and a court ruling that sleeping in parks is permitted where no adequate shelter exists, I’m not sure what other options there are though. It seems the only long-term solution that could work would require more federal funding for housing and services. It probably would save money given the health and policing costs of homelessness.

    I am tired of driving down Pandora. I wouldn’t set up business in this area or buy a home near there for this reason. I actively avoid going downtown because it is so unpleasant now. I would vote in favour of more funding for a comprehensive approach.

    As for saving $150,000 by buying on the Malahat. That kind of saving is illusory if you have to commute to Victoria still: http://www.mrmoneymustache.com/2011/10/06/the-true-cost-of-commuting/ Mind you, no worries about a tent city springing up next to you.

  63. Monday, July 27, 2015 8:00am

    MTD July
    2015 2014
    Net Unconditional Sales: 639 681
    New Listings: 1,022 1,195
    Active Listings: 3,959 4,570

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

  64. You don’t read the big news last few days ? Topaz park is the next homeless camp. More to come I’m sure.

    The Malahat is used by thousands every day who see the price savings significant enough. Know many who do it to save $150K plus.

    The fantasy of selling in Van to live out there retirement years in their late 30’s are for few and far between in reality. Most late 30’s would find OB boring after Van. I’m sure if it was a serious trend Michael would be all over it with a made up chart.

  65. No homeless camps in parks except for Beacon Hill, Pandora and Fernwood as far as I know? The solution is obviously not sleeping in parks.

    The law that permits this is wrong imo, why should only a few homeowners bear the burden of reduced property values and increased nuisance for a social problem that is the responsibility of everyone? Maybe until there is enough affordable housing and mental health support some compromise that is needed… And don’t buy in an area where this is a known issue. Do your research when you are relocating.

    Also, don’t live on the Malahat if you work in Victoria unless the ridiculous commute comes with a price tag that is worth it to you. And you might want to research winter driving conditions and accident rates….

    The Vancouver dream would actually be cashing out of a high appreciation/value home in Kitsilano/Point Grey and buying in OB with enough to almost retire on even though you are in your late 30s.

  66. Written by “Michael”. What a coincidence, lol. Forgot to mention the Malahat at a standstill (like today and regularly), the new homeless camps at the family parks for his kid, plus the lack of family doctors in an increasingly congested city which reminds me of Vancouver at times. Two bedrooms for $1089 ? Hmmm, not sure about that one unless it’s in Esquimalt.

  67. Indeed, the ripple effect of prices…
    Hong Kong -> Van -> White Rock -> sunny Oak Bay -> Victoria -> Colwood -> Sooke

    ALthough once you’ve stooped to a place like Sooke, you’re fooked! 😉

  68. The same if you are in Victoria.

    Why not sell your million dollar home and move to Duncan? or Brentwood Bay or Colwood’s Lagoon?

    More likely the Van boomers will just move to White Rock or Crescent Beach. It isn’t necessary to move to an island unless you have family here already.

    And it just not going to happen that parents will follow their unemployed kids leaving the oil patch to come to Victoria. However, it is likely that the unemployed kids will move back home to mom and dad after a summer in the tent cities.

    Maybe it’s the summer of 69 all over again. VICSTOCK

  69. I am a business owner. I’ve gotten two mortgages from the bank not a broker. The first was difficult because I just started my biz. A relationship with a person in the bank helped. Second time was easier but I still had to provide two years NOAs to prove income. I am not my biz so the lender only cares about me and my income. The guy in the article was a builder so probably
    Paid for nothing out of his own pocket and had his business buy everything. Paying himself nothing. He thought he was being clever but he f*cked himself in the end….Nothing’s getting worse with what they described. It’s just that a few brokers who were fan dangling to get people mortgages who probably shouldn’t are being reined in. Again, the truth doesn’t sell…

  70. The past baby boom you speak of (combined with an immigration boom) started in 1900, not 1918. That would put the leading edge in their early 70s in 1973, so yes they could have contributed to the 1970s price run in Vic.

    …and the more recent baby boomers (1945-65) will likely follow their kids (and grandkids) who will be moving to BC for work after being laid off from the oil patch….. but more than anything, the biggest jolt for Vic will be Van boomers. They know and love our city, and are becoming aware that we’re now less than half the price.

    If you were nearing retirement why wouldn’t you sell Van for 1.5M, buy Vic for .75M and bank .75M to live comfortably?

  71. I’m still waiting for that boomer wave to begin.

    Oh, maybe its been here and gone already starting in 2000 when the first of the baby boomers took early retirement at age 55?

    Could this have a precedence in the past baby booms such as at the one at the end of the Great War in 1918. That boom turned 55 in 1973 with our peak prices ending in 1981. Hmmmm coincidence?

    People just don’t pick up and move to an unknown city when they retire at 65 or now that it has become 67. They move to be close to family and friends. At 55 it’s being around their young grand kids. They are not likely to move at 65 to be around teenagers and 20 somethings.

  72. We’ve NEVER seen this movie before.


    HELOC’s , easy access to multiple credit cards and LOC’s never existed on your chart. As Bill says, it’s a new world heading into uncharted waters.

  73. There are many variable factors which affect the single housing market and interest rates are only one of these factors. Most buyers are keenly aware of locational factors which can affect price but once the buying decision is made, based upon Province, City and then neighbourhood, all locational factors of nearby houses will be generally the same and can be ignored except for house size/quality and lot size and orientation.

    The important external factors are changes in the general economy. Changes to commodity prices in a resource rich country such as Canada and the impact on employment is now of concern. Political decisions to increase interest rates as in the 1980’s exacerbated a housing downturn and could have been a deliberate policy to cut consumer demand and the perceived wealth effect of rapidly increasing house prices. Conversely this period of abnormally low interest rates has the reverse effect and may be politically motivated by the desire to reduce the cost of ballooning government debt and also to prop up an over inflated real estate market until after the next election . What might happen if the canadian dollar falls too low and american long term interest rates start to rise? Could a political decision to increase rates be precipitated by exchange rate weakness? Could a change in government bring about a decision early in their mandate to bite the bullet and severely curtail out of control consumer debt? We are sailing on uncharted seas and who can predict if and when we may face hurricane force winds.

    The housing market is not like the stock market because when homeowners cannot sell at their desired price they may prefer to take the property off the market rather than sell at a reduced price. The first indication of a downward change in the property market is a fall in the number of sales and sales could drop off by 30-50% but for a short period sale prices can actually increase. Those desperate to sell for financial reasons/personal circumstances will eventually be forced to find buyers at reduced listing prices. This could take up to two years and changes can initially be masked by the seasonal nature of real estate sales which tend to grow in terms of price and volume in the spring and early summer. In a severe downturn, the much smaller number of sales by those forced to sell may overstate the weakness in the market. Is the opposite true in this market where sales volume and increased prices may overstate the strength in the market? Whatever the economic cause,do not expect a fall in house prices until a downward trend in sales volume is well established. If you are crazy enough to buy make sure you sell your house first and be prepared to rent for a short time and hope that the current market will abate.

    These comments are based on the experience of buying a home in the 70’s in Vancouver and selling 40 years later after seeing large market declines three times in that period. If you in the market for the first time buy the best location you can afford, because in a downturn, housing in less desirable areas will fall the fastest and furthest and recreational properties, except waterfrontage, will become unsaleable at any price.Good luck.

  74. On the subject of timing, I still say we’ve seen this movie before and the sequel should be better if even a small portion of boomers follow through with their retirement wishes.

  75. It only relates to now in that one of the bears core arguments is when rates go up, prices will get crushed. Yet there are many past examples like 1968 to 1981 where lending rates quadrupled (see graph above) while prices went up about seven fold.

    If someone’s thinking about timing the market with interest rates, then my only suggestion would be try to determine where real interest rates are headed in the region one is thinking of buying.

  76. I am currently happily renting and staying liquid, I just think with negative growth in Canada and with interest rates possible rising in the future that now is not the time.

  77. How is that fluff when the guy had a high revenue business and is a current home owner of seven years with a solid credit record ? They have been giving out half a million plus to anyone with a pulse the last half decade and now that is changing. Why do you think Genworth and Home Capital exist ? For the self employed as well as high risk.

    The cycle is ending, time to realize the bankers and other lenders clearly see it coming.

    As Dominon guy said:

    “It’s become quite a bit tougher on them.”

    “Oyhenart says lenders are tightening the rules because of mounting fears that the country’s housing market is overvalued.”

  78. Yes, and BC’s economy seems to be currently doing better than Ontario. There are many instances of the Toronto and Victoria housing markets being “at odds” with each other.

  79. As I’m away from Victoria, I don’t have data at my “finger tips” to back up my assertions. That said, this blog being “House Hunt Victoria”, the history of housing prices in Ontario in the early 1990’s has little relevance to here. As for the rates increasing in between 1981-84, try comparing with the 1977-1980 period. Similarly, for 2001-4 compare with 1997-2000.

  80. What a fluff piece… Of course they want some proof of income from business owners. What? if you are cheating on your taxes and have been paying yourself nothing on the books you expect to get a million dollar mortgage?

  81. Yes you can partially look ahead and predict what will happen in rough terms. Because the market is so much slower than the stock market you can examine market conditions (MOI and sales/list being the critical ones) and predict with decent confidence the direction of the market in the next few months.

    That said in reality the factors that go into the decision to buy are far more important, and the glacial pace of the real estate market means even if it is worth waiting it will never be quick

  82. Looks like the self employed are in for tougher times borrowing for mortgages. The banks must see the cycle coming to an end.

    Self-employed Canadians looking to buy homes face tougher rules

    “Cameron Klem, a business owner in the construction industry, is looking to sell his home in Edmonton and buy a new one closer to the school his fiancee, a teacher, has been transferred to.

    But despite a solid credit score, “huge revenue” and having been in business for seven years, Klem is having trouble securing a mortgage.

    “It’s a pain,” says Klem. “It makes me ask myself if being self-employed is even really worth it when you have to go through this much trouble.”


  83. Ok now that I had some supper, I suppose you did preface those statements with this “…with sale prices often taking months to years to reflect rising or dropping interest rates.” You could make a case for months, but I don’t think years.

    Regardless, looking at rates are a waste of time for timing. As an example, take a look at what rates did from the 60s to 1981 and then tell me how many multiples your grandpoppy’s house went up (inflation-adjusted!)

  84. Same interest rate environment in Toronto and here and yet until this spring Victoria was pretty flat while Toronto was taking off like a rocket to the moon.

  85. David, you can do better…
    “A sustained period of lowering interest rates (such as 1990-93 and 2001-04) caused prices to rise.”

    Nearly half of all Canadians (think Ontario) saw their home price get absolutely crushed as rates fell by almost two-thirds from 1990-93, and between (late) 2001-04 rates didn’t really fall… they went up a bit then back down to the same level.

    “Conversely, a sustained period of increasing interest rates (such as 1981-84) causes prices to drop.”

    Interest rates didn’t increase from 1981-84, they fell roughly in half.

    If you’re trying to time the market, there are many better things to focus on than rates.

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