Sales are up across the board: except luxury
Sales were solidly up over in the latter half of last year compared to the same period in 2018. Overall sales July to December were up 15%, bringing detached almost back to pre-stress test levels in November. December dropped back a bit, but still it’s clear that some demand has returned to the market after 1.5 years of stagnation.
Where has the demand gone to though? In the first months it was largely in the low end of the single family market, and that is still an area of larger relative increase, but the increase in sales is actually quite broad based.
The detached luxury market is a notable exception, where sales above $1.5M dropped an additional 18% from the already anemic levels the year before. Although activity in the Vancouver market has recovered somewhat from the catastrophic levels of early 2019, prices are down substantially from the peak and that has curbed the enthusiasm of Vancouver owners to sell and buy something nice on the island.
What’s interesting is that sales patterns for condos is the opposite as detached homes, with sales of the higher priced condos increased much more than the lower end ones. Part of this is due to more new condo completions that tend to be higher priced, but I believe the larger reason is that some people priced out of detached homes by the stress test ended up purchasing a larger (2 bed) condo instead. As the city grows and densifies, condo and townhouse sales will continue to grow as a percentage of sales.
Note that people are driven to condos every time prices swing upwards (1990-95, 2000-2008, and 2016-102. You can also see the effects of the leaky condo scandal in the late 90s which soured people on condo ownership for a number of years.
New post: https://househuntvictoria.ca/2020/01/09/how-much-of-detached-construction-is-really-new/
Another question for HHV! So I recently bought a home in Oakland. I secured a mortgage last week and, as was to be expected, the bank ordered an appraisal. Everything went fine, I was told the appraisal value came in higher than my offer.
Apparently, I have to pay for the appraisal. Not super great but given the myriad of expenses involved in buying a home, not a huge deal either. However, I was also informed that I can’t get a copy of the appraisal. Which effectively means I have to pay for a report about the home I will live in but never get to see said report. That seems ass backwards to me.
A quick search through the web yielded inconclusive results as to whether I am legally entitled to the report I paid for. Does anyone know anything about it? I’ve bought the house and will live there hopefully for a long time but want to see the appraisal even if only for interest’s sake. Thanks in advance!
<Takes a few weeks for the new bc assessment numbers to feed directly into our database.
Thanks for the response.
Mortgages in serious default bottomed in 1996, 1997 and 2000 in USA, according to this mortgage bankers data.
https://cba.ca/household-borrowing-in-canada
Moreover, there were many “historical low defaults” in the USA in 1991 to 2000 period. This graph shows no low in 2005, though I agree with you and I’ve seen that on other charts. Point being, the presence of many historical lows didn’t indicate a housing crash. There may indeed be one before a crash, but the presence of a low doesn’t necessarily point to a crash.
Just like the stock market peaks before a crash (duh!), but it also peaks before a new high too.
Non-mortgage debt delinquencies among homeowners is also at very low rates. If there was “pain” amongst homeowners, we’d see this spike, as they’re going to hang on to their house. So no, I don’t think the low rates of mortgage delinquencies are explained by people immediately selling their houses. And so what if it does, as it just means another buyer has taken over that is able to pay. In a real default crisis, homes go back to the bank unsold. Not flipped in a few months at a profit.
Do you think that may have something to do with historically high prices, and therefore almost no negative equity? So owners in financial difficulty can just sell and take the money, rather then default and lose most or all of that money, along with their credit rating?
Defaults are almost always at historical lows at a market peak, like in the US in 2005.
Walmart to open at Hillside Mall where Sears used to be:
https://vancouverisland.ctvnews.ca/new-walmart-supercentre-coming-to-victoria-s-hillside-mall-1.4760647
Having driven past the site I don’t think their numbers are off; lots of concrete + steel beams.
Some of the other numbers are more than fair. For example, their market+sales is less than 6%100k+3%balance (commissions may vary).
In the last 5 years some construction costs have literally doubled. For example, framing has doubled. I paid 32k for my house in 2015 and I can’t see it being less than 60k now.
Evan’s term is over at the end of 2020. You’re right though, CMHC used to be all about pumping the resale market with cheap credit. They did a u-turn in 2008 but they could do another u-turn under a new director.
“Sustaining housing prices at close to the current absurd levels relative to incomes requires the forces of speculation, foreign ownership and yes, empty homes.
https://thetyee.ca/Opinion/2019/12/30/Housing-Unaffordability-Big-Reason/
Re: Aryze
400k construction costs per unit x 6 connected units = 2.4 million dollars?!
I call nopety nope.
Re the Aryze numbers. I am not saying they’re wrong, but I also wouldn’t hold them up as gospel. On paper, the majority of Hollywood movies lose millions via various accounting… let’s say peculiarities. 5 years ago they were building townhouses for $550k. Did costs increase $250k in 5 years? Doubt it. Developments are always sold at the price the market will bear, no one sets selling price by adding up costs.
Of course if costs are higher than market price we get less starts. That is the true indicator.
We’ve already been flat for two years and as time passes in a flat market prices become sticker and sticker to the downside unless we get some sort of economic shock and interest rates skyrocket; neither of which seems highly likely at this point and time.
Also, keep in mind every year the % of inventory that is SFH is dropping.
The database update is snappy if assessments are up, slower if they’re not. 😉
Takes a few weeks for the new bc assessment numbers to feed directly into our database.
CMHC doesn’t control any part of the stress test. OSFI implements the uninsured stress test and Finance Dept implements the insured stress test. Ultimately the government decides, likely after consultation with all the parties. But I don’t think CMHC alone could stop changes.
https://www.ratespy.com/morneau-to-review-mortgage-stress-test-improvements-121311348
“Everyone who saw this is now wondering, does Trudeau’s order pertain to the insured stress test (implemented by the Finance Department), the uninsured stress test (implemented by OSFI) or both“
“ The Office of the Superintendent of Financial Institutions (OSFI) is an independent agency of the Government of Canada, established in 1987, to protect depositors, policyholders, financial institution creditors and pension plan members, while allowing financial institutions to compete and take reasonable risks.”
oui
As long as Evan Siddall is in charge at CMHC, i don’t think that will happen.
@Local Fool
Huh? Are you talking about Shelbourne?
Analysis by CMHC and others have pointed to the stress test as being the main source of price reductions. The Prov. govt measures on foreign buyer tax (liberals) and spec tax (NDP) may have affected high-end Vancouver, but the numbers are just too small for the govt measures to have had much effect here in Victoria.
The feds seem to be planning to loosen the stress test, as well as going ahead with the stupid idea of a nationwide 1% foreigners vacancy tax. https://business.financialpost.com/news/economy/finance-minister-bill-morneau-to-review-and-consider-changes-to-mortgage-stress-test?video_autoplay=true
“ Morneau’s mandate letter requires him to help carry out one of the Liberals’ other key campaign commitments: a one per cent annual vacancy and speculation tax on applicable properties owned by non-resident non-Canadians.”
And https://business.financialpost.com/news/fp-street/ceo-of-canadas-biggest-bank-calls-for-caution-as-ottawa-considers-adjusting-mortgage-stress-test
Govt should focus on measures to increase the housing supply, rather than attempting to tax existing homeowners into leaving their homes.
There are almost no people defaulting on mortgages (historical lows in Victoria of 1/1500 mortgages in arrears). That seems to indicate very little homeowner “pain”, and that would include people who bought at high prices (since 2017). Things could change in future, but so far I think that the “pain” is limited to those people who could afford a home, but Instead have waited years in vain for prices to fall.
At what point do new listings (like ones that came up today) have to start using the new assessment numbers. Seems sketchy that a listing comes out today but uses last year’s assessment. Could it be that this years was $53k lower?
Or is it an automatic input and PCS hasn’t reset to the new numbers?
1660 Mortimer (MLS 419840) for example.
I’d be willing to be the vast majority of people behind that petition have owned for years in Vancouver. So they are salty that their house appreciated a couple hundred percent and then gave up a couple years of those gains. No owner complained about government policy inflating house prices on the way up.
Sure if someone bought at the peak I can see being annoyed but in the end everyone takes their own risks.
100k would be a great start as far as I’m concerned. Even a 200k drop would still make our housing quite expensive by national standards. Indeed, a nationwide housing correction would do nicely to purge the excesses from the system. A horrid crash not so much, but like you say it doesn’t matter what we prefer. When I drive past a janky area in Hillside and see townhomes asking 800k, something is wrong.
Alas, I’m not sure that central bankers are going to make valuation resets easy though, that, or the devaluation of our currency will make those high prices less meaningful. They certainly don’t seem willing to allow a recession to do what, IMO, needs to be done. Mind you, in the end, it will be out of their control. Many people think that globally, the power of central bank policy has been eroding for years. It’s certainly not helping Europe any…
Doesn’t really matter what you want…
Happens regardless.
I’ve got no source. It’s just what I heard. It was underwriting, not actually insuring. In the end it’s the same.
His point is clearly about feeling pain about buying at the current high prices, not pain caused after buying.
If you buy something that you can afford and plan to live in it long term, you should not have much “pain” from prices dropping. Your monthly mortgage will stay the same. The amount of time it will take you to be mortgage free on the house would stay the same.
Yes, a drop in price may cause you mental “pain” if you are so disposed, because you would have less equity on paper.
Why would they “feeling pain”? According to you, a drop on prices after buying “is not going to matter much”.
I’m not buying a 1 million dollar house, so if my future 500k house drops 10% it’s not going to matter much as I’m already at the low end and will be stress-tested. We’re also planning enough bedrooms to stay put and ride out any ups and downs.
Alot more pain to be felt for those paying today’s average prices, especially with borrowed downpayments from parents.
After you buy your house, let’s hear from you if you want prices to fall another $100k
Leo S that petition is ripe. “We need that magical equity money to help our kids buy houses in this same shit market”. How about your kids just get a house for 100k less than last year, and don’t have to borrow off you? Win win.
Well if the designers are to be believed the fire performance of mass timber should be good as well. Not like stick frame.
If condo insurance premiums are escalating for concrete and steel buildings I wonder what the insurance companies will charge for these new twelve story wood frame buildings? My guess is the strata fees for tall wood frame buildings will be astronomical. Since condo prices are roughly inversely proportional to monthly strata fees, I’m guessing these new 12 story condo buildings are in trouble even before they are even completed.
I don’t think it’s clickbait but there’s been a distinct lack of good reporting on this issue. What buildings are actually going up, and by how much? The quote is 50-300% increase so are we to believe the minimum increase for anyone is 50%? Doesn’t seem plausible.
And sure there are more wildfires and flooding but what the heck does that have to do with condos? When was the last time a condo tower in BC burned down from a wildfire? If there’s more losses from wildfire then you’d think insurers would be flocking to condos that have no risk from that and no real issue with flooding either.
Insurance is going up quickly but the stories are a bunch of speculation and nonsense as far as I can tell.
It’s not just one-off, or click-bait by news sites, and it’s not just in BC.
“Toronto Condo Owners Face Record-Breaking Insurance Premiums”
https://torontostoreys.com/2019/12/condo-premiums/
Vancouver owners getting cranky because a little bit of their magical money disappeared last year
https://www.stepupnow.ca/87_billion_equity
What source do you have for this? Worldwide or just BC?
Insurance in general seems to be going up with more (expensive) natural disasters that are happening across the world. Also the cost to replace a condo tower in BC has skyrocketed over the last few years. I also wouldn’t be surprised if insurance companies are running new AI algorithms that have pointed out how exposed they are to a massive earthquake in BC and have pulled out and/or adjusted their rates accordingly.
I heard that Lloyds stopped insuring condo buildings. Left a massive competitive hole in the market.
here’s an example of a 3 year old building with no claims.
https://globalnews.ca/news/6363104/langley-condo-owners-strata-insurance-deductible/
Here’s another for a building that just got completed in 2019
https://globalnews.ca/news/6374159/abbotsford-strata-insurance-hike/
What’s the footprint of your house? Does it need re-sheeting? Lots of peaks/valleys?
Ours is a simple hipped gable, ~1,000 sqft footprint, and ran $7,600 with new sheeting back in 2016.
Wonder why there used to be a much bigger spread between provinces and now they are all similar.
Interesting link QT. There also is an interactive map where you can zoom in anywhere in the world and run an animation of the sea level rise.
https://seeing.climatecentral.org/#14/48.6266/-123.2603?show=lockinAnimated&level=8&unit=feet&pois=hide
If you zoom in on Halibut Island, you’ll see it does go under. However it’s not clear if this interactive map takes into account the expected variations like are mentioned on the ocean.si.edu site (likely not). I suppose only time will tell – personally I wouldn’t buy that island.
$12K for a new roof – gee that’d be nice, my recent quote was for $19K. 🙁
30 yr shingle roofs are more like 15, 20 if you’re lucky. Less if the roofers did a crappy job.
Here’s an interesting (albeit long) video on NHPI for Canadian provinces 1986-2019
https://youtu.be/uwN_PFhA_N8
People don’t amortize costs well on a monthly basis. So the $12k is paid once and immediately forgotten, but the strata fee they see coming out every month and that hurts continually.
I think the other reason why strata and special assessments hurt more is the lack of control. Maintenance on a house you can often control the schedule. Replace the roof this year, or next? DIY or hire a contractor. With a strata you pay what you have to pay on the schedule decided and that doesn’t always work for your own finances.
But yes I don’t think that maintenance is cheaper in a SFH in the long run unless you do much of the work yourself.
Haven’t had this issue is any of the buildings I own…..there is always some sort of backstory (i.e. building had lots of recent claims) when the media publishes click-bait.
Quick look at accounting on my Promontory unit strata fees were $162.88 in 2014. 2019 started at $184.72 and increased to $190.02. Six years of maintenance has cost me less than $100 (changing out filters on the heat pump). Rent in 2014 was $1,195 and now it is at $1,495. I believe that offsets the $27 increase in strata fees.
Sure there is deadweight in strata fees (management costs, etc.) but people completely ignore the fact that a SFH requires maintenance as well. It is interesting that people freak out about a $3k special assessment for a new roof on a condo but just accept a $12k roof on their SFH as part of owning a home.
what .. no way .. never knew insurance will increase when things cost more .. oooh well
People might get ‘soured’ on condos again very soon due to the 300% to 800% increase in annual property insurance premiums on condos, even on new concrete and steel condominiums. There have been several news reports in the past few weeks on this topic where owners are facing thousands of dollars in special assessments PLUS an immediate doubling of monthly strata fees to cover the higher insurance premiums.
https://globalnews.ca/news/6374159/abbotsford-strata-insurance-hike/
Thankfully Halibut Island is in an area that is experiencing drop in sea level.
https://ocean.si.edu/through-time/ancient-seas/sea-level-rise
RE: Halibut Island
Here’s the actual listing, which has a bunch more photos
https://www.collierscanada.com/en-CA/Properties/for-sale-halibut-island/CAN-halibut-island-gulf-islands-british-columbia-canada/CAN2002686
I think you’d have to be nuts to buy an island when we could be looking at anywhere from (IPCC) 0.3 to 2.4 meters of sea rise by 2100. Bye bye any beaches that you have and watch out for the storm surges.
To Fight Climate Change, One City May Ban Heating Homes With Natural Gas
https://www.nytimes.com/2020/01/05/us/bellingham-natural-gas-ban.html
Brisk start to the private islands segment for 2020 https://victoria.citified.ca/news/halibut-island-private-island-off-the-coast-of-saanich-peninsula-listed-for-sale-at-2-million/