The direction of the market and a new resource

We had a chat about the direction of the market in the last post and I claimed that despite a dip in the average and median prices, the market was showing no signs of slowing down and was on an accelerating trend.  To back this up I submit the yearly median price and MOI charts which show the market has been carving a remarkably symmetrical price bowl with a significantly steeper slope in 2015.

Capture

The other important metric of current conditions is the ratio of sales to new listings which tells us current conditions and what we might expect going forward.  Same story there, with the trend showing no signs of reversal, and even accelerating.

Capture2

So far no signs of slowdown.  We aren’t in hot market territory just yet but at this rate we will end up there by next spring.


Change of topic.

They call me the king of the spreadsheets. 
Got ’em all printed out on my bedsheets.
Weird Al

The master spreadsheet that I based this blog on (and handed over to DavidL who has taken it to the next level) has 11 data sheets and 42 chart sheets.  It is pretty unwieldy and fundamentally this cycle of “update excel, update chart bounds, screenshot, upload image” is a real drag.   It’s 2015 and we have self driving cars.  This kind of manual bullshit really shouldn’t be acceptable anymore.

So I stripped out all the charts and migrated the important data sheets my spreadsheet to Google Sheets.  Anyone that wants to play can access the data here.  However an Internet spreadsheet doesn’t solve the charting problem.  In fact Google Sheets is woefully under-powered compared to Excel and some of the more complicated charts I’ve made over the years are impossible to reproduce in it.

Enter Google Charts, which is a fully scriptable way to generate charts using any data source including Google Sheets.  Scripting the data solves many of the problems elegantly that required awkward Excel acrobatics before.  Case in point, the market history charts for certain months are a real pain to generate in Excel, to the point where I never bothered posting them although they are useful (kudos to DavidL for generating them).   With Google Charts and some simple javascript you can generate your own for any month you so choose.

Unfortunately all this goodness cannot run on this blog directly because WordPress hosting restricts what can be embedded into pages.  So for now you’ll have to go over to househuntvictoria.ca to see this stuff.    Best of all, I no longer have to give my opinion on the market, I’ll let the script do that.

Not sure where I’m taking this, but if you have any ideas about what charts you want, let me know in the comments.   And happy thanksgiving everyone.

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107 thoughts on “The direction of the market and a new resource

  1. You would have to be very selective in your data to demonstrate owning a condo is less expensive than renting.

    The typical pre-owned condominium selling today is a late 1980’s or early 1990’s two-bedroom suite of around 975 square feet. That sells for $275,000 and rents for $1,200 per month. Property taxes are around $150 per month and maintenance fees approximately $300 a month.

    So in my opinion, it’s a real stretch of the imagination to think that owing a condo is cheaper than renting.

    Of course if you have a larger down payment then you can make any condo have a positive cash flow. In this case a down payment between $75,000 to $100,000. Money that could be earning wealth in other investments rather than a nominal amount in a condo.

  2. …and I meant in the core with same footage (hence when I said “apples to apples“). We’ve had this conversation a couple times in the past few months Hawk where I showed you examples how it’s cheaper to own than rent core. I assume you know what cash flow positive means. I wouldn’t have added property over the past couple years if they were not so. Banking purely on capital appreciation is not in me blood.

    Of course if prices start rising faster than rents, I agree they will become harder to find.

  3. “Literally hundreds of condos you can own cheaper than renting. ”

    I said in the core with similar square footage. Anything that is similar is pre-2000 and has the potential to be remediated which creates major risk. The new condos have 2/3 the floor space for a 2 bedroom and anything close would cost me minimum $400 a month more per month than my rent and that is at these emergency interest rates.

  4. Looking just at the return numbers doesn’t paint the entire picture. An old triplex in Fernwood, for example, will yield a much better return than 3 condos but the flip side is you’ll be at the triplex every weekend carrying out ongoing maintenance, you’ll have a higher turnover, etc.

  5. Every investor has to decide what is a good rate of return for themselves. Some feel comfortable taking a lower rate of return on real estate because of the perceived security of capital invested and a consistent income stream.

    I just don’t like the idea of locking up that much money in an inflated asset. For me, the return is not sufficient for the risk. And I believe that I am in the majority with other investors.

    If you’re that gung ho on real estate then you should equally consider investing in second or third mortgages.

  6. Marko.
    You are likely right that you are cashflow + with 20% down on Vic homes. Perhaps there is upside (downside) in terms of capital appreciation (depreciation).

    The article merely states it is cheaper to rent vs owning, other than perhaps 3 instances in 21st century, now being one of them.

    Now for the investors out there, there are great deals in stateside. 20 unit apartment complex, cap rate of nearly 10% in 2nd tier county. Total cost…let’s say the average price of SFH in the core, all within 3 hours of Victoria.

  7. As I’ve noted before homes that are significantly cheaper to rent versus own are usually homes a typical buyer would buy and then fix up.

    When you start looking at attractive homes a/ the prices goes up b/ there isn’t many available for rent

  8. Literally hundreds of condos you can own cheaper than renting. If it wasn’t so, I don’t think the affordability (gray line for condos) for Vic would be as good as it ever gets.

  9. Mon, Oct 19, 2015 8:00am:

    Oct Oct
    2015 2014
    Net Unconditional Sales: 412 602
    New Listings: 570 945
    Active Listings: 3,282 3,927

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

  10. Bottom line, it’s still cheaper to own than rent here in most cases (apples to apples).

    Vic is as affordable as it’s been in decades. Van is a different story.

  11. Great article, and so true. People who own like to trivialize the extra costs that are rarely accounted for. All those constant small things add up like new door stripping, lighting that needs upgraded, dishwashers that break down,etc etc. You make constant trips to Home Depot and always walk out a few hundred lighter. Been there, done that, several times over.

    “People are making so many trade-offs in order to have that home,” according to, associate professor of psychology at the University of British Columbia, Elizabeth Dunn, who studies consumerism and happiness. She finds that people are highly unlikely to admit any fault in past decisions. They are in fact even more convinced buying a house is the only way to go. Like a reformed smoker, they are militantly evangelical.

  12. Only time will tell if Bruce Yaccato is Right

    You’d have to be crazy to buy real estate
    Bruce Yaccato, National Post | June 18, 2015 | Last Updated: Jun 18 2:00 PM ET
    According to data from the TD Bank, housing prices in Canada from 1980 to 2012 increased at an annual rate of 5.4 per cent, Toronto and Vancouver a full point higher.
    The Dow Jones Industrial Average calculates its average annual return for the same time period was 8.9 per cent.

    The Toronto Real Estate Board says the average price of a house in 2014 was $566,726, an 8.4 per cent increase from 2013. It adds that “we should not expect current price increases to continue.”

    TD concurs, forecasting that over the next couple of decades, real estate should grow three per cent annually, while stocks will grow seven per cent.

    What should you invest in? Duh.

    That should be enough, but come to think of it, 10 lines of common sense arithmetic is not likely to come close to dispelling the most indestructible urban myth of all time.

    Robert Shiller, Nobel Laureate and author of the classic analysis of behavioural economics, Irrational Exuberance, has determined that going back to 1890, U.S. housing prices have risen faster than inflation only twice. Once in the generational boom after the Second World War and again only in the run-up to the sub-prime mortgage crisis of 2008. To which we may now add, price levels in Toronto and Vancouver the last few years.

    Otherwise, the rate of return, in real dollars adjusted for inflation is with extremely rare exceptions, zero.

    On the other hand, in The Apprenticeship of Duddy Kravitz, Duddy’s grandfather advises, “A man without land is nothing.”

    As Canadians pile up record debt levels to get into the housing market, they are apparently subscribing to Zayde’s Nineteenth Century Shtetl School Investment Strategy. Shiller, and others are working to figure out why the bias to ownership persists in the face of a growing body of overwhelming evidence. “Irrational exuberance” is how former Federal Reserve Chair Alan Greenspan described the stock market’s self-destructive, lemming-like behaviour in the dot-com bubble at the turn of the century. Shiller applies it to the real estate market driven by cultural and psychic motivations that transcend traditional economic explanation.

    He uses the simple example of a house sold in 2005 for 10 times its 1945 purchase price as a symptom of so-called “recency bias.”

    “Simple return from such a transaction is 900%. In addition, the claim of selling for ten times more appears impressive. However, this transaction yields a real annualized return of less than 1%, before factoring in operating costs.” Those operating costs, such as taxes, maintenance, repairs and in Canada’s case, mortgage interest can add up to hundreds of thousands of dollars leaving the Canadian dream home a money-losing proposition, painted in several coats of red ink.

    Yet, as Shiller notes,“the widely-held impression that single family homes have historically shown high real capital gains when in fact over the last century the gains overall have been only nominal and hence illusory (and) can only be explained by using other social sciences like psychology.”

    With data like that why are people incurring Frankenmortgages and crawling over broken glass to buy? Shiller’s answer, simply put, is that they’re crazy. Whether it’s tulip bulbs in Holland in 1637, dot-com stocks in Silicon Valley in 2000 or homes in Toronto in 2015, people are terrified of not having one, whether they need it or not.

    Homeowners angrily deny this. “It’s a good place to park your money” is one comeback. “Better than throwing money away on rent.” Both seem wise observations. Except if they ever actually sat down and did the math, they would choke. And they never have. They just repeat the accepted wisdom.

    Just take a look. As simple as possible, leaving out details such as reinvesting dividends, estimates of growth in property taxes or even having a mortgage subject to rate hikes (which frankly only make the case for owning look even worse).

    Put $400,000 each into A) a house and B) a stock portfolio while renting.

    TD forecasts an annual growth rate of three per cent for housing, well above the historic rate. So after 25 years, it’s worth $837,511. More than double, congrats. But the Bank of Canada forecasts inflation at two per cent, so in real dollars it’s down to $656,242, a net ROI of 2.6 per cent. Not great. But wait. Assume operating costs even at estimates ridiculously low by Toronto or Vancouver standards. Fees and taxes of $5000 per year, as well as maintenance and repairs of $7,000 and the net worth becomes $356,242, a net loss of almost $44,000.

    As a columnist at The Week recently observed: “If median-income people borrowed hundreds of thousands of dollars to speculate on the price 30 years hence of a single, highly illiquid asset that wasn’t a house, they would be called financially insane.”

    As for throwing it away on rent, your down payment invested in the market (at a conservative five per cent return) gets you about $1.34 million, call it $1.25 million after fees. Another $181,000 is eaten by inflation. Even at an average rent of $2,000 per month, the cost over 25 years would be $600,000 leaving $469,000. You do the math.

    Shiller does concede there are “implicit dividends” to ownership that can’t be measured. “There is no way to put a dollar figure on the psychic benefit one gets by owning and living in one’s own home.” But then, he argues, it becomes not an investment or even a good place to park your dough, but the consumption of a luxury good, which should be left to those who can afford it.

    But recent research in British Columbia and elsewhere has found there are diminishing returns to those psychic benefits as prices mount and the lifestyle sacrifices necessary to meet mortgage and other costs keep mounting.

    “People are making so many trade-offs in order to have that home,” according to, associate professor of psychology at the University of British Columbia, Elizabeth Dunn, who studies consumerism and happiness. She finds that people are highly unlikely to admit any fault in past decisions. They are in fact even more convinced buying a house is the only way to go. Like a reformed smoker, they are militantly evangelical.

    It could well be that people are happier spending on vacations and lifestyle than being house-rich, cash-poor. Or worse still, they could further erode their dismal rates of return by taking on lines of credit to try to have their cake and eat it too.

    The important thing is not to be critical of people for their investment decisions but rather to correct a dangerous economic distortion. Real estate is a huge business, bigger even than oil and gas. Do we want a significant portion of our GDP dependent on fundamentals that a Nobel laureate has called “illusory?”

    Have you ever heard a bank manager or real estate agent say, “You know at these prices, you may want to hold off and rent til you grow your down payment?” Not bloody likely. They make billions selling people mortgages and products they would be better off without. They are no better than Big Pharma or Big Tobacco. Call them Big Mortgage. They are enabling addictions that, left uncorrected, are well known for leading to catastrophic outcomes.

    National Post

  13. It does highlight that bottoms never feel like bottoms. And so few people buy because it seems like a terrible time to buy. While we in retrospect seem to have come pretty close to timing the bottom that was not due to any kind of insight that it would be the bottom. When we bought I was fully expecting at least another 5 to 10% decline and I believe I wrote as much on this blog. We bought anyways because it was a good time for other reasons and I could live with the 10%. Turns out that we got lucky, but the more important Thing is to minimize transactions by thinking ahead to what kind of place you will be needing in 5 years time. Even in an up market transaction costs can eat you alive.

  14. It’s pretty clear to me that a crash is just around the corner. Or… maybe not ha ha. What I do know is that this market is killing the real estate bear. They all capitulate or move away. Either way it’s fun to watch.

  15. The charts in my opinion stress buying a place you can see yourself living in (or holding onto) for at least 10 years. As we’ve seen this year the market is very unpredictable so no point in trying to time it; however, it would appear over 10 years you typically end up ahead.

    In recent memory 2013 was a half decent year to be a purchaser. In 2013 we also saw very low sales volume meaning that also very few people timed the market bottom correctly. Leo being the exception 🙂

    Year 2000, one of the best years to buy also happened to have the lowest sales volume in the last 25 years.

    People aren’t good at timing the market so buy something you can comfortably afford, that works for your family, and hold on to it for 10+.

  16. Might want to review a few charts from earlier this year that the outside world looks at Canada’s housing bubble Mike, they actually show reality.

    4 charts that show ‘Canada is in serious trouble’: Deutsche Bank

    Multiple forms of debt

    Mortgages haven’t just blown up over the past decade, according to Deutsche Bank. Auto loans, personal lines of credit and other obligations have soared as well.

    http://globalnews.ca/news/1762519/4-charts-that-show-canada-is-in-serious-trouble-deutsche-bank/

  17. You missed the record personal debt levels of 163% above US crash levels but you got the main point. Prices have gone up since mid 80’s only because of lowering of peak interest rates of 1982. The late 70’s price gains had wage growth going through the roof with annual wage gains in the 5% range by 1980. Today people are lucky to see 1% – 2% wage hikes, if at all. Spin it all you want with your distortion boxes that mean nothing Mike but you’re wrong, the chart clearly shows it.

  18. “Overlap that chart with interest rates…”

    David already did that for us…

    I simply added the boxes to make it easier to see that when interest rates do finally start rising in a year or two or three(?) that’s when house prices should really take off for a ~2-3 year stint as inflation rises. By my estimates that should then put us into the early 2020s when inflation, the economy and rates enter a more dramatic cool down for reasons yet unknown (perhaps as we pass the millennial buying peak?) and we get another correction.

  19. You must have missed the latest MacLeans on how Canada is seriously impacting the US economy with a 30% effect on US GDP. Interesting Yellen included Canada’s weak economy as one reason for not increasing interest rates a measly quarter point. Canada could well push the US into a recession then put us deeper than we are. Painting an illusion of wealthy house owners as being the main driver for a country’s economy is a recipe for disaster. It’s all musical chairs on steroids.

  20. Your stretched out chart doesn’t clearly show the 30 -50% disastrous drop in early 80’s and the early 90’s milder correction that wiped out many a homeowner or leveraged landlord like yourself and bankrupted thousands. I knew a few and it wasn’t pretty. Drawing dotted lines only going up forever is totally misleading.

    Overlap that chart with interest rates decline and personal debt loads of 163% and it will tell a more honest tale of what’s in store in the real world.

  21. If you don’t have lots of product to sell in the store, people just stop coming to the store.

    Real estate isn’t a necessity it’s a want. Good marketing will turn a want into a need, but that requires product to sell. You need to keep the buyer interested.

    Ask a salesman what happens to a product when buyers become indifferent. The momentum is lost and there is little that can be done to bring back the enthusiasm back.

    People stop looking because there is nothing worthwhile to buy. And that stigma can persist as inventory returns. Then lowering the prices won’t help because it only reaffirms prospective purchasers belief that the market is not a good buy.

    Only when there is lots of selection and the prices are so good that prospective purchasers can’t pass on the deal will the market return. Last time that took close to a decade to happen..

  22. Not yet seeing any reasons for it to be different this time.

    In my opinion the extreme bearishness like Maclean’s recent “A world of economic hurt awaits Canada” is what you want to see at this stage. When the Madanis, Dent, Rabidoux, MacBeths……..finally give up in the 2020’s that’s when we’ll get a correction.

  23. It’s interesting that Vancouver sales are finally slowing due to the low inventory yet Victoria is in manic mode. Still believe Victoria might just be late to the party. We always have been a city a step behind.

    Home sales fall in Toronto, Vancouver because not enough property on market: CREA

    “Overall, September’s housing markets stats are consistent with a continued hot housing market – it just doesn’t appear to be getting any hotter. This underscores our view that the highly simulative impact of lower mortgage rates at the start of this year would wear out by September/October,” said Diana Petramata, an economist with Toronto-Dominion Bank”

    David Madani, an economist for Capital Economic, continues to predict there will be a pullback in prices. “Overall, while most markets are responding logically to softening domestic economic conditions, Vancouver and Toronto continue to exhibit bubble behaviour. Over the longer-term, we still believe that these markets will experience major price corrections,” he said.

    http://business.financialpost.com/personal-finance/mortgages-real-estate/home-sales-fall-in-toronto-vancouver-because-not-enough-property-on-market-crea

  24. These are desperate times for some prospective purchasers that are panicking over real estate.

    How these buyers ever obtain financing baffles me. Maybe it’s a matter of overly accommodating lenders, brokers and appraisers.

  25. Maybe they like where they live and have no reason to sell just to pay more for something somewhere else. As Jack says, it’s just bubble bucks being passed around with higher mortgages. It’s the new buyer with limited equity whose going to get hurt the most in the end, which is mainly anyone who bought in the last 5-7 years.

  26. That’s insane for Victoria and has to be a sign the market top is near. One of my past sales back just before the 80’s crash sold the same way (not sight unseen but a quick walk thru), and within first hours of listing at asking price with no conditions. Would be interesting to see who the money launderer….er buyer is.

  27. I agree but there has got to be a bit of backlog built up by downsizers and those wanting to cash out for other reasons. If you don’t need to sell you wait for a good time to sell – next spring is likely to be such a time. With so little on the market I think buyers will have more choice come spring than they do now.

  28. The SFH market in the core has reached a new level of craziness….house listed yesterday afternoon with showings beginning today (I booked a showing) and I get a message late last night that the home sold to an unconditional sight unseen offer, what da????!!!!

  29. I think interest rates are too low, combined with a strong rental market for people to start unloading. Interest rates going up would help with inventory I think,

  30. Check out the New lists to Solds and Total Inventory in Van past 3 days:

    Wednesday
    New
    238
    Sold
    218
    TI:11385

    Thursday
    New
    173
    Sold
    323
    TI:11194

    Friday
    New
    156
    Sold
    208
    TI:11077

    Total inventory is now nearing record lows for an October… incredible when you consider how many more homes there are now than a decade ago. You’d think it would tempt some to cash in their ‘lottery tickets‘.

  31. We also looked at the Henderson home but did not bother with the Rockland one because that was obviously priced low on purpose (had a 15,000 sq.ft lot). It seems we are in the same situation you are, and we are kicking ourselves that we didn’t buy several years ago.

    Henderson did have a nice view and I could see someone doing a major reno to make a high-end house (not sure how much since I don’t know the $1M plus market. Of interest, a similar one on Oakdowne sold for around $775K earlier this year, but I don’t think it had the view, just across from a park.

    I am hoping that more sellers are motivated to put their houses up come the spring since there must be some elderly people waiting to cash out. However, the areas you and I are looking in have always been popular, so I am certainly not expecting a drop in prices in the near future, just hoping for a better selection and a slowing increase at best.

  32. Wage growth is different than job growth. VIHA job growth has been pretty stagnant since they privatized half the system a decade ago. Besides the tech bizz, the job growth in high paying jobs is minimal. Governments have reduced staff and eliminated many $80-100k jobs when people retire. They just don’t refill the positions. I know of a dozen in the past year.

  33. Not a bad theory. While the market has been improving steadily since mid 2013, it really hasn’t had much of a noticeable impact on prices until this year, and that has hit the media as well. Might bring some buyers out of the woodwork.

  34. The number of employees making over $75k is really not a great way to judge wage growth. At one point $75k was a very high wage, and only the very top few earned over that (in government). Now it is high but within the reach of vast swathes of professionals and middle managers. There will be a flood of people crossing that marker even just due to inflation. Doesn’t mean wages are growing faster or slower than before.

  35. Wage growth has not been great, but at the same time not static either. For example, we’ve gone from approximately 1,500 employees at VIHA making over 75k/year in 2007 to over 3,500 making over 75k currently.

    BC Ferries, Uvic, Government, IT, there are paying jobs in Victoria.

    Combine with lower interest rates, etc., there has been improvement in affordability over the last 5-8 years, but is being eroded by the market this year.

  36. Since you have all the stats at hand Mike could you tell me where all the high paying new jobs are in Victoria ? There doesn’t seem to be any stats out to back your claims that all these new jobs are mortgage worthy. I mainly see restaurant and hotel related and other low paying seasonal/cyclical part time jobs along with the 40 tech jobs Dasmo posted.

    I believe there was a big increase in people looking for work here too which means sooner or later they move away if something doesn’t happen quickly as we head into the slow job season. People leaving Victoria is a common occurrence at the top of the markets like last time around, especially with vacancies getting tight again. Not everyone believes Victoria is Mecca.

  37. I think there may be more houses than average listed for sale this spring. Some homeowners will have been waiting for five or six years for a bump up in prices to downsize or sell a property that is rented out. Hopefully that will moderate the market a bit.

  38. “I would hazard a speculative guess…”

    Hazardous indeed seeing how Alberta also saw a similar net inflow of 8264 persons in Q2. You probably picked the worst province to explain our population growth as every other province in Canada saw net outflows in Q2, except Alberta. For instance, far more Ontarians moved to BC, than did Albertans move to BC in Q2.

    “So if most have no job, I doubt they are heading to Victoria to buy a house and are most likely heading to Vancouver…”

    Well let‘s take a look at the most recent jobs data… from May-Aug Vancouver’s total employed went from 1,274,200 to 1,304,900 (+2.41% gain), while Victoria’s total employed went from 175,200 to 180,700 (+3.14% gain)… so I would say we’re kicking Van’s a$$, but thanks again for coming out 😉

  39. What happens to markets that are not affordable?

    My guess is that prices would fall until the market is once again affordable.

    That would mean that markets are almost always affordable except for brief time periods when they are adjusting.

    This is a dream graph for an estate agent as it almost always shows the market is affordable. Have a client complain about the asking price – drag out the affordability graph. The implication of the graph is that the property is affordable to the client, which is an assumption made by the client and left uncorrected by the agent. Bafflegab to keep the client off balance.

    Just part of the hard sell tactics to keep a purchaser hot and yet another reason why today’s consumer needs more protection than in the past. Estate agents are trained in strategies that consumers can’t defend themselves against. And that’s why we need legislation to protect consumers.

  40. I would hazard a speculative guess that most of those coming here are related to the unemployed oil workers of Alberta which last count I read was in the 35,000 range and counting. So if most have no job, I doubt they are heading to Victoria to buy a house and are most likely heading to Vancouver for construction jobs or interior/northern cities for industry related jobs.

    Oil is in the most severe downturn in decades and the worst is not over, energy giant warns

    http://business.financialpost.com/news/energy/oil-is-in-the-most-severe-downturn-in-decades-and-the-worst-is-not-over-energy-giant-warns

  41. Affordable and cheap are not the same thing. The homes are affordable only because of the interest rate, that doesn’t make them cheap.

    As for net inflow of people, the last time I looked at a map, BC was a very big place. Neither am I saying that there has not been an increase in buyers from outside of Victoria. There has been an increase in house sales of 30 to 40 in the core over last year just for one month. Not all of those will be buyers from outside of Victoria, so it seems we are not getting our fair share of those moving to BC coming to Victoria.

    Island living is not for everyone. After a year or two, the island gets boring. There is only so many times you can walk up and down the only sandy beach in the core.

  42. Oh and Jack, from Apr to June 2015 BC had a net inflow of 8076 persons (in 3 mths)… up from 6121 persons in the first 3 months of this year. Are you trying to say the ones coming to Vic are only going to rent (…our property is affordable), or you truly don’t think we’re seeing an increase of out-of-towners coming in?

  43. Victoria is actually about as affordable as we ever get. However I suspect we are on our way back to the 70% range by the 2020s.

  44. The word cheap denotes less costly. Victoria is in no way cheaper than other cities. This is an expensive town to buy in.

    And it isn’t because everyone wants to live here. We are not having a flood of buyers from out of town swelling our market and increasing the population. Our prices are high, as in most cities, because of ultra low listings. Along with an increase in Canada wide sales, most likely due to political manipulation of CMHC during this election year.

    But that will change – it always does. The pendulum of the market will swing back again. And most buyers will find themselves victims of this year’s excesses.

  45. It’s a bit early to make projections for the month but it does seem we are on track for a year over year increase between 30 to 40 house sales in the Core districts. Which for our little part of heaven calculates to a year over year increase of 20 per cent.

    My year over year projections for October so far include:
    Median price up 12% to $650,000
    Average price up 11% to $722,497
    Days on Market down from 32 to 21 days
    Sales to Assessment Ratio up 5% with this month’s median at 110 per cent.

    Months of Inventory are currently very low at 1.75 and the core is replenishing the supply of homes at a low rate of 1.15 new listings for every home that sells. This indicates a market heavily in favor of sellers with the better properties experiencing irrational bidding by prospective buyers in excess of market value.

    The result is that prospective buyers have a poor selection in houses to choose from at high prices with no relief in the immediate future.

    This also affects sellers as their is little reason to list your home when there isn’t anything worthwhile to buy.

    There are some exceptions but for the majority of Victorians this market is frustrating for both buyers and sellers.

  46. Sorry to be the party pooper again, but it’s the filthy rich who have flogged the system on borrowed margin debt and it’s coming home to roost at some point. When the IMF warns over and over, then you have to be a fool not to pay attention.

    $3 trillion corporate credit crunch looms as debtors face day of reckoning, says IMF

    A poisonous “triad” of global risks is pushing the world to the brink of a new financial crisis, says stark IMF report

    http://www.telegraph.co.uk/finance/economics/11916485/3-trillion-corporate-credit-crunch-looms-as-debtors-face-day-of-reckoning.html

  47. > Sooooo, with a VERY large portion of the world making SO much money, they want to live somewhere VERY NICE… like VICTORIA.

    Please explain why Victoria prices are not already at a million dollars. Victoria has been nice and people have had lots of money for at least 50 years.

    > VICTORIA is landlocked… so NO MORE ROOM.

    There is no shortage of room in the western communities. The downtown core can only densify, like every other city in existence.

    > I called average house prices at 650k in Feb of this year only to be laughed out of this (or the former blog).

    Link?

    > I call for next spring to push prices up between 5-8% at the low end, and 8-13% (in the bays of the core) at the max.

    That should be obvious at this point.

  48. I feel that almost everyone here is completely uneducated about how our capitalist economy works…

    See https://www.youtube.com/watch?v=wpGG3_pBHUc&feature=youtu.be

    Basically, rich get richer, and MUCH MUCH faster then you could imagine… even someone with a very small 500k invested, could gain enough of a downpayment to buy a million dollar home in 5-7 short years.

    Sooooo, with a VERY large portion of the world making SO much money, they want to live somewhere VERY NICE… like VICTORIA.

    VICTORIA is landlocked… so NO MORE ROOM.

    The pressure on prices is just beginning… I called average house prices at 650k in Feb of this year only to be laughed out of this (or the former blog).

    So since I have a track record of being right, I call for next spring to push prices up between 5-8% at the low end, and 8-13% (in the bays of the core) at the max.

    Inventory is going to keep dropping also, mark my words…. just like Van/Toronto, etc… the momentum is towards lower inventory… lots of reasons why this is happening, one being that most markets are local, and if locals feel they cant hop to a better/cheaper/opportune place why sell your own place… interest rates are not going anywhere soon also.

  49. Not short at all but might be if/when the situation presents itself. Markets are overbought and charts are still in shambles from the August meltdown.

    How come you only mention the markets moves when the market goes up a couple of hundred points and never when it goes down ?

  50. Could be some signs the party is nearing an end.

    Cracks Emerge in Bond Market

    Credit-rating firms are downgrading more U.S. companies than at any other time since financial crisis

    “Falling profits and increased borrowing at U.S. companies are rattling debt markets, a sign the six-year-long economic recovery could be under threat.

    Credit-rating firms are downgrading more U.S. companies than at any other time since the financial crisis, and measures of debt relative to cash flow are rising. Analysts expect profits at large companies to decline for a second straight quarter for the first time since 2009.”

    http://www.wsj.com/articles/debt-markets-shaken-amid-more-corporate-downgrades-defaults-1444671712

  51. 405 was a 90’s leaker and a shitty building to live in I was told. Condo committee was a nightmare. Good luck on that one. $100K over assessment for a condo shows us the market has lost it’s marbles and won’t end well.

  52. There must be some well-off retirees to be buying these older (mainly orig cond’n) units downtown for over list.

    221 – 405 Quebec St, ask 427500, sold 436000.
    202 – 636 Montreal St, ask 635000, sold 650400, assess 553000.

    These units will still require some money in my opinion to bring up to boomer standards.

  53. “…Victoria is seeing an increase in buyers from other parts of Canada looking for retirement homes”

    And here I thought we were just a local flippers market.

  54. “Walked through 4310 Torquay today since we live in the area. http://www.realtor.ca/Residential/Single-Family/16251135/4310-Torquay-Dr-Victoria-British-Columbia-V8N3L2
    Priced “low” for multiple offers. Needs a total redo. Floors, bathrooms, kitchen, windows, basement unfinished. The open house was swarming with people. Maybe sells for 510k, and needs another 100k in work so you’re 600k into a fairly ordinary 50s house. Definitely a bit nuts out there.”

    You were a little off….unconditional offer $522,500.

  55. Buyers from Vancouver are going to be up 50% year over year; however, the vast majority of the market still is local. As the population grows the inventory of single family homes in the most desirable areas stays fixed.

    Sell 50 homes in Happy Valley? No problem, build 50 more.

    Can’t do that in Oak Bay/Fairfield.

    “The prices are insane,” is all relative. I was planning on buying a pre-sale condo in False Creek earlier this year and then they rolled out the prices of close to 400k for 500 sq/ft, no parking, facing busy street and a month later I get an email that they are 90% sold and closing the sales office. I was hoping for pricing of 299k-329k.

    Ended up buying a pre-sale unit at the Encore here in Victoria two weeks ago. Expensive, but not in relation to Vancouver.

    Interestingly enough rents are not that much higher in Vancouver, certainly nowhere close to being higher enough to offset the higher capital investment.

  56. Those are insane overbids, or they were under priced on purpose, as per the usual agent game. The massive sloping backyard on Henderson could be a potential problem. Area has a history of flooding basements,best hope they have a sump pump.

  57. If you’re are intent on sticking with these two neighborhoods, prices aren’t likely to be much better in the spring. If you have to buy then you are going to have to pay the price. And for some of the better properties that means paying in excess of market value.

    And that can be a lot of money that is gone forever. $50,000; $100,000; $200,000 over market value? That’s a lot of years of rent for some choice properties.

    The silver lining is that if you’re also selling then you’re likely to get a good price for your present home and with years of built up equity it can be less painful. Most of what you’ll loose is just equity appreciation or bubble bucks not cash.

    A lot of people have made a lot of gains in equity over the years by trading properties. Ask a developer how they went broke after years of making money and lost most of their gains- it’s always on that last deal. Not knowing when to stop.

    This is one market that I am very happy not to be buying into.

  58. I was interested in both the Henderson and Rockland listings, but only at listing price. Never even got a foot in the door to see them.

    Any thoughts on where these buyers are coming from? Anecdotally, I feel like there are quite a few Vancouver refugees coming over here after being priced out by the influx of foreign buyers.

    These prices are insane, and every time I feel it can’t possibly go higher, it does. Are we entering a new era of competition from the Mainland? Or are these primarily local buyers in your experience Marko?

    Any thoughts on where the Fairfield/Oak Bay/ Cadboro Bay markets are headed would be appreciated. I choked when my wife showed me how much that Henderson listing went for! I feel these prices are out of whack and perhaps things will moderate in price and selection in the spring, but maybe this is a false hope.

    Thanks for any input you can offer Marko.

  59. Some decent over asking numbers in the last few days…

    3058 Henderson Road listed for 799k and sold for 933k.

    978 Carolwood listed for 669k and sold for 702k.

    1640 Rockland Ave listed for 729k and sold for 850k.

  60. One other thing Mike. Maybe you and Marko can post what date you bought these individual stocks when you do you actually buy them. Not now though, as credibility is lost on those picks.

    I do now recall you saying you were catching the falling knife on Black Monday back in August which would make those securities about the same price as today, not up 60%. At least Dasmo posts the day he buys something so he’s believable. I prefer not to make individual stock pick recommendations as I’m not licensed, just like to make guesstimates at market directions which is much different.

  61. Well Mike….when a stock falls from $20 to $5 in short order it dropped 75% approx. right? So to get back there it needs to rise 400% to get back to 20 so your 60% snake oil is all BS. Unless you are Marko’s side kick and bought with him at the absolute bottom(which I doubt) you are full of it. Please quit misleading people here,it’s getting sad.

  62. Since you brought it up Sir Hawk… fine BC companies like FM, Teck and numerous energy co’s are up 60% or more since bottom with many more having doubled or tripled (…those would be a few of the ones I’ve owned 😉 ), so you can’t blame me if you didn’t listen when I told you they bottomed.

    What I was more curious about is how long we can make this thread… so I suppose I should try to stir you up again on something to do with our “second largest trading partner“.
    How about a Do you see what I see? I tried to make it look like how a bear would look at it.

  63. The theories of a W correction assume a free operating marketplace. In our case the market was interfered with by the government. The government purposely re-vamped the cycle by bringing demand forward. Your assumptions are relying on a distorted cycle.

  64. Guess you missed your FM and Teck down 10% today and much more off their highs from last week of about 20-25% down, as well as USO oil index down and well below where it was a month ago. Incase you missed that China news they are Canada’s second largest trading partner.

    As Jack mentioned, many get fooled trying to time things perfect thinking it’s the bottom only to have their ass handed to them. Much more confirmation needed before you can tout some new bull market, otherwise you come off like a snake oil salesman. Better to be a bit late and grab the meat of any move than be too early and suffer major pain.

    You should watch BNN, they had a commodities expert on there today who was on the trading floors and sees the same scenarios for oil and metals. Precious metals are a separate beast I am bullish long term on.

  65. Painful if you bought in ‘10 and sold in ‘13… pleasing if you did the opposite 😉
    Now all homeowners are in the clear as we’re past the double dip (green W).

  66. The metals & mining index (XME) was flat today but thanks for coming out. Taking a breather after big increases. Even house prices will catch their breath from time to time in the next 7 years.

  67. A W-shaped recession is painful because many investors who jump back into the markets after they believe the economy has found a bottom end up getting burned twice—once on the way down and then once again after the false recovery.

    We haven’t hit bottom because the excesses of the market haven’t been flushed out of the economy. Things have to get really bad, before they can get better.

  68. Tues Oct 13, 2015 8:35am:

    Oct Oct
    2015 2014
    Net Unconditional Sales: 268 602
    New Listings: 371 945
    Active Listings: 3,338 3,927

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

  69. I prefer to live in the new world Mike. You obviously weren’t around then to see the stark differences in the economy back then but then it wouldn’t fit your fantasy thesis of 160% price increases would it.

    China the new economy driver is out with more news of slowing growth, as oil and commodities have been cooked for the same reason. Keep on dreaming Mike but it’s a global world out there, not some insulated bubble.

    Global Stocks Slide With Metals After Chinese Imports Tumble

    “Global stocks ended the longest winning streak in seven months and metals fell as a slump in Chinese imports underscored the headwinds to global growth. Treasuries rose.

    Miners led the MSCI All-Country World Index to its first drop in 10 days after China reported a 20 percent drop in September imports.

    The Chinese data rekindled concern that slowing growth there will spread, halting a two-week rebound in risk assets from commodities to equities after weakness in China and the specter of higher U.S. interest rates had roiled global financial markets. Growth concerns were fanned by reports showing U.K. inflation turned negative and German investor confidence fell to the lowest in a year.”

  70. I’ll copy & paste some of the similarities ‘86 to now for you that I posted here 6 months ago:
    * real interest rates are identical
    * oil crashed (by 2/3rds)
    * combined resource prices are same level (CRB index)
    * millennial bulge is same age as the boomer bulge was in ‘86
    * currency tumbled from above par to 70 cent range
    * everyone feared recession in ‘86 like now
    * Vic prices corrected ’81-’84 & ‘10-’13
    * nominal interest rates fell hard ‘81-86 & ‘10-15
    * vacancy rates plummeted like now with strong in-migration

  71. Interest rates were 13% in 86 Mike, now they are at almost zero, it is different. Why did you think oil and commodities collapsed ? China demand, which is only getting worse. Job numbers change monthly and the employment rate is up.

    I did notice an interesting trend in those job numbers. While construction jobs (cyclical), manufacturing, and agriculture (low paying) were the main drivers upward, there was a second month in a row decline in the jobs that pay the big bucks and many more professional type jobs. In a booming business cycle why would there be hits to these sectors that are the backbone and pay the most ? I will hazard a guess that the cycle is nearing an end.

    “Employment in the services-producing sector (-2,500 or -0.1%) decreased for the second month in a row in September. The industries accounting for the majority of the employment losses were professional, scientific and technical services (-7,300), educational services (-6,100), finance, insurance, real estate and leasing (-3,900) and business, building and other support services (-3,300).”

  72. My apologies Hawk,
    I forgot that it’s going to be different this time 😉

    P.S. Your “possible recession“ already ended earlier this year (try to keep up) now BC is by far and away Canada’s job machine… 57,200 full-time created lately.

  73. Oil taking it on the chin today, down over $2.

    Oil slips its hold on $50 as OPEC output climbs to 3-year high

    “Oil dropped the most in three weeks after OPEC reported that its members pumped the most crude in three years.

    The Organization of Petroleum Exporting Countries produced 31.57 million barrels a day last month, the most since 2012, according to its monthly market report. ”

    “OPEC pumping at the highest level in three years is a very bearish element. The decline in U.S. production is a drop in the bucket compared with the OPEC increase.”

    http://business.financialpost.com/news/energy/oil-slips-its-hold-on-50-as-opec-output-climbs-to-3-year-high

  74. Exactly why I think this market is peaking or almost there. The Flip This House/HGTV crowd are in manic mode.

  75. You’re ignoring what the BC economy was made up of back in 87 Mike. Lumber mills were booming and major high paying employers, along with government jobs, and oil wasn’t as dominant player in BC. Today we rely more on high tech and movie making it seems. Major pulp mills have shut down all over the province since back then. Plus people didn’t have massive personal debts wether they owned or not. Easy credit didn’t exist. You’re cherry picking to paint your own scenario.

    Tere will eventually be an exhaustion point when record sales are being hit after many months. It’s a natural market occurrence and there can’t be that many people clamoring to go in debt in an economy showing signs of a possible recession. I believe most of these recent buyers are buying forward due to fear of higher rates.

    To move a price point X amount of distance takes a lot of buying power and I see the similar distance points being met on top of my fundamental reasons and coming into seasonal resistance. All I hear is ridiculous statements “houses are going to a $1 million, the Canadian stock market is about to boom to eternity because the dotted line on my chart I drew says so”.

  76. You may want to keep in mind what happened after the very similar supply-driven oil crash of 1986. Victoria house prices went up 160% in the following 7.5 years (‘86 to late ‘93) in the face of enormous Alberta layoffs. Just thought I’d point it out…not that I think we climb 160% this time.

  77. Your seasonal theory appears to based on two data points over the last eight years. It is based on a price decline in 2009 and 2011 that is not reflected in 2008, 2010, 2012-2015, nor in the sales to new listings ratios.

    To get to your theory you ignore the correlations between all other data points that don’t fit your theory, including the strong correlation between rising prices and lowered inventory and, conversely, higher inventory and lower prices in 2009 and 2011.

    It seems like an attempt to filter relevant data to match what you want the market to do, rather than a reasonable analysis of what the market is actually doing.

  78. Nuts is right. This is what people buy who are at the edge of affordability and afraid of being priced out of anything decent. Might work out for them if they can access a HELOC to reno later.

  79. Walked through 4310 Torquay today since we live in the area. http://www.realtor.ca/Residential/Single-Family/16251135/4310-Torquay-Dr-Victoria-British-Columbia-V8N3L2
    Priced “low” for multiple offers. Needs a total redo. Floors, bathrooms, kitchen, windows, basement unfinished. The open house was swarming with people. Maybe sells for 510k, and needs another 100k in work so you’re 600k into a fairly ordinary 50s house. Definitely a bit nuts out there.

  80. Cenovus laid off another 540 last week. Oil going back up a few bucks off off a decimation is not a lock on some renewed boom. When it breaks $60-70 plus and all those oil companies start rehiring then the worst may be over for awhile. Right now many are still laying off thousands and scrambling to stay solvent with massive oil bond debt going lower by the day. Can’t turn around a freighter in a short period unless war broke out and then all bets are off.

    Canadian oil patch on downgrade alert as credit raters, bond market take stock

    “As the world’s biggest credit raters review their assessment of Canada’s energy companies, the bond market has already made up its mind.

    Bonds of almost 80 per cent of Canadian energy companies are trading at levels that imply credit ratings lower than those assigned by Moody’s Investors Service, as crude prices remain near six-year lows.”

    http://www.theglobeandmail.com/globe-investor/investment-ideas/canadian-oil-patch-on-downgrade-alert-as-credit-raters-bond-market-take-stock/article26709522/

  81. The last two times prices and sales to new listings peaked then rolled over was at or near year end and into the new year.

    Those are big predictions by Mike of some massive breakout when the economy is on the ropes and the US can’t even hike interest rates a measly quarter point without fear of crashing world markets.

    That’s a lot of momentum needed of continued buying pressure all the way through winter, especially if a new government forms. Just an opinion that could be wrong or right but I lean to the latter. 🙂

  82. There’s a possible Canadian trifecta shaping up over the next few years… real estate, TSX, currency.

    I have a feeling foreign inflows into various Canadian assets are about to accelerate again.

  83. “Look like they are topping, especially the MOI being a possible triple top.”

    Oh dear Hawk… MOI got as low as 2 in the last cycle (2004ish). I’m guessing we’ll see the 2s again by 2017 or 18.

    Thanks for the charts Leo… oh and thanks for that Einstein quote David – genius!

  84. It does not look like markets are topping in Victoria. It looks like there is super-low inventory and prices are rising. No sign of any factor that would indicate a top. And what is a “triple top” in months of inventory? I’m not familiar with that term.

    As far as Vancouver goes, that market has not been correlated with the Victoria market. It is has seen astronomical growth at the same time as Victoria has remained flat or slightly declined.

    I don’t know what will happen this spring but hopefully a lot more inventory will come onto the market to keep prices from getting too out of hand. Unless rates rise or something else intervenes we may, unfortunately, be in for a significant jump in prices.

  85. Thanks for the charts. Look like they are topping,especially the MOI being a possible triple top. As we come into winter, sales are bound to slow and roll over. Interesting to note the median is still below the high 4 years ago by a smidgen. I would have expected much higher prices with that type of acceleration the past few months with record sales. Sure seeing a lot of crap out there at top end prices.

    Ozzie Jurrock was saying yesterday saying that East Van has now passed New York City in average price (not Manhattan) with a lower median income than NY. He even stated caution is needed when you see markets with nothing to offer in similarity hit numbers like that. Vancouver’s Broadway ain’t New York’s.

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