Pent Up Supply

A topic of discussion here over the years has been that of pent up supply.  The theory being that when the market stagnates or declines for a long time, people that want to sell but don’t immediately need to will hold off on listing to wait for a better price.   You see a lot of these kinds of opportunistic sellers in down markets, with places priced too high on the market that end up languishing for months before being pulled.   Once the market picks up, you would expect years worth of these sellers to come out of the woodwork and pile on the new listings.

But is that actually true?  Let’s take a look at listings compared to market conditions and see.

nlmoi

Surprisingly it doesn’t seem like new listings are influenced much by market conditions.  Listings are all over the place both in buyers and sellers markets.  Maybe there is a slight trend towards more listings in hotter markets, but the data is so variable there really isn’t any way to tell for sure.     That said, the primary factor behind listing volume is the season, so any influence of the market conditions might be getting lost in the bigger signal.

So let’s take a look at simple listings over time and compare it to the change in valuations.

priceappreciation

Now we do seem to see a relationship, albeit with a significant time lag.  Unfortunately we only have listing data for one real estate cycle, so it’s not exactly the strongest of evidence, but in the 2000s run-up, new listings started to seriously increase about 3 years after the market started picking up.   Looking at our current market, we might still be in for a bit of a wait until the average seller clues in to the change in market conditions and lists their house.   Then again, now that HHV exists, people might figure it out faster…

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96 thoughts on “Pent Up Supply

  1. Further to my anecdote, this is from yesterday’s Times Colonist:

    Mainland family hunts for home, quiet lifestyle

    http://www.timescolonist.com/business/mainland-family-hunts-for-home-quiet-lifestyle-in-greater-victoria-1.2198919

    The family is among an increasing number of Vancouver-area residents crossing the water to a more affordable real estate market. They want a quieter lifestyle in a close-knit community…

    The capital region has “more of a small city feel where you get the best of both worlds”…

    Mackie had anticipated being able to buy a house in Fairfield, but that now appears unlikely in the fast-changing real estate market.

    Fairfield is among local markets, including Gordon Head and Oak Bay, where buyers battling for single-family houses often offer tens of thousands of dollars, and sometimes more than $100,000, above list prices.

  2. Introvert, you should have your friends check out the Vic PD crime map, it’s pretty ugly. Spreading out of the core lately I’ve noticed.

    Gang-related murders, of the kind that happened with disturbing frequency a few years ago in the Lower Mainland, is what we don’t so much have here in Victoria. Every city has petty crime.

  3. Still had to refresh this morning. Said 27 posts.

    Introvert, you should have your friends check out the Vic PD crime map, it’s pretty ugly. Spreading out of the core lately I’ve noticed. More stolen cars and thefts from cars, the homeless problem is the worst I’ve ever seen.

    Real estate bidding wars: ‘Sales strategy’ or scourge of Vancouver’s frenzied scene?

    Interesting article on agents rigging the bidding games, if they don’t get the price they like they pull the listing. That should be illegal, no wonder most people despise them.

    The process is “extremely stressful [and] essentially unfair to buyers.”

    http://business.financialpost.com/personal-finance/mortgages-real-estate/real-estate-bidding-wars-sales-strategy-or-scourge-of-vancouvers-frenzied-scene

  4. Main HHV page: link says “85 Comments”; I click it; 91 comments appear. Weird.

    Might need a force refresh (CTRL – R). What was happening was the browser caching was too aggressive so instead of asking the server for the page it would use the previous version in the browser cache. Might need a couple more tweaks

  5. Seems to be fixed now. Thanks.

    Wait a minute, Leo. Sort of fixed.

    Main HHV page: link says “85 Comments”; I click it; 91 comments appear. Weird.

    Before, though, it was worse. I used to, for example, click on the “85 Comments” and only 85 comments would appear. I’d have to open the HHV site in a different browser (or in an incognito window in Chrome) and the full 91 comments would then appear.

  6. Just looking on realtor.ca at the neighbourhood I lived in for a few years of elementary school in Vancouver. West side. Cheapest SFH listing is 2.5M and that’s on a busy street. Craaaazy. When I went to school it was already a nicer neighbourhood and there were definitely a few really rich kids, but lots of regular families without buckets of money.

  7. Anecdotal as fuck, but two different Lower Mainlanders I know (of the boomer generation) have indicated their desire to retire to Victoria, where they perceive life moves at a pleasantly slower pace, where there’s less crime, and — of course — where an equally lovely property can be had for substantially less than the value of their present one.

  8. Plenty of room for arbitrage

    It’s only “arbitrage” if you believe land in Victoria is actually the same asset as land in Vancouver. Personally I’m with Leo in believing that the fact that we are eight times smaller and not exactly a world class city (even if it is perfectly lovely here) might have something to do with the lower valuations.

  9. I’ve noticed as well. I believe I found the issue there. Let me know if it’s still broken.

    Seems to be fixed now. Thanks.

  10. Blog has been working strange lately always having to refresh the comments.

    I’ve noticed as well. I believe I found the issue there. Let me know if it’s still broken.

  11. In my mattress and gold’s in a tin can buried in the back yard. 😉

    Market timing is done all the time with success.

    LeoS , you can remove that double post. Not sure how that happened. Blog has been working strange lately always having to refresh the comments.

  12. Again, Hawk, you’re trying to time the market. May I ask where do you keep your money? All in cash waiting for the big crash?

  13. Is there a requirement for the selling realtor to inform the buyer’s realtor whether there is/ is not multiple bids? In our case we were informed that we were the only buyers, which dramatically impacted how much we offered.

  14. The article stated 2008 not 2006. Global economies are in brutal shape whereas in 2008 everything was on fire except US housing bust was beginning. Huge difference.

  15. The 59% were bang on the money in 2008 so they’re wrong now ? Now there’s some logic. Hilarious.

    Define “bang on the money”. The percent that predicted we were at the end of the cycle crossed 60% in mid 2006. Were they bang on the money by calling it early by 2 years?
    I agree we are closer to another correction/crash than not, but it could be tomorrow or it could be in a few years.

  16. The 59% were bang on the money in 2008 so they’re wrong now ? Now there’s some logic. Hilarious.

    59 is almost 60. Closer than 50/50. I’ll take a 60/40 any day when it comes to a clearly bloated QE driven paper pumping rally of 7 years.

  17. “59% of fund managers see the economic expansion in its final innings, highest since 2008. – Bank of America Merrill Lynch”

    Since when did fund managers know anything? Why do you think 95% of them underperform a simple index fund over the long run? If the fund managers are saying the expansion is coming to an end, its time to buy stocks. When they get super bullish, sell.

  18. 50% of coin flips come up heads. 🙂
    But seriously when the split on a yes/no question is 59%/41% that’s not really a strong answer

  19. Keep on paying 150K over. Deja vu.

    59% of fund managers see the economic expansion in its final innings, highest since 2008. – Bank of America Merrill Lynch

  20. Welcome to 4504 Limerick Lane SELLER IS OPEN TO NEGOTIATE ALL OFFERS PLS WRITE ONE IF U R INTERESTED !!!

    I guess this is marketing to millenials?

  21. Marko, you just said the other day that there should be government intervention. Flip flop much ?

    I said government should up the downpayment minimum to 10% (curbs demand).

    They have better things to do than investigate HAM…. This would be much simpler and why not?

    HAM influences demand.

    Changing legislation in terms of how offers are presented for a market we see once every 10 years does not make sense in my opinion. It wouldn’t influence market demand; it wouldn’t influence supply.

    Half of the houses would go X amount lower than a blind bid and the other half would go X amount over a blind bid. End result would be nothing in terms of the market.

  22. No way what happened to Van will happen here, right? Riiiiiight?

    Why do people keep comparing us to Vancouver like we’re even remotely similar. Did everyone forget we are some 8 times smaller and on an island?

  23. Marko, you just said the other day that there should be government intervention. Flip flop much ?

  24. Vicinvestor, I’m not saying it’s happening tomorrow but that red flags are stacking up as they did in 2007 into 2008. I’ve always said if you love it , can afford it and are prepared to be there a long time then go for it.

    As per AG’s claim he traded billions but couldn’t afford Vancouver but can afford waterfront Victoria, then I guess I’ll take it with a grain of salt. I used to know a bond trader in Toronto who traded billions of other people’s money and couldn’t make a buck trading himself nor was a good judge of market moves and character and wound up having a heart attack at a fairly young age.

  25. They have better things to do than investigate HAM…. This would be much simpler and why not?

  26. I have an easy legislation to implement…. No blind auctions….

    The government has better things to do than to protect those bidding 820k on a 675k asking price so their kids can go to willows elementary.

    The bidding wars are not taking place on affordable homes in Happy Valley. If someone is willing to go 1.7 million on a 1.3 million ask good for them; they don’t need government intervention.

  27. @Hawk: I don’t think people disagree with you regarding market craze, possible overvaluation, & ‘irrational exuberance’. However, you are trying to time the market by predicting a crash in the near future. No one can predict such an event esp. in Victoria where prices have been flat for many years (since 2006!) & are just now going up. I am in the market looking to sell my condo & buy a detached house. I admit I don’t know where the market is headed but can’t see the case for doom/gloom. I am not gonna buy a house for 100’sK over asking or without inspections, but I am not gonna sit out either.

  28. It did correct in real terms. Especially if you are a CPI skeptic like me…. I bought a Fairfield house in 2012 for 27% less then it’s present assessment. Plus I had no competition and I even renegotiated the price down after the inspection! So a major correction on that front.You just can’t quantify that in any stat….

  29. I’m surprised people are surprised houses in Estivan are not 675k anymore. 675k is a 30 year old home in Langford these days. Starter homes are now 700-750k

    I’m just surprised houses and lots are not double that. But I’m originally from Van so maybe I’m “biased”. No way what happened to Van will happen here, right? Riiiiiight?

    Give it a few more months and everything there will easily be over 1m. It’s one of the best spots.

    I think long term older locals were lulled into a sense that the prices here were high from 2002-2003, so anything over that price range is “crazy”

    To be fair they are a bit right, prices did go up quite a bit from 2002-2005. But that is now approaching 15 years ago. And 15 years of inflation plus low interest plus new waves of retirement and 30 somethings with inheritance might actually turn the tide.

    This is fundamentally driven beginning of a long bull run.

  30. Being a long term investor and thus reader of expert opinions I can say its random noise… A decade of reading about apple being like Betamax and about to become obsolete when instead they turn into the largest company in the world sums it up…. I also know there is no “truth” in the market and no one “knows” what the market is going to do. No one in Van knows the top is in…. This is also not acting like a bubble top. This is behaving more like a short squeeze… Which can pull back sharply at any time or keep plowing forward on its own momentum.

  31. I think Hawk’s point is that the core barely corrected in the last (so called) downturn. And I would agree with him. But whether that works for or against his theory of a pending crash is up for debate.

  32. “2348 Hamiota sells for 820, ask was 675. To me 820 for that place just seems nutty given the updating it looks like it needs. But then, people are nutty for the Estevan area.”

    That was listed under assessment. The lot value alone is probably 800k. Guessing that the agent was trying to start a bidding war?

  33. “Believe it or not, I used to manage billions in my previous career as a trader for one of the big banks. Trust me, the amount of money that you manage is no reflection of the accuracy of your predictions.”

    Fair enough if that what your real background was. I’m not comparing portfolio’s just opinions based on economics,debt levels, combined with bidding wars never seen before in the past in this town. There is nothing to compare too, which makes it purely psychological as Victoria is suddenly the hot place to be.

    As you well know hot stocks, and hot markets people get burnt. A few extra YVR’ers combined with media focus on the buyers with zero risk is a recipe for danger. Since you’ve only been here a couple of months the makeup of people here is not filthy rich with average income of $85K.

    The “outsider” has been coming here forever and Victoria is no secret, just a cheaper alternative and always has been. Why are they selling then ? Because they know Vancouver is over priced and could crash when the HAM slows down.

  34. 2348 Hamiota sells for 820, ask was 675. To me 820 for that place just seems nutty given the updating it looks like it needs. But then, people are nutty for the Estevan area.

  35. Haultain is not the only example.
    Someone tell me how much 3894 Braefoot sold for. Listed for $399k in 2015, apparently sold over asking.

    Reno’ed and flipped in 2016; listed for $750k and sold quickly…

  36. “I have an easy legislation to implement…. No blind auctions….”
    That would be awesome but who is going to have the b**** to implement that?

  37. I purchased my lot for 31% bellow the original asking price and 9% under its revised asking price. Many Conditions still to be lifted. I think it’s a small section of the market that is seeing overbidding. Marko’s example of the stupidity is perfect. Someone bids agains someone offering 10% under but they bid 20% over. Stupid….

  38. “Articles I post are from economists, academics, fund managers who manage billions, etc, not salesmen with a bias.”

    Believe it or not, I used to manage billions in my previous career as a trader for one of the big banks. Trust me, the amount of money that you manage is no reflection of the accuracy of your predictions.

    However, one thing I learned is that most short term market movements are based on psychology, and all long term movements are based on fundamentals. To me, this move higher in Victoria smells like a fundamental-driven move. At the margin, it is the “outsider” buying that is changing things, and I don’t see that stopping.

  39. We just purchased a house in the “core” last week. We paid asking price,

    To get a house in the core for asking price is quite the accomplishment right now, congats!

  40. “The doom and gloom theories are so one sided and so beat to death with a stick that after a few months of reading the bear becomes discredited in the mind of a new HHV reader.”

    Says the salesman lining his pockets as he posts numerous posts on many bull sites and media photo opps but claims he’s too busy and don’t send any more people his way.

    What does zero conditions mean ? I’ve mentioned it many times. Articles I post are from economists, academics, fund managers who manage billions, etc, not salesmen with a bias.

    I could care less who buys or doesn’t, just putting out the downside risks. Apparently in your world there isn’t any downside because it’s never happened in your brief salesman career. Now that’s what I call extremely dangerous.

  41. “Haultain was a good example as it sold right at the peak and then for a third off at the trough.”

    The only single example Mike can come up with over and over. Please spare us Haultain, it was an aberration, the market barely corrected.

  42. I have to flick past many of the bulls posts (especially the new ones) as they are so in la la land that it’s different this time. No economics to back it up other than some deep pockets over paying for a small percentage of over priced houses that the bulls jump on as god’s word what their place is now worth.

    This is a psychologically driven market based on panic buying and eventually the psychology changes when a catalyst appears. When you’re inside the bubble counting every penny in your walls is when you get burnt.

    BTW the Fed just backed off on raising interest rates by half because they don’t trust the economy is out of the woods yet. Gold spiking says it all. That’s huge.

    Fed Scales Back Rate-Rise Forecasts as Global Risks Remain

    http://www.bloomberg.com/news/articles/2016-03-16/fed-scales-back-rate-rise-forecasts-as-global-outlook-weakens

  43. Real estate chit chat needs its own metric

    100% agree.

    It’s almost like he thinks he will scare sellers into selling and buyers into renting with his rants.

    Info had the exact same approach. Has the opposite effect for those on the edge of buying? The doom and gloom theories are so one sided and so beat to death with a stick that after a few months of reading the bear becomes discredited in the mind of a new HHV reader.

    Better approach to scare off buyers would be to bring up examples of issues you can get into with unconditional offers (buried oil tanks, asbestos) and various angles like that. Would be a much better approach versus doom and gloom paste article every single day.

  44. We just purchased a house in the “core” last week. We paid asking price, and there was only one other offer we competed against. We had failed at two other offers prior that went for way over asking. I think if we didn’t get this one, we probably would have backed off a little and waited.

  45. It’s posters like Hawk [removed boring personal attacks – mod]

    It’s almost like he thinks he will scare sellers into selling and buyers into renting with his rants.

    How is that working out for ya?

    When I read this blog, I just flick past his many manic rants.

    Flick flick.

    On another note, now we have this amazing weather, I will bet this blog will slow down as people go outside to enjoy the paradise we live in.

  46. I don’t want my property taxes to go up. But when you get ads saying “out-of-town buyers want property”, you can see the realtors are following the money, and encouraging more of it to flow here. Canada has a small population, limited market. So for every Canadian that’s getting in too much debt, you probably have a non-local buyer wanting to buy Canadian property, pushing prices up.

    You can see how non-local buyers are having a serious ripple effect, pushing people out of big Canadian cities and into smaller ones. eg., Vancouverites might find Victoria more expensive than last year, but they can drive 10-15 minutes to a less expensive neighbourhood – not 2 hours in a rush hour traffic on a highway to Langley.

    One way the fire is fueled is the cheap Canadian $ for foreign buyers – partly caused by Canada’s low interest rates.

    That’s why Australia, UK, etc have imposed heavy fines and/or taxes on foreign buyers.

    Canada needs to start doing the same.

    But how do you convince local politicians to do something when they’re benefiting from the higher property taxes? Or the Canadian government who’s fabricating a housing/renovation economy based on inflated prices? Not sure how this is all going to turn out.

  47. But the fact remains that 8 years and counting is a very big prediction fail.

    True, but the crazier thing is the perma-bears didn’t even notice our correction. If you were looking, there were deals of up to a 1/3rd off about the same time Maclean’s magazine had “Inside the Great Real Estate Crash of 2013” on the cover. Haultain was a good example as it sold right at the peak and then for a third off at the trough.

  48. Here is something to think about…

    You can place $500,000 in a bank and get a negative yield (say 1% for theory sakes)

    or

    You can place $500,000 in a house and pay 1% annual property taxes

    (you have to live somewhere) and hence why NIRP is going to change the way people assess values…if not here…then in Europe, etc…

    (don’t forget, not everyone has to buy using bank debt….)

  49. caveat,

    I did scan the article quick and realized that after I posted, but the headline and tone of “the bears have been wrong a long time” is the misleading part. The fact remains that the banks were basically bankrupt and bailed out to the tune of $114 Billion of taxpayers money based on garbage loans and mortgages in 2008.

    They should be the last ones taking pokes at the housing bears when their so called “conservative” lending practices are a total fabrication of the truth. If Harper hadn’t bailed them out to save his ass we wouldn’t be having this discussion right now.

    Question is how many more garbage mortgages are on their books now that the lending levels have gone up umpteenth fold from 2008 to historical levels surpassing the US by miles? Me thinks this is one mother of a debt bomb ticking. Think Justin is going bail them out next time ? Highly unlikely.

    Banks got $114B from governments during recession

    Support for banks ‘more substantial than Canadians were led to believe’: CCPA report

    “Canada’s banking system is often lauded for being one of the world’s safest. But an analysis by CCPA senior economist David Macdonald concluded that Canada’s major lenders were in a far worse position during the downturn than previously believed.

    “At some point during the crisis, three of Canada’s banks — CIBC, BMO, and Scotiabank — were completely under water, with government support exceeding the market value of the company,” Macdonald said.

    http://www.cbc.ca/news/business/banks-got-114b-from-governments-during-recession-1.1145997

  50. Hawk –
    the article I linked pointed out the empirical historical fact that some housing bears have been wrong, wrong, wrong for a very long time. No doubt when housing finally does decline the bears will say we were right all along. But the fact remains that 8 years and counting is a very big prediction fail.
    The article isn’t particularly bullish going forward.

  51. Sellers these days tend to be people who bought 2 to 4 years ago, and renovated. They either bought with the intention of renovating and flipping, or the got into debt problems during the renovation, so now they must sell.

    Buyers these days must be people who are caught-up in the frenzy, the hype, the fear of low inventory, the rationale of ‘Buy now or never’.

    Real estate chit chat needs its own metric because it seems to be as important as interest rates, MOI, DOM, etc… And the ‘chit chat’ index is off the scale based on my Coffee Shop eavesdropping.

    If this craziness keeps going for much longer we will all be Hawk converts.

  52. AG,
    So you’re basing the continuation of this based all on outside money coming in. That is a new phenom that can end over night with a limited shelf life.

    caveat,
    You expect a bank to say there is a bubble ? So BOC, CMHC and every other economist/fund manager in the world is wrong but the banks are the real truth ?

    TD just let one of the biggest scammers of all time flush $5 BILLION through their bank with ZERO checks for 25 years while US banks cut him off !

    TD missed ‘warning signs’ about notorious fraudster, lawsuit alleges

    http://www.theglobeandmail.com/report-on-business/industry-news/the-law-page/td-missed-warning-signs-about-notorious-fraudster-lawsuit-alleges/article28467721/

  53. What about Marko’s listing in ESQ for $499? Looks like a cute family house? No bidding wars on the other side of the bridge…”

    Everyone wants to live on the corner of Lampson and Esquimalt.

  54. The key difference in the market now is the amount of money coming in from non-local buyers. That’s what is causing the jumps in price. It would be a bubble if it was caused by locals leveraging up, but its not. Its a combination of Victoria’s undervaluation vs the rest of the region, plus the weak loonie.

    I moved from Vancouver a couple of months ago. Got priced out of YVR, so came and bought a house on the waterfront in Victoria. Financed it by selling a property we owned in the US.

    We’re currently looking for an investment property here too. The open houses seem to have lots of YVR buyers. The fact that they have come over on the ferry for that specific purpose makes them very serious buyers indeed.

  55. “@Hawk you sound like you’ve never experienced the mania phase of a bubble. Trust me it feels nothing like this.”

    Been there kid, several times, this is a bubble in spades. Paying 20% over with zero conditions isn’t a bubble ? 100 people lining up at shit shacks isn’t a bubble ? Please explain in detail.

  56. Why would you buy your new house first paying $150K over based on an assumption your old place will sell for that ? What if you are wrong and your place doesn’t sell ? What if the market turns and you have to sell at a loss while you wait to move into the new house you paid way over market for ? Or maybe it doesn’t sell at all ? Then what ?

    I almost got burnt once doing that game in a hot market. I got lucky I had a subject to my old place selling, which this hot market won’t allow. Would have cost me 20%. Imagine getting burnt $200K because you thought your place would sell in a day or so max and it didn’t. Good luck if you’re going to roll the dice on that one.

    What’s all the panic of “where am I going to move ? ” If you’re selling for the easy $150K gift then that could afford you a very nice rental house, or condo. Once in a lifetime deal with a limited timeline. Are you going to take it or let it slip out of your hands like water ?

    Most importantly, why are the YVR’ers all selling now ? Why not last year or year before ? Because the top is in and they know it. You think by summer it will be $300K over asking as the “new norm” ? Seriously ?

  57. It feels like a lot of mania already… The only reason I don’t think it’s the precursor to a crash is because it’s not happening at the top. If this mania was happening in 2008 I’d be in Hawk’s camp

  58. @Hawk you sound like you’ve never experienced the mania phase of a bubble. Trust me it feels nothing like this.

  59. It’s funny how the psychology of this board has changed with new posters gloating due to a small amount of buyers,(in the big scheme of things), paying atrocious amounts of real money over asking like it’s monopoly money.

    I prefer to listen to those who look at the real world of economics that over paying/pricing and manias never end well. 1000 people yearning for 100 cans of beans. What happens when the delivery truck finally rolls up the road ?

    Sounds like Tectoria could be come “Tec-corpsia”.

    “Investors look to Watsa’s annual letter to gauge his outlook on the world economy, markets and any changes to company strategy. He said on Friday that Canada’s housing market was due for a correction amid record consumer borrowing and a lack of regulation, comparing the environment to the U.S. before the crisis.”

    “Canadian housing prices “have gone up significantly, driven by lax policies” at Canada Mortgage & Housing Corp., the nation’s equivalent to Fannie Mae and Freddie Mac, Watsa said. “Canadians have accessed their increasing real estate wealth through lines of credit easily available from the banks. Sounds familiar? This is exactly what happened in the United States before the financial crisis.”

    http://business.financialpost.com/investing/the-unicorpse-collapse-is-happening-and-prem-watsa-predicts-tech-stocks-will-plummet-even-further?__lsa=cd24-a25c

  60. Many friends in Vancouver who have told me they can’t compete with foreign buyers who buy real estate “sight unseen” (their words)

    The question is whether they can afford to buy in Victoria. If they weren’t priced out of the core before, the majority would be now.

  61. Not to be confused with the “Info Manoeuvre”

    I believe that is to compare Oak Bay from 2010 to 2014 with Saskatoon and Toronto and laugh loudly at the decline in house values in Oak Bay. Pretend 2015 and 2016 does not exist. Repeat. Draw ascii graph.

  62. Not to be confused with the “Info Manoeuvre”: Post confident predictions of imminent housing doom for so long that you are completely discredited, then move on to a more sympathetic audience at greaterfool. Avoid buying any Victoria housing until valuations return to pre 1843 levels.

  63. Why would anyone sell now???

    It’s called the ‘Hawk Manoeuvre” sell now, then wait for the crash, then buy back into the market after the crash.

  64. 929 Easter Road had a “Coming Soon” sign on it for about 10 days and now it’s switched straight to SOLD without touching MLS that I saw. Does anyone have any info on it?

  65. Great info on your blog.

    Wanted to jot down a few things that have happened over the last year and could have caused prices such suddenly explode in a “perfect storm”?

    3 months ago I started getting more realtor ads like these in the mail: “Foreign buyers want your property etc”
    http://imgur.com/l4zkCaR
    http://imgur.com/gwE8OOJ
    Wealthy people from all over the world are educating their families in Canada, because it’s cheaper (Canadian $), easier, and safer than ever before. They keep tabs on their kids via Facebook, Instagram, Snapchat, texting anything. I have personally seen this, as well as everyone in Vancouver. Now it’s stronger in Victoria.
    http://www.cbc.ca/news/canada/british-columbia/vancouver-real-estate-1.3487828
    “This reflects the itinerant nature of many UHNWIs [ultra high net worth individuals] who increasingly educate their children overseas while working and living in multiple international locations.”
    Millennials are fleeing Vancouver:
    http://business.financialpost.com/personal-finance/mortgages-real-estate/millennials-fleeing-vancouver-for-cities-with-more-affordable-housing-threatening-citys-tech-economy
    Pent up demand from Victoria Millennials who waited years for prices to fall and are now taking the plunge
    Wealthy Canadian baby boomers leaving expensive Toronto and Vancouver for retirement
    Many “information age” workers can work remotely and globally now. Some people work from multiple cities. This applies to employees of Vancouver companies too, especially if they can’t afford houses in Vancouver for their families. Many friends in Vancouver who have told me they can’t compete with foreign buyers who buy real estate “sight unseen” (their words)

  66. Been biking past 4121 Longview every morning and still says new listing. Surprised it hasn’t sold yet

  67. Why on earth would anyone list now when there are no houses on market, and you are looking at a bidding war to buy your next house.

    Reminds me of that lady 2 years ago that sold her North Vancouver house in early spring betting that the market would crash.

    Sold in March, by June she was permanently priced out of her fav neighbourhood. #needonemillion.

    Her neighbourhood is now 70% up since she sold. Meanwhile she ended up buying in Surrey, but not before Surrey went up 18%. Ouch!

    People selling now hoping to move sideways or even up a little would be smart to wait.

    I would wait till May 2017 to sell if I was thinking of moving out of the core to Langford or similar lower priced not as hot areas.

    But even Langford inventory and sales is getting hot.

    Sell now in the core, closing date in the summer, buy in Langford late summer and lose $100,000!

  68. Gwac has a point. Why list your home for sell, when the selection of homes to buy is so limited?

    In this market, it may be prudent to find a home to buy before listing your current home to sell. Unless you’re intending to move out of the “hot” hoods and buy in areas such as the western communities or even different cities. Or possibly rent in a high end rental building or condominium and bank the cash.

    What is happening in Victoria isn’t a one of a kind thing in Canada. Other cities are also experiencing low inventory and skyrocketing prices. Mississauga, Surrey, Langley, Toronto, Vancouver, etc. We’re not alone.

    So why is there such a universal phenomenon happening?

    In my opinion, the low interest rates allow the amateur investor to hold off making decisions on their investment properties. After a few years of mortgage paydown, rents cover expenses and there seems little reason to sell. The rents are sufficient and they are holding for price appreciation.

    And that low interest environment also has an effect on what prospective buyers are looking to purchase. Houses with suites in strong rental demand areas and luxury homes in prestigious locations for those that have acquired larger down payments from selling in other areas or cities.

  69. Some people are actually selling due to high prices. I know someone who lives in a 2 bedroom bungalow in Farifield. Had a guy come knock on their door asking to buy the place for $850k, they thought it was way too high and agreed. Buyer’s financing fell through. Now they are listing it. Two months ago they had no plans to sell.

  70. I see that bungalow on Rutland in the Uplands didn’t sell at $2.5 million and so the owner responded by increasing the price to $2.88 million!

  71. I would not sell in this market without having a place to go. Way to dangerous and could cost you many extra $$$$

  72. Also, adding fuel to the fire is the fact that when prices rise, lower priced homeowners that want to move up can now do so.

    Say a home is 400k when bought, and now is 550k. Homeowner is sitting on an extra 150k plus his initial down payment, and the mortgage has been paid down quite a bit.

    Said homeowner now has maybe $275,000 equity.

    That will buy a very nice upgrade, maybe even switch to Veriable Rate and pay off all loans, top up the TFSA and get a new car while at it.

    The more equity any home owner has, the more liquid they become. Wealthier owners can now move sideways away from neighbours they don’t like, or sell and top up retirement accounts and move slightly downwards and switch to Veriable.

    Condo owners in 6 months or next year are up next after a lag, and they will fuel next years booming market.

    All these market swings come in 4-5 year swells, a rising market like this has a long, long time to run its run.

  73. @dasmo, that is the best analogy I’ve heard yet. And it’s the same thing as central banks trying to get inflation happening. When prices rise, and it looks like prices in the future will be even more, then people stop delaying purchases, and the economy starts to “move” again.

    This is exactly what’s happening. Finally prices start to move after a decade of stagnation and deflation, and a lot of people on the sidelines betting on a “crash” are either permanently priced out of the area and SFH they could have afforded a couple months ago, or they made a smart move and jumped onto anything they could afford.

    If you want to live in the core, there is a lot of new buyers coming from outside Victoria with lots of money. And with only a couple sales happening, all it takes is 100 or 200 people from Vancouver to instantly out price locals.

    I see locals being pushed out of the core more and more as prices are just starting to get warmed up. This kind of momentum lasts years.

  74. It’s like a short squeeze. The short was people waiting. Now that it’s going up they are panicking. Plus it’s worsened by the dynamic of people not wanting to sell before they buy further tightening inventory…. Going up at this rate is insane. Nothing has changed since last year except people are buying!

  75. Broadmead has gone mental also. 4571 rithetwood. Ass 730k listed 950k sold in 2 days at 1025k. Small lot for broadmead standards. 2500 sq ft house. This market is nuts.

  76. Good point, I’m sure that did have alot to do with the ’99 swoon.
    I’m still leary of 80s & 90s construction, even if remediated.

  77. I think you’re right that condos lag houses and then take a bigger drop on downturns. I would think the drop your graph is showing around 1999 would have related to the leaky condo issue though?

  78. @Ash – If you’re buying an older condo, consider size of parcel (land per unit) and of course location…ie. what will be worth most for future redevelopment. Condos usually liftoff later in the cycle than houses. ’98-01 for example, houses started slowly rising while condos continued pulling back. Then from ’01-’07 condos outperformed on a percentage basis as they played catch up. However, the problem with condos is they usually take a bigger beating in the down cycle. I suppose there’s a chance they may not in the next downturn with the boomer bid, but I wouldn’t count on it.

  79. We live in Fairfield on a large (by neighbourhood standards) lot and essentially 100% of the increase in value over the last couple of years has been the land component. I questioned the assessor two years ago as our assessment went up way more than the Victoria mean. He cited a big increase in the value of larger lots in Fairfield.

    Personally I wonder if they were also trying to claw back what I won in two successful appeals (one of which had to go to the PAAB).

    Still quite a ways off 500/sqft. I think Dasmo’s formula is not too far off

  80. Wow….$500/sqft for land! Our Fairfield property has gone up in value considerably according to an assessment we just had. The house value is pretty low (It’s actually very valuable since it has allowed us to carry the property since it is livable, cute and rentable) So… I would say the land value is actually closer to thus: There is a base price for the right to build which is maybe $300k. Then add $60/sqft… For Fairfield… Other locations will have a similar break down. A flat per sqft price for land does not compute. JJ?

  81. I think someone was asking how condos are doing in the previous post. I’m also curious to see if they will play catchup with sfh’s, or if the gap between the two will continue to grow. Many of the older condos are still selling well below their 2010 peaks (and at lower interest rates today). So there appears to be room for price increases. My guess is we see some appreciation due to low inventory, but nothing crazy like in houses lately.

  82. Bringing this over

    Marko Juras

    March 14, 2016 at 8:39 am

    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

  83. 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+?

  84. February, the Teranet–National Bank National Composite House Price Index™ was up 0.6% from the previous month, the largest increase for a February since the recession. Though prices were up on the month in six of the 11 metropolitan markets surveyed, the gain of the composite index came entirely from a 3.2% jump in the Vancouver market, where the Real Estate Board reported the highest-selling February on record. In the other 10 markets, rises and declines essentially cancelled each other out. Prices were up 0.9% in Victoria, 0.7% in Quebec City, 0.2% in Toronto and 0.1% in Winnipeg and Edmonton. Prices were down 0.4% in Hamilton and in Ottawa-Gatineau, 0.9% in Calgary, 1.2% in Montreal and 2.9% in Halifax.

    http://a11576.actonservice.com/acton/rif/11576/s-003c-1603/-/l-000f:16bc/l-000f/showPreparedMessage?sid=IC1jtgCQ1

  85. Hi Leo do you have an updated version of that logarithmic chart? That’s the best one I’ve seen!

  86. Where the log scale is useful is when looking at price appreciation over the long run. I did this on the old blog at some point

    Not sure where else it would be useful?

  87. Leo, I don’t know too much about these things, but I’m wondering how your graphs would look on a logarithmic scale?

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