Weekly Conditions: All signs up

After almost 3 years of a steadily improving market, we are starting to depart from anything we’ve seen before in Victoria.   So far this is a spring where inventory has hardly increased because it gets sold so quickly.   February numbers came in just short of records, and March might be the biggest sales month we’ve ever seen.  The only months we’ve ever broken 1000 sales before was April and May 1991.  As I said a month ago, the market tilts towards sellers in the spring, and March/April/May are the hottest.   I don’t think this will let up until people start going on vacation.

Also note how the market is diverging in direction from last year.   Last March it was still reasonable, and the start of the month re-lists bumped up the months of inventory at least temporarily.  Now there is hardly a listing that expires at all so no bump.

Stats update courtesy of the VREB via Marko Juras.

Mar 2016
Mar
 2015
Wk 1 Wk 2 Wk 3 Wk 4
Unconditional Sales 193
734
New Listings 304
1448
Active Listings 2564
3769
Sales to New Listings
63%
51%
Sales Projection 1073
Months of Inventory

5.1

Log in or Register

159 thoughts on “Weekly Conditions: All signs up

  1. I can only speak for ourselves. Just before 1990, house prices in Vancouver made (for that time at least) a very dramatic jump. We were offered $100,000.00 more than we had just paid for our house and so we moved to Victoria where houses were incredibly cheap compared to Vancouver prices at the time. We had much smaller mortgage payments, more money to travel and do things with our lives and to raise a family.
    We see the same thing about to happen in Victoria today. People in Vancouver are selling their west side homes for two and a half million dollars and buying the same quality house here in Victoria for $550,000.00. (All within walking distance to the beaches and the downtown core and on twice the size of lot, than in Vancouver.)
    People here don’t seem to understand what is going on, but once you have seen it happen, it seems a no brainer. Even the real estate agents don’t seem to understand what is going on. We have been told more than once that this is just a minor blip and that prices in Victoria will settle back down again.
    No one has a crystal ball, but my bet is that Victoria prices are going to go up dramatically and stay there.
    Victoria prices are still the absolute best deal in the lower mainland.

  2. Look at 4571 rithetwood in broadmead. That is my shocker of the day. Ass 730. Listed 950. Sold 1025k. Small broadmead lot.

  3. Re: 211 Robertson

    That’s such a tiny lot, and I guess its a 4 or 5 year old house with only 2675sf. I’m guessing lot value would be in the 500k range? That seems like a really high price.

  4. 211 Robertson for $1.3 mill today, 0 days on market 🙂

    In 2012 it was listed for 342 days and sold for $970,000.

    What a difference a few years makes, wow.

  5. I live near 1601 Yale and it was first listed last year @$899K. It didn’t get much action and was taken off the market. It was a surprise when it came back on at the same price. My 2 cents is they hoped to set up competing bids as $1 million+ seems to be the new benchmark for pretty well anything walking distance to OB Village. Looks like they called it right.

  6. B.C. home sales set record pace for February

    The British Columbia Real Estate Association says nearly 10,000 residential units changed hands across the province in February, a leap of almost 45 per cent compared to 2015.

    Association numbers show the February performance nearly 1,500 units more than the previous sales record for the month, set in 1992.

    Value of total sales also surged to $7.51-billion, up 76 per cent compared to last February.

    http://www.cbc.ca/news/canada/british-columbia/b-c-home-sales-set-record-pace-for-february-1.3490450

  7. Mon Mar 14, 2016 8:20am:

    Mar Mar
    2016 2015
    Net Unconditional Sales: 447 734
    New Listings: 619 1,448
    Active Listings: 2,576 3,769

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

  8. EPS’s are higher than average by a few points. As well market is overbought. Apple may be big but they aren’t the whole market. Market is being supported by buybacks not fundementals.

    CMHC news out this morning, running into roadblocks with agents and developers who won’t disclose their foreign buyer buddies. What does that tell you ? Total joke.

  9. I don’t see the stock market as over valued. Apple’s P/E is only 10.86 right now for instance…. I believe the overall S&P is close to historic norms… Speaking of the stock market and parking cash… Maybe the recent volatility has also made people want to put cash into RE?

  10. Low interest rates are probably here to stay for quite a while because the alternative is deflation. But if the USA gets serious about raising interest rates then Canada’s government has a tough decision; raise rates and risk deflation or keep rates low and risk a massive sell-off of Canadian government debt bonds/treasuries. We’ve lost our economic leverage.

    The western countries no longer have the manufacturing jobs that kept the economy strong; the hot economy follows the manufacturing jobs.

  11. @Bizznitch: whether or not you & I like it, rates could be low for many more years or decades. Yes, loose monetary policy has created bubbles all over but you would be foolish to count on imminently rising rates. No one can predict this stuff. So it’s best to have a good job & have a well diversified investment strategy & just hope that things work out in the long term. Read this article if interested: http://mobile.nytimes.com/2015/12/15/upshot/why-very-low-interest-rates-may-stick-around.html?referer=

    On another note, I’m looking to sell my DT condo & buy a detached house:
    -does anyone know how the DT condo market is doing?
    -what are the best 5-yr fixed rates people have seen recently?

  12. Any thoughts on 1444 Hamley St? $1.15m seems a bit expensive for an old house, but then it was lifted up and given a new foundation/basement in 2010.

    I’m thinking the lot value should be somewhere around 700-750k, but is that house worth 400k+?

  13. VI: Sure, but they need to slowly start coming back up. Leaving them too low for too long distorts the market. Just look at it now. An alternative is to ramp up the lending standards. Have people put 20% down regardless of the price.

  14. What I don’t get is all the unconditional offers taking place…every other multiple I am involved in their is a winning unconditional offer.

    Are people doing pre-emptive home inspections or just taking their chances?

  15. Four offers written this weekend for four different clients….and as of 8 pm tonight all outbid. Got two more going in tomorrow for presentations at 6 pm.

    New standard procedure seems to be list on a Wednesday, Thursday or Friday morning, open house Saturday/Sunday and offers presented either Sunday 6pm or Monday 6pm.

    What I don’t get is all the unconditional offers taking place…every other multiple I am involved in their is a winning unconditional offer. There is no way that percentage of the population has cash…..I am guessing a lot of people are confident their financing will be approved?

  16. @Buzznitch: you can’t run an ‘experiment’ with rates to see who are the buyers. We’re in an unprecedented era in history where global economic concerns have forced governments into extremely low & perhaps negative interest rates. Who knows where rates go next, but they may stay low for a prolonged stretch. We just don’t know. Every asset bubble is in a bubble right now. It’s not just real estate. Try the stock market & you’ll see overvaluation all over the place. So what are you gonna do if you have disposable income? Keep it in cash? Market timing doesn’t work. It can’t be done & there is substantial evidence to prove it. I don’t disagree that there is ‘irrational exuberance’ but what to do with your $$? I admit I don’t know.

  17. Garth is definitely out to lunch on that one. His denial makes him look very I’ll informed and branding people racist for saying so is truly pathetic. I suspect some of his investors are HAM he’s protecting.

  18. LeoS: Probably the threat of offshore buyers is driving locals to “get into the market before they’re priced out forever”. I can’t imagine rich offshore buyers would be stupid enough to buy some of these low end dives that are for sale in Victoria. Heck, if you were rich and were looking for an investment, wouldn’t it make more sense to buy in the States at half the price? I still think it’s locals doing a lot of the heavy lifting when it comes to the insane prices increases that we’re seeing.

    An easy way to find out who’s buying (rich and buying cash outright vs. poor and leveraged to the hilt) is to raise interest rates.

  19. Yeah it seems the recent CMHC/ down payment rules have done absolutely nothing to take any momentum out of the market. Though I suppose it has reduced some risk to government.

  20. “Green Party MLA Andrew Weaver agrees with Danny Evans that B.C.’s market has never been hotter and that offshore cash is the driver.

    Just another thing that Garth is wrong about. For years he’s been saying outside buyers are not a major factor in Vancouver and calling anyone that claims differently a racist. I think that argument is going to be tough to stick to with average detached house prices at almost $2M

  21. Victoria incomes don’t support any of this insane behaviour .

    I tend to agree. Some Victoria incomes do but it seems too big a shift to have been entirely local. The overall market reversal is driven locally but the fizz at the top seems different.

    Another “Wow” moment. 1601 Yale, asked $899,000 and sold for $1,106,000

    So much for the effect of the CMHC limit of $1M

  22. I’m not a greenie but I will definitely agree with MLA Andrew Weaver in the news today. This will not end well.

    “Green Party MLA Andrew Weaver agrees with Danny Evans that B.C.’s market has never been hotter and that offshore cash is the driver.

    In contrast to Evans and many B.C. realtors, though, Weaver sees the offshore investment boom as a negative force in a “literally crazy” speculative market.

    “It’s like you’re chasing Bre-X stock, and there can only be one equilibrium result,” Weaver, a mathematics PhD, said.

    “It’s going to be a crash.”

  23. @stepbystep… if you look at the E-VALUE LISTING map.. it is in Stanley Park (which is wrong as it is near commercial).. so maybe the assessment is correct… but the location sure wasn’t… nor is the plot next door to 2162 Graveley a logical lot if it is indeed 2190… seems to not be one building but 2? SO my question is E-value faulty… or ? I did check the Vancouver listings and appears right. But then if you look at the listing it suggests that development paperwork is already processed.. so why a fire? Does it just add to the intrigue?

    Now that I look at the E-value of 2162 Graveley I see the picture shows 2190 building next door.. so I am probably all wet… Just a mis-direction by E-value it seems…the Land values are similar at 1,400,000 … asking price just seemed high…all in the perception I guess..

  24. Watching these people over-paying for these dumps is good entertainment. I’m sure this kind of behaviour went on prior to the bust in the US. A few things to remember:

    1) Interest rates will rise eventually. So, if you’re living on the edge now, you’re basically renting from the bank, and will probably have to give your house back if your mortgage payment goes way up. Plus, if you’re financed to the hilt, you’ll be paying more for your credit cards and lines of credit etc.

    2) There’ll always be houses for sale. Right now there’s low inventory. I’m sure it’s been like that in the past. There was high inventory in the past too. This is just a cycle, and it will flip the other way one day too. It can change fast too..

    3) You won’t be priced out forever. When this cycle changes, you’ll have plenty of choices of places from those who massively over-extended themselves, who will be bailing out or losing their houses. It’s happened all over the world, and it will come here too.

    4) It’s “not different” here. Lots of other cities in the US thought the same thing. I’m sure lots of places in Ireland said this as well. Lots of people in Victoria preach this same line too.

    5) A lot of people hang on to make a few more bucks with the hope the market will go higher. Being too greedy could sink you. If you’re going to sell, this is probably your best chance in a generation. If not, you risk riding the wave down when this bubble pops. This thing could pop any time.

  25. Another “Wow” moment. 1601 Yale, asked $899,000 and sold for $1,106,000. House has a new kitchen, but the rest needs work, especially the bathroom! A million for what? Can’t imagine why a buyer would think that was a good decision.

    Are these buyers just getting too caught up in the frenzy of the bidding wars. Why not walk away and take a pause. There will be a house for them one day without them overpaying like this. Have some patience!

  26. The question should be who is paying $150K over ? That’s what really matters here. My money is on the 548 outside buyers. Victoria incomes don’t support any of this insane behavior .

    Psychologists should be the ones making the real money when this bubble bursts. Like a desperate gambler at the table thinking he can’t ever lose til it comes up snake eyes.

  27. To be balanced in view, Wyndeat sold for close to 600k 5+ years ago. It looks to me like there was some improvements over that time, house is in great shape.

    So the buyers say put 25k into the house, and property tax of 10k, and now Realtor fees of near 30k, and have to pay property tax again on next better house of 12k.

    They maybe made 20k in 5-6 years. That is a small ROI.

    Even if they had made 100k in profit, that is only around 2.6% ROI yearly.

    I think the market is just catching up the slack of 10 years of no growth. If we had had slow growth for 10 years, this 20% uptick in prices wouldn’t even be a discussion. I think prices have a long way to go before there is a bubble risk.

  28. 1673 – 1085 – 16 – 24 = 548 outside.

    Thanks Marko. So 67% local, 33% outside compared to 71% local and 29% outside in 2015. Hard to tell with small numbers so far and whether the query is the same as what VREB uses, but those shifts might be enough to account for part of the insanity.

  29. Amazing to see MOI this low this fast! Quite fascinating to observe the market psychology out there. It`s even crazy how much things have changed in only 2 months since all the financial market fear (68 cent loonie, etc). It’s hilarious how far off our most bullish predictions will be as they were done into that mid-Jan fear.

    I just checked to see if Garth’s site is still going, and I’m glad to see ‘Vic RE Update’ is still hanging in there…

    http://www.greaterfool.ca/2016/03/11/hot-stuff/#comment-437646

    Victorians who are waiting for lower prices will be rewarded…Victoria’s price decline from 2010-2014 was an appetizer for the main course that’s on the way…Since 2010 house prices in Victoria have been in a slow melt

  30. 2851 Wyndeatt – really??? $703k? Wow. Just. Wow.

    Don’t get me wrong, it’s a nice house, but last year this house would have sold with a 5 in front of it.

  31. @Marko, can you do a query on how many buyers so far in 2016 are not reporting Victoria as origin? Or do we have to wait for VREB to report at the end of the year

    For the official numbers we need guidance from the VREB.

    Running some basic searches on my end

    1673 results.

    1085 Victoria
    16 PIPA (basically not reported).
    24 Sooke

    I am guessing everything else would be outside of Greater Victoria?

    1673 – 1085 – 16 – 24 = 548 outside.

  32. Marko, were you an active realtor during the 2003-2007 boom years? I’m just wondering if the current market would seem a little less insane to a realtor who’d been around for those years?

    In 2003 I was still at Vic High rolling in my Fiero 🙂 I became licenced in 2010, but all the older REALTORS® feel this is a way crazier market than 2003-2007.

    i/ Sales will probably hit an all time recod high for March and probably for the year as well given how things are going.

    ii/ Absolute prices are much higher so every day there are properties going 100k to 200k+ above asking, didn’t see this 2003-2007.

    iii/ Flow of information is insane due to the PCS system/internet. I was at a house two days ago that had over 50 showings on the first day on market.

  33. Wyndeat, Great yard, updated house, suite. Anything like that will go near 700 these days, the suite alone ads that extra 150-200 on any house these days.

    With weather this bad this March, storms and rain, I suspect that April and May and June will be the biggest months in history. And with this much pent up demand, it has to continue until at least the fall and into next year at a minimum.

  34. @db What do you mean by a plant?
    2190 Gravely Street shows this:
    Total Value $1,462,800
    Assessed as of July 1st, 2015
    Land $1,400,000
    Buildings $62,800

  35. “I suspect we are in for a historical 3-4 year upswing like the many times before. Those 700k houses in Fairfield will be 950+ or over 1 million average in a year or two. ”

    Those are the years when interest rates went down substantially. Don’t see mortgage rates going down even if BOC was so desperate to do negative rates, two different beasts. Affordability levels don’t compute either. Wage increases of 3 to 5% were common during that period and not seeing that anywhere.

    This is short term insanity that will flush itself out at some point, these aren’t locals paying 150K over. If some are they should be flogged in Centennial Square for being so stupid.

  36. @Marko, can you do a query on how many buyers so far in 2016 are not reporting Victoria as origin? Or do we have to wait for VREB to report at the end of the year?

  37. this is actually not as wild as those years.

    I think you’ll find March might be the wildest one we’ve ever had.

  38. In October, Michael – one of our resident bulls – said “MOI got as low as 2 in the last cycle (2004ish). I’m guessing we’ll see the 2s again by 2017 or 18.” We’re already into the 2s in February, and might be into the 1s in March.. Crazy how fast it accelerated.

  39. @Ash, I was around during those years and this is actually not as wild as those years. Houses in Fairfield went from 180k to 700k in 4 years.

    Fairfield now places are 700-900k (for a very nice place). Prices are up a little bit, and a lot of interest in buying before being priced out these days. I suspect we are in for a historical 3-4 year upswing like the many times before. Those 700k houses in Fairfield will be 950+ or over 1 million average in a year or two. You can still buy a nice house on a lot in Oak Bay for under 700k, so lots of affordability out there still.

  40. Marko, were you an active realtor during the 2003-2007 boom years? I’m just wondering if the current market would seem a little less insane to a realtor who’d been around for those years? I dunno, not trying to justify the current craziness, just curious if we have precedent for this kind of activity in terms of bidding wars etc.

  41. We looked at Chaucer and loved the location and the bones of the house. I think the final buyer was a developer, I’m sure it will come on the market in 3 months fully renovated for 1.1 Million and sell right away. The house was perfect for a Reno, it was basically gutted anyways. Solid frame.

  42. Agreed they could easily pass a speculator tax of 20% but they don’t have the jam because the Libs tout themselves as the “free enterprise” party. It’s all political but will backfire if they don’t do simething and NDP starts calling for one in a serious way.

    Sweethome , the TC has a couple good reporters but the ones who do real estate seem to be in the industry’s back pocket as they have never once done a single story on the down side of this insane speculation nor on past market turmoil. It’s always sunshine and puppy dogs reporting quoting agents/developers and never independent view points. They know who pays their wages.

  43. I did well buying a fixer upper in VicWest. Wasn’t a bunch of work especially spread out over a decade. Paid it off early and it appreciated 8% / year (not including costs of ownership and fixing up).

  44. Can’t believe this renovation project could sell for $802,000 (listed at $650,000). Obviously a major bidding war on this one – 2034 Chaucer St in North Oak Bay. Not a big house or lot – Wow!

    I am speechless.

    Does REALTORS® have moral obligation to calm down their clients when they make irrational decision?

    I understand it is tough call, damned if you do and damned if you don’t. Why not just close the deal and laughing to the bank.

    wow, $802k for Chaucer, just wow.

  45. This isn’t a Sellers market.
    This isn’t a Buyers market.
    This is a Realtors market encouraging buyers that if they don’t act fast with their best offer they will miss out.

    Points to consider…
    1. There are no foreigners buying into Victoria. Since January Chinese Govt has cracked down on individuals and shell companies from moving funds. Vancouver is really scrambling. In Shenzhen there is now an influx as private enterprise is offering incentives. Asian students are realizing that there are no jobs in North America for them. In the last month Foreigners are selling in New York, Chicago, San Francisco and returning home. This is very evident in Vancouver if you look at those selling in Point Grey and Richmond. This is why the Province, Van Sun and Colonist are pumping Real Estate. They’re flat out scared.
    2. Lower Mainland folks buying here? Small market in the 4/2 or 3/2 houses. These are retirees or nearly retires that want a guest room or two.
    3. CMHC caps $1 Million+ with mandatory 20%. How many careers in Victoria provide access to $200,000 savings. Sure, Gift funds or Loans. This is why Victoria is hard capped at $1 Million.
    4. Thinking of commuting from Vic to Van 3 or 4 days per week? We’ve all heard the story. Same in Nanaimo. Due Diligence would show that Harbour Air are Booked every AM with wait lists. Oh and then the reliability of Fog.

    Is Victoria nice? Sure. The summer tourist season? A real pain to travel around.
    For $1.5Million in Oak Bay In a 100 year old house built on Clay I wouldn’t be sleeping very well.

  46. the old method of real estate investing was to buy a place that you can put some sweat equity into and later trade up (whether up or down market, you are in and built some extra equity relative to other properties…if they come down, your spread is narrower to trade up)

  47. This market is so frustrating! I’ve been following this blog on and off for years and have been saving a healthy down payment hoping the market would turn down at some point. This year, I finally have enough to get a place (probably a townhouse) with just a small mortgage (I don’t want a huge mortgage), but the market is insane and there isn’t much to choose from. I wonder if just waiting until next year would be best or will it just be worse? I know it’s impossible to predict, it’s just frustrating when you’re able to buy a first place but there isn’t much to choose from.

  48. @Hawk – I just want to speak up for the value of journalism. We do need a story on what is happening in the real estate market in Victoria, but newspapers and our public broadcaster have had their budgets slashed. I think it is likely that our local paper no longer has the resources to do a full-scale investigative piece.

    I admit I am not a subscriber to the Times-Colonist, but I do subscribe to the Globe and Mail and Focus magazine. I also support more tax money going to the CBC. Maybe Focus magazine could tackle the real estate story.

    I wish people would realize that free information (even this blog) can not replace professional journalism. I do not work in the field, but have been exposed to some excellent work over the years, and found it really informative.

  49. I personally feel like it is time for government intervention. My suggestion would be 10% minimum down.

    It does seem like we are going beyond any rational level of activity. They just tweaked the down payment rules so I doubt we will see anything else until the fall at the absolute earliest.

    What will be interesting is all the investigations into foreign speculation. They are happening provincially and federally at many different levels. For Vancouver I think a serious speculation tax could collapse the recent gains. It will also be politically dead easy to pass.

  50. Two weeks later I see HHV seller puts home up with a traditional REALTOR® for $599,900 and it sells in two days for full asking price of $599,900.

    If not even HHV readers have figured it out there truly is no hope. I really don’t get the psychology there. I think at a certain point the numbers are just so big they have no relevance to reality anymore. Victoria house prices are like space. It’s difficult to get a sense of proportion. When you’re selling a house for 3/4 of a million dollars, an extra $20,000 here or there feels almost too small to bother with.

    I want to support Leo as I think he is an idiot for having provided so much incredibly useful information over the years for free 🙂

    Quiet you or I’ll start advertising the competition 🙂

  51. Gwac: Rates will be going up courtesy of the US.

    http://www.cbc.ca/news/canada/manitoba/what-does-the-rise-of-u-s-interest-rates-mean-for-canada-1.3373931

    I agree, the govt. will most likely not mess around with the housing marking too much. Who wants to be branded as the one who brought the market down. It’ll crash on its own accord.

    This is the best time in a generation to sell if you bought quite a while ago. Once things start going downhill, one won’t get this kind of return again.

  52. Rates are not going anywhere and the gov will not do any major meddling in the housing market. Our economy is doing shit and they cannot afford to hurt it in any manner.

  53. Marko: Govt. just needs to raise rates a couple of percentage points. That will cool it down. What some people are overpaying for some of these dives is just incredible. To put it in perspective, look at this link to see what house prices here really should be (A lot less for the dumps we’re seeing sold.

    http://www.zillow.com/homes/for_sale/Las-Vegas-NV/fsba,fsbo,new_lt/house_type/18959_rid/3-_beds/2-_baths/75000-300000_price/272-1088_mp/any_days/1800-_size/2006-2016_built/pricea_sort/36.395862,-114.764901,35.914079,-115.65754_rect/10_zm/0_mmm/

  54. I would like to see who the owners of these massive over bidders are in 3 or 6 months from now. I bet they won’t be the original buyer and will be flipped off to some foreign money launderer like they are in Vancouver via these shady wholesalers.

    If the media in this town had a pair of balls to do any serious investigation work like the Province is, versus pandering to their advertisers, we might know the true story here. All they do is cheerlead this insanity.

    Government intervention is needed now but the BC government will never intervene as they rely on all this transfer tax to prop up their political purses and their personal real estate holdings.

  55. I Know one person who sold their house in Sannich east by way of a knock on the door, we like to buy your house. Gave them a great offer. Issue I think they will face is no where to go and prices are surging. I wonder if sellers who have no where to go are facing a bit of a panic.

  56. Wonder how much it’ll cost them to get it renovated – $100K or more, and what would it be worth when it was finished?

    I would peg it more at like 250k, or more, at current construction costs (also rising).

    My friends are building a high-end custom house and they had me go over the budget their builder provided and prices are definitively up quite a bit over what I was paying 2014/early 2015 on my owner-build.

  57. Can’t believe this renovation project could sell for $802,000 (listed at $650,000). Obviously a major bidding war on this one – 2034 Chaucer St in North Oak Bay. Not a big house or lot – Wow!

    This isn’t even in my top 5 shock list in the last 24 hours.

    For example, 4566 Gordon Point Dr sold in 2010 after 95 days on market for $1,125,000.

    Re-sold this morning for $1,825,000.

    For me the biggest shock has to be 1001 Boeing Close in the Westhills. Sold in December of 2014 for $349,900 (including GST). Just re-sold for $399,000. I don’t think I’ve ever seen that type of appreciation on a Westhill re-sale.

    I personally feel like it is time for government intervention. My suggestion would be 10% minimum down. I am not sure if it would help much but it would be something at least.

  58. I think the buyers of Chaucer St are going to have a serious hangover (or buyer’s remorse) after getting carried away at that bidding war party. The sellers must feel like they just won the lottery.

    This is getting beyond a crazy market – what is fuelling this?

  59. Can’t believe this renovation project could sell for $802,000 (listed at $650,000). Obviously a major bidding war on this one – 2034 Chaucer St in North Oak Bay. Not a big house or lot – Wow!

    Wonder how much it’ll cost them to get it renovated – $100K or more, and what would it be worth when it was finished?

  60. “Not totally accurate. While textbooks often point to “lending value” as opposed to “market value” in reality, most purchase prices today are accepted as lending value and the loan to value ratio is based solely on how much cash the buyer has to put down.”

    Glad you have it under control LeoM. This is why the house of cards will eventually collapse. Lending on hyped up over bidding and mortgage brokers whose livelihood depends on a sale will be another catalyst when the walls come down.

    Might want to review the reasons the US crashed as they look like the same ones out in full force here right now.

    Contents [hide]
    1 Government policies
    1.1 Housing tax policy
    1.2 Deregulation
    1.3 Mandated loans
    1.4 Historically low interest rates
    1.4.1 Return to higher rates
    1.4.2 Regions affected
    2 ‘Mania’ for home ownership
    2.1 Belief that housing is a good investment
    2.2 Promotion in the media
    2.3 Speculative fever
    2.4 Buying and selling above normal multiples
    2.5 Dot-com bubble collapse
    3 Risky mortgage products and lax lending standards
    3.1 Expansion of subprime lending
    3.2 Risky products

    https://en.wikipedia.org/wiki/Causes_of_the_United_States_housing_bubble

  61. Yes, I know, Marko, I’m one of those dumb consumers who should’ve gone with a mere posting

    Sit down, calculate out how many hours you think your REALTOR® spent selling your duplex 40k over asking and divide 🙂

    Not picking on you specifically but I’ve seen it many times before! In the past I’ve had multi-year HHV followers that have left town call me for listing interviews and this is typically how it goes…..

    After a little chitchat about HHV and how awesome it is the scenario plays out like this

    Marko: “The market value on your home is around $585,000 +/- $25,000 and for reasons X, Y, Z, likely the best stategic list price would be $599,900 and at that price it should sell quickly. With the mere posting you can save close to $11,000 factoring in the GST while still offering a solid commission to buyer’s REALTORS®. These are all the examples of the successfully sold mere postings in your area I’ve done over the last few years.”

    HHV seller: “Yes, makes sense, nods head.”

    Two weeks later I see HHV seller puts home up with a traditional REALTOR® for $599,900 and it sells in two days for full asking price of $599,900.

    Personally, I really don’t care. I would financially be happy doing 25 deals a year so at 90 to 100/year (last couple of years) I am not in need of more business. Yes, I am advertising on HHV, not because I need more business, but because I want to support Leo as I think he is an idiot for having provided so much incredibly useful information over the years for free 🙂

    However, it has opened up my eyes to one thing. It is one thing to follow a blog/forum whether it be real estate, politics, various hobby related stuff, etc., but a whole different thing to interpurt what you are reading.

    It’s like when people come to my office to inquire about investment properties. I show them the spreadsheets on the three condos I have and how much financial sense they make. I point them to various articles I’ve written over the years such as -> http://victoria.citified.ca/news/stay-small-a-guide-to-buying-an-investment-condo-in-victoria/

    and after they’ve read all the materials, I’ve done all my explainations with real life examples the first objection when we start looking for an investment condo is, “500 sq/ft is too small.”

    At some point, well most of the time, I just give up and represent people on shitty investments.

  62. @LeoM

    Just another reason to stay away from RBC. Terrible rates right now and unconscionable methods of calculating prepayment penalties, never mind uninformed, dispassionate branch staff.

    Credit unions are better, but it would be a mistake to base your thoughts on how the whole system works based on a single credit unions lending policies. There are just too many variables, and credit unions have various latitudes to do things differently that many banks and mortgage lenders don’t have.

    When it comes down to it – the big decisions on ‘value’ are made at the 3 insurers – CMHC, Genworth and Canada Guaranty – even if a mortgage is conventional or high ratio.

  63. Having kids & wanting to leave them an inheritance is the only reason I could believe in housing-as-a-true-financial-investment.

    Well there is a common way of thinking that ties up the lowest rate borrowing you’ll have access to and a significant amount of your borrowing room without any analysis of how it could be better deployed. If you are comfortable with a paid-off house and a job until regular retirement age no problem.

    And as far as not believing a house is a true financial investment, it fits the dictionary definition. Just because you’ve decided never to pull capital out of it through a reverse mortgage or downsize and pocket the difference or work your way up the property ladder or sell and rent or rent out part of it or all of it doesn’t mean it is not sitting there for you like a big savings account (with a better rate of interest) or that these options don’t exist.

    And the only thing preventing a sale when there is emotional attachment (which is great) is lack of necessity. A renter doesn’t have the ability to cash out on equity later in life.

  64. “Only major life events will cause people to sell.”

    I agree with this. People have so many emotions tied up in their house (where the kids grew up, where they spent 50+ years with the spouse, etc.)

    Purchasing a house is definitely an emotional investment that is worthwhile if you can afford it!

    I always watch the HGTV episodes that are “time to downsize” episodes & it seems people rarely actually do. (Need a room for the grandkids to visit!)

    Not that at some point some wouldn’t sell for other reasons (need the money / yard work too much) but they sure don’t plan to.

    Having kids & wanting to leave them an inheritance is the only reason I could believe in housing-as-a-true-financial-investment.

  65. Leonard St has a good comparable from about 2 years ago at 1115 Leonard, a nicer house on a bigger lot. As I recall it languished on the market for months. I don’t think it sold. The new Leonard listing will likely sell fast.

  66. Thanks for your insight Mike, but I checked with someone I know at RBC and a local credit union before posting my comments. Not sure which lenders you’re referring to but I doubt you are referring to the major banks. I was also told that when they bend the rules a bit they likely charge a higher interest rate.

  67. @LeoM

    If people are paying $100,000 over the banks mortgage appraisal, then the purchaser’s are paying the extra from their own pocket. Banks will typically only mortgage 80% of their assessor’s valuation. CMHC also has restrictions based on the assessed market value. For example, if you are the successful bidder on a house and your offer is $750,000 but the banks assessment says it’s only worth $650,000, then the bank will only mortgage you the sum of 80% of $650,000 which is $520,000. That means the buyer needs $230,000 cash.

    Not totally accurate. While textbooks often point to “lending value” as opposed to “market value” in reality, most purchase prices today are accepted as lending value and the loan to value ratio is based solely on how much cash the buyer has to put down.

    In some rare cases where a purchase price seems unreasonable , a lender or insurer may perform extra diligence while assessing a mortgage application. That being said, lenders, appraisers and insurers are all very dialled in to current market conditions, and understand that market forces drive price and ‘value’.

  68. @Michael

    I’m pretty pleased how things went with the sale of my rental property (side x side duplex — looks like townhouse) and am glad I listed it when I did. It was priced at 400k, open house 2 days after listing was a madhouse (says my neighbour), three offers by 7pm, and the offer I accepted was $40k over asking. I think the buyer will love their new home, but, I gotta agree that the market is NUTS. Just happy to be a beneficiary of the upswing, and not a buyer at the moment….

    Yes, I know, Marko, I’m one of those dumb consumers who should’ve gone with a mere posting 😉

  69. In Hawks world, the end is near.

    If people are paying $100,000 over the banks mortgage appraisal, then the purchaser’s are paying the extra from their own pocket. Banks will typically only mortgage 80% of their assessor’s valuation. CMHC also has restrictions based on the assessed market value.

    For example, if you are the successful bidder on a house and your offer is $750,000 but the banks assessment says it’s only worth $650,000, then the bank will only mortgage you the sum of 80% of $650,000 which is $520,000. That means the buyer needs $230,000 cash.

    So explain to us Hawk how the world will end if someone loses their $230,000 cash downpayment if your daily apocalyptic crash predictions come true?

    PS to Hawk:: no need to fret about my financial situation, I have owned my house mortgage free for decades.

  70. As the news just said dasmo, new jobs are mainly part time and 6000 full time jobs lost in BC. Growth sectors are in low paying tourism or cyclical construction out of town. You won’t hear of tech layoffs til it’s everywhere.

    Small non public companies don’t put out news releases of layoffs. Bankers support most of the tech companies and don’t announce credit line cut backs either. If Silicon Valley is starting to hurt it will eventually hit here.

  71. Heating bill has never been bad. It’s gas and the house isn’t big. Timed thermostat is the key. Honeycomb blinds and insulated attic. Ranges from 40ish in the summer (dryer is gas too) to 240ish in the winter.

  72. hollow walls means the house breaths which is why it hasn’t rotted away

    I also like the idea the house can breath more than airtight that will trap moisture. However, what’s the heating bill like in those stormy winter months? Heat pump itself is only good for delta 20*C, they seem cannot keep up with drafty houses in windy nights.

  73. Old homes are more predictable. Plenty of problems with newer builds. I like a low tech house with some drafts. My 1933 house was solid and simple. Original windows and hollow walls. modern windows aren’t going to last 80 years. hollow walls means the house breaths which is why it hasn’t rotted away…. But my old house was never mucked with and wasn’t a mansion…

  74. The reason it’s good Hawk is that we are diversified. If we were a one big industry town and something happens to said industry then you get Detroit. We don’t have that here. Tech is up, tourism is up, education is up, construction is up, Manufacturing is up, Government is stable, military is stable. Sorry, don’t see doom and gloom for our local economy…

  75. Yeah, the old homes are lovely but a PITA to maintain with lots that can go wrong and often pretty drafty. Hampshire was built in 1892! You have to be ready to take a constant project on or have the money to pay others to do it for you.

  76. The house is on a 12,000 square foot lot. Which makes me wonder why it has not been subdivided into two lots by now? Maybe the house foot print is too big and you would have to demolish the home to subdivide

    Assuming you could subdivide the highest and best use would be either as two vacant ready to build lots or as improved with a house on one large lot. Which ever results in the highest price.

    Bidding on this type of property is outside of the understanding of most home owners. Before making any offer you should hire a consultant who will investigate whether the site can be re-developed and the costs to redevelop the site.

  77. He still managed to take care of the place on his own and it wasn’t a rundown hovel like some old peoples places you see. He probably would have stayed on until he couldn’t walk under normal circumstances.

    PS – I had no influence on his decision – my older brother helped with the convincing and he is more bull than bear.

  78. “fears of deflation brought on by low interest rates, slow economies, and the specter of negative interest rates; and of course my house earns an average of 6% per year but my bank accounts earn less than 2%.”

    What fears LeoM ? Did you miss the news today that people are borrowing their ass off to historical levels because they can, not because they fear all that you listed. Most wouldn’t have the slightest clue what negative rates are, let alone deflation.

    You borrowed against your principal residence and now you’re sweating bullets, I get it. That would be extremely stressful wondering what would happen if the bears are right.

  79. That fact he was 96 had nothing to do with it?

    Sorry Marko but Duh. He was 94 two years ago and he didn’t sell and you could have made the same comment if I had the same story. That latest market surge was the final trigger – the fact that he held on this long says something.

  80. “A home on Lafayette with much smaller land & need for renos sold for 1.6, $350k over-asking. Makes no sense. ”

    Exactly. What kind of money is driving over asks like that ? This isn’t local money driving these insane bidding wars for the most part. When the tap runs dry and the music stops, I wouldn’t want to be left paying $150K over for any of those over valued houses, let alone $350K.

    It’s only March 11th, the spring market has barely started and all the bulls will be blowing their loads by the end April making for a very slow drawn out summer and into a very painful fall winter.

    Small businesses are the first to lay off, get bank lines of credit cut back or called in, then shut down. Not sure how you can say that’s a good thing dasmo. Any tech companies here are at the mercy of Silicon Valley momentum and it doesn’t look good down there right now as the cash dries up.

    Silicon Valley’s Exodus Begins

    Hot air isn’t the only thing escaping the tech bubble.

    “The past few years have seen a sort of entrepreneurial utopia bloom in Silicon Valley. Young kids with big ideas moved to the Bay Area, where they were handed millions of dollars hand over fist by zealous venture capitalists anxious to fund the next Facebook or the next Uber. But recently, there’s been trouble in paradise. The venture-capital funding is slowing down. Start-ups are raising and exiting in down rounds. Investors’ confidence seems to have been shaken. Mega-rounds have declined, and companies have started laying off employees.

    In the latest sign that Tech Bubble 2.0 is bursting, Silicon Valley residents are now moving out of the area faster than they’re arriving.”

    http://www.vanityfair.com/news/2016/03/silicon-valleys-exodus-begins

  81. Gordon Head seems to have a few non-waterfront acreages, many of which I’ve noticed on my travels over the years but never took the time to investigate. Today I did.

    Go to http://evaluebc.bcassessment.ca/ and type in the following addresses:

    1889 San Pedro (1.24 acres)
    1812 Feltham (2.5 acres)
    2144 Wenman (1.91 acres)

    Also, 1715 Blair Ave (not quite an acreage) has a Saanich development application notice on it. The house on this property has a back yard the size of a field (106 x 408 ft). The application, I think, is for subdividing the property and creating four new lots. So, if anyone is interested in purchasing raw land in the “prestigious” neighbourhood of Gordon Head, get ready.

  82. @VicInvestor – the difference is the Cadboro Bay & Rockland houses are on corner lots of major roads.
    Lafayette is actually on a very private cul-de-sac.

  83. Wow, if I had the money, I could happily go Downton Abbey in 1936 Hampshire. Those photos! And my gentlemanly guidance would mean so much to the people of the village!

  84. Hawk said: “Getting Money Out of China: The Reality Has Changed”

    That will not change the current boom in prices, except for a few ultra-high end purchases. Maybe this will finally prove to you Hawk that your theory of HAM is wrong. The boom will continue until inventory increases in all price ranges. Low inventory in the RE market is a phenomenon in all popular cities in the western world and the low inventory is mostly due to the fears of deflation brought on by low interest rates, slow economies, and the specter of negative interest rates; and of course my house earns an average of 6% per year but my bank accounts earn less than 2%.

    Everything possible is being done by governments around the world to prevent deflation and home owners are doing their part to lock-in their wealth by refusing to sell their properties; and that’s why there is low inventory of houses for sale. HAM has little effect on inventory.

    Why would anyone sell their RE these days?
    Only major life events will cause people to sell.

  85. I agree it’s crazy for buyers. We were fully prepared to go 50k over asking.

    Yikes! We bought our Gordon Head place in ’09 (circa the previous peak) and offered $18k over asking in a multiple bid situation — and were successful. Today’s buying climate seems even tougher. Very glad we’re “in” and not planning on selling for a long, long time.

  86. What makes Victoria stable is it has lots of small businesses and not one big industry driving its economy. Many small businesses here have connections to larger ones. For instance, TCHelicon, part of the TC group was just bought by the Music Group. Large international music products Corp. TC Helicon is also expanding so expect more hires comming from other places…or Abe books owned by Amazon etc… We have Tech, Government, Tourism, manufacturing, military, education, construction, and finance driving our economy…. Sounds good to me.

  87. Some homes are being bidded up with no logic and sometimes you see a home like Cadboro bay not selling. A home on Lafayette with much smaller land & need for renos sold for 1.6, $350k over-asking. Makes no sense. The house on Rockland & Gonzales (1587 Rockand) also hasn’t sold despite 0.5 acres in one of the most prestigious neighborhoods. Hard to explain. I still think Rockland or Cadboro bay houses are much better value than oak bay homes with small lots going for 150-400 over asking!

  88. 3615 Cadboro Bay

    https://www.realtor.ca/Residential/Single-Family/16661978/1936-HAMPSHIRE-Rd-Victoria-British-Columbia-V8R5T8

    I think same as Hampshire. The price is too high for its land, the house is too expensive to maintance/update.

    If you don’t mind living like downton abbey, both master and slave of the old house, they are good buy. However, I am not sure anyone who has 1M in their pockets willing to do that. They rather buying turnkey updated war sheds.

  89. I’ve also wondered by 3615 Cadboro Bay hasn’t sold – haven’t been in but the photos are nice.

  90. I think some people will be motivated to sell in this market. I believe there have been three on this blog alone who have done so and we are considering it. If you have held on through the flat bit for an uptick to sell, now seems like a good time. I see that some of the small apartments/multis in Cook Street village area have already been turned over.

  91. Meanwhile this poor guy in the Uplands by the golf course dropped his price 500K over 4 months ago from $2.1 million and still can’t get a bite. Under assessed value even.

    I believe a lot of these bidding wars are driven by agents stirring up the sheep into a frenzy. Toss in some wholesaler flippers and this is a recipe for disaster. I think they should do a reality show on this to show the before and after. Imagine the heartbreak.

    https://www.realtor.ca/Residential/Single-Family/16443837/3615-Cadboro-Bay-Rd-Victoria-British-Columbia-V8R5K9

  92. “The psychology is they yearn for their money back.”

    Especially after they pay $150K over and realize what a greater fool they were when the air comes out of this gas bag.

    Nice hockey stick chart there Mike, looks like a blow off top by any T&A standards. Those charts never end well.

  93. ffs, there are still tons of great value, newish, affordable housing outside the core.

    A house on Bear Mountain purchased at the peak in early 2010 for $785,000 just re-sold for $800,000 today so some truth to that.

    $785,000 Oak Bay house in 2010 would be well over 900s now.

  94. The ones who usually pull the sell trigger just as something starts taking off, are the ones who bought near the previous top. The psychology is they yearn for their money back.

  95. “I would say Victoria is safer than Vancouver given below inflation growth for many years. ”

    Vancouver is a major city with industrial and business growth. Victoria has severe limitations with zero industrial growth, nor any serious corporations setting up shop. Every one that has leaves.

    Condo’s are the worst measure of growth as they rise and fall with developers ability to borrow and sell at a rapid pace. They are a box with no land value, just a space.

    When has Victoria had 100 people deep at every open house with $150K over ask prices and ZERO conditions ? Never. Who knows when it ends but it will end with a thud.

    I may not have a crystal ball but I know a bubble when I see one. This is a once in a lifetime opportunity for sellers to take the easiest $100K plus they will ever see.

  96. @Hawk: I see & partially agree with your concerns. There is a global asset bubble. However, you’re claiming that you have a crystal ball & can time the market (i.e. Pending market crash). I agree that over-leveraging & emotional buying is dangerous but there is still huge upward pressure on Victoria prices. It’s hard to tell where we’re headed but I would say Victoria is safer than Vancouver given below inflation growth for many years. I bough my DT condo in 2014 for 10K more than what the sellers had paid in 2006. That doesn’t sound like a bubble to me.

  97. Another agent or recent over bidder in disguise by the sounds of it.

    If someone isn’t a bear dancing for apocalypse, they must be an agent or idiot buyers… lol

    ffs, there are still tons of great value, newish, affordable housing outside the core. If the young buyers want the location that everyone and their dogs desired, of course they have to pay for it. Why there must be a crash coming, wipe out half of the market (or fantasy land as you called it) values, so that they can afford to move in their dream neighborhood, (with a big lot, newish house, s/s appliances, green lawn, cool dog) then it is fair and healthy for the overall market?

    unlimited wants and limited resources, pick your priorities.

  98. @reasonfirst – a few of my friends will not pull the sell trigger until they have completed the buy trigger. They are using bridge financing and ensuring they don’t end up scrambling for another home. So this doesn’t help with the supply side.

  99. Not sure what to make of this but may be worthy of discussion as it’s related to multiple bids etc. My 96 year old father just sold his Richmond home. It was listed for about 100-200k low. We expected a bidding war, didn’t happen, got 2 bids first weekend and both disappeared when the realtor responded without a price increase (just some minor closing date and rent back time tweaks that was disclosed up front). Maybe 1/2 dozen people showed interest over the next week and got one bid on the following weekend. The deal closed and the bidder knew there were no other offers. Short story is my dad got 188K over asking even with the low interest in the property. This is about 300-400K over what we expected less than a year ago. Seems nuts too me but great news for the family.

  100. I just searched this page for the word “supply” and it wasn’t mentioned once. Pent up demand was mentioned but I’m not really sure I buy that as houses bought = houses sold so there must be some balancing pent-up supply (when population growth) has been pretty moderate over the last decade. And with the way things are going, doesn’t anyone think people may start to pull the sell trigger?

  101. Thanks Marko Not a lot for sale and seems to go quickly, Been following for 5
    years. Learned a lot from you and JJ.

  102. Meanwhile, back in the real world:

    Canadian Household Debt Hits Record High, And Paying It Off Is Getting Harder

    “That’s in part because debt is growing twice as fast as people’s incomes.”

    “Taking on this level of debt may seem manageable at the time, but an unexpected repair, a job loss or a jump in interest rates could really send your finances into a tailspin.”

    http://www.huffingtonpost.ca/2016/03/11/household-debt-canada-2015_n_9437438.html?ir=Canada%20Business

  103. “So, when the bears are right, finally the crash happened (-33%), the price may adjusted back to 2015 level. That’s hardy a bargain price they are waiting for.”

    You mean 33% down from the median prices, not what the retards are paying 150K over at some fantasy land values that aren’t real. Those will be discussed at length in the future when the buyers disappear and the easy money crowd is all tapped out. Thinking this is the new norm is going to be major disappointment. Another agent or recent over bidder in disguise by the sounds of it.

    Vicinvestor,

    If you think this recent mania in Victoria is not driven by the chain reaction of insane HAM buying in Vancouver then you are not in reality. When the lawyers decide to not risk their reputation and/or decide it’s not worth the hassle to fight with the new forces now at work to slow the currency flows, then you will see a sudden and harsh crash. Lawyers are the only reason the cash is moving.

    HAM have fueled this whole rise and created stupid people over night. When it stops, Victoria will feel it in spades. Who actually thinks twice annual Victoria income being paid over ask is the new norm ? Seriously ?

  104. Let’s see what the next bungalow sale brings on Scott/Shakespeare. Problem right now is you can’t really look at sales from 3 months ago to draw a conclusion.

  105. Marko I take your point but the asquith place isn’t typical with 3 beds on the main and everything being like new after the flip/ suite addition. I bet most of the houses on say Scott or Shakespeare, just a block or two in from the townhouse, wouldn’t get much more than the townhouse did. Happy to be proven wrong though.

  106. No question the market is on a tear. Handy timing for me. Couldn’t buy my lot without the fast sale of my house! No crazy action in the lot market either… Not so easy to get the free money…. Too many obsessed with the core and not nature…I think this will be a solid bump up this spring and then level out a bit. This overbidding is by people who have money from other sales I think. Probably a number of speculators too. There would need to be an industry boom with wage growth and a rate cut to be like the early 2000’s. This is simply a snap from pent up demand, low inventory and the halo effect from insane Van prices. Enough gas to burn up but not to last that long.

  107. Yep that is tough. Hard to have the courage to go against the crowd.

    But it wasn’t so much going against the crowd as the numbers actually made sense. Rental market was right tight in those years too.

  108. 2828 shelbourne townhouse. What kills me about these places is that for an equivalent price you can buy a SFH in the same neighborhood on 6,000 sq ft lot, and well away from the main road.

    Maybe last year? The bungalow on Asquith went for $750k last week.

  109. Agree with Leo, my gut tells me this market has legs. With so many buyers out there it’s hard to see people just giving up en mass to the point that it causes a major slowdown.

    Re: 2828 shelbourne townhouse. What kills me about these places is that for an equivalent price you can buy a SFH in the same neighborhood on 6,000 sq ft lot, and well away from the main road. I have to wonder if that’s sustainable or whether the townhouse eventually loses out in terms of appreciation.

  110. For example, when you could buy very obvious downtown cash flow positive condos from 2009-2014 few were buying

    Yep that is tough. Hard to have the courage to go against the crowd.
    Last month I wrote that it was still an ok time to buy. With every week it’s harder to tell if that is still true. I still think this market is going to run further than we might expect right now.

  111. really it is market driven and there is a lot of buyer irrational behaviour out there.

    Hard to tell. Is $750k for park side irrational? Well it depends on where prices go.

  112. How’s the SFH market (under 1M) in Calgary and Edmonton doing? The sky is falling over there, however the house prices are still somewhat stable. (pls correct me if I am wrong)

    Even HAM is gone, BC ferries do a huge price hike, CAD$ up/down, seniors are all dying off, etc etc, it won’t be half as bad as Alberta right now. There is no indication of slowing down here in the core, so even if a crash/soft landing/correct is inevitable, that may not be happened until the price risen another 20% (or 50%??) /quote Marko “Some areas are close to pushing 20% since January 1st, 2015….”

    So, when the bears are right, finally the crash happened (-33%), the price may adjusted back to 2015 level. That’s hardy a bargain price they are waiting for.

  113. I don’t refute that the market is insane right now. But I wonder how much the intentionally low listing prices are adding to the hype. For example, that place on Parkside crescent, listed for 600k and sold for 750k. Even in the dead of 2013 I remember similar places there selling for well above 600.

    It didn’t appear to be horribly underlisted on first glance, although it certainly was to some extent. The home was purchased in 2010 for $539k and then the market dropped another 4-5% by the time we rolled around to the end of 2013. Home had updates done since the purchase but nothing super crazy.

    I went through the home and my gut feeling was 675k to 710k but I was still short by a mile.

  114. I don’t really buy it. You’ve said before for properties that go in bidding wars that it’s not necessarily the realtor under pricing the listing, but that in a hot market it’s extremely difficult to guess the market price. So if a realtor can’t get within $50k of market price, how would any consumer know whether $540k or $515k is above or below market? Unless the market is dead flat I don’t think anyone can appraise closer than 5% to actual market value even with domain expertise.

    I don’t agree with your argument either of opening up homes to a transparent bidding system as the seller is not a large evil corporation with an intellectual or other advantage over the buyer. The seller has to face the same when he or she goes to buy another property. I probably should have added formulated/educated evaluation of the property PLUS one’s personal comfort level. I wouldn’t feel comfortable bidding up a 300k Ferrari on eBay (a more transparent bidding process) due to person comfort/affordability irrelevant of market value/how far it gets bid up.

    Plus offers are more complicated than just the price. If I am a seller listing a house for $799k and I receive a conditional offer for $875k and an unconditional offer for 850k I am taking the unconditional offer. Add completion dates and other variables.

    A lot of people are trying to blame realtors for what’s going on (in Vancouver specifically) when really it is market driven and there is a lot of buyer irrational behaviour out there.

    Why are so many people emailing me (I am certainly too busy to be soliciting anyone) about investment properties now that it is a much worse time to buyer compared to previous 5 years? Monkey see, monkey do, and monkey potentially get burned.

    For example, when you could buy very obvious downtown cash flow positive condos from 2009-2014 few were buying. Now that prices are up and the investment properties are becoming cash flow negative (rents are not up nearly as much as the market) everyone is piling in. Just makes no sense.

    With the sale of the studio without parking sale today at the Era for $338k I am tempted to offload my condos in this frenzy but damn the captial gains tax is in my way.

  115. I don’t refute that the market is insane right now. But I wonder how much the intentionally low listing prices are adding to the hype. For example, that place on Parkside crescent, listed for 600k and sold for 750k. Even in the dead of 2013 I remember similar places there selling for well above 600.

  116. @Hawk: how much of this Victoria housing activity are you attributing to Chinese $$? Vancouver is definitely buoyed by offshore buyers but Victoria not so much. Plus, it’s hard to know what effect capital flight controls will have on Chinese activity here. There might be a massive pool of offshore buyers compared to # of houses available. So controls may reduce capital flight but not sufficiently to stop the housing bubble.

  117. Re: the bidding war process – I agree it’s crazy for buyers. We were fully prepared to go 50k over asking. On the day that offers were being looked at we learned one other buyer lost interest and another buyer dropped out because they didn’t want any part of a bidding war. Being the only ones left, we got it for under ask. Crazy.

  118. China is slammin’ the HAM, sell while you can. When the pot soon runs dry the sales will drop like a ton. This a major game changer.

    Getting Money Out of China: The Reality Has Changed

    “we wrote how “in the last week or so, our China lawyers have probably received more ‘money problem’ calls than in the year before that. And unlike most of these sorts of calls, the problems are brand new to us.”

    http://www.chinalawblog.com/2016/03/getting-money-out-of-china-the-reality-has-changed.html

  119. If I am in multiples maybe I consider going at asking or above asking; however, how far above asking would be based on an educated/formulated evaulation of the property, not how many multiples I am competing with.

    I don’t really buy it. You’ve said before for properties that go in bidding wars that it’s not necessarily the realtor under pricing the listing, but that in a hot market it’s extremely difficult to guess the market price. So if a realtor can’t get within $50k of market price, how would any consumer know whether $540k or $515k is above or below market? Unless the market is dead flat I don’t think anyone can appraise closer than 5% to actual market value even with domain expertise.

    In 2012 we offered $490k for 1762 Howroyd. It was listed for $500k and assessed at over $600k. We were told there was another offer so we upped ours to $510k which was accepted. We ended up backing out and it sold to the other buyer for $501k. So technically our bid was over market, but how could anyone know that? It’s not a science.

    Plus who cares if you get outbid? People get caught up into this weird BS that the house they are bidding on is the only one

    I agree that another suitable house will always come along. Although in a market like this one you might be better off making an above market bid and just get the place rather than wait around for a long time.

  120. But Marko – doesn’t that logic assume the asking price is appropriate? What are you seeing these days regarding the setting of asking prices & reasonableness?

  121. Super sketchy or the average consumer lets emotion get in the way of a big purchase?

    If I was looking to buy a house I would only consider two things; am I the only offer or is it multiple offers? If multiples just ignore whether there is 2, 10, or 25 offers.

    If I am the only offer then I am definitvely going below asking.

    If I am in multiples maybe I consider going at asking or above asking; however, how far above asking would be based on an educated/formulated evaulation of the property, not how many multiples I am competing with.

    Plus who cares if you get outbid? People get caught up into this weird BS that the house they are bidding on is the only one? Doesn’t make any sense.

    To me houses are like Diet Pepsi and Diet Coke, pretty close substitues. Every day I show houses for a living and every day I think, “yea, I could totally live in this.”

    Problem is, just like 98% of people pay a brand new car in real estate commissions to sell their shack in a day and age where everyone/everything is online, 98% of people let the amount of offers on the table influence their top number.

  122. @nan

    How does the total cost of the CMHC premium balance out against the discount on the rate? I would think that if it was a good for the purchaser, the CMHC would go under (eventually) due to a mispricing of premiums/ underestimation of default risk. Given that over time, the premiums paid must be in excess of the cost of expected loan defaults for the CMHC to be sustainable (which it appears to be), do the premiums paid outstrip the benefit of the lower government backed rates available on a high ratio mortgage?

    I think you are asking if the discounted rates on high ratio mortgages would make up for the cost of the premium? No is the fast answer. Not only are the premiums expensive, but they are tacked onto the mortgage, (and accrue additional interest over the term as well -albeit at a discounted rate).

    Whereas a 10 basis point discount on a $500K mortgage may save a borrower $2349 over a 5 year term, the cost of insurance premiums for high ratio mortgages are much higher:

    5%-9.99% Down: Insurance Premium = $18,022.95
    10%-14.99% Down: Insurance Premium = $12,000
    15%-19.99% Down: Insurance Premium = $9,000
    ** on a $500K mortgage

  123. We got into a three way bid last January and lost. Same bullshit. I vowed to not buy a house with multi bids. The one bid/no disclosure mechanic only guarantees that whoever actually gets the house pays more than the one dollar more than the next best offer they need to win. Fortunately, I was able to do this on the next offer. This year, I wouldnt think many houses will go on one offer though. I agree though it’s terrible. before I got into that situation, I didn’t know it worked that way and once I was in it, I couldn’t believe that was how it was done. Terrible as a buyer.

  124. I call both back and let them know they are competing and I am meeting the sellers at 7 pm to present the offers. 505k comes back with 505k and the 515k goes to 540k.

    This just seems super sketchy to me. I think in a bidding situation the value of all bids should be disclosed to give everyone a chance to make an informed offer.

  125. Exactly what totoro said. Perfect example is a few years ago I had a property listed and within two minutes I see two offers in my inbox. One was for 505k and one was for 515k. I call both back and let them know they are competing and I am meeting the sellers at 7 pm to present the offers. 505k comes back with 505k and the 515k goes to 540k.

  126. 2828 Shelborne is that much!

    What concerns me is that this has just started, I don’t see anything on the horizon that would interrupt the price increases. 21 bids on a house! That’s a lot of serious buyers lining up to bid on the next house for sale.

  127. Generally no-one bidding knows what the other offers are. The more offers are submitted, the greater the perception of risk of being outbid and therefore incentive to increase the offer.

  128. Instead of 5 offers on a house, for example, my clients’ 20k over ask no hope offer is making it 6 offers on a house which probably pushes the 100k over asking person to go 120k over asking.

    How does your clients’ 20k over offer affects the 100k, push it to 120k? The 100k over should not need to move for any offer under it, no? Sorry, my auction experience limited to eBay.

    re: 1883 Lulie St. $575/sq ft. I guess $500+ is new norm in the core.

  129. “I’m definitely noticing some buyer fatigue out there right now. I’m finding more clients are seriously considering “benching” themselves to wait for better conditions. Not sure whether this will affect anything at this point.”

    The few people I know looking keep saying they will stop looking for awhile but their agents keeps coming up with another “affordable” listing and get sucked back in to view it…. along with 50 other couples crammed in a small house within a tight timeline, with the listing agent barking out bidding time deadlines like a prison warden.

    Of course the shit houses are all on a busy street in a shitty hood that you would normally never even look at and goes for 70K over. A crash is the only thing that will stop this now.. a very painful crash. Mike’s chart clearly shows it will happen at some point in the near future.

    These wholesalers are stuffing mailboxes in Fairfield I am told. It’s all coming to an ugly head.

  130. I really don’t understand this must be in the core mentality. I’ve lived in Victoria all my life in various areas but I can’t see the draw of the core. I absolutely hated living near downtown. Hated it. Too congested, too many scumbags, too expensive etc etc. People avoiding the horrible 10 minutes waiting at the light at Mckenzie end up spending every damn car trip dodging traffic and scumbags around town.

  131. “but that’s how it works.”

    How does the total cost of the CMHC premium balance out against the discount on the rate? I would think that if it was a good for the purchaser, the CMHC would go under (eventually) due to a mispricing of premiums/ underestimation of default risk. Given that over time, the premiums paid must be in excess of the cost of expected loan defaults for the CMHC to be sustainable (which it appears to be), do the premiums paid outstrip the benefit of the lower government backed rates available on a high ratio mortgage?

  132. Things are getting crazy by the day.

    1883 Lulie purchased August 15th, 2015 as a brand new home for $1,110,000 just resold today for $1,319,000. Nice return in 6 months, damn.

  133. I’m definitely noticing some buyer fatigue out there right now.

    I am struggling working with buyers right now.

    i/ Young couples are approaching me with 500k budgets wanting to buy SFHs in the core and I don’t how to phrase it to them that there is no hope of finding something livable without sounding like a total jackass. The average person not following HHV may not be in the loop re 15% YOY increase.

    ii/ I’ve only represented 4 buyers on purchases YTD and at this point I’ve written over 25 offers for various clients. I have buyers writing up offers 20k over asking and I don’t know how to phrase it to them that there is no hope and that realistically the home is going 50 to 100k over asking with no conditions without sounding like a total jackass, so I just write up the offers which only fuels the fire.

    Instead of 5 offers on a house, for example, my clients’ 20k over ask no hope offer is making it 6 offers on a house which probably pushes the 100k over asking person to go 120k over asking.

    Word on the street is the property on Grant has 21 offers and the 875k Pembroke had 11 offers. That’s a lot of wasted paper.

    I’ve asked people to stop referring buyers to me as it is kind of like spinning wheels. Go show 10 homes, they find one they like and they get outbid, then over and over again. Eventually the buyer becomes burnt out too. I haven’t had any core buyers reconsider the Westshore despite the situation.

    In 2014, 50% of my sales were listings and 50% buyers. This year I am on pace for about 80 to 85% listing and 15 to 20% buyers.

  134. @Leo

    The buyer with the 15% downpayment would get the lower rate.

    Reason being: the conventional mortgage (with 20% down) is still “back insured” by the lender, at their (the lender’s) expense. In this regard, the lender’s costs are higher, so the higher interest rate reflects this.

    Seems backwards considering the risk of a borrower putting less money down is higher, but that’s how it works.

    @Stepbystep

    Thanks for the feedback. Will try to re-work that so it is a bit more clear! Sometimes its tough translating industry talk to everyday talking points!

  135. @MikeGrace – that is an excellent piece – very educational and clear. Two thoughts. The triangle at the start is rather unfriendly. I get your point about the various levers, but you are targeting humans and it could be presented in a friendlier way. The part of the message about ‘has the property been on the market forever’ could be more than an undesirable property issue. Maybe rework this to be really clear that ‘unique and possibly less of an interested buying population’ means the property carries risk for the lender…. Good luck with this – people will gain some great financial literacy knowledge.

  136. @Mike. Consider two buyers, one with 15% down who will be purchasing CMHC insurance and one with 20% down who will not. All other factors are equal.
    Who would get the lower rate or are they equal? Would the buyer with CMHC be seen as lower risk and be able to secure a lower rate?

  137. I’m definitely noticing some buyer fatigue out there right now. I’m finding more clients are seriously considering “benching” themselves to wait for better conditions. Not sure whether this will affect anything at this point.

    I’m more convinced that the market will just force buyers to look outside of their core desires into more affordable neighbourhoods like view royal, the gorge and yes… langford.

    Just finished an article on 3 factors that will affect the interest rates you’ll get on your mortgage. Have a read and let me know what you think?

    http://www.mikegrace.ca/mortgage-rate-triangle/

  138. Why is the value of weekly unconditional sales to new listings of interest? If I look at Dec 31/2015, there are 103% sales/list. If I’m understanding this correctly, it means that more sales were taking place than listings were coming onto the market which seems reasonable since it is Christmas time when people don’t want to list a house and earlier commentary mentioned that there were sales being signed on Christmas Eve. But does this value indicate market demand versus the much clearer, MOI indicator? The current sales to listing is 61% but isn’t demand higher now than on Dec 31/15 when it was 103%?

    (Also, thanks for earlier feedback on rental management companies – I appreciate those who shared their knowledge – it’s got us talking at home about more options.)

  139. Yeah I’ve noticed alot of attached going substantially over ask lately. I wonder if Katyusha will soon regret that she sold her detached in Swan Lake area.

  140. In the last few days I’ve seen the insanity spreading beyond the SFH homes market.

    #10 – 2828 Shelbourne, 1996 built townhome, sold for $554,000. Purchased in 2011 for $475,000.

    #910 – 728 Yates, 1 year old studio with no parking, sold for $338,000. Pre-sale price would have been around $220ish including GST.

Comments are closed.