Napkin math on forced selling
With the worst of the lockdown behind us, the biggest concern is no longer about the market locking up (it isn’t) but how it will look in the fall when income and mortgage supports expire. The National Bank wrote an excellent analysis, where they predicted that house prices would fall 10% nationally in the next year. They expect Toronto and Vancouver to be worse hit at 13% and 12% declines respectively, and the risk of higher declines if immigration drops substantially or the CMHC tightens credit availability (which they did, but likely not in a particularly consequential way).
Another thing to note in the National Bank forecast is the home ownership rate by industry which I haven’t seen before. As I’ve discussed before, the employment impact has hit hardest in occupations and age groups that are less likely to own, which should reduce the impact on the forced selling side compared to a more broad based increase in unemployment. Now we have some numbers to put to that statement, and that allows us to take a stab at how many owners may be affected by job losses right now, and what that could mean for the fall. Multiplying the number of people that lost their employment between February and April (peak unemployment) in each industry by the percentage of people that have a mortgage in that industry, we get the following numbers.
That adds up to just under 13,000 households with mortgages that may have lost their jobs in Victoria. Job loss does not automatically mean a mortgage deferral, but it’s relatively likely. The latest estimates are that about 15% of the mortgages on the books of the biggest banks are in deferral, and based on the estimate above if every job loss amongst mortgage holders turned into a deferral it works out to 13% for Victoria. We’re possibly in the right ballpark.
Now, most of those households will defer their mortgages, get their job back or another job, and be perfectly fine come October. National Bank estimates that 10% of current owners with deferred mortgages will end up needing to sell, which would be about 1300 properties in Victoria. If such supply were to hit the market, it would likely be spread out over at least 6 months as some see trouble coming and list proactively, while others go through the relatively lengthy foreclosure process. I would also hazard a guess that supply from forced selling would come more on the condo side. 1300 new listings would be substantial, but because we are starting from a pretty strong base, it wouldn’t bring us into unprecedented territory as far as inventory goes. Even if they all piled on in a relatively short time period, it would bring us back to about 2013 levels of inventory.
Compounding errors alert
As you can tell from the title of the article, this is a back of the napkin estimate, and not a particularly robust projection about the size of the deferral cliff in the fall. There are many assumptions here any of which could turn out not to be accurate for our market. If I had to guess I would say the numbers represent a high estimate for number of households that will be forced to sell. High priced markets like ours likely have a lower rate of home ownership in lower income sectors, job losses are concentrated in younger ages so those without work may be less likely to hold a mortgage than the industry average, and BC seems to be one of the leaders in terms of managing economic impact which could help us compared to the nationwide average. This is an exercise to put a national forecast in terms of our local numbers to get a sense of the order of magnitude of impact, but take it with the appropriate grains of salt.
What do you think? Will the deferral cliff that the CMHC is concerned about have a big impact in Victoria?
Test
Test2
Test3
Yes. CERB costs $17bn per month. Total revenue for the government from all taxes is $26bn per month (see link,that was 2018, it will be much lower in 2020). They would need to almost double all taxes just to pay for CERB, yet alone all the other programs like CEWS and CESB. They should cut CERB back, with a means test, as it’s being abused, and we simply can’t afford it.
(Govt revenue sources) https://www.canada.ca/en/department-finance/services/publications/annual-financial-report/2018/report.html
Monday numbers: https://househuntvictoria.ca/2020/06/15/two-very-different-markets-in-victoria/
The graph doesn’t show a drop at all, as per Leo’s comment.
It’s not useful for what you say it’s useful for.
I didn’t say once that the USA rate was falling as fast as Canada’s, I didn’t make a comment on rates of change at all. I said the graph wasn’t useful except for obfuscation. I’ve made it abundantly clear what my point is, and you continue to miss it.
So i’m done here.
That’s the beauty of a log graph. It does show any 40% drop as an equal slope downward, making comparisons easy. If you want to ignore all that, and consider that USA rates for CoVid are falling as fast as Canada, go ahead.. but they aren’t.
nm.
Shocker. CERB to be extended. Taxes to pay for this profligacy are going to be insane.
It is equivalent in terms of cases per million.
Tell me how the graph is useful when it doesn’t show a 40% drop.
Actually just refreshed the browser and cleared cookies and it works now.
Safari browser and nothing happens when I hit the thumbs up button.
Except it doesn’t.
This is what Leo S said when he posted the graph:
60% of peak is bringing down the curve.
It doesn’t show in that graph.
Hence, graph isn’t useful for what you all seem to be claiming it is useful for.
No, here’s what you said (post 70970), which was wrong then and is wrong now too.
That’s only because you mistakenly think a drop in cases per million from 100 to 60 (USA) is equivalent to a drop from 50 to 12 (Canada). But it isn’t, the drop in USA is 40% and in Canada is much more at 76%. Just like a drop in cases from 100 to 60 or a 0.4% drop from 10,040 to 10,000 wouldn’t be as significant as a 100% drop from 40 to 0. Log scale graphs show that nicely.
That’s bullshit. I’ve already pointed it out.
The numbers are bigger so it’s hiding the US decline even though it’s been the exact same as Canada’s decline. It also won’t show the increase as the US goes from 20 thousand cases a day back up to 40 thousand either.
So by looking at that graph it’ll look like the US has it under control and are maintaining a flat line, or small increase until it really really doesn’t.
It was not a claim for purpose of comparison (at least not what I thought when I wrote it). I just wanted to point out that two cities with high numbers distorted the curve of the whole (otherwise much less dramatic and more peaceful) country. But sorry for the unintended confusion. 😉
Yeah any individual deals we saw in April on the detached side have basically passed for the moment.
Voting is working here. What browser? What happens when you click the thumbs up button?
Hi Leo, I don’t seem to be able to upvote any comments since the site was updated. Any way to correct this?
Thanks, looking for something post-1950 with some privacy and a south facing backyard likely in Oak Bay or nearby for family reasons. I can see why Rithet may be a hard sell at anywhere near assessment, and covid wasn’t really a thing when it was sold in February for a discount. It is surrounded and overlooked by apartment buildings on all sides and is pretty shabby looking with questionable renos. You need a special skill set and interest to maintain and renovate this era of home. We are in no hurry to move but so far seems pretty competitive – might wait until fall.
BC Assessment
533 Rithet Street, Victoria, BC, V8V 1E4
Total value $1,092,000
2020 assessment as of July 1, 2019
Land $958,000
Buildings $134,000
Previous year value $1,110,000
Land $986,000
Buildings $124,000
533 Rithet Street, Victoria, BC, V8V 1E4
Sales history (last 3 full calendar years)
Feb 18, 2020 $825,000
Totoro:
Here’s an opportunity for you. It was purchased in February of this year for $825,000. They got the covid discount and are still trying to get out. It is apparently listed for $839,000, now.
533 Rithet Street, Victoria, BC, V8V 1E4
$1,110,000 2019-11-04
$998,000 2019-11-18
$899,000 2019-12-03
$849,000 2019-12-20
$839,000 2020-01-13
$829,900 2020-02-06
Overall Change= -$ 280,100.00
Percent: -25.23
Agreed. If we do get an uptick in cases here, I expect that our excellent Dr. Henry changes her mind and makes masks mandatory in public. As you pointed out, the studies have conclusively found that mask wearing reduces infection rates, as summarized in that Lancet review article.
btw, the ferries are requiring masks starting tomorrow (mon jun 15) , and they won’t let you on without a mask, even if you plan to stay in your car. They aren’t providing or selling them, so you may get turned away if you don’t have one. It is a federal agency (transport Canada) requiring the masks, I don’t think BC Public Health would have done this.
The “per million” part is irrelevant to what type of chart is used, yet you refer to that as if it’s significant. It is the number of viral cases that are best (and typically) represented with a log chart. It is because of the exponential nature of growth in virus cases. Lots of exponential data in science is represented this way – viral cases, sound levels (decibels), earthquakes (Richter scale), pH (acidity) etc. etc.
This is because the exponential graph is much more informative, without it they all would look similar, hiding the changes in growth rates that are critical to following a virus pandemic.
It was a mistake. The research is very clear. Here is the study of all studies (literally) on it just released by the WHO which confirms this:
https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)31142-9/fulltext#%20 Warning – if you read the research you will run the risk of sounding like a broken record like me.
Our public health officer is excellent, but we got lucky in some ways and it could have been even better with full masking asap. Social distancing in not enough on its own to stop a second wave in the community and one can only hope that the education campaign on prevention measures ramps up if our numbers start to rise. Right now the majority of people are not wearing masks where I shop and there is a lot of misinformation circulating and people who feel like they are being “shamed” for their “personal choice” because it is just a recommendation.
My view is that when your personal choice impacts others risk of getting covid and mask or visor (for those with breathing difficulties) wearing is incredibly easy to do – and available at all major retailers now – London Drugs, Canadian Tire, pharmacies, Staples – this is a public safety issue. Right now our numbers are low but if there is any increase I am in favour making masks mandatory in all public inside spaces until this risk has been managed. Social distancing seems to be enough outside given the research on UV light and its effect on the virus. We should make mask use part of a mandatory public education campaign in the schools come fall imo – like they do in Asia.
Back to real estate. We’ve been actively looking in the 1-2 million range and it is not a buyer’s market imo. It is maybe slightly better than pre-covid for properties with issues. Desirable places are selling quickly.
Disagree.
I’m not against log scale graphs.
I was saying it didn’t make any sense when the graph is cases/million.
Only way masks will happen is buy making it mandatory and enforcing it.
Same with Quarantine on Entry.
If this pandemic has taught me anything, it’s this.
Hi, Leo. I see that paragraphs separated by a line of empty space are prohibited under the blog’s new formatting. Any way to fix that? It would help with readability.
Speaking of that, does anybody have any suggestions for where to purchase reusable cloth masks or good inexpensive single-use ones? (I don’t want to make my own.)
BC Ferries is now requiring passengers to have a mask in their possession for times when physical distancing is impossible.
Those drops aren’t equivalent. The drop in Canada has resulted in cases at 24% of the peak. The drop in US is 60% of peak. A logarithmic scale shows these trends better. Similarly comparing how well 2 stocks are performing, if one dropped by 40% vs 76% drop. Comparing them by saying one dropped by $40 vs $38, so both have dropped by the same amount, would be misleading.
Nope. One of the few that wore masks in the grocery store. I just was pushing back against people that said BC was making a massive mistake by not requiring masks.
I thought you were anti-mask Leo?
I don’t know that our economy does that well if only BC does poorly.
Our major industries are mostly export, or aren’t really going to happen with closed borders:
Other than High Technology, I see everything there being effected.
With some luck BC will pull out of this with less economic impact than most. If we get our masking game up for the second wave we could completely quash it without substantial restrictions. We have about 6 months to get the mask supply chain up and running and then this could be very manageable.
Yes I agree. Was just pointing out the Seoul information.
Fair enough, wrong hot spot. The point still stands: comparing a whole country to another country minus the hot spots is bogus. No matter which two countries are chosen.
Yes it’s clear BC did better than ROC and many countries. But you were responding to a claim that Canada ex Montreal+Toronto performed like South Korea. Not that I think such a comparison is meaningful anyway, as I said.
No.
Seoul has only 9% of total South Korea cases CoVid cases, hardly the “bulk”. And less than expected given Seoul is 20% of SK population. The bulk of SK cases (57%) are in Daegu region, which is the opposite end of the country to Seoul.
Next time, you might want to do a few seconds of research before posting.
Source: https://en.wikipedia.org/wiki/COVID-19_pandemic_in_South_Korea “COVID-19 cases in South Korea by region”
Seoul is bigger than Montreal and Toronto put together, and not surprising had the bulk of South Korea’s COVID cases. So suggesting Canada ex Montreal+Toronto has done as well as South Korea is really an indication of how badly Canada has done compared to SK.
The Canada ex-M+T curve wouldn’t be similar anyway, because the peak in SK occurred much earlier than in Canada or any part of Canada – as you can see from the graph posted below. End of February.
Yes. Here is BC vs ROC and other countries.
http://www.bccdc.ca/Health-Info-Site/Documents/BC_Surveillance_Summary_June_5_2020.pdf
Page 11
Yes, the Covid case number is not that important as they are not accurate anywhere, but the curves/trends are.
In Canada, If we make separate curves: one for “Montreal + Toronto” and one for “the rest of the country”, our (rest of) country curve would likely be similar as South Korea, for this wave.
A few countries that we could compare ourselves to.
https://www.ctvnews.ca/health/coronavirus/covid-19-curves-compare-canada-and-other-key-nations-1.4881500
For a linear Y scale you’d need to make the graph about 20 times taller to make all countries clearly readable.
Log scale graphs are commonly used in engineering as they show exponential relationships clearly. An exponential growth or decay is indicated by a straight line.
When you take out the outliers, no one has very disparate numbers in terms of cases/million in 7 days.
You can easily fit them all on the same graph. Just go up by 10s.
It makes it seem like the US didn’t drop at all, when it has by quite a bit since second week of April when it peaked.
It’s gone from around 100 cases per million to just over 60 cases per million,
Canada topped out at around 50 cases per million and has dropped to around 12.
So they’ve dropped around the same amount, but US is flat, and Canada isn’t.
Good ol’ Calgary!
https://twitter.com/mjbrown_0/status/1271989614698352640
https://calgaryherald.com/news/local-news/severe-storm-leaves-trail-of-damage-flooding-across-city-southern-alberta
We’ll see I guess. I have very little certainty about prices so I’m not ready to rule out any scenario.
But I do know that Q2 sales will be the lowest quarter this year (seasonally adjusted) except on the outside chance that there’s a massive virus resurgence in the fall with full lockdown. I also think no one cares about the BCREA forecast accuracy because no one should be basing anything consequential off them whereas the CMHC has a lot more responsibility to validate theirs. My theory is that CMHC ran a model that does not have a societal lockdown as one of its inputs (why would it ) and it simply spit out a number for sales based on unemployment and population growth projections. And no one gave it a sanity check before hitting publish.
Because it allows you to compare countries with very disparate case rates. The point on that chart was to compare chart curves, not absolute numbers.
Blah blah blah.
Apparently quoting actual epidemiologists makes you an armchair epidemiologist.
Why would you have a log scale graph on a cases per million? doesn’t make any sense unless it’s used to obfuscate.
They also have prices rising in Vancouver this year.
Either they admit they were wrong now or admit they were wrong later is their only two options right?
May seem “weird,” but log scale charts are standard issue in public health. They should be familiar, even to “armchair “ epidemiologists.
I think the higher one is Italy, looks like the label got cut off.
You can change it to whatever. https://ourworldindata.org/coronavirus
Sarcasm.
Nope. They’ve averaged about 250 tests a day since the start, and for example did 300 on June 11. In the last 30 days that’s about 7500 tests with zero positives. They just don’t have enough people with flu symptoms to test more. In March, April they had lots of people known with CoVid symptoms that weren’t tested, only a few of those in May/June. Zero people in hospital or ICU and no active cases argues against large numbers of undetected cases..
https://experience.arcgis.com/experience/a6f23959a8b14bfa989e3cda29297ded
Totally. That’s why we have 0 cases on Vancouver island, because they reduced testing.
On a logarithmic scale? seems weird.
Cases aren’t really all that relevant. More testing equals more cases and if suddenly testing doubled tomorrow cases would increase considerably but really we wouldnt be in a worse position even though people would think it. Deaths is the better indicator and US is down considerably from the peak and so is the world (though I question how accurate numbers are in places like India and Brazil etc)
Nice picture. But wondering why there are two curves for Germany?
As it says in the title. Daily new cases per million people, 7 day rolling avg
Total sales may be back to pre-pandemic levels by end of June.
We may see some odd things in the seasonally adjusted data since this year’s sales patterns will be very different than a normal year. I would not be surprised to see a positive year over year month in sales sometime this year.
What is that y-axis even supposed to be?
BCREA predicts flat prices for Victoria out to 2021
I think the average price for the whole market will be pretty useless with what’s going with condos and detached right now.
One of the few countries that has not managed to bring the curve down after flattening it
The distinction between forced and voluntary will be impossible to measure as well. Certainly 10% of deferrals will not end up in actual default in most markets. Some will see the writing on the wall and sell before it becomes a problem, others will de-risk by dropping an investment property out of caution, and likely only a small proportion will end up in actual foreclosure. All we can really measure is if inventory increases.
Anyone able to cash out will simply sell. Really the only reason you would want go to default is either if you can’t afford to sell (negative equity) or if you think you can still turn it around but then can’t. We’ve seen weakening of the condo market but no outright price declines yet. The CMHC data that shows vastly higher rates of default amongst people with lower credit scores and less than 10% down means it’s likely the more recent buyers that will be most at risk.
Texas and Arizona are really still in first wave – cases have been increasing almost continually since March. Also true for a number of states in that vicinity I think. It looks like a second wave when all cases in the US are added up.
New poster here (although I’ve been reading a while).
CMHC sales predictions don’t seem that pessimistic. Toronto sales were down from pre-Covid levels by 67% in April, 54% in May, so Toronto sales still need to increase quite a bit to get to the 19%-29% drop from pre-Covid levels that CMHC is predicting this year.
April sales were suppressed in part by people having to adapt to the shutdown and that effect is already going away but other impacts of Covid, less travel and economic impacts can be expected to take longer to recover. I hope we end the year with sales close to pre-Covid levels as that would mean things recovered well, but I think too many are relying on government funds and pre-Covid income to be confident of that.
Yes, poor word choice on my part. I think it is likely high and 10% of owners who deferred will not be put into a forced sale situation. I also think covid impacts may prompt non-forced sales among those who have not deferred but are worried about job security and price declines.
Disabling the rich text editor until they can fix the quoting issue.
This seems predicated on there being no second wave.
There’s already a second wave starting in the US, they were up to 27000 cases yesterday. Texas, California and Arizona seem to be hot spots right now. The US won’t lockdown, that much is clear, but people will stop going out regardless of what their government is telling them if their hospitals are full and people are dying in the streets. Regardless of whether we get a second wave or not, our biggest trading partner doing badly is going to have an economic effect. Not to mention the majority of sales in this country are in 2 provinces that are harder hit than here.
No one directly. But what should we think when CMHC tells us here is our forecast produced by our amazing models and the sales forecast is obviously and badly wrong? Why did no one look at it and say this makes no sense?
Maybe it doesn’t matter and their price forecast will be amazingly accurate while their sales forecast is amazingly inaccurate but Im saying it doesn’t instil confidence in the model.
CMHC as a public institution should be obligated to publish their entire models and complete list of assumptions
CMHC cares about sales volume because that’s where its revenue comes from.
OK, backing off the “price” part of the objection to the CMHC prediction seems to negate the whole point. Because who (other than RE industry) cares about CMHC prediction about number of sales?
I suppose I’ve never understood the importance placed on housing sales numbers vs housing prices. If I asked you to predict where the stock market will be a year from now, would you think I was talking about average volume of shares traded per day?
Yes I know, we are told by “experts” that home sales are such a great predictor of prices, and lower sales mean lower prices. Except when they don’t, like right now with a collapse in sales and no change in prices, so maybe they’re not such a great predictor of prices after all.
I think the important prediction on most people’s mind is where housing prices will be a year from now. I think they’ll be 10-30% lower, depending on what’s happened with the virus. I have no idea where sales will be. MOI is a better predictor and I expect it to be way up.
Nope, just the biggest economic downturn since the 1930’s. But we made it through that didn’t we?
On sales, I will say there is zero chance their prediction will be correct. Q2 sales will be the bottom and they will rise after that, not keep declining until Q4.
I have no prediction on prices per se, other than what I’ve written about not being that bearish. The future is too uncertain. However CMHC’s big gaffe on sales predictions does not exactly inspire confidence in the rest of their forecast.
However I think what might happen is that a shift in the sales mix towards detached may mask some average price declines. When you predict on average prices for all property, you are very sensitive to mix because you have a camel type distribution. If condo sales suffer more it biases average price up.
Small clarification. It’s not 10% of owners that national bank is predicting will need to sell, its 10% of people that are currently deferring their mortgage. That’s less than 1% of all owners
Always take the pessimism on this blog with a grain of salt.
CMHC forecast is for Canadian home prices to decline by 9-18% from pre-Covid in the next twelve months (to June 2021), and for sales to decline 19-29% from pre-CoVid in the next 6 months.
Are those the predictions you find laughable (“amusing”) and certain to be wrong (“wrong now or wrong later”) ? If so, what are your predictions?
https://assets.cmhc-schl.gc.ca/sites/cmhc/data-research/publications-reports/housing-market-outlook/2020/housing-market-outlook-canada-spring-61500-2020-en.pdf?rev=5288445e-bf20-4289-aa36-9330383bc4fc
“Our [CMHC] forecasts indicate that the average MLS® price will decline by 9% to 18% from its pre-COVID-19 levels before beginning to recover in the first half of 2021,
[Existing home] Sales are likely to register a decline in the range of 19% to 29% from their pre-COVID levels before beginning to recover in late 2020. “
Lower wager earners are less likely to own in Victoria and it would depend when they purchased and how low their mortgage is currently imo. They also still have had to qualify for a mortgage so if the entire household income is 50k they won’t qualify for more than a 280k mortgage – which is currently $1021/month – cheaper than rent in most places although maybe slightly ore with strata fees and property taxes (est. an additional 300-500/month).
First time recent home buyers may be at higher risk if they used their savings to buy – which is common. I would expect the government to provide some assistance – hopefully with stringent criteria instead of after the fact enforcement.
As always, people who have to sell will probably be those who are experiencing divorce, addictions, and permanent job loss that they don’t believe they will recover from such as is caused by disability, but now imo also by covid in some circumstances ie. older workers who will have difficulty finding new jobs and business owners who may need to declare bankruptcy and provided a personal guarantee.
I’d guess that an additional 10% of owners will not have to sell because of Covid impacts once deferrals end. I think the number will be lower. I’d expect more Airbnb units to come onto the market though.
Future CMHC market outlooks will be amusing. They have painted themselves into a corner with that last market outlook predicting sales not to bottom until Q4 which made no sense. Admit they were wrong now or admit they were wrong later is their only two options.
Wonder if the media will notice.
Victoria is about middle of the road in terms of reduction in employment. Interestingly enough Vancouver was hit substantially harder.
The other wildcard is what the government will do when CERB expires and deferrals hit. If it really was a massive cliff they would try to extend payments, etc. I think they would only let a smaller hit go through unimpeded.
“You usually don’t sell your house as a first step because of transaction costs unless you believe you won’t be able to recover. The average amount held in RRSP plans was 101,155 in 2018 and 42,000 in a TFSA.”
Good point. Although for the lower wage earners who this has disproportionally affected so far, doesn’t it stand to reason that they’ll have less savings to fall back on than average? Also first time home buyers were encouraged to milk their RRSPs too for a downpayment.
Or people have savings in a combination of both in registered and unregistered accounts and equity they can access. And/or family help. And/or they rent out a room. And/or rent the whole place and move in with the folks until this passes. And after CERB there is EI for those who qualify and some incentive programs for employers to hire.
You usually don’t sell your house as a first step because of transaction costs unless you believe you won’t be able to recover. The average amount held in RRSP plans was 101,155 in 2018 and 42,000 in a TFSA.
Rents Dropping
We are a small landlord ( 10 units ). I can say that we have managed to get through this so far without one late or missed rent payment. We also offered all of our tenants 200$ off of April’s rent with no questions asked, one tenant took us up on that offer and the rest thanked us but said they were fine.
One tenant gave us one months notice because they bought a house and we couldn’t be more happy for them 🙂 we listed the unit a 2/bed & Den basement suite on May 29th, we had the lease signed @2100+utilities on June 3. We most likely could have raised the rent with the amount of interest we had.
I was surprised because all I have been reading on the forums Is the world is ending and rents are dropping fast with all the short term rentals hitting the market.
It will be interesting to see what happens in the next few months, as usual half the inquiry’s we had were from out of province Alberta or Ontario…
I don’t know National Bank’s rationale on this (comes from a non-public report cited by ratespy.ca). It feels about right to me, but if I had to bet on over under I would still bet the real number will be slightly under. No good reason though, other than gut feel. Will be interesting to see if we finally see some serious inventory build. I could see it on the condo side, not so much on detached.
Capital Economics estimates 68% of job losses will be recovered by August. How many by September/October when the deferrals expire?
Thanks Leo. The ‘10% of current owners with deferred mortgages will end up needing to sell’ feels way too low. That would mean the 90% are made up of a combination of households who took the deferral as a precaution and those people who get their job back with enough hours to cover the mortgage. Seems like a overly optomistic assumption to me. I read their analysis and didn’t see how they arrived at that number.
Between the disparity of employment numbers, optimistic mortgage deferral hopes, and hurting airbnb/residential property investors, my guess is that the estimate of 1300 new listings is 3x-5x too low.
Keeping an eye on the Vancouver daily stats (zealty) where inventory is building quickly now. Pent up supply incoming.
Yes. Similar to last week. Big sales day today though, so likely will only be down about 15% in a day or two though.
Yes. The most accurate measure of employment losses would include lost hours as well. However this is difficult to calculate and I believe impossible to get on a municipal level. Trevor Tombe calculated this for the country and came up with an unemployment rate north of 30% for April.
My measure of effective unemployment does not take this into account but it it does take into account all drop in employment, so it is far closer to the true unemployment rate than the official one.
By that measure, it was 18% in April in Victoria.
Leo are we still seeing a more listings than sales?
Its should also be noted that Leo’s tables are based on the occupation of the “primary household maintainer”. Most home owning households have two people in the work force, and a still-employed engineer may be married to a now-unemployed service industry worker or owner of a now-bankrupt small business. Not as bad as both losing their jobs, but if both their incomes were needed to buy, it matters.
Would you not need to include some percentage of people who haven’t lost their jobs but have had their hours cut? For households where they rely on 2 full time incomes to make ends meet, a cut in hours may force some more folks to sell.
A CBC article I read recently said the millions more have had their hours reduced.
That’s what a lot of people – including myself – thought would happen after 2008. IMHO as long as RE is seen as a safe haven, people will keep putting as much money into it as they can. The only thing that will change that is a crash.
Assuming peak unemployment in higher wage sectors is a major assumption. I think a smaller “second wave” of high wage unemployment is more likely than not. If so, then a manageable supply increase runs into soft demand in the fall too.
There are way too many uncertainties still.
We also have been considering this. We sold on property partly out of concern for future capital gains tax rate increases but it is likely we will end up buying a more expensive primary residence – seems unlikely this will become a tax target however reasonable it might be to remove some of the capital gains exemption.
I believe the deferral cliff is likely to have more of an indirect impact on the Victoria market. As much as all markets are local for RE and Victoria has many factors that differentiate it from others in Canada. The risk RE in Victoria has, is getting caught in a national mindset of a recession and the possibility of more people becoming uncomfortable carrying large debt levels as the see others go under. Yes, there is insulation with higher income and stable employment in demographic owning SFD, but people can become risk adverse and protective rather quickly that may lessen the desire to perpetuate increasing debt in the chase for housing. I don’t know about others, but I have started putting significant effort in preparing for the post Covid tax scenarios and where money will need to positioned in ordered not to be clawed away. If others are doing this as well, it may be taking some funds away from real estate investment to be used in other areas before opportunities are closed off by taxation. All in all, it will be uncertainty from the deferrals and lack of confidence that will push people away from being active RE market (holding in place) no matter the strength of income or belief in their job security.
Not a huge amount of well placed land here but Esquimalt Songhees Nation could have a real opportunity close to town
That’s why I’m so excited about the Senakw project in Vancouver and hope it is successful. 6000 units on 11.7 acres! 6.6FSR. If this gets off the ground I hope it serves as an inspiration of what can be done if you build to the market need instead of being restricted by local government.
https://dailyhive.com/vancouver/senakw-vancouver-approved-squamish-first-nation-westbank
I read that the government is concerned that the longer programs like CERB are in the place, the harder it will be to eliminate them, as those programs become increasingly normalized.
I personally think it’s time for a Universal Basic Income!
The federal government will need to provide some additional assistance should this occur to stop the greater costs associated with extended unemployment for otherwise employable people – imo.
If the ‘pandemic’ is over then the 13% number is high but if a serious and prolonged second wave occurs then the number is too low.
Yes, I reported this to the devs and may just disable the rich text editor until they’ve fixed this. If you use the quote buttons in the editor instead of typing > it works, but it’s annoying for those that are used to markdown syntax.
13% seems high, and I’d think that you’d also see an effect through all the property price brackets. It is not just about losing a job at the low end although these homeowners may have fewer resources to tide them over, some people at the higher end may be ex. business owners affected by covid or concerned about how long the recovery will take. People may also be concerned about projected price drops and that may bring more homes onto the market as well.
Nice to see that Germany has only 138 CoVid cases today.
Since Germany population is 15X BC, thats a similar number to B.C. per capita.
And Germany has opened up…
Hopefully BC sees similar results as we continue to open up.
Introvert: Doubt that will be another lock down, but I would point out that neither Vancouver or Victoria have actually even experienced the first wave of Covid. I suspect that BC is like a dry stack of kindling waiting for a few sparks.
I am running your numbers through my head and something seems to be missing (possibly just my brains). Must be all the rain this morning.
BTW, Leo. After the latest blog changes, when one uses a blockquote it automatically blockquotes everything one writes underneath the initial blockquote (see Soper’s comment as an example)
And the only way to avoid this is by editing one’s comment and manually removing the unwanted blockquoting, which is tedious and annoying.
With the worst of the first lockdown behind us…
I don’t think that we’ve seen peak unemployment.
I think that this is just the first wave.
This analysis looks about right to me. I still think there’s a secondary concern with rental suites, as rent prices drop income from suites drop and that will also nudge some people into forced selling. Likely a fraction of the 1300 you’re predicting, but I think still big enough to be a factor.