January 21 Market Update

yeahright#7742 1st time home buyers. Power-bar for all electronics at once (things like tv’s and dvd players or not turned off, they are on standby and still juiced), no power vampire as we turn of all the power at once on the power bar. We got a used car near the end of 2004 and only use it, on average, weekends (so less in insurance). Cook our food mostly from scratch as much as possible

You’re my kinda guy. Great work and I hope you enjoy the fruits of your discipline and planning. A lot of Canadians would give anything to be in your position right about now.

@ Yeah Right

$80k times 6 years = $480,000 gross <- $210K of this is mortgage paid off.

We also live on $24K, on average, per year.

And we have over $120k in investments. So $425k house, plus $120K investments is north of half a million.

So with a progressive annual income of around $60k – $80K, it took us around 16 years to gain $500k.

…Also, I posted years ago on how we saved like mad and live with in our means. Essentially I have posted my life story on here in past comments.

That’s impressive.

Is that 2 adults living on roughly 24k/year with a paid off mortgage?

Roughly how much is the weekly (or monthly, whatever’s easiest) food bill for the 2 of you?

I’m just running numbers off the top of my head and despite reading your post below, I’m genuinely curious on your monthly numbers…

• Car (insurance, tires, repairs & maintenance, gas)
• Food
• Alcohol
• Eating out
• MSP
• Phone/cell phone(s)
• Supplies/hygiene
• Household costs (insurance, repairs & maintenance, taxes, hydro/gas, internet, etc)
• Pets?
• Travel?

Checked Google, saw your previous post in case anyone else is curious:

yeahright#7742
1st time home buyers. Dipped into RRSPs and Tax Free.

Paying off quick as we don’t want the bank to have the power to own our house. Miss the last payment and loose a job and can’t pay the bank, all the years paying gone and now the bank takes possession.

My wife and I bought in 2012 and got possession about mid April. We are on track to paying off the house in just over 3 years (Low Low 2 year rate right now, bi-weekly double payments, and extra/found money lumps sums at the end of the year ~we are aggressive). We are paying ourselves back on those RRSPs and Tax Free and we are still saving.

We live a very frugal life.

Power-bar for all electronics at once (things like tv’s and dvd players or not turned off, they are on standby and still juiced), no power vampire as we turn of all the power at once on the power bar. http://i.imgur.com/P9Y3VVv.png

We got a used car near the end of 2004 and only use it, on average, weekends (so less in insurance). We still own it today with regular checkups and little maintenance, it’s prob. got another 10 years in her. So we bike or walk as much as we can.

Cook our food mostly from scratch as much as possible (huge money saver!). Eat out very little and buy in bulk where we can (avoid canned, boxed or bottled foods as much as possible). I also process/grind/butcher my own meats so as to not only be frugal, but to also know how it was processed (healthier conditions and knowing where it was done. None of the blood splattering of old meat to make it look new again B.S. etc.). We do splurge on better indigence as we figure if we went out to a restaurant to get this it would cost us way way more.

I do brew my own beer and wine, but will spend on a good bottle or case from time to time.

We do some gardening mostly of the food variety. It’s more of a hobby but does help with the food bill and you know how it was produced and processed. And I do barrel my rain water off my downspout from my gutters. I also use a push/reel mower to do my lawn, but not only to be frugal, but it is also for a noise and pollution reduction.

We only leave lights on only in the room/s we are residing in. As we have electric baseboard heaters, we keep the house at 16 degrees always, and turn the heat up a bit in the room we happen to be in and turn it down when we leave. We just add extra layers for clothing or blankets on the couch. We tried having it off during the day while we are not at home and schedule it to turn on by the time we get home. But it actually take way too long to heat up and actually causes more energy, thus more money.

We always try to buy used before new. Why get new when used can be perfectly fine or sometimes better.

Well that’s my frugal rant. Hope you enjoyed it.
https://househuntvictoria.ca/2016/04/14/the-power-of-not-over-leveraging/

@guest_55088 how much of that increase is in the last 5 years ?… the price increase was flat lined for the first half of the decade … victoria house price will definitely increase in the future .. but how much of the future will be flat lined in prices till the next boom?

LocalFool: Prices cannot rise to this degree, this rapidly, without significant FOMO and speculation.

Victoria house prices only rose 2.5% per year above inflation over the last ten years (2009 to 2019).

Victoria prices (teranet) rose 50% in the last 10 years. (Teranet 122 to 235 from 2009 to 2019 https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/economic-news-teranet.pdf). That 50% rise over 10 years is 4% per year (compounded). Inflation CPI rose 20% during that period, which is 1.5% per year (compounded)

So the rise was about 4-1.5=2.5% per year above inflation. Seems unremarkable to me, during a period of population and economic growth in a desirable city. And likely to continue for the next ten years!

To those bears who have no FOMO, good for you, but you still may end up “missing out”.

Almost all of Canada has experienced population growth and record low rates for 10 years – very few have experienced our degree of run up, and no city remotely our size has experienced our degree of run-up.

Almost all of Canada isn’t as desirable a place to live as Victoria.

That’s not speculation or FOMO, that’s simple economics.

So if a speculator takes advantage of low rates and snaps up a bunch of properties for short term gain – that’s not speculation to you? Because they used low rates?

Your 1, 2 and 3 points are the same old tired crap. Almost all of Canada has experienced population growth and record low rates for 10 years – very few have experienced our degree of run up, and no city remotely our size has experienced our degree of run-up.

Tomato linked to this earlier:
https://twitter.com/fivre604/status/1087738677973868544?s=21

Sure looks like a lot of speculation and FOMO to me.

@ Jamal McRae

Easy, if you review all my comments.

After around 10 years of savings and making less then $80K over that time:
Down-payment was $210K. ($215K Mortgage left)
…. 6’ish years, it was totally paid off.

$80k times 6 years = $480,000 gross <- $210K of this is mortgage paid off.

We also live on $24K, on average, per year.

And we have over $120k in investments. So $425k house, plus $120K investments is north of half a million.

So with a progressive annual income of around $60k – $80K, it took us around 16 years to gain $500k.

…Also, I posted years ago on how we saved like mad and live with in our means. Essentially I have posted my life story on here in past comments.

I think the point most bears are trying to make is that the run-up in the past 3.5 years is caused by purely speculation and FOMO.

And that’s why you see so much arguing on this blog – because statements such as “the run-up is due purely to speculation and FOMO” ignores so many fundamentals and drives the not-bears a little bonkers.

When interest rates are at historically low levels, it forces investors to purchase assets instead of saving. World wide real estate is way up, so are stocks. Google this and you’ll see article after article talking about this. Record low interest rates also makes buying a house for the average Joe a very attractive idea. I’d bet dollars to doughnuts that if the central banks hadn’t lowered and kept interest rates as low as they have for the last 10 years, that we wouldn’t have anywhere near the run up in prices. That’s not speculation or FOMO, that’s simple economics.

There are of course other lesser important factors at play:

1) Population in BC is up 12% from 2007 to 2017. (Population in the CRD is up ~11% during this time)

2) More and more baby boomers are retiring. As of 2019 they constitute 18% of the population and by 2030 it’ll nearly be 23%. They’re not all going to end up on the island, they aren’t all rich, but no one on this blog is going to argue that the island isn’t known as a retirement destination.

3) And as we’re finding out, there was also a lot of laundered money, the estimates are now upwards of $2b per year. But even at $2B per year that is only about 2.5% of the total sales of $77.6 Billion (2016) Certainly alarming, but it’s not like every other neighbor is an Asian crime leader or fentanyl dealer.

None of this precludes that there has been some FOMO and speculation. That happens in any asset price run-up. Could the current RE market be a bubble? Possibly, no one will know until 3 or more years from now. I personally think it’s near a peak in the cycle, and that there’ll be a modest decline. But are current market prices based on pure speculation and FOMO? The current economic environment we’re in and the data clearly shows that is not the case.

Sources
1 https://www150.statcan.gc.ca/n1/pub/12-581-x/2018000/pop-eng.htm

2 https://www.theglobeandmail.com/globe-investor/retirement/the-boomer-shift-how-canadas-economy-is-headed-for-majorchange/article27159892/

3 http://www.bcrea.bc.ca/docs/news-2016/2016-12.pdf)

To be fair, they have 60 years of history to support that mindset. This particular downturn could be an outlier. Or not.

I know Math isn’t your strong suit, but 1981 is less than 60 years ago.

I don’t think we can know with any high degree of certainty what causes many of the effects we see in real estate markets. But Leo is working on it!

There’s been a run up! We don’t know why, but it’s not because of speculation, that much i can tell you.

There’s very little new development space within the Urban Containment Boundary, reference map 3a.

I don’t know of a city that has succeeded in their attempt to increase density by containing growth. In Toronto it was the Golden Horseshoe, in Ottawa, it was the greenbelt. I’m not against these things but you can’t say they succeeded at containing growth and I don’t think you can say they promoted density either. Developers have always chased high margins which means building on cheap land. For some reason, people have tolerated ever growing commute times and worsening traffic to excuse their “cheap” property prices. What seems to promote density more than anything else is economics. If the commute becomes intolerable, people will shell out for properties on high-density envelopes, which promotes better margins on those kinds of properties. A city saying “no more expansion, mkay?” isn’t my idea of promoting density.

@Cadbrosaurus:

I tend to agree that two people in Victoria making a combined income of under a 100 k does not represent good paying jobs. That is a about the equivalent of the average single fireman or policeman and less than most plumbers as well.

I have been mulling over this argument that house prices are likely to take a big fall because they price of a SFH (not talking about condos) is so detached from the median income. This argument never felt totally right to me. Here are a couple of thoughts that are troubling me. Also I am talking about greater Victoria and not just the city. I am using rough number stats.

1) Historically about 60% of people own SFH in Canada;s cities. So we should be looking at the median income of the top 60% and not at the overall median income.

2) On average this generation is in school a lot longer than my generation was and we should be looking at the median incomes of people between 30 and 50 since these are the productive years where SFH are first bought.

3) The other factor that plays into Victoria’s pricing of SFH is that about 25% of SFH are bought by retirees from outside Victoria many of whom have deep pockets. We dont have great stats on these but I would hinder a guess that the vast majority of luxury homes over 1,5 mil are bought by outside money. This would lower the median average SFH price that is reliant on local incomes.

4) According to a banker friend of mine we are beginning to see the start of serious wealth transfers as the leading edge of the baby boomers starts to take up residence underground. You might have a family income of 100k but if you have inherited 750k than your housing options start to look better. This will not apply to the majority of buyers but there will be enough that it impact the market and absorb some of the listings.

Overall I think the market will soften with price drops but if you are waiting for SFH prices to be within easy reach of median incomes than I suspect that this might be an illusion.

Wouldn’t the obvious choice be to remove the primary residence capital gains tax exemption?

Such a bad idea on so many levels.

when capital gains were first brought into income for tax purposes in 1972, the
government rejected full taxation in order to provide incentives to Canadians to save and invest and to put them on roughly the same footing as foreigners investing in Canada. Also, capital gains on principal residences were not made subject to tax on social policy grounds.

Source: A Government of Canada Review of Taxation, 1980
http://publications.gc.ca/collections/collection_2016/fin/F2-51-1980-eng.pdf

@ Yea Right

I am pretty sure you will not be able to afford a $700K home on an $80k combined income unless you are putting a significant amount down…

@ Marko

Completely agree that two people with “good” jobs can still afford to buy a SFH. The real question is if there are enough of those people around to support the prices.

@ ks112

Well, we got it for $425K in 2012 (asking $450K, reduced from $485K, well over 90 days on the market).

Assessed over 700K today.

After around 10 years of savings and making less then $80K over that time:

Down-payment was $210K. ($215K Mortgage left)

Our mortgage payment were around $510 every 2 weeks. (But we doubled down as much as possible, and would put lump sums at the end of the year from even more savings). 6’ish years, it was totally paid off.

So, even if we had to pay more in today’s market. We’d probably be able to pay it off in less than ten years. Because if we didn’t buy, we would have saved more in that 6’ish years!

I forgot about our 13 municipalities.

https://www.victoria.ca/assets/City~Hall/2017%20SOFI.pdf

Scroll down…..some decent salaries.

I was surprised how much people born in the mid 1990s made working at 443 Squadron at the airport (ended up with rental applications from a few when I was renting my suite). There are high paying jobs in places that don’t cross your mind.

Sure, the average sucks but the average isn’t buying the core SFH either. Above average jobs (small percentage, but growing absolute numbers every year), 2x in household, throw in a basement suite as income helper, and that is who gets in the SFH market.

LeoS: Thank you for the population chart. It is a welcome addition. I saw a stat recently that Vancouver Island has added over 50k registered vehicles and your chart seems to back that up.

Okay, Our household income combined is just north of 80K Gross (around 70-75K+ Net). A wage of $20hr + $25hr.

We own a house paid off. If we did have children we would still own a home with a very small mortgage.

Really, if we had 90K+, like described in the comments here, we would be laughing!!

As per my previous post, “good” in the Victoria context is $90k a year per person, “well paying” is $120k and above a year per person.

By this definition only a small percent of the working population in Victoria are making a “good” income

But your arguement is valid as I wonder how many people in Victoria make at minimum a “good” income? Two people with a “good” income ($180k combined) will be able to afford the average SFH in Victoria.

So a small fraction of folks (HH income 180 K or above) can afford the average house?

@Cadbrosaurus

Please don’t take any offense but I and probably most people would not consider 100K/yr combined income between 2 people good jobs. As per my previous post, “good” in the Victoria context is $90k a year per person, “well paying” is $120k and above a year per person.

But your arguement is valid as I wonder how many people in Victoria make at minimum a “good” income? Two people with a “good” income ($180k combined) will be able to afford the average SFH in Victoria.

That’s kind of the point no? Homes shouldn’t be investments, and if they are, then they should be taxed as such. If they wouldn’t make a return if taxed, that kind of makes the whole point moot.

This would get people out with the guns….
It would cripple the economy. Mobility would be crippled. Inventory for existing Homes would become even more rare.

Lets take the example of RCMP members. They are forced to move within their careers. Part of that is their expenses are payed including Realtor fees, transfer tax etc. Now us tax payers have to add a 100k to that bill to pay their capital gains tax.
Good luck hiring anyone from further away than 50km unless your willing to pay their 100k capital gains tax.
No one would sell, they would simply rent it instead.

This is the idea of a bitter person seeking revenge not solutions….

@ Introvert

Having worked at several of the places you have listed below, I thought I’d modify your list a little bit with the insight that I have. You did leave out police, firefighter and nurses though, all of which you can make $120k with over time. And just FYI those Vancouver sun salaries include banked over time and such (sometimes years worth before retirement), that is why you see deck hands at bc ferries being paid more than VPs and nurses being paid more than doctors.

In my experience, generally people in Victoria associate $90k a year as being a good salary. So you can make your own judgement about what kind of house they can afford.

BC Gov (Don’t pay much, executive directors cap out at $127k)
bcIMC (Pays well on the asset class side ($120K to 7 figures), capital markets job though and not for everyone, recent layoffs in the equities group has everyone scared, typical work day is 12-14 hours)
BC Lotteries (Kelowna HO)
BC Securities Commission (Vancouver HO)
BC Utilities Commission (Vancouver HO)
BC Assessment (see BC Gov)
BC Housing (Vancouver HO)
BC Hydro (Vancouver HO)
BC Pension Corp (See BC Gov)
BC Safety Authority (dunno wtf they are till today, doubt they pay much)
BC Transit (see BC Gov)
BC Transmission Corp (Vancouver HO)
ICBC (Vancouver HO)
Island Health (See BC Gov)
Camosun (both campuses) ( salaries for Instructors there cap out just under $100k, but you get summers free)
Royal Roads (dunno too much, but was offered to teach an online finance class there for $80 an hour)
Canadian Navy (no clue and doubt they pay much)
Community Living BC (See BC Gov)
Liquor Distribution Branch (Vancouver HO)
Powerex (Vancouver everything, pays well but commodity trading job and not for everyone)
Provincial Health Services Authority (Vancouver HO)

Victoria who don’t worry a lick about recessions and losing their job

I worked at one of those places during the last “recession”. People lost their jobs, and any open jobs were not filled for years after 2009.

I don’t think you (or perhaps many) realize just how many well-paying, virtually inextinguishable public sector jobs there are.

This is a data question. According to Statscan, about 38% of the Victoria CMA (2016) would be employed in the sectors you listed below, but their incomes on average aren’t terribly illustrious, IMO.

The three largest in Victoria in order are health care (including social assistance), public administration and retail/services. For people aged 25-54, on average:

Health care (including social services) clears about $28.5/h. Public admin will do about $36.7/h. Retail is about $23/h. Education is also quite a significant sector here, and they will clear about $32/h.

Things like utilities and transportation aren’t really worth mentioning in the context of RE, as they employ a proportionally very small amount of people – but nevertheless, utilities is actually among the top paying at just over $38/h.

There’s definitely grounds to argue that RE here is likely to be more stable and resilient than some other markets as over a third of positions have what can be called “non-cyclical” employment. But as some know, “stable” hasn’t been a good word to use to describe the RE market of the last two years.

The relevant point here is that this same data cannot be used to explain the current pricing of homes, and it most certainly can’t explain the sudden and stratospheric rise of those prices. In other words, a sustainable RE market will require either far higher wages or…lower home prices.

Cap gains doesn’t exceed 25% of the taxable gain.

I see. I’d think most people would believe that to be a huge amount of tax on the sale of a primary residence. On a 400k gain, which is quite common for older Canadians on the West Coast, that is 100k of tax. And, given the impact of inflation, could represent a negative return if taxed for some Canadians.

Introvert there aren’t that many good paying jobs in the government. Unless you think good paying is 60k (which in a city where median house price is 750K its not).

I don’t think you (or perhaps many) realize just how many well-paying, virtually inextinguishable public sector jobs there are.

Take but one example: BC Ferries, whose headquarters is Victoria, B.C.

Sure, not all its managers and highest-paid employees make their home here, but a great many of them do.

According to: http://www.vancouversun.com/business/public-sector-salaries/basic.html

Search “BC Ferries” on the drop-down menu. In 2014, there were about 520 people earning $100K or more. And that was in 2014. We know each one of them is making more today, in 2019.

That’s just BC Ferries.

Let’s look at UVic:

https://www.uvic.ca/vpfo/accounting/assets/docs/financial/uvicfinancialstatements/FIA-2016-17.pdf

From what I can tell, there are approx. 1,000 people earning $80K+ per year (with a significant number of them earning $120K+).

So that’s two employers based in Victoria. How many others are there?

I don’t know the answer, but there are lots:

BC Gov
bcIMC
BC Lotteries
BC Securities Commission
BC Utilities Commission
BC Assessment
BC Housing
BC Hydro
BC Pension Corp
BC Safety Authority
BC Transit
BC Transmission Corp
ICBC
Island Health
Camosun (both campuses)
Royal Roads
Canadian Navy
Community Living BC
Liquor Distribution Branch
Powerex
Provincial Health Services Authority

I’m sure I’m missing some.

In short, there are a lot of people in Victoria who don’t worry a lick about recessions and losing their job, make a fantastic salary (and have for years), probably tend to live in the nicer neighbourhoods, and stand to receive a solid defined-benefit pension when they retire.

Victoria City Council wants their own ‘Vacancy Tax’.
https://www.vicnews.com/news/victoria-city-council-seeks-authority-to-tax-empty-homes/

@guest_55087

No that’s wrong. Your cap gains tax would be 89,498.

Affecting the housing market would be the point.

Canada is one of the few countries with a capital gains exemption for your primary residences.

Capital gains would be a lot.

Ex. If your income is 80k a year and you bought your home for 400k and are selling it for 800k you’d owe $114,777. That would affect the housing market.

https://smartasset.com/investing/capital-gains-tax-calculator#nm6OPNsKmh

@once and future

You just described buying T Bills.

FYI capital gains aren’t huge.

If Victoria prices fall as fast as it did in the states in 2008, wouldn’t you say we are at least 3 years from bottom? I personally can’t figure out scenario where our correction will be more steep and violent in Victoria than cities similar in the US. Thoughts?

Victoria isn’t generally a volatile market and I don’t see a swing down that looks like ’81 for instance. But I do think it will be worse than the early 90’s, and potentially more protracted – deleveraging dynamics are already starting in Canada and the only question is whether this mountain of consumer debt is paid off gradually or written off quickly. A bit of both, I suspect.

If you want to use the US as a proximal metric for a bust (and actually, previous ones in Canada), then you’ll find most cities, especially the west coast cities, endured the worst of the losses within 12 to 18 months. From there on in it dribbled down, went up a bit, then down, and somewhere in those few years the bottom was found. If the market declines here of the last few months actually denote the start of the real downturn, then by the end of this year it’s possible that things will look a lot different. We’re ready for that, if need be. But I don’t expect it.

For me and others it comes down to confidence in pricing. I have absolutely none right now for Victoria or almost anywhere in BC atm. In my humble opinion, anyone who does is either not paying attention or is wilfully blind to the economic reality and dynamics unfolding right in front of them. I’m not looking for a market bottom, or X percent off. Not only because I doubt I could ever time it with that kind of precision, but I have no compelling need to wait until then. And with a principle residence, I feel I can be more flexible than if I was speculating. Basically, “knock the froth off” and see where its at.

Almost all the metrics I watch in deciding when I want to buy here, has little to do with the Victoria market. The latter is secondary, because this market inexorably follows larger trends than itself. I usually couldn’t care less about transitory things like “inventory” in a local market. You see people tout that here, but they may not realize how suddenly and quickly the inventory dropped from nominal to almost nothing, which is an almost stereotypical, transitory end cycle dynamic where mania is present. In other words, it’s an effect, not a cause, which is also why people here aren’t going to find out what “causing” it.

If you want to have a sense on where things are going, you can watch certain types of credit origination, M1, demographic trends, consumption of non-durable goods as well as good old consumer debt. These metrics can’t tell you pricing this month or next, but they definitely tell you whether they are going in a direction conducive to RE inflation, or not.

And guess what folks – they’re not. Right now, every metric in the book, and the ones not on the book for that matter, are pointing down, down, and down – and that’s despite a growing population and employment at 40+ year lows.

Re: « What we need is systematic review and revision of policies that prevent housing from being built, at the same time as research into cheaper housing construction methods.« 

First, not sure that more free market is the answer to the problems caused by lack of regulation (i.e. the free market).

Second, agree that more creative approaches to building could help a lot. Maybe we can start 3D printing houses:

https://youtu.be/Q1sOnlPMqtY

Local Fool
Ya we’re looking at a few scenarios. Probably not this summer though, too early IMO. Also, Picard FTW.

If Victoria prices fall as fast as it did in the states in 2008, wouldn’t you say we are at least 3 years from bottom? I personally can’t figure out scenario where our correction will be more steep and violent in Victoria than cities similar in the US. Thoughts?

”“experts say a millennials housing policy could be a vote winner in next fall’s federal election among this increasingly critical demographic.”

Wouldn’t the obvious choice be to remove the primary residence capital gains tax exemption? Making a house the only asset that you can purchase which isn’t eligible for cap gains tax increases the impetus to invest in it vs other assets.

Doesn’t help in the short term but would definitely help discourage the run up in values.

Kirk sucked but no one would have watched without him.

No one needs to buy those homes. The majority are already owned. These are not all tulip bulbs. Cruz around Oaklands at 8:30 AM. These are homes owned by families. This is the problem bears will face. Inventory is super low. So one scenario that might happen is some sales happen to drop the prices in the stats yet you still can’t buy your ideal house for the price you want even though the statistics say you can.

The statistics are telling you enough already. The market has turned. Get your Kirk on and start making low ball offers this summer / fall / winter while the market stinks. Eventually you might get a bite. Do I have to tell my Saratoga Beach story again?

@LF, Logic should only be a part of what guides your decisions. You kinda remind me of the Starship Enterprise without Captain Kirk….

+100. If this world only worked the way I think it does, it would be pretty boring. But Kirk sucks. Do you recall that scene where he fought the Gorn? WTF.

I think you fundamentally don’t understand how it works.

I’m afraid that’s what Mrs. Fool might say on our wedding night. FML 🙁

Are you saying all those character conversions will be converted back AND be more affordable? All those suites removed AND be more affordable? That those bulldozer specials will be torn down and replaced by SFHs AND be more affordable?

Greater affordability doesn’t mean that new homes won’t cost more than bulldozer bait, suited homes won’t cost more than one with no suite potential, or that all segments of the market will magically become priced at 3x or 4x, or whatever, average income. You know it doesn’t work like that either.

Home prices (not rent) are relatively elastic and affordability is a tiered, flexible notion in the sense that when we say, “a house in Oak Bay will become more affordable” it doesn’t mean that applies to a person making 25k a year. And in that case it doesn’t need to, because a sustainable market has the ability to meet the demands and parameters of the various socioeconomic tiers. What greater affordability means is that averaged over the market, homes are not going to stay at 8, 10, 20 times income. And, that correction will affect all tiers sooner or later.

To your point there is, proportionally, so much housing here that is SFH, that to say that it will remain unaffordable to the vast majority of the market here on in, is IMO, disingenuous to the point of being almost a contradiction in terms. Who will pay for these overpriced homes then, in the absence of a speculative mania? The “trend behind the trend” is clearly inarguable, but that is a terribly slow moving dynamic, and it’s unclear at what point it will change. At any rate, I don’t think that should factor into anyone’s decision making today.

…prices are not going to drop anywhere close to what you figure

I don’t recall ever giving you a figure to which you can base that conclusion. I can’t predict a market with any precision, but nearly anyone willing to pay attention can identify trends that effect them. Having said that, I do expect prices are going to fall, as do you.

And yet for most of the 20th century that wasn’t the case in most cities, as things went towards the suburbs and city centers deteriorated. It was why Hillside Mall got built in the first place. Until very recently oaklands and fernwood were undesirable.

by your logics … London, new York, Vancouver, Tokyo , should of turned to dust … city centers only crumbles due to lack of desirability… look at Nainaimo … grid locked to death and unable to develop due to bad city planning … city centers crumbles and every one moves the fringes of town… the only thing that make victoria desirable to most people now is a city center with activities … if one day city center becomes dead … all the houses here in victoria will worth much less than stuff a decade ago

@LF, Logic should only be a part of what guides your decisions. You kinda remind me of the Starship Enterprise without Captain Kirk….

Why is Fernwood more desirable then it was? Any answer I give can be logically argued away. Yet…. here we are.

As far as the death of the SFH. This has been happening for decades. Most houses have been converted to multifamily already. So when you say
“when this cycle completes and affordability returns, it will only return to smaller, generally attached units. “Average” detached units in many areas therefore, will now remain unaffordable for subsequent cycles. Which then means, according to your implication, that a very large portion of the existing housing stock is never returning to affordability. I don’t think that’s how the RE market works, ”

I think you fundamentally don’t understand how it works. Are you saying all those character conversions will be converted back AND be more affordable? All those suites removed AND be more affordable? That those bulldozer specials will be torn down and replaced by SFHs AND be more affordable?

P.S. Don’t be angry by me calling you Spock without Kirk….

“Average” detached units in many areas therefore, will now remain unaffordable for subsequent cycles. Which then means, according to your implication, that a very large portion of the housing stock is never returning to affordability.

Not sure about “very large,” but dasmo is absolutely right about certain neighbourhoods never returning to general affordability.

It happened to Oak Bay. It happened to Fairfield. It happened to Caddy Bay and Cordova Bay. It happened to Gordon Head. It happened to Oaklands and Fernwood. It happened to Broadmead and Sunnymead. For some of these areas, we have to reach far in the past to find a time when they were affordable. For others, we only have to reach back maybe a decade or so. But what they all share in common, in my opinion, is that they aren’t ever going to return to broad affordability.

I don’t think that’s how the RE market works, or how a correction works when money flees the housing sector

I have a feeling that this downturn in Victoria is going to be an eye-opener for you, in that prices are not going to drop anywhere close to what you figure based on your readings on cycles and so on.

There are precious few things in markets and in economics that occur “by the book.”

I think that this partly presumes that the geographic footprint of the city will not grow.

Good luck gathering the political will necessary to clear-cut the Highlands and pave over the remaining farmland on the Peninsula for subdivisions. These are things that will never happen in our lifetimes.

The plenty of land argument also doesn’t hold up in the modern world. We no longer have slaves to build our railroads. We can no longer demolish and dump at free will. We can no long just destroy nature as we see fit.

In other words, there’s plenty of land, but a), they can’t really use it due to a lack of slavery and environmental concerns, and b), they are going to be incapable henceforth to build what the market demands. I don’t find either premise convincing.

There is a great deal of open land west and northwest of here, and whether I laugh at it or you disagree, it’s there regardless. And they’re going to be building on it sooner or later. Have a look at google earth, and you will see much of the region is unencumbered forest. You didn’t get homes in downtown Victoria that moved from 500k to 900k in just a few short years because the lack of slavery and usable land finally, totally, and drastically caught up to us.

This is why housing affordability will return to the norm but that wont be for a 2000 sqft single family home on a 50X100 lot in Fernwood.

What you seem to be implying here is that when this cycle completes and affordability returns, it will only return to smaller, generally attached units. “Average” detached units in many areas therefore, will now remain unaffordable for subsequent cycles. Which then means, according to your implication, that a very large portion of the existing housing stock is never returning to affordability. I don’t think that’s how the RE market works, or how a correction works when money flees the housing sector, and history to date in this particular market appears to contradict this apparent implication. Apologies if I have misunderstood you.

The cost to build new infrastructure is much much greater than it ever was.

Construction costs are highly cyclical and the more intense the cycle, the more intense that dynamic exerts itself on construction. Aggressively rising costs (like the housing boom) have been going on so long you may not even be able to imagine a different reality. If bureaucracies choose to pile on regs and cash in on the boom or to supress it, it will be harder politically to continue to do that if that becomes the principle reason no one can afford to build anything. This is also why the current iteration of the spec tax and a few other changes are not terribly likely to hold over the long term.

Exactly. Now you are catching on!

Yet again…Why do you think that those neighborhoods suddenly because so “desirable”? Let’s use a current and more extreme example – why are the most “desirable” areas of Vancouver suddenly becoming so…undesirable? These are not long term changes, they’re affects from a housing bubble which so many are intransigently convinced is “the new normal”…

PS…loved the T-800 there. 🙂

-300 sqft 3D printed house on a perfectly flat lot accessible by a huge 3D printer: $4000
-Land cost $956,000
-engineering, permits and other soft costs $40,000
AHHHHH!

Oh…. I cant wait for the Uber of house building to disrupt the industry. I have no love for it at all. I know of some startups looking at this on different fronts than 3D printed houses….
But, If you are waiting for robots to save you well…. I leave you this….

Until very recently oaklands and fernwood were undesirable.
Exactly. Now you are catching on!

Laugh at it all you like LF. It’s what is happening. The simple fact that going forward less and less SFHs will be constructed and more will be replaced by multifamily even in langford. This is why housing affordability will return to the norm but that wont be for a 2000 sqft single family home on a 50X100 lot in Fernwood.

The plenty of land argument also doesn’t hold up in the modern world. We no longer have slaves to build our railroads. We can no longer demolish and dump at free will. We can no long just destroy nature as we see fit. The cost to build new infrastructure is much much greater than it ever was. Just look at he cost of a single overpass…. This alone drives consolidation in existing centers.

The political climate is also enabling this because of the crisis. Just talk to Aryze…. https://www.talktoaryze.ca/

I am not arguing for or against but are not most of the 5000 condos already pre-sold?
A lot may be speculators flipping but I am sure that a lot are also final buyers.

So they’ll either rent out the condo, sell the place they’re currently in, or rent out the place they’re currently in, or if they’re currently renting that place will become available. Either way, there’s 5000 more rentals/for sale properties.

For those of you looking for additional information or assistance with the new speculation tax:

https://www2.gov.bc.ca/gov/content/taxes/property-taxes/speculation-and-vacancy-tax

”It’s not a sine wave on a straight axis. Need I remind You that the affordability axis of said sine wave is on an incline showing that over time affordability is slowly eroding despite the ups and downs….”

Man, it blows my mind that people look at 60 years worth of data and think they have the answer. This assumes there’s no upper limit to house prices. There’s no economic reason that prices can’t appreciate forever beyond inflation. There’s a magical money fairy that’s going to endow the populous with hoards of cash and keep the appreciation up forever.

I think more than anything people that buy condos for appreciation are by far the most shocking. Condo cap rates are what… 2% after expenses? You can get a no risk, no effort government bond for that amount. Which means the only reason people buy them is for the potential capital gain. Capital gains only make sense if the next buyer sees additional upside to the purchase (like increased rents) which isn’t going to happen. Condos are a fixed asset which depreciates in the long term and the owners have an irrelevant portion of the physical land. By all logic condos should be worth less and less every year, not more.

It does seem like this is changing as more investors are unable to buy. Can’t wait to see what happens when 5000 condos plus rentals come on the market in the next 18 months. I think a lot of shitty accessory suites are going to go vacant as the larger purpose built rentals become more competitive as vacancy increases. Vacant suites = increased defaults as the market turns as people use the income to qualify for their mortgages.

https://twitter.com/fivre604/status/1087738677973868544?s=21

Oh my…

“WE ARE A TEAM of PRESALES Realtors and professionals that watch the market for opportunities to help our clients get VALUE. Imagine buying top area BRAND NEW condo presales at BELOW MARKET.

This is our value proposition. Vancouver downtown, Falsecreek, Cambie Corridor, Metrotown , Surrey – there are a lot of buyers who can’t afford to CLOSE. This is your leverage if you’re buying now.

We can help you with those opportunities. These listings are NEVER on MLS. Developers HATE seeing 10’s of their units listed online – as if no one wants to live there.”

https://vancouver.craigslist.org/van/reo/d/vancouver-going-broke-below-market/6795857132.html

@ James Soper

No way man. Ask Introvert. Hawk’s been calling this way way longer than either of them. He’s the OG of market turn over.

Haha touche. My bad.

Andy7: At the end of the day, I think the real reason for the spec tax is to find out where the money’s coming from;

The “intent” of the spec tax was to stop speculators. Given the train-wreck of changes, even the bewildered GreeNDP supporters here don’t believe that anymore, and are left (as we see above) to make up some other “real reason”.

What does seem clear….It’s looking like a main effect of this opt-out implementation is going to be many lost votes for the NDP. Lots of pissed-off regular folks. A gift to the Libs. The NDP should fix this, and quick.

It’s not a sine wave on a straight axis. Need I remind You that the affordability axis of said sine wave is on an incline showing that over time affordability is slowly eroding despite the ups and downs….

Is… has been…
No guarantee that continues.

@Leo S

Is it perverse that I’m looking forward to filling out the spec tax form?

Ha, love it.

@ Jerry

Oh, that is a huge relief. First thing tomorrow I will call my Ma in Ottawa and tell her she doesn’t have to pay the ‘speculation’ tax on her Victoria condo after all. We were all a little annoyed.

But now that the tax has been revealed by Andy7 to be only motivated by noble justice we are much mollified. I do confess that in my darker hours I cursed the tax as being another spittle-flecked ploy for the support of the great unwashed by an unprincipled leadership, with a garnish of class-enemy manufacturing.

Mea Culpa.

Oh geez. Eye roll here please.

At the end of the day, I think the real reason for the spec tax is to find out where the money’s coming from; it’s a means to an end to build a data file. And the real intent is to target money that’s not taxed in BC. When 2 B is being laundered through BC every year, I think it’s understandable to implement something like this.

The lack of oversight is staggering. And if you read the report it certainly has the ring of truth. Makes me wonder what kind of things went on under the liberal government that people were willing to look away for so long.

Wow. Just read the Plecas report. Outrageous conduct. Glad the RCMP are investigating.

LF said All you really have to do is look at the historical affordability metric for Victoria – it looks like an almost perfect sinusoidal wave. There is no reason I can think of why that wouldn’t continue.

It’s not a sine wave on a straight axis. Need I remind You that the affordability axis of said sine wave is on an incline showing that over time affordability is slowly eroding despite the ups and downs….

Andy7: Some of the stuff Ross says doesn’t make sense, but overall he’s been bang on so far in predicting this market turnover and he’s been ahead of everyone else on calling for it. Him and Steve Saretsky have been leading the charge on this from what I’ve seen over the last few years.

Does this prediction strike you as “bang on”? This article is from May 2013.
https://www.google.ca/amp/s/www.greaterfool.ca/2013/05/29/a-downward-spiral/amp/

So I will ask again, please tell me why an intelligent seller (faced with the stats Leo is posting and the Vancouver news reports about falling sales and building inventory) is not lowering his asking price? Please provide some evidence or logical argument to back up what you say.

Not this again—the notion that whoever marshals the best evidence/logical arguments wins the debate and, in winning the debate, will accurately predict the future is so unbelievably stupid.

Interesting piece from Ross Kay.

Jim Goddard asks him, “If Canada’s housing bubble is deflating, then how much room do prices have to fall?” This starts at 26:00.

https://www.youtube.com/watch?v=WSvdOlfrbNo

Not much way to commend or condemn his response given he doesn’t reveal his methodology in detail, but if he’s even close to correct, ouch. I wasn’t expecting that. That would be a major, major recession.

@ Caveat Emptor

Or just skip the east coast mansion and retire to Mexico. You might be closer to your family and probably cheaper airfare

Have you seen some of the RE prices in the popular spots in Mexico? Not exactly cheap! You’ve gotta get off the beaten path for the cheap stuff.

For the buyers out there — Best realtor advice I’ve heard: “A dear friend of mine once told me if you are not embarrassed by your first offer it was not low enough, it has served me well through the years and it has found me many bargains”.

A lot of homes in those regions are down between 30% to 45% from their bubble peaks, but most declines are closer to the former.

The data shows that homes are down about 2.7% from their all-time high in 2018 in Georgina. If you have a house drop in value by 40% maybe it burned down. FWIW, homes in Georgina are up 56.3% from five years ago.

https://georgina.listing.ca/real-estate-price-history.htm

Why don’t you take a stand on something and then provide a logical reason for your point?

Avoidance of the Dunning-Kruger Effect primarily.

Tdm21: Patrick, you always seem to be pumping the market………..just wondering……….are you a realtor? Or do you own multiple homes?

No, not a realtor or anything to do with the RE industry. Just a homeowner. As mentioned previously, I find the discussions here interesting and educational. My advice is that young families who are able and want to buy and plan to stay for at least ten years should buy for lots of reasons (good for family) and not worry if the house appreciates even though it likely will.

It’s hard to believe that you are serious in pointing out that a 70% profit is really 68%. I did the calc in my head.

other “sellers” who price too high and may never get a sale or who have to wait a long time for a sale.

Is this group of “sellers” that seem to be much despised by our bears here, in fact analogous to these same bears – who price expectations are “too low” and “may never get a purchase” ?

The laws and forces of supply and demand are clearly telling the sellers that they must reduce their prices if they want to get a sale.

At any point in any RE market there are sellers who price competitively for a quick sale and other “sellers” who price too high and may never get a sale or who have to wait a long time for a sale. There is nothing abnormal about some would-be sellers pricing high.

By doing this they take a risk that the market could turn against them in the short term but they might also avoid selling into short term weakness.

Your claim that sellers are “idiotic” is empty:
1) You have no ideas of seller’s motivations
2) Your prediction of the short term RE market movements in Victoria may or may not come to pass
3) By your own words it is based on your own opinion that Victoria RE is overpriced
4) We already know that a percentage of any group of people (buyers, sellers, owners, renters, conservatives, liberals…….) are idiots, so BFD

Not that I’m a bull but the evidence of high prices are… well… that they are. The evidence that they may not come crashing down is … well… the past 60 years of data. In particular the Great Recession of which had a lot higher inventory and a global financial meltdown. So to play devils advocate I might say it would have to be different this time for us to see a 30-40% crash in prices here.

evidence to support their arguments

Your argument seems to boil down to stating that sellers are stupid and taking advantage of realtors.

We operate in the same free market economy. Right now those selling are not reducing prices to the level you think is reasonable, so you are calling them names. Wait out the market and if it drops 20% threshold, buy. If not, off to the East Coast you go. Happily it seems. Not sure why you are waiting.

My point is not that the market will rise or fall short term. I don’t know. I’m just tired of hearing illogical complaints. You actually have no “evidence” of what the market will do or not, you are making a prediction. We have had so many predictions here, spoken with the greatest of certainty, and eventually proven entirely wrong.

@Totoro “Yep, nothing to do with the free market economy. The laws and forces of supply and demand are clearly swept aside by your unbiased analysis.

The laws and forces of supply and demand are clearly telling the sellers that they must reduce their prices if they want to get a sale. The evidence is: (1) the current amount of sales (2) the building inventory (3) the Fed Gov’t has stepped up and reduced buyers’ ability to borrow money, and (4) the BC Gov’ts have stepped in and imposed a variety of additional tax consequences to force some sellers to list.

Mine is not a biased analysis, it’s simple Economics 101.

I’m looking at the current statistics Leo is providing on this website and looking at other reports (like Steve Saretsky’s and the CBC News and the BBN Bloomberg Market News) and surmising what will probably happen to the Victoria RE market in the upcoming year or so.

What are you looking at to support your positions? Instead of calling me biased, a bear, broke, angry, jealous, wanting, bitter, a baby crying over spilled milk, how about if the BULLS provide some objective, fact-based evidence to support their arguments.

Deryk: Once again with the common sense. Unfortunately most people dont want to hear that you need a plan of retreat. Worse still they really dont want to hear that they cannot afford to buy if they have no way of holding on if things go bad. Telling people the truth is a very dangerous thing if it conflicts with what they believe.

Read it a couple of years ago on your suggestion (you can get it at the library), it was a funny to hear everything you hear here now, from 90 years ago.

I find the historical research to be the most fascinating part of watching markets whether it’s RE or anything else, for that reason. Nothing really does change, because the basis of all markets (human psychology), never changes.

Other good ones are, “This Time Is Different: Eight Centuries of Financial Folly”, and “House of Debt”. Both are easy to read and understand. Many “ah ha” moments in each. 🙂

Couldn’t they just move to Halifax?

They’d have to be able to sell their house first.

@Barrister …. “If you only have time to read one book this winter get Galbraith’s, The Great Crash”.
I am a strong supporter of the idea that the Victoria real estate market will be just fine.
That said though, no one knows what is going to happen in the future and as Barrister points out, Galbraith’s, The Great Crash, is something that we should keep in our minds.
It’s a good idea to always look at the worst case scenario and make sure that you have the ability to hang on for the long term. That might mean moving into the small, charming, one bedroom suite, until the storm blows over. It’s better than losing everything. If the numbers don’t work with that option……… then you might want to rethink.

.

LocalFool: Yes. It wasn’t a flipper; more or less an opportunist like any market participant.

Yes, and this is a good learning moment for you LF. Here you have some owner near Toronto who bought a house in 2012 for $290k and sold it seven years later for $490. A 70% profit. That’s called buy low, sell high.

Now you have told us that you’ve never actually managed to buy or sell any real estate. So you’re hardly an expert. But that didn’t stop you creating this professorial and patronizing speech to this Toronto seller, lecturing him about “paying attention” and “emotional anchoring” to prevent “even greater losses”. And now it appears that he sold at a (70% gross) profit, not a loss.

LocalFool: “Here’s one among countless other examples of a Toronto home seller “chasing the market down”. Sellers must pay attention to the market they’re selling into the maximize the price potential of the sale. Emotional anchoring to a price in a declining market, raises your risk of incurring even greater losses”

So there’s a lesson for you to learn from that mistake LF…

You’ve told us you’ve never owned RE, yet you manage to lecture to the buyers and sellers on the finer points of buying/selling RE. I know you hate analogies, but isn’t that like a virgin telling people how to have sex?

Matthew: Inter alia, Steve refers to a new study that is out showing that 46% of Canadians now feel that if their expenses rise only $200 more per month, they might have to claim insolvency.

Couldn’t they just move to Halifax?

Can anyone confirm that bear mountain sales are completely non existent. If I remember correctly they are also the first ones to suffer during the last downturn.

@totoro
analysis paralysis = from my experience are people who think they know more than you. Not just RE markets, but everything in general. One thing I learned many moons ago is you just can’t beat the market.

@all bears or people looking to purchase
keep on waiting, you have lots of options buy/rent/move etc… But calling people names because they won’t sell to you at a price YOU FIND REASONABLE is like baby crying over spilled milk. Life happens…savour it. No one knows what will happen tomorrow, but b***ching about won’t make your life any better.

Keeping it simple, short term pains in the market will lead to long term gains 🙂 Good luck house hunters and home owners.

If you only have time to read one book this winter get Galbraith’s The Great Crash,

Here’s one among countless other examples of a Toronto home seller “chasing the market down”.

@guest_55046 any idea on the history of this property? what’d they originally buy for? etc?

Local Fool… I could say ‘Great minds think alike; but then the bulls would chime in with, ‘Fools seldom differ…’

Great article LeoS, but the advancing slowdown was expected; not surprising at all.

early-2018 – Slowdown started with luxury RE

mid-2018 – Slowdown gradually moved down to include the $1.2 million range SFH

early-2019 – Slowdown continues to gradually engulf lower priced SFH, now any SFH over $1million is languishing.

Spring-2019 – the big question now is: Will we get Hawk’s Bull Trap this spring with a slight bump in prices?

Mid to late 2019 – no disaster yet, just sellers’ anxiety, a few ulcers for sellers unable to sell at their price.

2020 – a terribly bad year when people start trying to renew underwater mortgages and others forced to sell below outstanding mortgage value. Thousands of new condos suddenly arrive on market and Victoria’s population stagnates or decreases slightly as laid off construction workers move on. Interest rates drop for stimulus.

Winter 2020/21 – likely a great time to be a buyer.

It’s a cycle, the pattern repeats; the graph always looks the same, just the amplitude and frequency change.

Recent Steve Saretsky interview with Howestreet. Very informative:

https://www.howestreet.com/2019/01/21/human-psychology-and-behavioral-economics/?fbclid=IwAR3mdIqm0tM3tpgWL_tUTSgR4KwEYVRLq-mKn6GJstL1hbEYpk3il6wGBpc

Inter alia, Steve refers to a new study that is out showing that 46% of Canadians now feel that if their expenses rise only $200 more per month, they might have to claim insolvency.

Meanwhile, many idiotic sellers in the Victoria area refuse to budge one inch from the ridiculous prices they were asking for last year (and did not get a sale on), thereby grinding the real estate market to virtual standstill.

The Victoria realtors are now like the furloughed American federal workers. All of them have to report to work, but none are getting paid.

Here’s one among countless other examples of a Toronto home seller “chasing the market down”. Sellers must pay attention to the market they’re selling into the maximize the price potential of the sale. Emotional anchoring to a price in a declining market, raises your risk of incurring even greater losses.

Ha! White Rock! Sales in the past month? Bloody. 2 detached, 2 condos….sound about right? White Rock is one of the few markets I keep a close eye on and one of the markets I think will tank the quickest. I personally know of many residents there that cannot sell their place for what they need to sell for. People there are definitely waiting for the market to pick up in the spring, and have no idea what is coming. The only person I know in White Rock that has a bearish view of the market there has been a mortgage broker for 30 years.

Just today I was speaking to a friend at work about the WR market. He was visiting a friend recently and he mentioned that the real estate signs there are beginning to litter the streets. It is getting ugly as all sellers are refusing to drop their asking price.

You are wrong; it is because of the lunar eclipse

That was a great show last night. Having binoculars made such a difference.

Speaking of slow real estate sales in Vancouver LF.

You (or anyone else) want to guess how many real estate sales White Rock has had in the last month?

Local Fool: You are wrong; it is because of the lunar eclipse (read it in an earlier post).

Time for Hawk’s graph?

Yes Ian, Vancouver gets flowers in January too.

Do you remember when they were blaming slow RE sales on bad weather?

If the spring market doesn’t pan out, I suspect it will be because of…people staying home due to seasonal allergies.

Achoo, sniffle sniffle.

@Barrister: “But some of your secondary arguments are a bridge too far.

A. I don’t think it’s a stretch for me to say what many realtors actually think and feel, but cannot say publicly and certainly not directly to any client. It’s like an old, balding, 350 pound man walking into a whorehouse to get serviced. Throughout the ordeal, the poor sex worker has continue to pretend that the customer is a special hunk of love.

B. The house I am talking about is located at 3466 Plymouth Road. As far as I understand (and from driving to the place and looking at it last summer) the residence is unoccupied. Therefore, my argument about the seller losing money every month it remains unsold, is wholly valid. However, I do understand your point about a homeowner (who is occupying the home) who wants to go on a two-year fishing expedition to see if he can suck in a foolish buyer who doesn’t know or understand the current real estate market, and who has no qualms about using the services of a realtor who will probably never get paid for his work. At least he is not losing money everyday like the unoccupied homeowner. Still, it is not a wise strategy in a falling market.

C. Everyone I referred to in my last post was male (the seller, the realtor, the liquor store owner) so I don’t think I was sexist. But if you like I can change it to “the sensitive loving husband and kids don’t know if they are coming or going because the surly, petulant, irrational and controlling Dominatrix has the house up for sale for a price that no-one is willing to pay”. There, does that make you feel better?

@Introvert

I’m kind of getting tired about making what I believe are completely rational and legitimate (and humorous) posts on this site about the Victoria real estate market, only to be chastised by readers such as yourself for being “angry” or “broke” or “jealous” or “not a homeowner”. Those were just lucky guesses. In any event, please provide responses with some substance to them, instead of offering gratuitous insults. With respect, I don’t even understand about 90% of your retort.

Subtle shift in the bull argument : Victoria will go up forever => Victoria won’t go down anywhere near as much as Vancouver.

PS It’s been a while, someone remind me – does Vancouver get flowers in January too?

As to number of listings:

I expect that one gets a fairly constant number of listings from death, divorce, disability to nursing homes and job relocation.

I suspect that the almost doubling in house prices brought a lot of homes on the market years earlier than otherwise. People decided to retire early and move out of Victoria years earlier than otherwise since they found that they had an extra million in equity. One would expect that such a dramatic spike in prices would pull future listing into the present. But, with the passage of time, we are left with a smaller available pool of listings.

People also moved from Vancouver who had also retired early and who might have advanced their plans by a decade. There is now probably less retires to be expected since the mass migration drew down the pool. The retirees who came where probably younger in age, many in their late fifties and will probably not sell their homes for decades.

I am sure that other factors are at play as well,

Thanks Leo. A well written, balanced and insightful article.

Introvert and other poster. A few principles that may help.

Opportunity costs are real, whether the money is tied up in houses or stock. If someone has enough reserves (doesn’t need the money now), they may determine demand will go back up and wait to sell until then.

The analogy was a great one. If a shop owner has to sell that cognac this year in order to pay his rent, he will (even if it’s at a loss). If it he has enough cash, he won’t.

Then the psychology gets interesting. For many the choice will differ if they expect a rebound in 6 months, vs one year, vs 5 or 10, depending when they need the money or how long they can hold out.

It always reminded me of the question, do you take the smaller lump sum lottery payment or the 1K per week for 25 years….

listings that really amp up they’re “UNDER ASSESSMENT!!!”

People seem to like to parade this both ways – on the way up, bulls go, wow look, over assessment! On the way down, bears go, wow look, under assessment!

I feel like it’s kind of a questionable metric to parade. Assessment is an often falliable guesstimate designed for tax purposes, and I don’t think much more. I’m much more interested in the comparitive selling prices, both YOY and against other similar homes. Do people care whether it’s selling for under assessment? Is it relevent? Perhaps if people perceive it so, I guess.

(From the previous thread:)

It is a fact that the Vancouver and Victoria markets are currently in a downturn, and every indication is this trend is going to continue for the foreseeable future. This means the seller is not going to get more money for his house in Feb or March 2019 as compared to what he could have got last July 2018.

No, it means the seller is less likely to get the price she’s asking. That’s all it means.

Meanwhile, every month the seller continues to own his house, he must pay property taxes, utilities, insurance, mortgage payments, a lawn care company and house upkeep bills. So the seller is losing money for each and every month of ownership.

This isn’t a lot of money for many homeowners, and it certainly isn’t for many owners of upper-end property.

If those costs seem like a big burden to you, then you should reconsider your readiness for homeownership.

Regarding your analogy, assuming the liquor store owner actually wants to sell his bottles of cognac, and if no-one is buying them, the rational thing to do is lower the price. Why? Because he’s paying rent to run the store, and heating costs, and employee salaries.

The store is more than likely making enough profit on everything else to sell cognac at whatever price the owner fancies.

If no-one is buying the cognac because they cannot afford it, why wouldn’t he lower the price (unless he wants to go bankrupt)?

Just because you can’t afford something doesn’t mean that everyone is in the same position.

A seller who refuses to lower his price even though the property has been for sale for months and months and months is, in essence, abusing others. To begin with he’s just jacking around with society in general.

Readers, I told you this genre of HHV commentary is one of my favourites, and stuff like this is why! Entertainment gold, I tell you!

Meanwhile, the greedy selfish seller sits back and threatens the realtor with lines like “I don’t care what you think. If you don’t sell my house for the full asking price by next month, your fired and I’ll get someone else”.

No one put a gun to the realtor’s head and forced her to take the listing.

You think I’m angry at sellers, however, I am actually offering them sound advice.

The majority of sellers don’t need advice from broke people.

In a couple years from now, when Victoria house prices really hit the ropes, I suspect that many hangers-on who did not get a sale at this time will be kicking themselves for not lowering their expectations. It’s already starting to happen in West Van.

“It’s already happening in West Van.”

I love it.

Zero Hedge: Mortgage Stress Test Blamed For 25% Collapse In British Columbia Home Sales

“It’s still unclear to me why new listings are sometimes high and sometimes low, as it doesn’t seem to correlate with the state of the market and is seemingly driven by some other cycle we haven’t discovered yet.”

I think in our market there are enough people who don’t “need” to sell , they that have an actual effect on listing stats. They are retired, and will not sell if they can’t make money. They aren’t getting foreclosed on, or having to move for work, so they may be sitting the lull out.

If the sales weakness continues for a couple more weeks we can be more confident that it is real versus just a delay in getting started.

Fundamentally, there is a liquidity problem emerging in the RE market.

Until that changes, I would be more inclined to expect continued weakness, especially in the higher and mid range properties. “Just a delay in getting started” would make me think nothing has really changed in respect of liquidity, other than a temporary bout of hesitation on the part of buyers.

Good read Leo, thanks for taking the time to write it up!