The Must-Sellers
I’ve been talking about the importance of “must-sellers” quite a bit in the past few weeks. It’s not a great sounding term, but I can’t think of a better one since the common “motivated sellers” really doesn’t capture it. Infinitely motivated sellers?
Anyway, these are owners that absolutely have no choice but to sell. That would include sellers that:
- Passed away and aren’t leaving the property to their heirs (estate sales) or downsizing due to moving into assisted living.
- Are leaving town and can’t keep the house or are divorced and must sell (the cooping up together for weeks won’t help!)
- Cannot afford to maintain the property or have already lost it (foreclosures).
These sellers don’t have the luxury of waiting out the market if they don’t get the price they want. They have to make a sale, and often in a fairly short time period. In normal markets, this is absolutely no issue. The must-sellers are often indistinguishable from opportunistic sellers (and the listing agents look to keep it that way), and they get generally the same prices for their properties as everyone else. The danger during a demand shock is that the number of buyers drops below the number of must-sellers, and prices are driven downward. This happened in Victoria for a brief period in 2008, and it happened for several years in the United States during their housing crash, where foreclosures cascaded and overwhelmed the few buyers wanting to jump into a declining market.
When the number of sales drops below the number of “must-sellers”, prices decline quickly
How many must-sellers are there? It’s nearly impossible to know. The rate of people selling their homes due to health is roughly constant most years (although increasing over the long term), the number of people leaving town also relatively constant, which leaves the people unable to afford their properties. In normal markets, that number is insignificant. We’ve seen boom times in house prices which have masked many a poor investment or over-leveraged buyers. Anyone getting into trouble could extract equity out of their homes to pay the bills, or easily sell into the active market and walk away with a profit. Investors have also benefited from the rise of AirBnBs and our ultra-low vacancy rate that have both supported investment returns.
The risk to the market now is an increase in the must-sellers from rising unemployment and dried up AirBnB bookings coming at the same time as a drop in buyers as people press pause on their purchasing plans, whether voluntarily or not. Note that while overall market averages and medians do decline during such a time in the market, exact pricing also becomes quite unstable with low sales volume so it’s difficult to tell how much the market has actually moved. That should concern you less than the potential for individual deals though. Normally there is little opportunity in the market for getting anything below market value, but your chance of getting a good deal on a property increases with the ratio of must-sellers to total sales. This is why you will often see better individual deals being made in the fall, when most opportunistic sellers have sold or given up for the year, while the must-sellers remain. As unfortunate as it is that people will profit from sellers’ distress in this situation, the reality is that’s it’s a free market and there will be opportunity for those with cash and decisiveness. If you’re still in a position to buy, watch the individual listings closely in the coming weeks and months.
Also weekly numbers courtesy of the VREB.
| March 2020 |
Mar
2019
|
||||
|---|---|---|---|---|---|
| Wk 1 | Wk 2 | Wk 3 | Wk 4 | ||
| Sales | 165 | 337 | 468 | 577 | 640 |
| New Listings | 307 | 595 | 840 | 1032 | 1284 |
| Active Listings | 2172 | 2224 | 2254 | 2255 | 2435 |
| Sales to New Listings | 54% | 57% | 56% | 56% | 50% |
| Sales YoY Change | +13% | +17% | +4% | -5% | |
| Months of Inventory | 3.8 | ||||
Month to date sales now down 5% from last March, with a few more to come in the last two days. The real picture however is the actual trend, which is down some 30-35% from this week last year. Note that last March and April were already quite weak due to the continued impact from the stress test, so 30% fewer sales than that might bring us to record low levels for this time of year. Impossible to tell at this point what level of market activity can be sustained given that the lockdown is likely to continue throughout April. Certainly real estate transactions with appropriate safeguards can be made low risk, but consumer sentiment is the larger factor at work.
Greater Victoria Market Activity. Note sales in recent 2-3 days are partially estimated due to reporting delays.
I’m curious why it seems so many townhouses are for sale all of a sudden? Do people use townhouses for investment? Are they dumping them?
Initial thoughts on the month-end numbers https://househuntvictoria.ca/2020/04/01/flat-stats-hide-a-rapidly-changing-market
I feel like given the stock market of recent years has been fueled by liquidity, when this situation subsides they may rocket up to record highs again and then some. Not because the underlying economy deserves it, but because they are repeating their 2008 intervention and actually going a fair bit further in promoting the large scale distortions seen almost everywhere now.
Who knows, my two cents.
What do folks think about the stock markets? Personally I think we have further to fall as there are still more shoes to drop. That said I have put a bit of cash into equities in the last couple of weeks over and above my regular monthly contributions
Possibly, but the reality is most tenants will still be able to pay rent and we are still a ways away from places being hard to rent. Selling might also trigger large capital gains and of course significant transaction fees. So for many holding on will be the right thing to do. On the other hand for investors whose own financial future is murky or who are overleveraged it may make sense to bail quickly.
What certainty of opinion that there will be a big, sustained drop? I personally don’t know what will happen in six months to the housing market. Seems unlikely houses will be hard to rent, depreciated assets in a couple of years and stay that way for decades.
Based on the certainty of opinion that housing prices will have a big drop does it not then make sense for any holder of an investment property to bail? Better to take a 10% reduction now than be holding a hard to rent , depreciated asset in a couple of years, particularly if a long holding period has provided a deep cushion of equity. Could be a fun rush to the exits!
Sideliner: “I’m going to wait 6 months until the Covid problem goes away, then I’ll list the house for the normal price at that time”.
Now that is probably one of the most sensible approaches that we’re going to see over the next little while. Unfortunately, there will not be a normal for the next phase of housing.
The “must seller” is also the person who bought a house in Jan/Feb. “The market is recovering, so act quickly and we can sell your place after the fact.” Whoops. When the buyers are scarce the only option is to reduce the price. Until a buyer shows up.
These sellers, similar to the run up, dictate the market direction. Therefore, if you want to know the direction your property is going, watch the prices next month and the following months.
That pent up demand … not so much so when prices are going down. Why pay today’s prices when tomorrow’s are cheaper? Then, there’s always the problem with the lender’s desire to provide a mortgage.
The banks are corporations and currently, the government is ASKING them to provide deferrals on mortgage payments. They will .. for some people. In behind the scenes the policy makers are lowering capital buffers from 2.25% to 1% of risk-weighted assets and the Bank of Canada will be/are purchasing Canada Mortgage Bonds in the secondary market. As a starting point, the Bank will target purchases of up to $500 million per week. Then to top it off we are going back to the Insured Mortgage Purchase Program. This is a return of a program the government used during the 2008-2009 financial crisis, with plans now to acquire up to C$50 billion in government insured mortgages through the nation’s housing agency. Under no circumstances does this suggest the economy or the housing market will be returning to normal.
A black swan is always unexpected and it wreaks havoc. Be safe and good luck.
“I’m going to wait 6 months until the Covid problem goes away, then I’ll list the house for the normal price at that time”. What’s a normal price? In West Vancouver, average sale prices are back to pre-2017 levels, and in some cases pre-2014. Arguably ‘normal’ would constitute reverting to the long term mean, which for most homeowners means a very large haircut from their mentally anchored value of peak assessment plus some percentage.
In the great depression, real estate as an investment became toxic (for decades) due in part to the large property taxes coupled with inability of tenants to pay rent. Not difficult to see how those two factors could re-emerge.
It’s kind of a lagging indicator though.
If it’s ever getting to the point where it is becoming an issue, then we have 2 weeks of built in mayhem at the very least.
“I assume they are also testing those that have been diagnosed with COVID-19 multiple times to check when they are free of the virus.”
People who have a mild form of the virus in BC and are symptom free for 10 days are considered recovered with no testing done. They do not require two further tests showing a negative result like more serious patients require. The recovery rate in BC is so high compared to other provinces because of the way they record this.
608 sales for the month.
Well if you said that in 2008 when sales started drying up you’d be in a much worse position in 6 months. Not many have the luxury of waiting 12 months. The must-sellers do not have a lot of discretion, that’s what makes them must-sellers.
I assume they are also testing those that have been diagnosed with COVID-19 multiple times to check when they are free of the virus.
Just judging by what I have seen in the past few weeks, driving around the city, I think it was only in the last week that social distancing was starting to be taken seriously by a large number of people particularly older people (those sixty and up). I suspect that we will see dramatically increasing numbers for the next three or four weeks and then hopefully a flattening of the curve.
Need to get dressed and get going in a little bit, dropping off some books and jigsaw puzzles to a couple of other older folks. I am going to package then wearing gloves but I will warn them to let them sit for a week before using them just in case. Dont want to give new meaning to the phrase “dying to read a book”.
I have to agree with former landlord that the really relevant numbers to look at is the number hospitalized, the number in ICU and regrettably the death tolls.
They are testing a very limited number of people and clearly with people in front line positions like nurses and doctors they are testing the same people repeatedly.
I worked at the hospital and also had a mask fitting once a year. There were a couple of different styles of mask. They were fitted to your face, not your head. You can lose or gain weight in your face changing the size and style of the mask you need. It has to fit snuggly around your face. They put plastic around your head with the mask on and spray a scent. If you can smell it, the mask doesn’t fit properly.
The hospitalizations are a better number to track. And only having 9 of these on the Island seems like we are looking ok so far.
Meanwhile all non essential procedures have been cancelled in our hospitals, so with only 9 hospitalizations our hospitals should have lots of resources to prepare for escalations in the numbers.
One good thing out of this. My wife needed a CT scan done last week. She was able to get it done within a week of being referred. Based on normal average wait times, we were expecting it to take over a month.
I mean, what’s more likely, that BC has miraculously curtailed the number of cases nearly instantly while other provinces doing the same thing as BC have had increasingly more and more cases each day, or that they’re just not testing enough people?
We have a neighbour who has virus infection and was asked by the doctor to home self-isolate for two weeks, He is young and the symptoms are not very severe so no Covid test was done. So the reported numbers are just reference.
Regarding masks
Quoting:
Now I am not saying that masks work, rather that owing to an asymmetry you MUST wear one. Decision-making in real life is based on asymmetries.
Asymmetry meaning the error FROM NOT wearing masks is vastly costlier than the error FROM wearing masks.
This would be elementary for grandmothers (decision makers under uncertainty) but something about the
@WHO & the @CDCgov with “evidence based” BS is suspiciously blind to such a notion!
– Nassim Taleb author of the Blank Swan and other risk management books and options trader.
https://twitter.com/Lukewearechange/status/1244024856666148864/photo/1
So actual number of people tested is half that then or less?
I used to work in a major Canadian hospital. N95 masks required a few tries; one year I had to return to OHS twice to get it done.
Not suprised at all.
Remember folks… professionals…lol. no offense Marko.
“In a hidden camera investigation, the program sent an employee to visit five randomly selected real estate brokers. He pretended to be a client wishing to acquire a luxury residence in Montreal and told the brokers that he intended to pay with money from drug trafficking and that he would never give his ID.
After a meeting, all five brokers agreed to work with the false client, including his condition for using a nominee. Three of them sent a draft pre-filled offer to purchase.”
https://www.remonline.com/radio-canada-catches-brokers-in-money-laundering-sting/
Comment on previous post: https://househuntvictoria.ca/2020/03/16/what-could-covid-19-do-to-real-estate/comment-page-5/#comment-67989
Leo S, you were asking about what is happening among real estate appraisers? There have been a number of directives from lenders and the federal appraisal bodies as to relaxing regulations regarding interior inspections of properties. Real Estate Appraisers are recognized as essential workers supporting the important flow of funds and mortgage financing to Canadians. The Bank of Montreal and Scotiabank have approved the use of Full Appraisals without complete inspections where there are access limitations.
The guidelines are as follows:
1. Make an appointment and advise the contact when the appraiser will be visiting the property.
2.Notify the contact informing them the appraiser has arrived and will be walking around the exterior of the property
3. Leverage technology. Offer to video call the contact so they can give a tour of the rooms in the house, request photos and or video where appropriate.
4. Request information by interviewing the home owner and ask questions about the property that are required in the report
5. Validate the Details. confirm the information with assessment tools and local real estate boards.
6. Report the inspection details in a written 10 to 15 page report.
7. Refer to appraisal guidelines referencing CUSPAP/USPAP/OEAQ for guidance.
8. Request approval to change service types. if the appraiser cannot proceed on a full service they are to proceed with an alternative service type.
We’re all feeling the gravity of the situation. Children are being kept home from school, businesses are closing their doors, and Canadians are waking up each morning wondering what the day will bring. I would like to add my comments to many of the other posters to stay safe and help others to do the same as we join together to stop the spread of COVID 19.
saw a must -sell in Metchosin, 13 acres asking for 990k.
BC assessment valued at about 650k.
Dr. Henry just said she is concerned that it’s a diversion of resources and not helpful.
I think social distancing is working. We have 67 cases on Vancouver Island, same as yesterday I believe. To keep it in perspective there are 870,297 people on Vancouver Island so 67 cases is not a lot. We need to keep up the measures we have now but I am not sure a mask for everyone is needed.
It is tests performed. They don’t seem to be publishing people tested.
8 in acute care on the island.
That’s the point Marko. They aren’t (can’t) do widespread testing. In the meantime if everyone wears (even a cloth mask) then people who aren’t staying at home because they haven’t been tested for covid and don’t know that they have it, are less transmissible. If it’s not mandatory, then people won’t do it for whatever reason, sick or not.
Anyone know if this means actual people, or if it’s the same bullshit as the US was pulling in the beginning where tests were just tests performed, and they had to do 2 for each person?
If you read chapter and verse of the BC OHS regs, all occupational users of N95 masks, and all other respirators, require annual fit-testing to ensure proper protection.
I had a business with them- monthly transactions that coming from the USA and Asia. I was hoping to deal with someone local, guess what they simply do not have a sense of business at all.
I went with another provider in Seattle.
Encore might felt they own something that other do not. the Market told them otherwise.
I registered http://isitflatyet.ca a couple weeks back to make a simple visualization of the curves but it turns out that work + home schooling kids takes up 100% of the time, so I just redirected to Jens’ excellent visualization tool. Likely the best way to look at the signal rather than noise of daily counts.
Provincial and country growth rate charts are the most informative
Home tests are being developed/tested now. It may make sense to focus traditional testing now on key areas and then once home tests are available ship everyone a few rather than trying to scale traditional testing
I like the mass testing approach.
That’s why it should be compulsory (not optional) to wear a mask if you want to get into a grocery store. That’s what they do in China and elsewhere.
If people are not bright enough to use homemade masks without increasing their own chances of infection, they’re probably not bright enough to take precautions to prevent spreading infection to others, either. Society can’t demand that people protect themselves, but I think we can demand that idiots not expose others to the consequences of their own behaviour.
You likely aren’t referring to N95 masks if your mask required elaborate annual fitting. Most N95 masks come in three sizes, small/medium/large, and your head size doesn’t change each year. https://www.moldex.com/wp-content/uploads/N95-Respirator-Protection-for-Pandemic-Influenza.pdf
I have medical doctors wanting to go look at homes in completely non-essential scenarios.
So I am going to go with reality and say I have zero faith in anyone doing anything optional that makes common sense.
Over 42000 tests complete in BC now
Follow the simple donning and doffing instructions on the WHO website. And now you know how to put on and take off a mask. Yep, I have faith most can figure out how to do it.
https://www.who.int/emergencies/diseases/novel-coronavirus-2019/advice-for-public/when-and-how-to-use-masks
https://www.health.state.mn.us/diseases/coronavirus/hcp/masksalt.pdf
“Joe” should watch a simple YouTube video on how to apply and remove a mask.
How to apply and remove a mask https://youtu.be/zoxpvDVo_NI
Then he will know to not touch the mask when he takes it off (just the strings, which is less risk), and any virus on the mask is discarded (and the mask has possibly saved him an infection). And he will know to wash his hands after removing the mask, not before. Note that a mask doesn’t need to eliminate risk completely to be “obviously” a good idea. It just needs to reduce the risk to either you or other people.
I don’t think it is that obvious or simple.
When I worked ICU we had to be fitted for a mask once a year and at least for myself it never went smoothly, maybe my head is too big. Try a mask, fail test, try a mask, fail test, repeat until you found one that was a semi-fail and they you try to adjust it until you pass and they can sign you off. This in a health care setting with a health care professional being fitted by another qualified health care professional with testing after each fit.
Good luck with your amazon order.
Secondly, Joe puts on a mask, goes to grocery, touches something, mask is irritating Joe’s nose so he adjusts the mask. Goes home and washes his hands properly and than touches his mask to take it off.
In conclusion, I am not super convinced that it is so obvious.
How long will that take? Who will be infected in the meantime? Who will die? It took the Czech Republic took three days to get the public into cloth masks. Everyone can do that. I can’t even sew and I did it. There is no way for me to get tested currently or a DIY solution to that.
Lots of people with solid medical and research credentials are supporting #masks4all Marko.
Here are Gao Fu’s credentials, including his PhD in the field from Oxford, and his fellowship at Harvard: https://en.wikipedia.org/wiki/George_F._Gao
If you are making a decision without considering the data independently, or from other sources, particularly advice from top health officials in countries that have been more successful in slowing transmission, I don’t see the utility of further debate with you. I can only hope that at some point Canada will change its position so that people who keep quoting the WHO can change their behaviours as well.
For those who are open to using critical thought on the matter given the public health emergency and potential utility of another approach, I’d suggest looking this 3.5 minute video. https://www.youtube.com/watch?v=HhNo_IOPOtU
I’m not usually one to go against expert advice but it seems obvious to me that all things being equal, wearing a mask is better than not wearing one. If that weren’t true then it would be silly for health professionals to wear masks.
The only reason they are recommending against it is because there aren’t enough masks for everyone and they don’t want to make that situation worse by telling the world to go out and wear masks all the time. And that’s a perfectly good reason. I’m certainly not about to figure out how to get masks for myself because I know there’s still a shortage and we’ve already arranged our lives to make the risk of infection very low. But they certainly can reduce risk.
I don’t agree with federal advice on this point, both for the reason you specify above, but also…
If we accept that the primary way of transmission after inhaling cough/sneeze droplets is to touch an infected surface then touch your face – common sense would seem to suggest that inhibiting your hands from touching your face could reduce the risk of you getting ill. It begs the question as to why health care workers in Canada working in sensitive conditions all wear masks. Why do it if it doesn’t make a difference?
I don’t care for the idea of “just don’t touch your face”, because people do it hundreds of times a day without even thinking.
That is a problem which needs to be tackled with widespread testing.
I would say his credentials are solid….
Dr Ryan first joined WHO in 1996, with the newly established unit to respond to emerging and epidemic disease threats. He has worked in conflict affected countries and led many responses to high impact epidemics. He is a founding member of the Global Outbreak Alert and Response Network (GOARN), which has aided the response to hundreds of disease outbreaks around the world. He served as Coordinator of Epidemic Response (2000-2003), Operational Coordinator of WHO’s response to the SARS outbreak (2003), and as WHO’s Director of Global Alert and Response (2005-2011),
Be careful in relying on information, even from the WHO, without clearly exercising critical thought and independent investigation. The issue is not you getting it from aerosolized particles, it is that you spread the virus through your mouth and this is reduced if you, the infected person who does not know you are infected, wear a mask.
I’ve read all the published research studies I can find on this matter. My conclusion is that people should be wearing cloth masks or face coverings. Do I know better than the WHO? I’d say they clearly know this too, but are more concerned about PPE being diverted from medical staff and consider this risk to be the greater issue at this time.
Are they right? I think they are underestimating the power of a public campaign to get people into cloth masks while leaving PPE for health care workers. People in Canada will get on board with that if that is the clear message imo.
You wouldn’t know you had COVID unless you end up in the hospital at this point.
The WHO is absolutely wrong not to encourage the general public to wear cloth masks or face coverings imo.
They are absolutely right to discourage the use of medical grade PPE by the general public in a time of global shortage and right to be concerned about this as a priority.
The WHO does specifically encourage the use of masks by the general public as a measure to prevent onward spread from you if you are ill. However, we don’t have widespread testing and you can be both symptomless and contagious with COVID and the evidence we have from many studies is that cloth masks reduce the onward spread of transmission and they do not take PPE from frontline workers.
A house they’d really like to buy, and have for a while, came up for sale privately. They can buy if they sell. They have secure jobs that have not been impacted.
WHO says masks aren’t required, that’s different from not recommending them. Everyone (including WHO)agrees that Infected people should definitely be wearing masks, and since many cases are asymptomatic/undiagnosed, it’s clear to me that means everyone should wear a mask.
WHO says…
https://www.who.int/docs/default-source/documents/advice-on-the-use-of-masks-2019-ncov.pdf
“a medical mask is not required, as no evidence is
available on its usefulness to protect non-sick persons. However, masks might be worn in some countries according to local cultural habits. If masks are used, best practices should be followed on how to wear, remove, and dispose of them and on hand hygiene action after removal (see below advice regarding appropriate mask management).
Wearing a medical mask is one of the prevention measures to limit spread of certain respiratory diseases, including 2019- nCoV, in affected areas. However, the use of a mask alone is insufficient to provide the adequate level of protection and other equally relevant measures should be adopted. If masks are to be used, this measure must be combined with hand hygiene and other IPC measures to prevent the human-to- human transmission of 2019-nCov. WHO has developed guidance for home careb and health care settingsc on infection prevention and control (IPC) strategies for use when infection with 2019-nCoV is suspected.
World Health Organization is not recommending masks and I agree. Makes sense in an ICU/hospital setting but I don’t really know how it helps you outside in social distance settings.
It’s helpful if you have COVID but then you shouldn’t be outside.
If you think the virus is airborne or you think you are walking through aerosols you really need a full body suite at that point.
Can you tell us why? That’s quite pertinent to the discussion.
My BIL is trying to sell his house up island right now. They listed three weeks ago when things were different and then everything changed so quickly. He has not had any showings. Was priced okay for a pre-covid sale, not sure about now. I think most people who are looking to buy may have put the decision on pause. Those that haven’t are probably looking for a discount.
Of course we should be wearing face coverings when out.
I am extremely angry at the decision of our public health officials – I’ve written all of them repeatedly since this started – who still continue to downplay the evidence in favour of a policy which was, in my opinion, developed based on the fear that the general public would take masks from front-line workers in a time of shortage and a failure to consider the issue of symptomless contagious adequately.
The messaging we are given is that masks don’t protect as covid can still pass through and infect you and people adjust them and infect themselves. What they failed to mention is that they are fairly effective at stopping transmission so you don’t infect others and they actually reduce facing touching in public. Doesn’t take a genius to realize that if everyone wears them the transmission cycle is broken and everyone is a bit more protected. And people don’t need some fancy training to use them. There are a few simple steps set out on the WHO website for gods sake.
Instead, we infected others and further crippled our economy by not telling the general public to wear cloth masks and giving out the very simple instructions. Grocery store and other essential workers are put at avoidable risk.
I protect you, you protect me – it works with cloth masks and the Czech Republic managed to institute it in three days with people sewing masks and giving them away and now it is illegal not to wear a mask in public.
#masks4all
https://www.nytimes.com/2020/03/31/opinion/coronavirus-n95-mask.html
Market hates uncertainty. The risk premium is there because the lenders don’t know what will happen and whether your job is safe if you have a job now. Once that passes it should ease. The people that are unemployed don’t have to worry about the risk premium because they won’t get any loans to start with.
That’s a good point Matthew. And Dr. Fauci (CDC) mentioned yesterday that if they get an “efficacy signal” (ie during testing it appears the vaccine works), they could release the vaccine sooner.
Everyone should be wearing masks when outside. If you look at the countries that have flattened the curve, they wear masks. They aren’t wearing high quality N95 masks that health care workers use, they are lower quality but still effective masks.
BTW, BC govt announced they received 1 million high quality masks yesterday for health care workers which is great.
Finally the US CDC is considering “urging” all US people wear masks. Let’s hope Canada reverses track and does too.
https://www.businessinsider.com/coronavirus-cdc-may-urge-face-covers-leave-masks-for-medics-2020-3
Here’s a quote from the head of the China CDC
“ George Gao, director-general of China’s Center for Disease Control and Prevention, told Science magazine in an article published Friday that the lesson they learned from the outbreak is simple: Wear masks to stop the spread.
“The big mistake in the US and Europe, in my opinion, is that people aren’t wearing masks. This virus is transmitted by droplets and close contact,” Gao said.
“Droplets play a very important role—you’ve got to wear a mask, because when you speak, there are always droplets coming out of your mouth,” Gao added. “Many people have asymptomatic or presymptomatic infections.”
Do note that today a historically high number of seniors’ houses still have mortgages on them. Or reverse mortgages like CHIP. Or HELOC’s. Or deferred property taxes. All of which much be repaid upon the death of the owner.
Unwillingness to pour money down a rathole I guess. You also saw a lot of unfinished renos/rebuilds going on the market in West Vancouver around a couple of years ago. People in that business can’t afford to kid themselves.
Anyone who has money hasn’t lost any of in on the stock market. You seem to think that every potential buyer is all-in the stock market. Not true at all, and I speak from personal experience.
If someone HAS to sell, he has to settle for a price that some buyer can come up with.
Matthew said: “the amount of MUST-SELLERS at this time is going to stay constant or maybe even decrease a little bit”
Why would all those behaviors you mentioned not have worked that way during the 2008 crisis, which appears to have been a cakewalk for Canada compared to this time around? Perhaps I can summarize your theory as, “It’s different this time”?
Executors and beneficiaries often want their piece of the pie quickly. If they see falling prices looming, why wouldn’t some try to rush the door instead of waiting for the unknown?
Divorces are often so gut-wretchingly stressful, people often just want it settled and everything done as soon as possible. The last thing many want is for it to drag out another year while they wait and see if the property market maybe might recover. Talk to several people that have been through rough divorces, you’ll see.
You ask who the people are leaving town right now. Ask all the owners who depend on university and exchange student renters, and ask airbnb owners.
About buyers with liquid funds, various people on this very site have stated over the past few threads that they are ready to buy, avoided stock losses. There are likely plenty more out there who have never even heard of this site. (If there are too many… perhaps they can help keep prices afloat 🙂 )
Maybe this whole thing will just blow over in a month or so? Tell that to Victoria-based Encore-FX and it’s 180 employees (and their families). Hopefully there isnt a lot more bankruptcy to come, but some businesses like restaurants and hairdressers are already infamously hard to succeed at, at the best of times. I would be very surprised if we don’t see a bunch of other Victoria businesses go under in coming months, due to all this.
On the other hand, health professionals will do well, and with nowhere to go, anybody still working is being virtually forced to save up more money these days. Some of those people are saving up more money than ever, for bidding up the price of a house. But, can they make up for the number of people that will need to sell?
In my opinion, the amount of MUST-SELLERS at this time is going to stay constant or maybe even decrease a little bit, but it’s not going to go up much. Here’s why:
Many Executors (in many Wills) are given a wide discretion to sell real estate immediately or hold on to it until market conditions are favourable. And it doesn’t matter whether the beneficiaries are family members or not, the Executor still has a duty to maximize the value of the estate, even if it all goes to charity. So, I question how many Executors will proceed forward and put the estate home up for sale at this uncertain time, if they don’t have to. They can just say “I have a discretion, so I’m going to wait 6 months until the Covid problem goes away, then I’ll list the house for the normal price at that time”.
Secondly, why would any senior citizen (in their right mind) want to downsize at this crucial time and move into assisted living? Now is not the time to move into a crowded seniors residence where the Covid infection can spread like wildfire. Seniors are far better off to stay right where they are, safe and sound, in their privately owned bungalows, for the next 6 months to a year. By then there will be a vaccine at every Drug Store. So just be smart, stay where you are, and wait it out.
Regarding the people who are leaving town or getting divorced and must therefore sell. I ask: who’s leaving town at this critical point in time? Everyone in the world is hunkered down in the city in which they live, in the homes they occupy. It’s almost illegal to be outside right now. India is on a nationwide lockdown. California is hibernating. Putin has released lions in the streets of Moscow (so the story goes). So, I would suggest that there is not very many people needing to leave town right now and sell their homes. Maybe a few, but I bet they’ve already called their Realtors and talked about withdrawing the Listing.
Also, divorcing couples (if they are smart) can agree to not sell their property right now, especially if they are going to take a bath to sell it. They can work something out so the house can be sold in 6 months or a year for a decent price. Again, this pandemic will end. There is going to be a vaccine coming along soon. So people need to just wait it out. Maybe one of the divorcing couples (the lady) can stay in the house and the guy can rent an AirB&B that a tourist (in normal times) was going to rent. It’s just a matter of adjusting and adapting to the present circumstances, which a lot of people will do, especially if they are going to lose a lot of money if they don’t act smart.
Also, banks are not big on lending money right now. So, the only people who could possibly benefit from buying a home (right now) are those people who have a lot of liquid cash available. But I don’t think there’s very many of those people around right now, do you? Anyone who has money has already lost about 25% of it on the stock market. So they have less money to spend on a house, compared to before all this started. So in short, for every seller who must sell, there’s a buyer that wants to buy, but he cannot borrow the money or come up with the money required to close the deal.
Finally, as fast as this pandemic came upon us, it’s gonna disappear, or be controlled by a vaccine, and life will return to normal. Prices may go down 10% or so for a few months, and some lucky buyers with liquid cash will get a good bargain from a desperate seller, but before you know it, prices will return to normal. They are already testing a vaccine in the States, and as the death rate from this insidious disease increases, you can bet that the FDA is going to fast track the vaccine sooner rather than later. That’s what I think anyway ….
I like the innovation but I’m not sure this is what the city should be doing. And with 50 test kits they’re not exactly making a difference and might cause problems with coordination. Would be a nightmare if every municipality was doing this
I smell blood.
Sellers bought it for 799k in November 2018, and looks like a major tear-down reno + flip project.
If that’s the case, the expense to even do that much work is likely so high, 950k could actually represent a loss. Could be break even. Looks like they’re bailing rather unexpectedly…I wonder what the circumstances are?
That’s an interesting listing to watch, thanks for posting it. I’m not sure they’re going to find a buyer as quickly as they like though.
Not to be too negative or mean…. But has anyone seen MLS 423806 that came up today? Does it seem very out of touch or possibly listed as a joke?
We looked at 10-20 in person, before buying.
How temporary though?
in 2008, 425,000 people lost their job over 8 months. A million lost their job last week.
Given how many hundreds of hours I’ve spent on analysis, I didn’t look at a lot of places before we bought. Maybe 10, one offer we backed out of, one that failed, then bought. I’m pretty adaptable on places to live though. When we came to Canada our family of 6 lived for 5 years in a shack in the middle of nowhere. Walls insulated with sawdust, blankets froze to them in the winter. Good times.
Definitely. But the risk premiums we are seeing now will be temporary, just like we saw in 2008 (lasted about 4 months then).
The City of Langford has expanded its COVID-19 pilot project, which includes home testing for all residents of the West Shore.
https://vancouverisland.ctvnews.ca/video?clipId=1931271
Hospitalization rates for Canada by age
I feel like somewhere in between “we definitely better buy a house in the next 5 weeks so we don’t annoy our realtor” and looking for 2-5 years is the sweet spot in terms of productive pickiness.
I don’t know. I have always been picky, looking at 50-100 properties before buying usually at good time and I’ve always been happy with my calls long afterward.
As I was reading your interesting points (Leo and Marko) on the effects of possible financing changes and the impact or lack thereof on existing or pending offers, another thought popped into my head. What are the possible impacts on re-financing in the next 3-6 months? Will lenders price in risk premium on mortgages causing re-financing rates to be higher? How many home owners looking for re-financing have lost employment or seen there income drop due to the pandemic? Victoria is a government town, so there might be some insulation to job losses, but the possibility of the second income on a household may be impacted or the loss of AirBnB or second suite revenue causing some lenders to be stricter on re-financing. Could this add to the must sell category?
From my personal experiences, picky, over analytical, and emotional buyers usually end up in the crappiest houses. The buyers I’ve had look for 2-5 years the case is never “ohhh wow, they waited and found the right one” it’s usually along the lines of “what just happened, we looked for three years saw a ton of solid houses and you pick the one on the super busy road in the end?” or something along those lines.
By picky what I mean is you have a preference for diet coke over diet pepsi versus someone that is just going to grab the better value product.
Interesting article in latest Lancet points to lower death rates than previously reported. Moreover, this one does base it on available data of prevalence of asymptomatic cases. Obviously this would need to be confirmed by other studies, especially since data from China can be suspect. But nevertheless it points to an overall death rate of 0.66%, which if true would be great news,.
The death rate for each age is listed in this table in the last column “infection fatality rate”
https://www.thelancet.com/action/showFullTableHTML?isHtml=true&tableId=tbl1&pii=S1473-3099%2820%2930243-7
Age less than 40 <0.08%
Age 40-49 0.16%
Age 50-59 0.59%
Age 60-69 1.93%
Age 70-79 4.28%
Age 80-89 7.80%
The article is here https://www.thelancet.com/journals/laninf/article/PIIS1473-3099(20)30243-7/fulltext
If you’d prefer to read a media summary of it, https://www.cnn.com/2020/03/30/health/coronavirus-lower-death-rate/index.html
Not being picky enough can mean you buy a property that you regret and then have to go through the selling and buying process a second time ($$$) with your favourite realtor.
It’s also easier to be nearly emotionless when transacting real estate when you’re a) completely comfortable with every single aspect of the process because it’s your job and you’ve done it hundreds of times, and b) so rich that a mistake doesn’t cost you much relative to net worth.
For a savvy buyer that is. I had client negotiate 8.5% of a brand new listing on Saturday; however, they went in unconditional with a big deposit and extremely quick completion.
You aren’t going to get a deal going in subject to the sale of your home or asking for 21 days for conditions or similar.
The Must-Sellers are looking for certainty and if you can offer that certainty they will take less, on average.
It helps if you aren’t picky as a buyer….if you are the type of person that buys on emotion then you are kind of screwed because the house you happen to love it won’t be a Muster-Seller.
I am wanting to buy a small commercial space downtown and my plan is wait it out 3-6 months for vacancy to start going up and then hit sellers with unconditional offers with 10 day completion until I find someone that is a Must-Seller. There is always an opportunity in markets like this but you have to be in a position to grasp it.
Personally, I’ve yet to hear of an unconditional deal (NOT just an accepted offer) collapsing as a result of COVID19. Average completion is approximately six weeks and COVID19 started becoming an issue three weeks ago so I think maybe there is a risk that a handful of deals collapse in the next three weeks but after that seems very unlikely.
For example, someone going unconditional today would be aware of the global/economic/personal circumstances.
So far my clients are completing on pre-sales as well.
In Prine George it is 69.9
No numbers per se. The way VREB reports sales is by reported pending sales by the end of the month. Some of those pending sales will not close and they will be backed out of next month’s totals when the deal falls through. Unfortunately there is no way for me to access those collapsed sales (I’ve asked).
There may be some way to estimate it based on what sales went pending vs what sales were reported. I’ll think about this some more, interesting topic.
I have been reading around on a few financial blogs and there was some discussion of housing deals collapsing because lenders have pulled pre-approvals from offers already excepted and in place; just awaiting closing. The discussions were mostly based on lenders de-escalating risk and uncertainty over actual appraisal value during the financial instability of the pandemic. Are there any numbers on possible deals falling through in the Victoria market? Could many of the pending offers from the last 30 days in Victoria evaporate?
Some good news.
China is down to only 2500 active cases, and Italy seems to at least have turned the corner on the insanity a bit. Only 4000 new cases today.
That sucks.
I used to be good friends with Paul & worked at Custom House once upon a time.
He’ll be fine, but they really loved their employees.
Gas 99.9 Costco
Victoria-based EncoreFX seeking creditor protection
https://www.timescolonist.com/business/victoria-based-encorefx-seeking-creditor-protection-1.24109031
”
“We also sincerely regret and are saddened by the significant impact these events and actions will likely have on EncoreFX’s 180 employees and their families, especially at this time of the global pandemic,” the company said.
“
This one? https://househuntvictoria.ca/2018/06/21/the-battling-trends/
Many things have changed since that post two years ago 🙂 Rates back down, affordability improved, before this whole virus thing we seemed to be on track for a double peak like in early 90s. Needs an update for sure.
Leo i can’t find that graph you posted one time which was an add on to the affordability graph which showed three options for price outcomes at the bottom. Where can i find that and do the prices still apply?
One thing I hadn’t even considered is the impact on immigration. Big drop in numbers this year for sure which will put a dent in housing demand as well.
Leo S, yes it is indeed, but don’t worry I don’t think Peter G. will be waiting in line at the EI office anytime soon.
From what I heard, they were profitable and were focused on international expansion. Unfortunately they did not manage counter-party credit risk properly so when Covid-19 rolled through many of their clients had bigger things to worry about than paying Encore the losses they accumulated due to being on the wrong side of FX hedging.
Anyone know how many employees they had in Victoria?
Or probably much longer, perhaps until a vaccine is widely available, next winter at the earliest.
If the virus is still deemed ‘highly contagious‘ and if people are still in ICU and dying at the current percentages, then I doubt the lockdown will be eased. How could it? As soon as the bars snd restaurants and crowded offices re-open the new cases will start its exponential growth again.
Unless something changes radically in the experts understanding of the virus transmission characteristics, then the authorities can’t let everything return to pre-virus ways.
Wow, that’s the Gustafson’s place. As in UVic Gustafson School of Business
The normal rules don’t really apply in a locked up market I think. I don’t think high inventory is required to drive prices down when buyers drop below a certain point. Not quite there yet but have heard of some pretty interesting sales that you wouldn’t normally expect.
There is hardly any new inventory listed in Oak Bay. I think you’d be hard pressed to get a deal. Maybe more is available in other areas.
“…That would bring the U.S. unemployment rolls to 52.8 million, or more than three times worse than the peak of the Great Recession. The 30 percent unemployment rate would top the Great Depression peak of 24.9 percent”
https://www.nbcnews.com/business/economy/coronavirus-job-losses-could-total-47-million-unemployment-rate-may-n1172111
Looks like we have our first decent sized local business succumbing to covid-19. Encore FX (formerly Custom House before they were sold to Western Union) is now in receivership as of this morning, I think they had a decent amount of employees here (by Victoria standard).
Don’t think there is severance pay in this case, so sucks for those folks.
With a PCS account, which gives you close to realtor-level info on listings including sales prices and such. You want to be looking at the individual listing level, not stats in this time.
If you don’t already have one send me an email leo.spalteholz@gmail.com with the criteria you are looking for (price range, type of property, area) and I’ll set it up for you. Limit is 350 results per search, so it has to be a segment of the market, not all of them.
“watch the individual listings closely in the coming weeks and months.”
What is the best way to do that Leo? Plenty of public sources for collated individual sales stats in the lower mainland, but none that I’ve found for Victoria.
Much like the last couple of years I am seeing a HUGE disconnect between what the media is pumping out and reality.
Medical professionals telling us to stay at home and last week I had three MEDICAL DOCTORS wanting to look at homes in completely non-essential situations.
Below is my current working essential definition below for the time being + some common sense like showing vacant is less risk and the vacant properties I am listing I am only allowing one showing per day.
Selling
• Divorce – property must be listed for sale as per a court order.
• Death in family and estate sale in progress.
• Job Transfer / loss of job.
• Foreclosure / Bankruptcy pending.
Buying
• The buyer has sold his or her own house and needs to buy another one.
• The buyer has been transferred to different city.
• Life circumstances – divorce, separation, death, change in income.
A different type of public health messaging from the Czech Republic on COVID: https://www.youtube.com/watch?v=jZtEX2-n2Hc
Thanks for the numbers and the insight. I suspect that recouvery for some sectors is going to be slow although Victoria has a strong Government base.
Interesting numbers. How much will prices drop?
“Must-sellers” is a good name for them, I think.