Jan 22 Market Update: Let’s go bananas
Weekly sales numbers courtesy of the VREB.
| Jan 2018 |
Jan
2017
|
||||
|---|---|---|---|---|---|
| Wk 1 | Wk 2 | Wk 3 | Wk 4 | ||
| Unconditional Sales | 41 | 115 | 251 | 478 | |
| New Listings | 124 | 276 | 469 | 753 | |
| Active Listings | 1398 | 1417 | 1420 | 1516 | |
| Sales to New Listings | 33% | 42% | 53% | 63% | |
| Sales Projection | — | 368 | 458 | ||
| Months of Inventory | 3.2 | ||||
Couple things that need to be addressed in this week’s sales numbers:
First: There were 136 sales reported last week compared to 74 the previous week. We expect sales to be increasing in January but not that much. Looking closer there were 13 pre-sales entered from the Legato that happened all the way back in 2015/16. In all 23 sales reported last week happened in years past so the real number is closer to 113. Still a pretty active week of sales. On the reporting based system of accounting, we are down only 4% from last year’s sales rate. In terms of real sales, we’re down about 13%.
Secondly, the market is really two markets: condos, which are off the hook, and single family which is moving similarly to before the new year. Pretty plain to see that when we look at the number of places going for over the original asking price. For condos, that has spiked recently and almost 40% of sales were at more than 1% over the asking price in the last 30 days.
Quite a different story in single family, where the rate of over-asks hasn’t budged much.
What is somewhat odd though is that single family homes are selling at almost exactly the same pace as last year in the first three weeks of the year. Meanwhile condo sales are off some 15% despite the crazy offers. Is it an inventory problem? Not really, there are 350 condos on the market which is a few more than January of last year. The pace of new listings for single family and condos are also quite similar so far compared to a year ago.
I haven’t put up the weekly months of inventory chart in the past couple weeks because it’s been swinging so wildly as to be essentially unreadable. I suspect it will take a few more weeks to really see through the confusion on this market.
New post https://househuntvictoria.ca/2018/01/25/fixed-or-variable-how-to-make-a-bet/
Number6
Why do people budget without any strategic reserve? We prepared a pretty good budget when buying this house but we still ran about 80k over budget. But that was well within the envelope of expectations. While not significant for us, you would think that budgeting would be key for a young family.
I had one example of how a recent purchase went bad for a couple with four children. They bought last summer with a minimum down payment. However, they didn’t budget for higher monthly expenses and now, eight months later, find themselves with credit card debts of $30,000.
They are hooped unless prices increase and they can roll that credit card debt into their mortgage.
So let’s take a look at the month to month velocity of price appreciation for houses during the last six months in the Capital City.
Jun 2017 $884,000
Jul 2017 $842,500 down 4.6%
Aug 2017 $845,500 none
Sep 2017 $840,000 none
Oct 2017 $867,450 up 3.2%
Nov 2017 $815,000 down 6%
Dec 2017 $803,900 none
While there has been some month to month fluctuation. Home prices have been relatively flat over the last 6 months with zero appreciation.
So why would 2018, with higher interest rates and tighter lending policies, be better than 2017 for appreciation?
The advice I would give for someone buying today is to have a huge down payment and expect your month to month cost of living to increase significantly.
You really read up hey.
Strongest provincial economy is… ding ding ding Alberta.
There are what 2 markets w/ near zero vacancy rates in the country?
I’m nothing but a radiant unicorn bursting with positivity! Did you miss my beautiful photo signalling that it’s spring?
Related to Richard’s argument, from a commentator at GF today:
Rents will soon swell with the new B20 rules as those who do not have credit to buy will place pressure on existing rental stock – because everyone needs shelter. There will be a lot more competition in hot markets with already near zero vacancy rates.
Sure, there will be some more rental houses on the market from speculators cracking under the pressure, but local rental demand will absorb them as there will be more ‘rejected B20 potential buyers’ than houses on the market from speculators. This adds another pressure on top of the near 0% vacancy rates in major cities.
The irony is that due to more competition for scarce rentals, renters will soon be paying more than the mortgage/insurance of owners who bought their houses under the old rules and cheaper mortgages.
Hopefully Leo will add your prediction to the list. Entomologist had a similar argument some weeks ago.
It’s an interesting point of view and argument. Predictably, I’d be more inclined to suspect that areas that have had the greatest degree of debt binging and prices that are out of whack with their fundamentals will be more affected by a credit crunch than areas that have not used it to excess (ie, the markets that you postulate where B20 will be more effective). Keep in mind, while economic growth, wage gains and migration are net positives for a housing market – that doesn’t mean that the market is supported at any price.
Gutsy call Richard.
Last time oil went from $40 -> 100 (assuming we get there) between ’05-’07, prices look to have fully doubled in Calgary.
The OSFI new regulations are going to achieve the exact opposite of what they intended.
Yes, I am going to take the contrairian view! But what’s a blog for if there are no contrairian views? However I will make one reservation to my controversial statement and that is, in areas of strong economic growth these new rules will force prices up (Toronto, Vancouver, Victoria) whereas in economic suppressed areas RE prices will fall (Calgary, Edmonton, Prairies) which I am sure is the complete opposite of what they intended.
My theory is based on supply and demand. These new rules will force existing home owners to stay put as they realize they won’t qualify to buy up in the market and other than that they have no need to sell. People will stay in their homes and renovate them to add that extra space or modernize them if that is what they are looking for. So in areas of low unemployment and a strong economy such as you have in Victoria people will make do with their current accommodations and there will be way fewer listings brought to the market which will force prices up due to lack of inventory as more people come looking for work. Conversely the opposite will happen in economic suppressed areas such as Calgary inspite of what the media is reporting with projected economic growth. In Calgary if you “have to” sell you are going to take a beating as you are selling into a flooded market. (Hawk, here is where your projections of a bubble bursting would prove more prophetic.) The writing is already on the wall as RE prices in Calgary have slipped 4% so far this year compared to the same time last year which was considered the bottom of the recession.
So I predict SFH prices to increase in Victoria approx 12% to $948,975 Condo’s to $509,150 sales to drop to 7150 ( due to lack of listings).
In Calgary I predict prices sliding a further 7% from where they are now.
You really enjoy dwelling on your luck and other’s misfortunes.
Karma’s a bitch man. You can’t go through life with so much negativity that it doesn’t affect you and the people around you.
Then that bear isn’t paying attention. Whether or not renting or buying is a “smarter choice” depends on one’s life circumstances as well as the overall condition of the market. Hence there isn’t necessarily a great answer that applies to everyone. It’d be foolish to say, “renting is always smarter” because the market is always changing.
If your opportunity cost in renting today is favourable relative to the cost of owning today, renting is a quantitatively better choice providing you’re not blowing all the money you save on cars, clothes and other useless garbage. Many people are unfortunately frivolous, which negates the benefits. But for many of those that are more disciplined and live here in Victoria – renting is indeed financially favourable to buying. Of course, that will not be true in perpetuity. And for others, whether it’s better to rent or buy is irrelevant due to insufficient income or other restrictions.
Here is a recent CBC article on this topic. I’d invite anyone interested to read it.
http://www.cbc.ca/news/canada/calgary/calgary-rent-vs-buy-road-ahead-1.4490332
Why is that a problem? I thought renting was the smarter choice. That’s what the bears tell us.
Dasmo:
Sound like you have “Shelob” down there.(it is an LOTR reference). Maybe you can name the house
Cirith Ungol just to give people a heads up.
I meant layer actually but ya lair would have been creepier….
Don’t worry Barrister, it will wither and die like the hopes and dreams of a new generation to own a home in Victoria.
Wouldn’t you only heat it in the winter?
We don’t get any sun in the winter.
Introvert:
Stop with the photos, there might be people from Alberta reading the post. We should all be posting pictures of snowdrifts and fierce wolves hunting down children. No more flower counts either.
“I also didn’t like the dark molding spider layer under the house.”
It’s more of a spider lair than a layer of spiders, but whatever. 🙂
Oh, I see the jpeg from my post disappeared. Here it is again:
Amazing, isn’t it?
This old house has a full eight foot basement, 10 feet on the main and second floors and a high peaked roof with plenty of dormers. Of coarse from the back elevation to the peak is about forty-five feet so I doubt if you would be allowed to build that today. The joists are all solid oak and the framing was all old growth lumber so it has stood up well for a century. I sometimes wonder how the new houses being built today will stand up after a hundred years. On the other hand I wont be around to find out.
You must insulate under the slab!!! don’t compare to old basement slabs that are cold and wet. We are also polishing it for our floor finish too. The slab is an important part of a solar gain equation. If I wasn’t in the trees I wouldn’t even be heating it. The sun would do it for me. Depending on the design this large thermal mass with regulate the internal temperature all year round. For this reason I think you will see more of this design in the future. You wont see more cathedral ceilings in combination with this though. My house has no where to hide! Every space is finished space….
“Don’t know if Canadian interest rates will rise again this year: Poloz
This is great news.”
Yes, it’s such great news that Canadians are so stacked with debt another 1/4 point will put the country over the cliff. So reassuring.
Won’t stop 5 years from rising via US bond market which will be used for the stress test, not to mention the new NDP spec /foreign buyers laws kicking in, just because. Insanity now = “great”. 😉
??????
We are on slab. In part for the thermal mass and radiant heat. Also because we are nested into a large rock so geology was at play. I only paid $1500 in blasting. To make a 4’ crawl space would have added a lot of cost. I also didn’t like the dark molding spider layer under the house. That said it has been a huge burden dealing with utilities. My framing was designed with this in mind and there is a central bulkhead that is against a support beam which carries the HRV and a bunch of other stuff but that filled up fast! Would have been in big trouble without that. We also don’t have an attic. It would be a mess if I wasn’t managing the details. A crawls space would let them hack things in sight unseen. Easy to fix the mistakes etc. So if you plan no layer under or over your house prepare to be on top of everything….
I also have extra plumbing in place now. Garage is roughed in for bath, laundry kitchen for instance so have hopefully future proofed things well enough…
They weren’t meant to be finished basements. They were high crawl spaces useful for the building’s mechanics, laundry and unfinished storage. Some even have the garage space open to the basement. A sump pump was all that you needed to keep this unfinished area dry.
It’s the other way round. A slab is the least desirable.
The majority of all custom built homes including two storey will be built on a 3 to 4 feet high crawl spaces. While most economy spec homes built by builders will be on a slab.
One thing I really don’t get about Victoria is all those houses with driveways that slope DOWN to the basement. They are everywhere! They also are not prevalent in Van. Here, they are esp. prevalent in homes built in the 40s, 50’s and 60’s, but also some older homes. I know, someone on here once told me it’s due to zoning, but it still makes no logical sense in a place that gets a fair amount of rain in the winter months. The water from heavy rainfalls should not come rushing down in towards your house! Right?! With climate change causing possible heavier rain storms in winter – this situation is likely to get worse for people with homes like this! I shudder every time I see homes like this and they’re everywhere here!!!
Anyway – My preference is not necessarily for homes on slab – unless you have installed heated floors throughout and didn’t need to do further reno’s. This is not something I see very often out there though – and so, that concrete slab can get very cold on the feet in winter. I’d prefer a home on crawl… with the biggest benefit it’s also easier to do changes or maintenance than Conc. slab.
Some of those split and western contemporary type homes in Broadmead are among my fav. types of homes, so quintessential Canadiana it’s like the Canadian dream, and would be my fav. hood if not for all the large shade trees causing all that moss there (but nothing’s perfect). Also, in Broadmead – often the driveways, sensibly, slope away from the home – hmmm… what a concept in a rainy winter climate! Sunnymead however – is not so great having all that stucco in a rainy climate is it? The 90’s was such a terrible era for home design and decor as well! Hopefully if in Sunnymead, you’ve gutted out all that 90’s crap!
Nothing much wrong with the typical two storey 70’s box on slab above ground in places like Gordon Head… However – nothing much exciting about it either. Just functional and well built with the last of the good lumber from the last old growth forests. It accomplishes the task w/ minimal worry about flooded basements or too many things going wrong and provides a functional family home.
So, in my books the best type of home is probably a one or two storey above ground home on a crawl with a driveway that slopes AWAY from the house! With a bit of funk and design if new, with a sloping, NOT flat roof. A preserved arts and craft, fully renovated older home is also great! With covered porch in front and covered deck in back – this type of home proves the winner 🙂
The true believers will froth and tell you they have bought an electric car not to save money but to save the planet. When you are dealing with faith-based religions data is a damp squib.
https://www.citylab.com/environment/2015/06/where-electric-vehicles-actually-cause-more-pollution-than-gas-cars/397136/
Off topic from housing – but it is a caveat for those who continue to grumble about our high housing costs… Here in BC we enjoy among the lowest electricity rates in the world, and our fuel costs for conventional vehicles are about mid range globally. Our mild climate also helps offset higher housing costs with lower home heating costs than the rest of Canada.
Leo and Marko… this is great for your long term costs running that EV, given our ultra low electricity charges in BC. However, I’m wondering how your upfront costs compare with a conventional vehicle and does that work out better over time? How do long term maintenance cost’s compare? How long do you have to own that Tesla or Leaf in order to make the long term costs (likely cheaper) outweigh the upfront cost (likely higher). Since there are so many different types of conventional vehicles, and not many EV’s to choose from – if making a comparison – try to pick a conventional vehicle that’s similar… for ex. the Leaf compares to a Sentra. The Tesla compares to a more upmarket sedan.
This site compares global gasoline prices, priced in US dollars per litre – we can see that prices are about mid range here, compared to other places… (for ex… Norway – awash in oil – is the highest in the world, likely due to taxation such is the case for most Euro countries)
http://www.globalpetrolprices.com/gasoline_prices/
Meanwhile… here we can compare global electricity charges, and find that here in BC where we pay less than the CDN average, so we pay among the lowest in the world… https://www.statista.com/statistics/477995/global-prices-of-electricity-by-select-country/
We have an 80’s rancher on a 3′ to 5′ crawlspace. I really enjoy the accessibility for repairs/maintenance as I like to do everything myself. Being able to access both the top and bottom of every room (except the garage) really makes plumbing and electrical work an easy task. Was super easy to wire the house for network.
Our crawlspace is dry and with a floor hatch in the laundry room, so we also use it for storage. Installed some shelving for organization and to keep everything dry should there ever be a leak. Our hot water heater is located in the crawlspace and a few months ago blew a massive leak in the middle of the night. Woke up to no hot water with very little pressure. The crawlspace had a nice little river running down to the floor drain, but zero damage. Also put a drain under the washer and dishwasher just in case.
Sidekick Spliff
Yeah, the access is the trade-off. Not sure how important that is if stuff isn’t going to be switched around. What’s the usual period for renovations? My parents had the same kitchen for 30 years iirc and I don’t think they did any major plumbing on the new one (sink stayed in same place). Bathrooms stayed same general layout. The unfinished area was roughed in when they bought it (new).
What I like about a crawlspace in a rancher is you can run duct work for a ducted heat pump system (cheaper than running ductless heads). You can do the attic as well, but I always dread going into our attic, wading through blown insulation, trying to not fall through the ceiling stepping over insulated duct work while avoiding tearing my head open on roofing nails. In a crawlspace you can roll around on a creeper. Sounds like heaven in comparison.
In a new build I’d prefer slab and do polished concrete for the flooring with radiant heating. I don’t like carpet (area rugs are fine, you can get to the dirt underneath) and it seems a waste to put engineered flooring over the slab. That being said I like the aesthetics of polished concrete (many do not, so it risks resale ease). With a crawl space it’d be hardwood all the way. Real unfinished hardwood that is finished in place (no micro-bevels!). Of course that’s $$$. For some reason prefinished box store hardwood is a lot cheaper than unfinished hardwood. Scales of economy?
Anyhow, all things I don’t need to worry about. No way I could afford a new build anywhere I’d want to live in greater Vic. What’s a lot in Saanich East worth these days? 600k+? Decently finished house will cost another 500K+ on top of that. I mean, ratehub says we could afford it (ha!) but it it’s beyond what we would be comfortable putting towards a house. Seems like the market in Victoria is always 20% ahead of what we want to spend. Our incomes go up, so does housing.
I called him up and told him my prediction was in jeopardy if he keeps raising. I’ll ask him to drop sometime before Dec.
Thanks Number 6, very interesting. I’m surprised at the preference for slab though. I actually think crawlspace is the best option for ease of working on it. So easy to run new wiring, data, plumbing etc. On a slab it is a pain in the butt, everything is in the walls and needs to be torn apart to change anything.
The other issue with our place (70s) is that the floor in the basement is very cold. Not a problem on properly insulated new builds of course.
More practicality. How easy it is to live with.
We have a bush in the driveway that sprouted pink flowers about 2 weeks ago. Lots of snowdrops, too.
Victoria’s climate: the great differentiator.
Taken today, January 25th:
This is cool:
This is great news.
“Canadian debt is a bit of a yawner when compared to other countries…”
Yep, when 1 in 3 are severely hurt by raising rates and now oil/gas prices. Good thing no one bought GE at $30 on the slam dunk. 😉
Poloz too paranoid to commit to raise rates again this year. He knows NAFTA fall out and the bloated housing bubble will blow up one way or the other. Buying a place in the second most expensive city in Canada will be a very painful mistake.
Don’t know if Canadian interest rates will rise again this year: Poloz
http://www.cbc.ca/news/business/poloz-davos-interest-rates-1.4503324
This is what I’m currently doing, 10″ slab on 10″ EPS. I would have preferred a 3′ uninsulated crawl but that eats 4′ of your height restriction. Cost-wise, they’re about the same, but crawl obviously has better access to DWV plumbing and uses less concrete and no foam.
Are you talking about desirability? I think you need to provide some more info in order to make a decent reply (if you’re talking about construction).
I’m with Number 6. Poured slab all the way. If building new I’d want it insulated and thick (for thermal break and thermal mass).
Second to that would be insulated and heated crawl space (easier for running utilities) but higher risk for water issues long term. Victoria isn’t a great place to have stuff below grade. I mean, it depends on the site, but in general it’s pretty wet here. I don’t think many people check an elevation map or water table levels prior to buying a home.
I know a few people that have had issues with their 80s houses with crawlspaces or partial crawl spaces. That’s pretty new to be having drain and water intrusion issues. Since the crawlspace is out of sight it’s generally out of mind, so catching an issue tends to take longer than a basement.
I’m sure a new build like Dasmo’s will stand up great long term (properly wrapped foundation with dual drain system etc). I don’t know if the mass built Langford homes are doing the foundation wraps.. is that code now? I know the double drain is.
Introvert said
But most people make reliable predictions every day. In fact that is a trait that defines us being different than say a goldfish. We predict what the future will be and then plan for that day.
I think what you’re saying is that you can’t make reliable predictions. But most people do so successfully every day.
New James Bay library branch given Lekwungen name
http://www.timescolonist.com/news/local/new-james-bay-library-branch-given-lekwungen-name-1.23154333
I think this is great, but I bet most people, out of convenience, will still call it the James Bay branch.
Here is an audio clip of the name’s correct pronunciation: https://soundcloud.com/user-76281004/pronouncing-sxex-taexw
Assuming that the finished floor area and the quality of construction is standard then I would rank the desirability of the homes as follows:
One storey on a poured slab foundation
One Storey on a 3 foot crawl space.
One storey with a full height unfinished basement
then a
3 level split design on a poured slab
3 level on a 3 foot crawl space.
4 level split with a full height unfinished basement
two storey home on a poured slab
two Storey on a 3 foot crawl space.
two storey with a full height unfinished basement
The floor plan layouts would also affect desirability. A simple square or rectangular homes is not as desirable as a layout with a more complicated design even though the size of the home is the same. But that comes at a cost of increasing linear exterior areas.
Roof pitch will also affect desirability. Flat roofs are less desirable to more pitched roofs. Neutral exterior colors will appeal to a larger target market and landscaping should be low maintenance.
Garages are still important to buyers even though most of us use them for storage nowadays. The car is an integral part of North American life. Planning a house without sufficient off street covered parking limits buyers. A double garage is still the most preferred style of parking.
What do you think is the best layout/construction method?
A little Mr. Fusion makes all the difference, but I question your story. You ever try to drive at 88mph in Oak Bay? I doubt you could break 20. And I wouldn’t buy condos, especially ones on the good ol’ 27th floor. You might end up next to some loud, patriarchal butt-head with a drinking problem and a predilection for bad robes.
Thanks god, my DeLorean uses nuclear reactor… Just back from Xmas dinner 2014, told my buddy to buy OB, he laughed at my face, told me even Walker lost their hotel there. Summer 2016, told my nephew to buy a condo at his wedding, Aunt B scolded me, she was paying for the remediation, and she hated the chihuahua lived upstairs.
My time machine cannot argue with their facts. They acted rational, but the market kicked their asses.
That extra $4.25 per tank is sure to ruin me!
Glad you’re enjoying your EV, though. Once they make an electric Toyota Highlander that goes 500 km on a charge, I’m in!
Holy moly gas is $1.36/L out there tonight..
Didn’t notice.
I filled up in Washington State for $0.87 a liter yesterday (with USD to CAD conversion). I’m glad its 56% cheaper in the US for gas compared to here!!!
Holy moly gas is $1.36/L out there tonight..
Didn’t notice.
Holy moly gas is $1.36/L out there tonight..
Good thing electricity is still 10 cents/kWh!
Yeah people always say they want to hear your opinion on what’s going to happen. But in reality they have already made their minds up and will just do whatever it is they want to do. Best policy there is to stay out of any concrete advice. Just a good way to ruin relationships.
Yeah unless the rental argument makes sense (i.e. cheaper to own than rent or can be rented out with good cap rate), I would never buy a condo. Investing in condos for speculation is totally different than investing in something with land.
A bit early to tell, sales are all over the place so far.
If only I could, or else find a Delorean and give myself a copy of Grays Sports Almanac.
@michael
I just checked the predictions too… maybe most of us were low again and you’re right (maybe youre low?!).
I keep waiting for a change in the market. Maybe its not coming, haha. Fine with me, im already in it, but the stress test, rate, debt, bubble-bears arent gonna be happy.
Local Fool, I must inform you of a sad fact: you cannot egghead your way to reliably predicting the future.
I did see that in the writing and I’d agree. “Educating” is unlikely to get anyone on board, quite the opposite. Probably better to just smile, nod and at the right moments, display a sense of awe. A wise person once said, “You can’t tell anybody anything.”
Ya, sorry if that went too far Michael. My problem is Jonathan Ratner is a journalist that really irks me. I like it when people have dissenting opinions or blow holes in an argument, but not if it’s with an air of misdirection, obfuscation or with a veil of unrealistic, patronizing reassurance. That guy is just one of those people that when he writes about financial matters and real estate, has consistently spewed material I’d expect to see in the Toronto Star.
Congrats on the HHV Crystal Ball!
I was too bullish, I though more seniors will cash out their $1 million war sheds in 2017. I am wrong.
2018, even skyboxes are too expensive in the core. Maybe Westshore is a good buy? The hwy #1 will be finished, more bigboxes, DT is dying, and their city mayor has no nonsense.
Come one LF, I know you can do better.
I do. I won it last year from Leo… same as I will this year 🙂 Although, I just scrolled back to the predictions and you and gwac are looking mighty fine too.
Finally a sound article about home financing for 20-30 year olds.
http://www.cbc.ca/news/canada/calgary/calgary-rent-vs-buy-road-ahead-1.4490332
Condos have traditionally just kept pace with inflation, plus or minus a few percent. Compared to returns on my savings that I’ve seen over the last 7 years or so, just breaking even would be horrifying. The gap between the cost of renting and owning in Victoria is even bigger. It’s a damn chasm here. Pending big changes, eff condo ownership here.
Give unsolicited advice to F+F at gathering? There won’t be enough boozes for it.
BSing on internet is one thing. Who has the crystal ball and who has qualification?
Michael, offer a serious rebuttal.
Firstly to claim that it’s a “yawner” here because it’s worse somewhere else isn’t even an argument. Aside, I don’t think you’d get anyone from the BoC, our mainstream financial institutions or our leadership to seriously accept the notion that there’s “nothing to see here”. Even our banks that lend the money have remarked to policy makers that this binge we’re on needs to stop. Stephen Poloz has almost begged people in our inflated markets to stop buying on “extrapolative expectations”.
You also fail to take into account different policy environments in those respective countries – using Australia as an example, you have negative gearing and interest only loans, something you’d never see here. Those other countries also have the ability to deduct mortgage interest from your taxable income, again, something we’d never see here. Apples to oranges, but those countries still have serious consumer debt problems. It doesn’t negate ours in the slightest.
The same spurious argument rears its head again: “the market is strong because of fundamentals like employment levels, wage growth, and net migration.” The problem is, house price growth in certain markets has outmatched all of those drivers combined, and by a significant margin. If the price growth was supported by those fundamentals, you would not have consumer debt exploding. The latter is what people are using to continue to drive prices higher in a self-reinforcing orgy of speculation and fear of missing out. By definition, it’s unsustainable.
And lastly, Jonathan Ratner regularly writes “nothing to see here” articles – he was quite prolific in early 2017, mainly around Toronto real estate. He tends to pick sources that try to do exactly what you do – take a steaming mess of something that’s an incontrovertible problem, roll it in colorful sprinkles and present it on a glitter encrusted plate as something either nonchalant or even virtuous. Not a good or neutral source of information.
@Michael
Ah but some of those countries have advantages when it comes to mortgage loans: http://blog.norwegianabc.com/reduce-income-tax-in-norway/
I believe it is the same in Switzerland and Sweden.
Canadian debt is a bit of a yawner when compared to other countries…
NBF compared household debt as a percentage of net disposable income for major OECD countries. While this measure of indebtedness has never been as high in Canada, the country ranks eighth at about 170 per cent, just behind Ireland and Sweden. Meanwhile, Switzerland, Australia, and Norway were much higher above 200 per cent, and the Netherlands and Denmark exceeded 250 per cent.
NBF economists also noted that the household sector in Canada includes non-corporate businesses. When U.S. figures are adjusted to reflect this element, that country’s debt-to-disposable income ration climbs to 141 per cent from 104 per cent – making the situation in Canada look far less dire in comparison.
http://business.financialpost.com/news/canadian-household-debt-levels-may-actually-be-conservative
NBF highlighted several other factors working in Canada’s favour, including the country’s second-place rank among OECD nations for share of the working-age population with jobs. They also noted that employment growth in Canada is primarily due to full-time employment – a key element behind household borrowing capacity.
Demographics go a long way in explaining why 40 per cent of Canadian households have mortgages. The prime-age workforce (25 to 45 years old) – the group most likely to buy a home with leverage – is benefitting from full employment.
As for immigration, approximately 300,000 new permanent residents come to Canada every year, and that number is expected to rise by 13 per cent in 2020. More importantly, more than 60 per cent of these immigrants are selected because of their ability to become “economically established.” That compares to just 13 per cent in the U.S. and four per cent in Germany.
Hi Richard.
You might want to look again at the source and its context before you attempt to discredit them by calling them “comical”. It was written in 2007 – just before the US housing bubble blew and they dropped the rates to zero. That’s why Leo said it’s a “blast from the past”. Overall it doesn’t matter anyways as they’ve depicted the market cycle quite well – or really any asset class in a free market.
So let’s look at today, because what you say is true – at least in concept. Are Canadians actively taking advantage of low rates by attacking their debt levels? Undoubtedly, some are. About 30% of us have no debt at all. But a much larger portion of the population cannot say the same. In fact not only have household finances deteriorated in terms of quickly escalating debt levels, we’ve rapidly become one of the most indebted consumers in the world principally because of low rates. And unlike 2007, there’s very little room to enact monetary changes to smooth over the market.
Incidentally, below is an updated chart from BD, depicting Canadians’ rampant and exploding use of HELOCs. Indeed, taking advantage of “low rates”.
Typical Realtor forgetting to mention taxes, maintenance, energy (mine is included in my rent) and opportunity cost of downpayment.
Quoted from “Priced out Forever”
“just about anything you do with your money is likely to be a better choice than paying twice as much as you need to for a roof over your head.”
I always get a kick out of this logic when the author always overlooks the fact that at these low interest rates over half of your mortgage payment pays down the principal, effecting a “forced” savings. So to imply “anything you do with this money is a better choice than buying”
is comical indeed.
Oh yeah—I thought the name sounded familiar. He’s usually on CFAX 1070’s Friday morning roundtable panel.
You’d think that Mike would have bought a place a long time ago, presumably being more in the know than some…
Expired
Leo, that was a great link. For those of you reading that are on the fence and tempted to buy out of fear of being “priced out forever”, this page on that site provides, IMO, very sage advice:
http://pricedoutforever.com/action.html
Do:
Educate your friends and family.
Find a nice place to rent at half the cost (or less!) of owning.
Invest wisely with the money you save by renting.
Don’t:
Buy a home out of fear (or at all, for that matter).
Withdraw equity from your home (if you own already).
Write your senator, representative, governor, county council, mayor, or dog catcher.
Renters:
The absolute worst reason to buy a home is “I’m afraid that if I don’t buy now I’ll be priced out forever!” The biggest financial decision in your life should be based on reason, logic, and sound financial planning, not fear.
Homeowners:
Although it is certainly tempting to take advantage of the wild appreciation your home has seen in the last few years, you will be much better-served financially if you leave your equity alone. If you can’t afford to buy some thing without withdrawing equity, then you simply cannot afford it.
2018 is going to be another bear blood bath. It’ll probably make 2017 look bearish.
Did 1618 Richardson sell or was it pulled from the market? Thanks.
Agreed. If you’re 55 you don’t suddenly find yourself 50 the next day. But lots of people move into an 18+ condo and then a few years down the line find themselves having kids and being kicked out. That is just wrong.
Is this not having your cake and eating it too? Age discrimination is wrong. 55 plus buildings don’t bother me as much as anti-family 4 unit condos, but they’re still wrong, particularly with the rental vacancy and inventory at what it is now.
And Mike who runs citified buying a house.
And the message, as always, get in before you are priced out forever. Blast from the past: http://pricedoutforever.com/learn.html
CTV News video clip: Victoria ranked Canada’s second-least affordable housing market
I like the guy from Winnipeg (who will be tallied as a “local buyer,” no doubt) wanting to buy a house here. Also, Marko, our ubiquitous friend, makes a nice cameo appearance.
https://vancouverisland.ctvnews.ca/victoria-ranked-canada-s-second-least-affordable-housing-market-1.3772939
Gated communities are very popular in the USA for retired people. Guards at the gate, neighbourhood watch by every resident, age restrictions, every third guy has a CCW permit (carrying a concealed weapon), visitors by appointment, visiting kids must be on a short leash, absolute quiet after 10pm, surveillance cameras coverage of all common spaces. Utopia for some, 1984 for others.
Rome…nice.
@Grace
Sadly not here Grace, it was in Rome where I lived for a year. Happy memories.
You will have to let me know which building if it is in Victoria Deb.
When you have young children it is your world. Best years of my husband and I’s lives.
I enjoyed my two boisterous boys and when they were small I didn’t even register the noise other peoples children’s made. Now however, I love to hear children in the daytime but at night it just stops me getting any rest at all. I think people with children also have a hard time looking at the faces of grumpy, sleep deprived, old people.
For myself, I love the garden way too much to move into an apartment right now. I have lived in them in the past and the only type of building that works really well for everyone is solid concrete building. I loved the one I lived in. There were children in the building but the only time I heard them was when we met in the lobby, me with a well rested smile, happy to meet them and friends with their parents.
https://www.theglobeandmail.com/life/home-and-garden/real-estate/condo-builders-push-merits-of-concrete/article12001560/
No gated community for me either!
I would never live in a seniors gated community. Shoot me. I love being around young people… I have friends of all ages. But in an apartment? I would prefer no kids.
I grew up in an apartment. Single mother and three of us kids. It was noisy. Family oriented building long ago torn down.
I would definitely look for an
over 55 building with no smoking. I am picky about noise. But seniors can
blare their TVs too……so not quite ready for apartment life though I am sure it is in my future.
Agreed.
I don’t really support age restrictions but I can at least understand how folks living in an apartment where sound travels might prefer the building to be kid free. I have a harder time understanding why someone would want to live in a kid free neighbourhood (like an age restricted gated community).
I’m old and cranky too. The only thing that makes me feel younger and less cranky is having kids around.
I love children. Had two of my own and every job I have had since the age of 16 involved caring for, coaching and teaching them. Homeschooled my own for a few years.
But yeah if I am living in an apartment I would prefer not to have children living around me.
Kids are noisy. When they aren’t your own that noise can be pretty annoying.love the sound of children playing and singing etc. In public but at home I would prefer not to hear it.
Cranky old lady I guess.
If I had young kids I would want to live around other families and not cranky old people.
The key is choice. Maybe have a limit it on the number over 55 apartments allowed?
Yes, agreed. The only thing sweeter than coming home to the sound of your children’s laughter, is the sound of coming home to complete and utter silence…
The interest differentiation between Canadian and US bonds is mostly a factor of what people believe the exchange rate will be going forward. All else being equal money flows to the highest return.
^ and what’s that you wrote there? Is that tolerance? How dare adults procreate in the home they own. How inconsiderate of them to create a human which would inflict unpleasantness upon thine holy blessed ears.
Precisely.
Back to the Comox Valley for a moment. Just saw this story.
https://www.cheknews.ca/four-arrested-courtenay-drug-seizure-409895/
Now this is just one incident but like I said before a police acquaintance told me the “valley is awash in drugs”. He said per capita it is far worse there than Victoria.
Kind of surprising because when you are there it seems so pleasant. And it is but you definitely have to be aware and always lock your doors and car.
Although our car was locked and still,was stolen from our Old Orchard driveway. It was found a few days later in the bush completely trashed.
Was that a genuine Hawk posting? If so, it flew under the radar given his recent absence. Unless I missed a previous post acknowledging his disappearance.
Every Canadian economic indicator including interest rates has a high degree of correlation with what happens in the US. Does not mean they have to move in lockstep.
10 year government bond yields have differed by up to 1% in either direction in Canada and US in the recent past.
Overnight rates have followed the same trends between US and Canada, but have diverged in the past by 1.5% or more.
http://www.macleans.ca/wp-content/uploads/2016/12/Craig-Wright.png
BoC can and will raise rates, but they can afford to lag the US. They have stressed a number of times that the Canadian consumer is particularly sensitive to interest rate hikes currently.
Bingo…
This “they can’t raise rates because households are too in debt” has been repeated on this forum several times recently and more widely across Canada for the last few years. It’s simplistic to the point of being inaccurate.
You can follow the 10 year US treasury bond rates to get a sense of where we’re headed, IMO. Poloz is a very dovish soothsayer that does his best to act accordingly. But a lot of what goes on in the US forcibly impacts Canada, and coupled with the actual mandate of the BOC – makes the link between domestic indebtedness and interest rate decisions more tenuous than some people think.
We’re already seeing this concept in action, and they’re not done yet.
SweetHome asked about interest rates and mentioned the government is backed into a corner making it unlikely that interest rates would rise. But that’s not what effects rate increases.
If you want to predict the future of interest rates, just watch what the mega-investors are doing with their U.S. Treasuries holdings, and whether or not the mega-investors are lined up for new treasury auctions at low rates, or are the investors demanding a higher return by refusing to buy at low auction rates, thus forcing the USA government to offer higher rates. Remember, U.S. Treasuries are sold at auction to the lowest interest rate bidder. If no one bids low, then the rate is increased a few basis points until someone buys. QE was/is used to buy this debt at low rates when no one else buys at the low rates. This tactic keeps interest rates low, prevents the government from paying billions more in interest payments, yet keeps rates high enough that current treasuries holders are not inclined to sell-off their holdings. Less QE means higher rates.
The mathematics the USA government uses to decide whether or not to use QE to keep bond/treasury rates low is complex but based on a relatively simple concept. The simple concept is to minimize the interest paid but keep demand high enough that mega international investors (China et al) keep buying new bonds/treasuries and prevent them from selling current holdings of USA bonds/treasuries.
Canada follows American interest rate trends regardless of our economic situation. Canada is forced to follow the American interest rates for a simple reason… our government is in debt and relies on mega international investors to buy our debt (treasuries/bonds/etc). If our Canadian rates are too low then the investors refuse to buy Canadian debt and instead buy American for a better return; therefore Canada must follow the American interest rate trend.
Here are links showing the trends are going up:
American:
https://ycharts.com/indicators/10_year_treasury_rate
http://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart
Canadian:
https://www.bankofcanada.ca/rates/interest-rates/t-bill-yields/
Completely, totally safe, can’t go wrong private mortgages to borrowers who fail the stress test.
Got a call from a neighbour at 4 AM. Checked the news a bit and by 430 it was pretty clear this was going to be a nothingburger (no significant tsunami near anywhere near the epicentre). Went back to sleep. Might not have been so casual if the shore near our place wasn’t so high. Although close to the water we are 10+ metres a.s.l.
Oh it’s not because I like the kids or anything. It’s because you get free money. What other investment do you immediately make a 20% return in the first year?
Sweethome: “The government seems to be proceeding very slowly and cautiously with any rate increases, so if this is the case, why do you predict RE prices necessarily tanking in the near future?”
<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<
Hey Sweethome, I can certainly appreciate the confusion regarding the impact of interest rates but you have to put it in context to the size/supersize of mortgages today.
Back in the 1980’s, if you had a mortgage of $80,000 at 12% interest you were paying around $825. When mortgage rates blew up to 23%, the mortgage went up to over $1400. and the market crashed…hard.
Today if you have a $400,000 mortgage at 2.8% you are paying around $1800. If interest rates move just 2% you will be paying $2300.
Leverage is a bitch. Rates went up 11% back in the 80’s and your typical mortgage went up $600. Today, if rates go up by 2% your mortgage goes up around $500. People are certainly making more money than they did in the 80’s but, apparently they are also spending it. All of this, when so many Canadians can’t afford a $200. increase in payments.
The OSFI legislation imposes a test of the posted bank rate + 2% or the BOC qualifying rate, whichever is higher. This will have a significant affect on people buying their first home or possibly even move up buyers.
I agree with Leo M. There are many posters here that have their act together and can’t fathom other Victorians not being as cautious or as intelligent as they are with money. Be careful and spend within your means.
I sort of wish that I went back to sleep. We had an elderly friend, who leaves near the water come over to the house and bunk in one of our bedrooms. Which means I am running on two hours sleep. Bad case of grumpy old man syndrome coming up.
Did anyone get woken up by the tsunami warning last night. The reaction of people interviewed on the radio was hilarious. I believe it would be a disaster if/when a tsunami hits this part of the island. So many said they just went back to sleep! This truly is lala land as everyone goes about snapping up waterfront property as though this will never happen.
@Leo M “In my opinion we are just at the end of a long run-up in RE prices that the governments manipulated through massive QE in tandum with ultra low interest rates.”
So, I totally agree that the price run-up largely happened because the government kept interest rates too low for too long (along with Victoria being “discovered” by international buyers). However, my spouse and I were just talking earlier this evening about how that means the government is backed into a corner of not being able to raise rates significantly.
The government seems to be proceeding very slowly and cautiously with any rate increases, so if this is the case, why do you predict RE prices necessarily tanking in the near future?
It is interesting that two of you have labelled RESP as priority over all other investments. I have been a bad parent and not started one for my kids yet but plan to soon. They are <= 2 so have time but need to get on it!
Anyway I don’t disagree with giving kids help but in my experience most people I know who had middle class parents and who paid their own way had better career success than those who were middle class and their parents paid. I am sure there are many sad/poor parents with kids that got psychology degrees. I don’t personally think education is ever a waste and I plan to help my kids out but I think if I only had X money and it had to go to either a more enriched childhood or education fund I’d pick the former. Then I would give them help when they needed it in post secondary if I saw them making good choices and I was financially able. Saying that I’d still love to give my kids a head start with an RESP.
And just to clarify I’m not criticizing your priorities just find it very interesting you prioritize RESP over your own retirement investments. I haven’t even started an RESP out of laziness so I’m not one to talk 🙂
Let’s see here…
Naw, I’ll stick with Victoria.
https://www.weatherstats.ca/
Time to move to Moncton. The most affordable Canadian market where houses are only twice the median income. Can you imagine? Pretty good economy too. Could pay the mortgage off in just a few years.
We’re at 8.1
http://demographia.com/dhi.pdf
We fund our RESPs well, but not extravagantly, while aggressively paying down the mortgage regardless of interest rate. (Mortgage is top priority, but we wouldn’t sacrifice the former for the latter.)
TFSAs come next. RRSPs are last. Defined benefit pension (not as good as Christy Clark’s). May contribute aggressively to RRSPs once the mortgage is paid off. Not sure yet—I’ll let you know in a few years. 🙂
Got it.
I meant had the government not bailed out the biggest banks (i.e., Morgan Stanley, Wachovia, Citigroup, Goldman Sachs, Bank of America, etc.) Sorry for my lack of precision.
Gee, Soper. You’re awfully testy today. Take some deep breaths and think about rising interest rates and stress tests. Hopefully your mood will improve.
Except they’re fucking horrible in terms of actual city layout and definitely contribute more polution wise than Germany which has double the population.
So based on nothing tangible.
By the way, tons of banks failed.
Only 25 in 2008, the largest of which was Washington Mutual with 307 billion in asset (ie: it was half the size of Royal Bank at the time)
154 failed in 2009.
an additional 140 stuck it out until 2010.
CMHC will not insure loans in age restricted buildings
Contribute to RRSP, quit your job at X years before your pension kicks in and bridge the gap with the RRSP
From previous thread…
I struggle with this question as well re: taxable investments vs. Mortgage. I also struggle with whether to bother with RRSPs given I expect to have a decent (though not gold plated) db pension. Interested in what others are doing. My priority is:
RESP
TFSA
RRSP or taxable investment or mortgage
Still loathe to pay extra on the mortgage with rates sub 3%!
Hmmm, this is what you said three days ago:
A depression is when the economy has been in a recession for three consecutive quarters.
I can see the little fingers of Introvert and Totoro googling right now to find some obscure misdirection to what I just wrote.
Yours Truly Number 6
or to those with narcissistic personality disorders – justjack
The Strata Corporation is like a private members club and can adopt an age restriction as long as the age has some meaning. For example if the bylaw restricts ages to 19 and older that makes sense as the liquor and voting regulations are at that age. But a bylaw stating 10 years of age or 35 years would likely be struck down as arbitrary. 19, 55, 65 are all ages that have some meaning.
I agree this is ageism and the Provincial government should not condone this practice. Therefore condominiums in any complex that has age restriction should not be entitled to the home owner’s grant.
I think because, according to most observers, it would have been so much worse had the government not bailed out AIG and the banks.
https://www.huffingtonpost.com/james-altucher/why-we-needed-a-bailout_b_457573.html
California is awesome.
That is bad news.
“Off-topic, but good news:
Tech giants sign up for a record amount of clean energy”
Off topic, but bad news. The anti-NAFTA war begins.
Trump’s Solar Tariffs Mark Biggest Blow to Renewables Yet
President approves four years of tariffs starting at 30%
“On Monday, Trump approved duties of as much as 30 percent on solar equipment made abroad, a move that threatens to handicap a $28 billion industry that relies on parts made abroad for 80 percent of its supply. Just the mere threat of tariffs has shaken solar developers in recent months, with some hoarding panels and others stalling projects in anticipation of higher costs. The Solar Energy Industries Association has projected 23,000 job losses this year in a sector that employed 260,000.”
https://www.bloomberg.com/news/articles/2018-01-22/trump-taxes-solar-imports-in-biggest-blow-to-clean-energy-yet
Charter is subject to reasonable limits via section 1. Discrimination that can be justified in a free and democratic society, perhaps like age restrictions on housing, will not contravene the Charter. Not sure as I don’t think there has been such a case.
Here is a summary of the 19 and over restriction law:
http://www.ahbl.ca/wp-content/uploads/2012/05/Supreme_Court_of_BC_Upholds_Adults-Only_Bylaw-Elaine_McCormack-December2004.pdf
what other choice did they have when they’re based out of California?
It’s still the longest one since the great depression, based on your link. On what basis is it just a recession and not a depression?
Better to call 2008-2013 the Great Recession. If it was a depression it would have to be referred to as the Itsy-Bitsy-Depression.
“Canada was hit hard by the Great Depression. The worldwide depression that started in the United States in late 1929 quickly reached Canada. Between 1929 and 1939, the gross domestic product dropped 40% (compared to 37% in the US). Unemployment reached 27% at the depth of the Depression in 1933.”
Peak to trough, it lasted 18 months. However, many people felt pain for a lot longer, yes.
http://www.nber.org/cycles.html
Off-topic, but good news:
Tech giants sign up for a record amount of clean energy
http://bit.ly/2DzaW3n
It lasted 5 years. The only reason people don’t think it was a depression is marketing.
Thanks to Marko for the new malaprop “Escalading costs”. Probably only useful for those considering the purchase of a Cadillac.
Problem is the Honda Civic is no longer going to be on production due to code changes. You can’t go out and build a simple home with baseboard heat and passive air vents, for example.
Thanks to Marko for the new malaprop “Escalading costs”. Probably only useful for those considering the purchase of a Cadillac.
Totoro – could you explain a bit more – I have always wondered about age restrictions.
1) The BC Human Rights Code IS a government action and has to follow the Charter doesn’t it? or at least is susceptible to challenge if it doesn’t. If the Human Rights Code made a similar exception based on country of origin or skin colour that wouldn’t be OK would it?
2) Since “age” is not listed as protected from discrimination with respect to purchasing a property could someone seriously list their house for sale with the stipulation that they won’t sell to anyone over 60 years old (as an example)?
3)I guess basically I don’t see why these forms of age discrimination can persist in the face of the Constitution. Is age discrimination in accommodation really something that can be “demonstrably justified” relative to Section 1 of the Act?
“guarantees the rights and freedoms set out in it subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.”
I understand that there are people who would prefer not to live with young people and I understand that constitutional rights are limited. I just have trouble understanding why people’s preference on living with other older people is considered strong enough rationale to limit a constitutional right.
Bored went through some of the core neighbourhoods. Scary the prices and limited inventory for sfh.
https://www.rew.ca/properties/areas/broadmead-saanich-bc
http://www.vicrealestate.ca/gordon-head-saanich-east-homes-for-sale.php
http://www.vicrealestate.ca/cadboro-bay-saanich-east-homes-for-sale.php
http://www.vicrealestate.ca/cedar-hill-saanich-east-homes-for-sale.php
http://www.vicrealestate.ca/estevan-oak-bay-homes-for-sale.php
http://www.vicrealestate.ca/fairfield-east-victoria-homes-for-sale.php
http://www.vicrealestate.ca/oaklands-victoria-homes-for-sale.php
http://www.vicrealestate.ca/mayfair-victoria-homes-for-sale.php
Thanks for the reply Leo.
So it sounds like the cash purchases graphed are most likely actual cash purchases (25% of sales!).
I wonder how much of it is fresh cash vs downsizing.
Most weeks none or just a couple. That’s why it’s generally noticeable when a bunch arrive at once.
Agreed. The stats as published on the reporting-basis that VREB uses will become less and less reliable going forward. I am going to move to a pending-sale stats basis shortly, once I confirm the data feed is accurate.
There is nothing saying those sales will get entered on MLS. They don’t need to be unless they were listed there to start with, which most pre-sales are not. Marko any insight as to why these presales are entered into MLS after the fact?
How about: We are pushing the step code, so to avoid increasing costs we are removing existing red tape in other areas.
Well they are included in the week’s numbers and will be included in the month’s numbers as well.
Had the exact same thought this morning. Perhaps the restrictions are the way to make it affordable by decreasing desirability.
Depends which stat you are referring to. The realtor survey, it’s just what the agent knows, so your HELOC purchase would likely be filed under “Other” financing. As for the Bank of Canada, that is using mortgage originations, so whether you get the mortgage at purchase or later, they would still capture it.
Josh:
The townhouse you are referring to seems to be trying to be more flexible than the general 55 rule.
It seems that if everything is not tailored to your needs then it is automatically stupid. Frankly if I was in the market for a townhouse I would pay extra not to have to live next door to kids. You seem totally intolerant of anyone’s preferences other than your own.
The U.S. had to protect the too-big-to-fail institutions to avoid a depression, not a recession. Insofar as it avoided a depression the experiment was a success. Yes, there were unintended consequences.
Is that the sum of legal age restrictions? I’ve seen some townhouses in James Bay that I actually could have bought but they had some serious BS going on with their age restrictions. I think it was no one living there can be under 19 and at least one owner must be over 40. So amazingly stupid.
Victoria has been “pricing people out” for many years now, so the concept and sensation are fairly ingrained.
@Marko:
I find it a bit disturbing that a 50k increase prices someone out of the market. It implies that they are borrowing to their max and i dont know how prudent that is financially. But, thank you for the explanation; it explains their perspective.
A lot of comments on this blog by the younger folks talk about the market being skewed in favour of us older folks, but I disagree. In my opinion we are just at the end of a long run-up in RE prices that the governments manipulated through massive QE in tandum with ultra low interest rates. The economic manipulation of the past 12 years has been an experiment to protect big banks and big corporations. The slow motion return to normal has begun as big government have learned their experiment failed with unintended consequences and they should not have prevented the normal economic recession.
The younger people on this blog have never seen how fast a RE market can turn from boom to bust, although I think the next SFH bust will happen in slow motion over the next 24+ months. It’s already started globally in all the cities that were booming 12 months ago.
Here in Canada the slow motion decline is already happening. Toronto Detached Real Estate Inventory Rises Over 230%; detached real estate is seeing prices drop for a 7th month in a row, as sales continue to decline, and inventory soars.
https://betterdwelling.com/city/toronto/toronto-detached-real-estate-inventory-rises-230/
I’d guess Canada’s RE boom ended last spring when we hit peak prices across the country for detached SFH.
Yup:
The disturbing part about Amazon’s HQ2 competition
But, there’s one part of Amazon’s HQ2 competition that is deeply disturbing — pitting city against city in a wasteful and economically unproductive bidding war for tax and other incentives. As one of the world’s most valuable companies, Amazon does not need — and should not be going after — taxpayer dollars that could be better used on schools, parks, transit, housing or other much needed public goods.
http://www.cnn.com/2018/01/20/opinions/amazon-headquarters-competition-disturbing-richard-florida-opinion/index.html
I am a little surprised that FOMO has taken hold of the condo market considering not just the amount of inventory
There is no inventory in reality. When clients give me some basic reasonable criteria I can’t find anything. When you throw out leaseholds, timeshares, units without parking, units with in suite laundry, pre-sales that will be finished in three years, and a few other basics you are left with nothing and what comes up has 20 showings in two days and multiple offers.
Also when I explain the risks of buying right now a lot of people have the attitude of “well if it drops $50,000 that’s fine, I can still afford to make payments and I’ll continue living there, but if it goes up $50,000 I am completely priced out of the market.” That is the FOMO impact.
@Marko:
I appreciate you boots on the ground insight into the condo market. It provides us with insights that stats alone dont. I am a little surprised that FOMO has taken hold of the condo market considering not just the amount of inventory but the amount of inventory that is coming online in the next year.It makes one wonder if this is being partially generated by questionable advice from agents.
Leo, I have a question related to your previous posting:
If I run out and buy a condo, writing a cheque/draft against my secured line of credit (HELOC) would that show up as a ‘cash’ purchase?
What if I then later get a tradition mortgage against the property (to get a better interest rate)? I’m assuming that’s not going to show up in purchase data (since that’s a snapshot of the purchase transaction). It would presumably show up in debt stats in the proper bucket.
With the amount of home equity floating around Victoria I assume there are quite a few people putting RE purchases on their LoC. When I secured our LoC the bank agent suggested buying a condo with it. “That way no condition to financing!” Uh huh.
Not sure, as Totoro says, they will be able to do this but since I lived up there I have some experience with this. Also a big problem in Parksville.
My friends who live up there, under age 55, have had big problems finding housing if they can’t afford freehold SFH. There are so many strata’s, or rentals, that are age restricted it makes it very challenging for younger folk to live there. I think the long time mayor of QB is on the right track, as he’s well aware this is a big part of the reason demographics are so skewed towards older folk there. However, will he be able to do this? That’s another story.
Sorry, what do you mean? People that already own that want another? Or people that don’t but want to?
From the side conversation I can gather at the showings mostly potential buyers that would occupy the unit. I.e., people buying places because they need a place to live.
Also, I am hearing a lot of “this is expensive, but that one bedroom rental we looked at is $1,700 so maybe better to buy.”
If people could rent for a reasonable amount I think there would be less of a push to buy. The rental inventory coming on in the next 12 months could help things in a variety of ways.
This is Marko’s comment from last thread – it’s a new concept for many Canadians who still remember the recent times where it was still possible for most to able to attain the ‘Canadian dream’ so to speak, based on local income fundamentals and because Canada was a relatively ‘new’ country. We are starting to see that this is no longer the case here in the most recent years. Somewhat surprisingly, it still comes as a shock to some Canadians who have not known it to be any different until most recently. Like those who say ‘how come my kids can’t afford the same thing I did in Victoria’.
For ex, my British relatives have had the same holdings for many generations – they don’t sell them it just gets handed down to the next gen. It’s not like anyone could go out and buy it now starting out from scratch. It’s not for sale. This is common over in Europe, and the lack of inventory and high prices relative to income in the best area’s is endemic there.
In addition to this phenomenon, what we’re seeing now, both here and in Europe – is also the effects of globalization. Read Oxfam’s recent report where 1% of the world’s wealthy have 82% of the wealth…http://www.bbc.com/news/business-42745853 There is some debate over the wealth statistics in this report but you get the idea that the top 1% of the world has far too much of the share of the wealth.
So, moving forward I think we’re more likely to see the financial ‘fencing off’ of the best parts of our best cities here to either… generations who have owned for many decades, or…the world’s uber wealthy since we are among their favourite target areas. Just like the best parts of Europe are either ‘spoken for’ or targeted by globalization. Poorer immigrant communities in Europe are often segregated to the worst parts of the most least desirable cities. Existing Europeans either have to have generational wealth when starting out (as many do) or they fend for scraps. We will likely see these trends continue to develop here in BC, and we will start to look more similar to them now that we are well settled and the best places are often either spoken for, or being bought by wealthy foreigners.
So… for us here… expect low inventory’s (esp. quality inventory), and continued detachment from local income fundamentals to continue for our best areas. We are established now folks. The times of opportunity in pioneer spirit, what many will remember from recent generations, for what was once a new country – have passed.
Sorry, what do you mean? People that already own that want another? Or people that don’t but want to?
Obviously, a lot of older people prefer being in a community of their peers without kids or equally annoying millennials who are so self absorbed that they want to impose their preferences on everybody else. there is a real fascist streak that seems to run in that generation.
Marko, resale is not the only consideration and becomes a much lesser consideration when your next
downsize is to a 10 sq. foot basement unit.
One of the big advantages of moving to Canada is that we left the two parasites back in California along with their endless demands for cash.
I am not in favor of the 55+ but doesn’t it provide “affordable housing?” 55+ must be trading 20% below market value all other things equal.
I think the condo craze is definitely due to the stress test. Whether it is due to filling pre-approvals or people moving down to a condo. Perhaps the lower sales numbers could be due to lack of lower priced condos available even though total inventory is adequate.
I personally think it has more to do with FOMO than the stress test. On the ground I am seeing a lot of people spot $ from parents to negate the stress test so they really aren’t on a time crunch.
That being said it is the craziest condo market I’ve ever seen in my career. I showed a condo Saturday at 11 am and there were 7 realtors with clients there and they were doing showings all day long. From what I can tell mostly owner occupiers showing up.
55 plus age restrictions are legal and this has already been challenged in court and upheld.
The Charter has nothing to do with it – the Charter applies to government actions only. The BC Human Rights Code applies but has a specific exception for this.
The Code provides that restrictions as they relate to family status or age do not apply if the space is a rental unit in residential premises in which every rental unit is reserved for rental to a person who has reached 55+ years of age or to 2 or more persons, at least one of whom has reached 55+ years of age.
You’d think age restrictions would lower resale value but I guess they don’t care about that as much as the horrifying idea of hearing a child from the comfort of their patio.
Will already have proof the rental restrictions impact re-sale by approx. 10% and age restrictions would probably be a similar amount; however, owners can’t think ahead. They only complain about re-sale at the time of sale.
Looking closer there were 13 pre-sales entered from the Legato that happened all the way back in 2015/16.
Are they actually being counted as sales or just some system corrections?
Victoria steps up to energy code, but builders want city to wait
It is only a matter of time before new SFHs are only for the 1%ers. You wouldn’t believe the amount of bureaucracy that has been piled on in the last 10 years. It just gets worse and worse with each subsequent project.
It isn’t so much escalading costs that drive me nuts it is the affordable housing BS that is on the news every day. City takes away the re-zoning requirement for garden suites and they make it a media news story; however, the fact that at the exact same they are applying the HPO owner-builder exam to garden suites is 100% not mentioned. The two factors completely cancel each other out and surprise no one is building garden suites.
Some honestly would be nice….”Hey, we’ve added so many layers of bureaucracy that it isn’t really affordable to build a home anymore.”
I’ve emailed city reps to ask them to look into banning age restrictions altogether and haven’t got any replies. It may actually be illegal per Canadian charter rights but no one seems to have challenged them in that way before. You’d think age restrictions would lower resale value but I guess they don’t care about that as much as the horrifying idea of hearing a child from the comfort of their patio.
On average, what percentage of monthly sales are from >1 year ago? I would presume that over the next few years we will see a larger number of these types of delayed sales being tracked due to the influx of new buildings being completed and owners taking possession.
Related to that question (and somewhat hypothetical), when a new building is completed that had a sellout in 30-60 days, would all those units show as sales in a 30-60 period when the titles are transferred?
Thanks for doing such a great job with the numbers. Considering the amount of inventory, it is a bit surprising that condos are selling so often over ask. I also find the inventory numbers a bit confusing since there are a lot more new listings than sales yet the inventory number does not seem to budge (it is not like December were people tend to take houses off the market) Leo can you provide some irrational (or irrational) explanation?
I am a bit surprised that SFH have not slowed more. Is there any way of telling if the core is behaving differently than the West Shore?
Victoria steps up to energy code, but builders want city to wait
But Casey Edge, executive director of the Victoria Residential Builders Association, said the move to “fast-track energy efficiency” through the Step Code not only undermines existing national and provincial building-code standards, but will add thousands of dollars in costs for homebuyers.
http://www.timescolonist.com/news/local/victoria-steps-up-to-energy-code-but-builders-want-city-to-wait-1.23150530
Qualicum looks to ban adult-only condos
Two incidents inspired efforts to implement a ban.
In one, a woman was returning to her hometown of Qualicum Beach, with a husband and two young children. The family found a condominium, but couldn’t move in because people under 19 are not allowed. The family now lives in Parksville.
In another, a 47-year-old woman wanted to move into a trailer park. But she was kept out because it is restricted to people ages 55 and up.
http://www.timescolonist.com/news/local/qualicum-looks-to-ban-adult-only-condos-1.23150526
I think the condo craze is definitely due to the stress test. Whether it is due to filling pre-approvals or people moving down to a condo. Perhaps the lower sales numbers could be due to lack of lower priced condos available even though total inventory is adequate.
Is that demand being pulled forward from pre-stress-test pre-approvals? An even more pronounced flight to affordability because of the stress test?
Thanks for the numbers, definitely interesting.