Predictions: How are we doing so far?
Many professionals, organizations, economics, and analysts (of the armchair and manager chair variety) make predictions for the housing market on a regular basis. We too here on househunt have a tradition of an annual predictions thread that allows everyone to put their guess in as to what the housing market will do in the coming year. The difference between all those analysts and us is that we also review our predictions every year and see how close or far off they were. Meanwhile the last thing the professional guessers want to talk about is their past predictions and it seems the media is similarly disinterested in verifying whether the emperor has any clothes.
This is not to say that I or anyone else is necessarily better at predictions, but one of the reasons I like doing these is to see how differently people can interpret the same data, and that even with experience and lots of information it is very difficult to make accurate predictions about the real estate market, especially when it comes to prices. That doesn’t mean it isn’t fun to guess though. Predictions this year were based on the number of sales for the year, the median December price of single family homes and condos, as well as the Bank of Canada rate.
Let’s start with sales. Predictions ranged from a low of 5750 to a high of 9020 for the year. So far we are at 3674 from January to June so to hit the low estimate the market would have to collapse to 350 sales/month for the rest of the year, and to hit the high target we would need almost 900/month. Both are now outside the realm of possibility.
The proportion of sales that happen in the first half of the year has ranged from 47% when the market was accelerating in 2014, to 67% when it was collapsing in 2008. If the market turns out similarly to last year, we can assume that we have seen about 55% of the sales for the year, which means that we will most likely end the year with about 6700-6900 sales. That’s very near the average guess of 6975 so like last year on sales we should be quite close.
Now prices. The guess here was for the median price in December, so this is difficult to call at this point but here is the picture as of now.
I would say the single family average guess of $744,000 is still very well possible, while the condo median will not likely go down as far as $383,000 by the end of the year. However I do see condos cooling off faster than single family from here on out.
The pattern continues that we are much better at guessing sales numbers than prices. This year it looks like our average forecast for sales numbers might be within a couple percent of the final tally which is similar to last year while prices were further off.
On rates, so far they haven’t budged from the 1.75% we started the year out at which many may have been surprised by. Only 3 out of 27 expected a hold on rates, with the majority predicting at least a 0.25% bump and the consensus at nearly two increases (2.18%). I think there’s some chance that we might get one more raise and really doubt there will be a cut but overall outlook on rates has soured significantly. What I don’t think anyone predicted was the collapse in bond yields which brought down fixed rates substantially in recent months.
Overall, reviewing my predictions I am very confident on my guess of 6700 sales, and I believe my guesses on prices could be quite close as well although as with last year my guess of condo prices at $395,000 may be a little low. Reviewing my overall summary forecast for 2019, I wouldn’t change anything about what I said 6 months into the year. Regulatory environment has been stable, sales decreased a little bit but not much, and prices have been sticky while interest rate increases have been put on hold.
What I’m looking forward to is the federal election and seeing the housing platforms that will be rolled out. I’ve been impressed with the federal regulators’ commitment to restricting unbounded credit growth in the last few years but have been decidedly underwhelmed by supply side actions coming from Ottawa. I hope the election will cause everyone to dial up their commitment on that front.
Here are all the predictions made at the start of the year. How are you feeling about yours? Anything new to add?
| User | Annual Sales | SFH Median | Condo Median | BoC Rate |
|---|---|---|---|---|
| Leo S | 6700 | $744,000 | $395,000 | 2.0% |
| Caveat Emptor | 6596 | $735,000 | $380,000 | 1.75% |
| Penguin | 5900 | $710,000 | $365,000 | 2.00% |
| Renter in Paradise | 6250 | $725,000 | $395,000 | 2.25% |
| Marko Juras | 6750 | $750,000 | $385,000 | 2.00% |
| Mt. Tolmie Foothills | 7400 | $800,000 | $400,000 | 2.00% |
| Jamal McRae | 7000 | $750,000 | $370,000 | 2.50% |
| LeoM | 6500 | $710,000 | $375,000 | 2.25% |
| Michael | 7550 | $815,000 | $440,000 | 2.25% |
| DuranDuran | 6625 | $785,000 | $390,000 | 2.00% |
| gwac | 7428 | $825,000 | $452,000 | 2.25% |
| Triple A Rated | 6250 | $695,000 | $355,000 | 2.00% |
| plumwine | 6869 | $767,000 | $385,000 | 2.25% |
| Gate | 7200 | $790,000 | $425,000 | 1.75% |
| Vic RE Newbie | 7250 | $780,000 | $430,000 | 2.50% |
| Matthew | 6975 | $735,000 | $390,000 | 2.50% |
| Robin | 5750 | $745,000 | $405,000 | 2.25% |
| Patrick | 7500 | $840,000 | $375,000 | 2.25% |
| Dasmo | 6100 | $760,000 | $380,000 | 2.00% |
| Cadborosaurus | 8250 | $579,375 | $253,500 | 3.00% |
| yvr-yyc-yyj | 7500 | $820,000 | $400,000 | 1.75% |
| strangertimes | 6550 | $730,000 | $375,000 | 2.50% |
| Ian | 8000 | $690,000 | $330,000 | 1.50% |
| Hawk | 9020 | $525,000 | $275,000 | 3.50% |
| The Underwriter | 6666 | $735,000 | $410,000 | 2.25% |
| inreallove | 6810 | $749,000 | $437,000 | 1.50% |
Monday numbers: https://househuntvictoria.ca/latest
Looks like a two horse race for best predictors between me and Leo 🙂 but I think I’ll be closer on sales and SFH median.
Leo: Still waiting for their analysis. It might be a bridge too far.
Any updates about carting your house away Barrister?
Went to look at two open houses today. One in Uplands and a new build on Landsdown . Both seriously overpriced in my view. The new build was crappy construction with the standard condo look about it and a surprisingly cheap kitchen.I have to wonder with the houses priced at 3.5 and 2.5 whether people are starting to be more selective about what they are paying their money for in terms of quality. I will be interested to see if some fool bought either of them in the next six months.
Everyone is on holidays, by the looks of it. Us too. Heading to Cowtown soon.
Precedent is EXACTLY the reason the CRA shouldn’t be pursuing weak cases to court. By pursuing a weak case where the facts seemed to be in the taxpayer’s favour CRA established an adverse precedent. While justice seems to have been eventually served here this precedent may well help taxpayers with more marginal cases avoid paying taxes in the future.
If living in an RV doesn’t appeal, might upgrade to the Pod Life – $1,200 USD for a bunk bed/shared space in San Francisco https://www.cnn.com/2019/07/05/success/podshare-co-living/index.html
Mansion owner hit with a 128k vacancy tax bill claims he missed the deadline to dispute the bill because he was out of the country
https://www.cbc.ca/news/canada/british-columbia/vacancy-tax-bill-vancouver-real-estate-1.5200200?cmp=rss
Probably illegal, but not a bad idea. Rent out your RV instead of going through the expense and red tape of building a garden suite.
Alternatively, you could Airbnb your RV.
There was a poster in James Bay advertising someone renting their RV in Saanich as a living space for $800/month.
Hope this news story doesn’t give politicians the bright idea of an “empty RV tax”:
Two arrested after Saanich homeowners find intruders living in RVs
https://www.timescolonist.com/news/local/two-arrested-after-saanich-homeowners-find-intruders-living-in-rvs-1.23877182
Following in line with my comment about low interest rates:
https://maplemoney.com/low-interest-rates-the-good-the-bad-and-the-ugly/
There are distinct winners and losers in a low interest rate environment but as I mentioned, the chasing of return on investment causes many to take risks they wouldn’t otherwise.
A court decision in CRA’s favour creates a precedent for similar cases in the future which may involve much more money. It’s inexpensive to reassess someone, and if that someone feels like challenging it in court, there’s the precedent to discourage them, and guidance for the court if they’re not discouraged.
Remember that a court challenge of an assessment is a civil case which is much easier for the government to win than a criminal charge of tax evasion.
Mortgage rates (and interest rates) stayed high through the 80s – 5 year mortgage rates were 15-20% for a couple of years in early 80s but then fell to 10-15% and stayed there for the rest of the 80s. The idea was that rates much higher than inflation was the cure for inflation. Ten years of 10-15% mortgage rates means you pay the whole house price in interest in 10 years. Many homeowners during the 80s paid that.
Now we have 2.65% 5 year mortgages and 2% inflation. Big difference!
Rate history: https://www.ratehub.ca/csv/boc.csv
Oops, I meant when interest rates rocketed. Thanks Michael
Did you mean when inflation “plummeted” (between ’81 to ’85) ?
.
Hold on a second. If after 2008 we avoided a major deflationary period, then for the entire economy as a whole it has been healthy, but obviously not without bad side effects for some. The anti deflationary medicine of 10 years of rock bottom interest rates, along with QE, led to a huge appreciation in asset prices. On the real estate side of things, in many sought after markets if you aren’t already in the game, or with other assets to convert and bring to bear, then the central banks actions were like taking a wrecking ball to your affordability. That’s why in some respects this real estate run-up really is different this time, because never have the central banks flooded the economy with so much cash.
https://www.investopedia.com/articles/investing/051315/what-deflation-and-how-do-central-banks-fight-it.asp
Look at those numbers for the stock market – and people think RE should be any different?
On the other hand their recent $200k average haul (or at least assessment) in BC would indicate they are not exactly scraping the bottom of the barrel here
Comox Valley:
June, update
Annual sales of single family dwellings are on track to drop to 583 the lowest since the year 2000, when 509 sold. For comparison 2018 – 770, 2017 – 889 and 2016 – 1,022.
Despite the rapid sales drop, prices continue to climb sharply. 15 sales in the past month show prices, confirmed by B.C. Assessment, to be 20% over assessment. Two examples both on Church street, Comox, show the trend.
#1 Purchased July 2016 for $399k, sold May 2019 for $620k, assessed $530k
#2 Purchased Feb 217 for $410k, sold May 2019 for $557k, assessed $489k
I think what surprised me the most this year was BOC putting rate increases on hold. This very long period of low interest rates has not been healthy for a number of reasons. There is still a lot of chasing return on investment that might not have otherwise happened if we were closer to more normal rates of return on safe investments.
My predictions were based on BOC continuing on the march of interest rate increases. If I had a mulligan on this, I would bump up my annual sales number to the 6500-6600 range. While still below the average here, I believe that with the FOMO balloon having deflated that sales will be on the low side for the rest of the year. Not spiral downward but just drift in that direction.
“That seems like a really weak case for the CRA to pursue and over a trivial sum of money. I hope the CRA can find some more egregious RE transactions than that to investigate.”
I wouldn’t be surprised if the CRA loses much more of these cases in the future,. With the government putting pressure on the CRA to find more tax cheats, and the CRA “estimating” $1 billion on uncollected RE taxes, there is a lot of pressure on auditors to find this money somewhere…
Also this should not have made it to court. The notice of objection internal CRA review process should have concluded that this was not worth pursuing which should have prevented wasting time and money.
There is fact and/or logic based prediction and there is wishful thinking influenced prediction.
Very true. But the example does show what CRA can go after, be it small or big …
The only way Hawk’s (~30%) or Cadborosaurus’ (~25%) predicted price declines could materialize is with a major shock to the economy, and even then, history shows the only drop of similar severity happened in the 80s when inflation sky rocketed. Since then the major declines have been held to 10% after the financial crisis in 08 and 12% in the 90s (oil price shock). Look at those numbers again – a predicted decline of 30% by Hawk (!) His interest rate prediction was 3.5%. So even though Hawk’s predictions are routinely shown to be completely out in left field, his comments regarding the market received lots of praise/upvotes. When it comes to taking advice from (what used to be) prolific commentators here, caveat emptor!
I’m not familiar with the economic and planning rationale for rental only zoning but I do feel for the owners that may have bought rental apartments with intention to run them to end of life and then develop into something else. From what I know about city planning I believe it is a good thing to mix rentals and condos and income groups together, so swaths of rental only areas of town seems like a bad idea.
I think that a series of very enticing bonuses and federal zero/low cost loans might be a better long term approach.
Victoria council eyes forever rentals, but landlords say no way
“This is a non-starter. This is a down-zoning. Some of our members call it expropriation,” says LandlordBC CEO
https://www.timescolonist.com/real-estate/victoria-council-eyes-forever-rentals-but-landlords-say-no-way-1.23876766
That seems like a really weak case for the CRA to pursue and over a trivial sum of money. I hope the CRA can find some more egregious RE transactions than that to investigate.
FYI: condo sale – capital gain or income – fight with CRA: https://business.financialpost.com/personal-finance/taxes/condo-flippers-beware-the-taxman-is-watching-you-and-has-new-tools-at-his-disposal-to-take-action
Yeah, I love Hawk’s price guess. And Penguin’s prior-to-buying price guess is also notable for its wishful thinking!
Never thought to look at it this way. There are 64,235 single detached privately occupied houses in the region. On average, 3840 of them sell every year.
That would indicate average of 16.7 years for detached houses. Taking into account private and other non-MLS sales and it might be about 15 years.
Three more earthquakes registering between 4.5 and 5.6 magnitude were detected off the coast of B.C. this morning:
https://www.cbc.ca/news/canada/british-columbia/earthquakes-bc-canada-1.5201165
Regardless if you have earthquake insurance or not, your life is more important. So be prepared and get the first aid and 3 to 4 days surviving food/water/medicine … (it is about the time to check the generator in the our earthquake proof shed).
When we bought our current house in 2009, we checked to make sure it is well above sea-level (50 meters), it also happens that our end of the street is on the rock thus in Low-earthquake-hazard zone. That is something to consider when/if we buy next house/condo.
That’s the average length of stay before moving and includes renters and owners, and all dwelling types.
It’s obvious looking at the % of dwellings that sell each year that owners, and owners of houses in particular, stay longer than that on average. Note also some of those sales are rental properties, not owner-occupied.
Yeah I think we can draw a best fit line at the end and say that’s the real December median. Doesn’t matter so much I think. If you’re within $30k you can pat yourself on the back.
Man hawk and cadborosaurus were extremely bearish on prices and bullish on rates – no surprise Patrick was the most bullish on SFH though not unreasonably so. Should be interesting to.see how the year finishes especially since median can move 40k in a month.