Market starts off with a roar in 2021
January is usually a very quiet month in Victoria real estate. In a normal year, sales would still be depressed from the holiday hangover, while on the new listings side we start to see some overly eager sellers putting their properties on the market before the spring market. It’s the month when the sales to new list ratio is the lowest for the year as buyers take lazy note of the early birds, but mostly hold off on their purchases to see what else might come around.
This year started out completely differently. Early listings came back about on pace with last year, but as soon as they hit the market buyers sprang into action and sales roared back as well. The final tally for the month at 646 sales is 57% higher than last January, and second only to January 1990 when we had 686 sales.
That brings the sales to list ratio to 71% in a month where we normally average 43%.
There’s almost no segment in the market that isn’t extremely active. Although the market conditions for single family properties continue to be the tightest (with 40% of properties going for over ask), condo sales are also extremely strong, even exceeding the 2016 high on a seasonally adjusted basis.
I’ve been saying for months that these market conditions point to rapid price gains, with the current sales to list ratio indicating gains of around 20%. The detached market is arguably already there, with the median sales to assessed value ratio at 20%. In other words, the median house sold in January went for 20% over its valuation from only 6 months ago. It’s been clear that even in the substantially weaker condo market, market conditions have been pointing to substantial price increases since the late fall. That started to be evident in January, with the median price inching up to $440,000, the median sale at 8% over assessment, and 16% of places going for over ask. That’s a big tick up in activity from last year when we were only seeing 5-8% going for over ask.
Why all the mania? Well aside from unprecedented demand, there simply isn’t much of anything to buy, with inventory 33% lower than this time last year and continuing to decrease.
Other than increased sales activity, one important reason for this scarcity of supply is a long term trend of fewer house listings hitting the market. In 2020, we saw 30% fewer houses listed than in 2011. With only 246 active single family listings in the region to start the month, we could have sure used those extra 2000 listings. In the price runup from 2000 to 2008, listing activity increased almost 50% as sellers were tempted by large profits. Not so this time around. Despite rapid price appreciation from 2016 to 2018, it hardly enticed any owners to list. The reason is not entirely clear. Are lower interest rates allowing more owners to hold on to their previous properties when they upgrade? High prices and associated high transfer fees making it difficult for owners to climb the property ladder? Either way it’s bad news for supply and a big part of the reason behind our current price explosion in detached properties while the jump in new condo listings moderated price gains there.
Market conditions measured by months of inventory are now hotter than they were in 2016.
The difference between the median condo and median house price continues to increase, with the median house in January coming in at $530,000 more than the median condo. Only 6 months ago that difference was $418,000. A more than $100,000 jump puts immense pressure on condo prices to catch up. Townhouses have already turned upwards to close the gap. Due to a continued very high rate of sales in the luxury sector, the average detached price jumped to $1.2 million.
My Take
The real estate world is full of cheerleaders for the housing market. I’m not one of them, in fact I think this rapid price appreciation is bad news not only for Victoria’s economy and vibrancy, but also our society in the long run. However I just look at the data and do my best to show you what it’s telling me. Normally I emphasize the weakness in the market in order to balance the other narratives out there which generally are only positive. However with the current market there simply isn’t any immediate weakness to be found so there’s little to talk about.
4 years ago we had similar market conditions and I said it was probably a good time to buy for many reasons. Now we’re back to a similar market, but the picture is much less clear. We’re not at the end of a long price plateau like we were back then. We’re not at favourable affordability levels, in fact affordability is very strained for detached properties (more on this soon). Meanwhile the economy is so weak it has just required hundreds of billions in bailouts to hold it together and we still have 8 months of pandemic restrictions before we can get back to some kind of normal.
Jumping into the detached market with nearly half of the properties involved in bidding wars and a 15-20% price jump already behind us is impossible for me to recommend. For condos the situation is different and if I were in the market for a condo the current market would be lighting a fire under me to act. I don’t see how we avoid a price jump in that segment this spring.
The risk in this market is less short term, but medium and long term. How much of this demand is borrowed from the future? What will our economy be like when the government taps are shut off and will we face inflation and a debt crisis? How will our market respond to rising interest rates when they come? In the past, affordability has returned to the market primarily through dropping rates. It’s anyone’s guess what will happen when that is no longer an option. With over-asks in the detached market in the high tens or even hundreds of thousands of dollars, be very careful not to overpay.
To buy or not to buy in this market? There is no easy answer to that question. I would go back to the risk assessment approach to buying and think carefully about each of the risks and how they jive with your tolerance. That’s more difficult than usual because many economic models have been disrupted by this pandemic, but in the end you still know yourself.
Good luck.
Hi Beatriz. Townhouses are between condos and detached in terms of activity. So they are also extremely active and prices are rising. I agree that there isn’t enough focus on them, I’ll be focusing more on them going forward.
How about town houses? Everyone is talking only about detached houses and condos …. and townhouse???
“It’s different here.™
Is it not? We bought here in 2001 and moved from the prairie in 2010 because it is- or at least, to us it is. Happy to be shown how it’s ‘the same’, of course.
New post: https://househuntvictoria.ca/2021/02/06/the-pandemic-impact-on-rentals/
Very curious what happens this year. From an affordability perspective we can actually absorb the current increase and a bit more as well. But if we see large increases from here on out then I think we’re in uncharted territory. Out of town buyers are definitely a chunk of demand (let’s say a third of the market), but the market still depends on local buyers to function. You can’t drop 2/3 of the buyers and keep the market hot.
I don’t care to predict Tesla’s market share in the future (but I’ll bet they’ll do just fine), but if you don’t see that electric cars are 100% the future I suspect you haven’t driven one.
At this point my unpopular opinion is it makes zero sense to buy a new gas car. Either buy electric if it works for you, keep driving your old car, or buy used to bridge the 2-5 years when it will work for you.
Either way by 2025 I think BC will be at around 50% share of new vehicles sold as EV or plug in hybrid. By 2030 it will be 80-90%. That’s not because people will suddenly start caring about the environment, it’s simply because it’s a better product
I’ve had many Honda products (five). You can watch some of my Honda reviews from back in the day -> https://www.youtube.com/watch?v=c3_oS2N1dDs&t=1s
Tesla has been more reliable and cheaper to maintain than any of my five Hondas and the Hondas were solid, not too mention all the time I’ve saved no having to go to gas stations, service, etc. Also, at 200,000 km feels like new versus the Hondas at 100k you could feel it was a used car.
Seems to me there are likely to be as many, or more, people who will leave if it gets any more expensive. Or people who had been considering moving in who can no longer afford it.
Tesla servicing here, eh?
I think what you’re seeing there is the last grab at a market share which will soon shrink to nothing.
Think back twenty years. If one wished to appear hip and environmentally sensitive one bought a Smart car. Never mind that a Honda Fit was better built, more reliable, quieter, more comfortable, infinitely more practical, had a delightful engine and transmission, would last forever and had an established service department in every city on the continent. For a certain strata of society all of those considerations were ignored for the sake of fashion and virtue-signalling. That group was insufficiently large, so despite the PT Barnum rule of marketing the Smart had a well-deserved and very prompt demise.
Here we are two decades on and you may substitute Tesla for the Smart and the Ford Mach E for the Fit. The outcome will be the same.
My friend is coming from in a few days for a second look at Victoria. He has already decided that the actual city of Victoria is just too trashy but he likes Oak Bay and I have suggested that he looks up the Peninsula, He is hoping to find a nice House for 3 to 4 but is willing to go up to six for the right place. My point is that while the numbers may be small it is outside money that is serving to set the price point.
This should have burned through now.
There are just too many factors to accurately predict anything in my opinion. Sometimes I’ll look at how much debt people are piling on and I think this bubble has to burst sooner or later then the next week multiple people will email me from Toronto looking to relocate to Victoria with budgets of $1.0 to $1.5 million which makes me think is there going to large net migration to Victoria. Then add like 100 other factors.
Interest rates are an integral component of demand. The lower the rates are, the more people are willing and able to pay.
This is exactly what I do as it allows me to be more productive. I believe my time is better spent pulling permits on Technical Safety BC and other activities while I sit at an open house versus harrassing poor souls that just want to view the home in piece. Also, statistics indicate 1.4% of all sales are as of a result of an open house. Half of that 1.4% would have booked a private showing if there was no open house so we are well below 1%.
As I said earth shattering sales last 6-7 months and no open houses. If we had 6000 sales in the last 6 months do you believe with open houses we would have had 6100? I don’t.
As a consumer personally what I want is no salesperson. My Tesla 8 year battery warranty will expire in the next few years so I will be in the market for a new EV. If I could order other EVs online I would consider them but the fact the two EVs I would consider as alternatives can only be purchased through a dealership it’s a non-starter right off the bat. The fact I can buy a Tesla using payable online gives them an insane advantage with an individual like myself.
This is why the full service industry is here to stay and why people pay the equivalent of Teslas in commissions. People just eat up sales non-sense.
From October:
Tesla announces plans for Victoria-based electric vehicle service centre
https://victoria.citified.ca/news/tesla-announces-plans-for-victoria-based-electric-vehicle-service-centre/
Lots of different predictions for the spring market by analysts being reported in the media.
Leo, Marko, or anyone else who has an opinion… Understanding current circumstances have no comparable precedent. Given historical trends of spring inventory levels from years past, what impact do you all think the usual bump in spring SFH listings will have on market dynamics ?
I believe a big part of what we are seeing is the result of the supply/demand equation, more so than low interest rates… Pent up demand in the fall from lockdown combined with FOMO and demand pulled from the future over the winter. Rates have been low for a while, whereas buyer/seller psychology have recently shifted.
I think odds of the current market conditions continuing into the spring market are low but I’ve been wrong about real estate many times before though. I welcome someone to poke holes into my conclusions.
I’m pretty sure that a lawyer representing a buyer would be in a conflict of interest to receive a commission from the seller. In my view it’s also a conflict for a “buyer’s agent”, but lawyers have to take this kind of thing seriously.
Used to be unthinkable for anyone to have a mortgage after 65. As well it’s the lower priced markets that have the greatest % mortgage free.
The paid off % is declining in spite of an aging population, and real mortgage debt has greatly increased. Again this is Canada wide, the most expensive markets will be worse. This is 2016 data, likely things are worse now.
https://www150.statcan.gc.ca/n1/pub/75-006-x/2019001/article/00012-eng.htm
In the UK and I think Australia, law firms will often advertise homes for sale.
80% of Canadians over 65 have a paid off mortgage. 43% of all homes have no mortgages.
No, the system is not set up for this. Lawyers do not have agreements for realtors on how the commission split works and realtors are not going to give up this market voluntarily. Also most lawyers are not going to do showings on houses because of how the commission is organized. Best use of money with a lawyer is on offer review.
RE: Open Houses
I heard of one realtor that just sat on their computer the whole time. Even if I could do that, doubtful, but surely someone could be paid? There might even be an Open House service company that people can use in the future. Not sure the cost? $500? Do you think we can find anyone to play on their computer for $250/hr? These people might even talk to the people for that $. Then the buyer would know what they are getting each time they go to an open house.
“No need for a Realtor but need for a Lawyer.”
Yes , you need a Lawyer. Unless something has changed? No , you do not need a Realtor, unless something has changed?
“But you feel open houses are important?” Yes, I already explained this they are extremely important to a buyer. I understand you disagree.
Did you have a point?
But you feel open houses are important?
I always thought there would become a crossbreed Lawyer/ Realtor.
“Not really. It has always been a legal option to have a lawyer represent you and provide real estate representation services under the Real Estate Act.”
I think you just proved my point. No need for a Realtor but need for a Lawyer. I would gladly pay anyone of you professional realtors? $200/hr ? $500/hr? sorry don’t want to offend anyone if that is too low. For your professional opinion on a house I choose. You might even be cheaper than the Lawyer to do the paperwork.
Because math and logic – like determining highest ROI and using equivalent comparisons in examples.
You only have so much money and time. The question is not whether you can hire someone if you don’t have time, but is the time you have being used in the best way weighing the actual numbers and intangibles like level of interest and aptitude.
An oil change costs $80. I don’t change my own oil because the cost:benefit is not there for me in savings nor interest — although it might be for others. I do learn how to sell and buy and save commissions because it has been worth $100,000 to do so and I am interested. I also learned about investment, taxation and cooking because the cost benefit favours diy for me. Saying you are too busy with work and family means that you might be lacking on the analysis side.
Not really. It has always been a legal option to have a lawyer represent you and provide real estate representation services under the Real Estate Act.
“What does the open house have to do with anything?”
Not everyone agrees with you Marco. Some homeowners still think giving more people an opportunity to see the house is a good thing. So in the old days Open Houses were important in some people’s minds. I get it you were bored at all your open houses but they are great for us buyers. It was a huge opportunity for people to see maybe 10 houses all over the city in a day without dragging their realtor around.
“How were you given preference over the 13 other groups if they were also able to view the same day?”
Being unrepresented and allowing the listing agent to suggest a realtor to represent likely gave some type of Kickback to the Listing Realtor? I have heard of this type of thing happening with commissions.. Have you heard of realtors splitting commissions for an easy sale? We were also the nicest family with the nicest kids that would keep up the property and not waste all the hard earned sweat and tears they put into the place. We were the right choice. I didn’t think so at the time and was freaking out as everything was moving way too quickly. Like it is now.
Lawyers get paid by the minute. How would this be an efficient use of their time?
I always thought there would become a crossbreed Lawyer/ Realtor. The Lawyer has to get paid ? $1500? $4000? but you cannot avoid that. Give the wannabe Lawyers only real-estate as their specialty and teach them a bit about houses. They can list with their commission being a small % or a flat fee. Sure the Buyers Realtor needs to get paid. That payment is based on the house price negotiation. You offer $810 instead of $800K and that Buyers realtor gets the 10 K or maybe 30K if he gets a better deal and buys the place for $780K
What does the open house have to do with anything?
How were you given preference over the 13 other groups if they were also able to view the same day?
It’s like when I call back the buyer’s agent and say “Congrats!! Your clients got the house and my sellers really loved the letter and are happy the home is going to a young family.” In reality, they outbid 5 other offers by 50k….I am not going to call the buyer’s agent and say “Congrats, you cleared everyone else by 50k.” Buyer’s agent phones clients and says “Congrats, the letter worked.” Buyer goes back to office Monday morning and tells everyone they got the house because of their letter then all the co-workers think letters work and everyone is writing one.
If you want to buy a house IMHO… being unrepresented is a probable way to make it happen. Just approach the listing agent and ask them if they know anyone that can represent them. It worked for me in late 2015. We had the house purchased within 2 days and 3 days before the open house. 13 groups viewed the same day but we had preference because we were unrepresented. It might not be entirely legal.. not sure.
The other option is to approach a partnership being unrepresented. They may ~ be able to split and one represents the buyer. This might not work anymore.
Yup, that’s the problem. If you are a realtor making xxx,xxx/year doesn’t make sense to risk your licence for $500. The outlined scenario is ridiculously high risk for the agent, much smarter to just refer it to a lawyer.
+1, Leo has surprised me with exceptional spot on common sense lately 🙂
Little anecdote. Late-60s relative in Victoria meets with a lawyer to draft a will. Going over the relative’s assets, the lawyer asks what the mortgage balance is on the house. Relative says, “I don’t have a mortgage.” Lawyer replies, “Hm, that’s rare.”
Holy Fak.
‘
‘
A would say a small amount of people that I meet over 70 have a mortgage and of those who do they don’t care because rates are so low and inflation and rising property values mean the mortgage gets smaller in real terms every year. If your under 60 and planning on working for a while or have lots of money then you’d be silly not to borrow at these rates.
I won’t comment on the price, but for the agent it’s not the time, it’s the risk. In the eyes of the council the buyer will almost certainly be seen as their client and they will have implied agency even if they try to claim it wasn’t a client relationship. So then it is very risky to write an offer for a client without doing due diligence on the property, and whether it works for the client. If that deal goes south it could create a bunch of problems for the agent.
I don’t see the point from the consumer’s side. If you just want someone to review an offer get a lawyer. Ours didn’t even charge us anything for the review since we were using them for the purchase.
I agree that in 2016/17 Gordon Head overheated and prices overshot a bit, then declined somewhat in 2018/19. I don’t think it was a $100k drop though.
Leo, looks like the average GH house price ( 1970’s built ~2200 sqft on a 6000 sqft lot) took on a bit of a roller coaster ride in the last 3 years. I am guessing it went from $850k (2017) down to $750k (2019) before popping back up to $950k now. Do you think this this accurate?
Little anecdote. Late-60s relative in Victoria meets with a lawyer to draft a will. Going over the relative’s assets, the lawyer asks what the mortgage balance is on the house. Relative says, “I don’t have a mortgage.” Lawyer replies, “Hm, that’s rare.”
Holy Fak.
an interesting observation- someone asked a realtor to write up the purchase and sell agreement for $500 , leaving the realtor’s name out of the document… the realtor counter offered for $2000 for 30mins of her/his time….
Sure it’s possible for any self-sufficient person to become knowledgeable enough about houses and legal transactions to confidently lead themselves through the process with hired help just where required. However, it takes time and experience to develop those skills. Most people are too busy making money & raising families to invest in developing that expertise… just like how you could change the oil in your lexus, but why spend the time and effort, if you’re willing and able to pay an expert to do a better job than you can do yourself?
In principle I agree with you – I bought my house privately and though I paid for an inspection, the guy didn’t tell me anything I didn’t already know. But for most people, paying for some peace of mind is probably worth it.
One thing I have noticed over all these years, (and I’ve mentioned this before), is how people rely on a real estate agents advice so much. It used to be that we would do our own homework and figure out what we wanted for our home. Now, we have so much paperwork, all designed to make the homeowner feel less confident, and creates a legal nightmare along with fear.
This is by design. Listen to the ads. “Our agent had our backs” etc etc.
The bottom line is… you had better have your own back. Do your own homework. Have a good lawyer go over your paperwork. You don’t need an agent. The fear factor is invented to make you submit to their power.
And yes…I’ve used an agent before. But several times I’ve chosen not to and it has been straight forward and easy. (With a lawyer handling the paperwork. Much much cheaper than an agent.)
People are spending $500.00 to have someone “inspect” a million dollar house to be told that the house needs a new hot water tank. That’s another one that cracks me up. You are not buying the house. Most of your money is going towards buying the fact that the box sits in Kitsilano, moosejaw, or Victoria. That system needs to be changed as well. (Stupidity of banks) (There should be a deep penetration radar scan data base of whether there is an old tank or not. If no history exists then do a scan.)
Forgive me…I’m getting old and cranky:)
Victoria employment up 1700 jobs from December, but still down 6600 from this time last year.
Bad national numbers, but BC employment is up by 2,800 jobs from December.
Cool, so most buyers in any growing city are out of town buyers if you say anyone that wasn’t born here is not a local.
So back to my previous point. What’s the difference to the housing market between someone buying who was born here and someone who moved from Kitimat and then bought after 5 years? Nothing.
Leo- You missed my point completely. Few people can afford to buy a property on the Island without selling the property they own. I would still consider someone an out of town buyer if they first rented a place to live and then bought a property in 1-2 years. And yes, you could be considered an out of town buyer.
So when does someone become a local in your book?
I moved here in 2001 and bought in 2013. I guess I’m an out of town buyer?
I really don’t think it matters. What matters to the housing market is how many buyers are dependent on the BC job market and income from that to buy a home, and how many are wealthy from other sources (Vancouver real estate, overseas income, etc) and thus local affordability has no bearing on their ability to afford a home
I believe the perception that most of the buyers in the market are locals is not accurate. I know the numbers reveal that most are local, but how many “locals” are people who have moved to the Island in the last two years and rented while they search for a home or waiting to have one built. When they finally make a purchase, since they are already residents, they appear on the stats as “locals”. This is the problem with raw data, although it is accurate, it doesn’t necessarily tell the whole story.
Never said anything of the sort and kind of odd that this is your conclusion.
I said that if being self-represented should be a choice and the obligation should only be to inform buyers that there is a risk but not to preclude such offers. I do object to double-dipping on commissions when there is an unrepresented party as a contractual term.
I also said many people would benefit from using a realtor, just not everyone. Quite frankly, paying a lawyer an hourly rate to advise you on your offer is going to be a bargain if you get the buyer’s commission as a discount – however the offer to purchase forms used by realtors are readily available.
🙂
So what I gathered from debating with you the last 10 days is couples buying property together unrepresented would be a reasonable idea with little concern 🙂
I disagree but we can move on.
btw, worst example of bidding blind I’ve ever seen is on a house listed for $900k a number of years ago. Only two offers, one being my clients at 950k and then we saw it go pending at $1.1 million. Those $1.1 buyers would never know and they re-sold the house a few years later for 350k more but still.
No, but any half decent buyer’s agent will ask. If offers are due at 5 pm I’ll wait until 4:45 pm, call listing agent, call my clients, and then DocuSign at 4:55 pm. If you are a few minutes late it isn’t a big deal. At 4:45 pm you typically have enough information. If there are already 5 offers it won’t really matter if there are 7 by 5 pm either way you are bidding blind. If there are no offers at 4:45 pm then you wait until 5 pm and check again.
Three times in my career buyers’ agents sent in above asking offers on my listings with delayed offers without asking me if there were other offers and there weren’t. My sellers signed right away. Once I had buyers that still went in over ask despite being the only offer at the deadline but they really wanted to sellers to sign that evening which ended up actually looking like a smart move as the next day the sellers had a back-up offer above ask.
Obviously, not everyone have the same priority.
If saving 10-15K to those that pinch their pennies then so be it, but others have their priorities else where. Just as those that justify perfectly at throwing away ten of thousands if not hundred of thousands on pets, toys, drugs, cigarettes, and alcohol between moving and selling their homes.
Not of their own accord but if your agent asks if there are other offers the listing agent has to answer truthfully.
Problem is the delayed offer makes this not always possible. Offers at 5 PM you can hold your offer to just before and ask but of course others may be doing the same.
I’m curious, if you initially expect multiple offers and set up a delayed offer date, but only end up with one interested party, is it common practice for the listing agent to tell the buyer’s agent that they are the only one making an offer? I ask because this is exactly what happened when we bought. We were prepared to bid $50k over, then on offer day found out we were the only ones making an offer, so we offered ~15K under instead.
What universe are you living in? Canadians spend an average of $2,573 on vacations each year, and that makes travel one of the single largest annual purchases for an average household in non-covid times. Saving 15-20k after tax (likely 18- 26k before tax) on a home purchase is very significant for the long-term net worth of the median family in Victoria. This does not mean that realtors have no value, a lot of people will benefit from using one. My point is that there should be freedom and transparency in the market instead of a move to secrecy about commissions and shunning of self-represented folks due to “concern” which is really veiled self-interest.
And, as far as stock fluctuations, the median net worth of Canadian families was $329,900 in 2019.
I agree that some realtors are shady, but others worth every penny.
I had two instances that I didn’t like, one on the first house purchased in 2003 and the second were on the second purchased in 2014.
The first were a for sale by owner and the seller didn’t let me involve my agent so I walked away from the deal.
The second were an open house with out my agent. My wife love the house and we were going to put in an offer, but I walked away because the selling agent told us that we don’t need to involve our agent as he can represent both parties (he was looking for a double end commission).
IMHO, 10-15K is a lot of money to save on commission, but at the end of the day the stress of represent yourself may only worth the cost of a family vacation for a year. And, many people stocks portfolio fluctuates at least that amount or more in a day that they don’t need the added worries.
That would still create inefficiency in the market. Personally, I think the most efficient would be you pay a listing agent $xx/hr whether home sells or not and you pay buyer’s agent $xx/hr whether you buy or not. Would get rid of unrealistic sellers, tire kicking buyers, open houses, no incentive to just “close the deal,” etc.
Until then if selling mere post with reasonable cooperating commission and if buying negotiate cash buy with buyer’s agent or go in unrepresented if you are super savvy (most people aren’t so cash back buyer’s agent best option).
Imagine this (insert whatever dollar amounts you want):
Buyer says to realtor: “Help me buy a house. When I do, I agree to give you $5,000.”
Seller says to realtor: “Help me sell my house. When I do, I agree to give you $5,000.”
The purchase price is the purchase price, and the realtor fee is the realtor fee.
For the seller, it doesn’t matter if the buyer is unrepresented or not; either way, you’re paying your realtor $5,000 to sell your house.
For the buyer, it doesn’t matter if the seller is unrepresented or not; either way, you’re paying your realtor $5,000 to buy a house.
Don’t want to pay a realtor fee whether buying or selling? Then don’t use a realtor. No confusing/stressful commissions negotiations involved in either case.
Every time the topic of commissions comes up on the blog I understand very little and get a giant headache.
so dear readers, I suggest you all get your realtor license before you buy or sell 😉
Couldn’t agree more. People will shop around for a 30k kitchen which has 15k+ of material inputs but they won’t shop around for a 30k commission which has $500 worth of photos/floorplan inputs. Confusion is probably the reason.
Thank you, thank you, thank you.
You know why the commissions are bundled in there? Because that way it’s fucking confusing. And realtors on both ends of the transaction stand to take advantage of, and profit from, that confusion.
First the buyer pays, then the seller pays.
But if you really want to get persnickety about this, the actual price of the home should be unbundled from the transaction costs. It’s odd that when a house sells for $1M, people think it’s worth the sale price. But the actual house sold for ~$970,000 and the rest is commission. So why does the land title office put the sale price down as $1M?
If you really want a revolution in how real estate is bought and sold, mandate that the commission be unbundled from the purchase price, just like taxes are.
Of course this all depends on the market. These days sellers are sometimes taking unconditional offers thousands or tens of thousands of dollars under the best conditional offer.
Lottery win now or maybe a lottery win + 2% later. Hard to say no to the former, and no one is doing any negotiating on like 40% of the single family sales.
Leo can probably articulating better than I can, but the buyer is the only one bringing $ to the transaction; however, doesn’t give him or her the right to know how much of that $ the seller is giving to the listing agent.
You mean what the buyer paid. Remember, the buyer is the only one bringing $$ to the transaction 🙂
+1, that is a good way of articulating it. Negotiate on the basis.
I don’t but if I was a seller I’d be pretty annoyed if I got an offer presented from an unrepresented buyer asking for the buyer’s commission as a deduction and the listing agent refused and wanted to pocket the entire commission and take that money that they otherwise would not get if it was a represented party directly from my pocket. Real fast way to get very negative word of mouth.
Really depends on the market. In many cases the realtor will be assigning the buyer’s commission to the seller which makes them happier to accept your particular offer and makes the agent look good and works well in an ultra-competitive seller’s market. In a slower market you can make an offer and are more likely to negotiate the commission split as an additional buyer’s discount because the seller doesn’t have other offers and so it an easy give and a significant win for a buyer.
Unless you saw the amended contract how would you know what the seller paid?
We also bought unrepresented and I negotiated on the basis that we were unrepresented and thus the seller was saving themselves $10k. We got $20k off the list price. But in reality I have no idea if the selling agent actually reduced the commission or if if they pocketed the full amount and the seller simply reduced the price on their end.
You still have to fill it out, you can’t leave that section blank. I’ve never had it not be a discussion with the seller when listing.
The offer you were outbid by the buyer’s agent waived his or her commission? That is defintively a <1% situation and the fact that you would know that (listing agent disclosed it to you?) is another <1% situation and 0.01×0.01 is a very small probability.
I think you ended up in some very unique situations and played it exceptionally well to your benefit.
Leo is right…."Seems like a no brainer next step to address bidding war transparency for the real estate council."
Don’t think it needs to be complicated and the template listing agent contract should be revised to clearly facilitate and not block this option where requested by the unrepresented buyer imo, but unrepresented have no voice in this other than with their buying power and sellers are not going to think about this, perhaps unless they read this.
As per what Leo posted below you are asking the sellers and the listing agent to amend the listing contract.
I like the overall concept of making an unrepresented offer; however, I don’t think we will see eye to eye as to how it should be handled. My angle is going in unrepresented, clean, but don’t come across as complicated and the odds are you’ll benefit by what plays out behind the scenes based on human nature.
All my sellers ask what’s going on when we get to this section.
No, that’s the old contract. The new one looks like this. Of course the listing agent could put that the seller pays the same amount whether there is a co-operating brokerage or not, but at least it gives the seller a chance to ask questions about why they should pay double to selling agent if the buyer is unrepresented.
Ironically the much more dire warnings that agents are forced to present to unrepresented buyers after the REC was taken over by the government has probably driven more people away from being unrepresented than before.
Not really. You are the only person that actually brings $ to the transaction as the buyer.
Why? Obvious that you are asking for the commission split as a discount which is entirely reasonable given that you are representing yourself and the split is supposed to go to the buyer’s agent. There is no “interference”. And this is very successful in real life.
I have twice requested and twice received 100% of the buyer’s agent’s commission – 30k saved as a deduction from the price. In a third case I was willing to forgo the commission as I felt that the realtor would be highly motivated to complete, which he was, but the seller did not agree to the price. Having the possibility of negotiating with the commission provides additional leverage, you could also request it be assigned to the seller as motivation, which happened in another case but we did not complete.
Problem with this is both the listing agent and the seller are going to think what’s wrong with this person, why are they trying to meddle with the listing contract which has nothing to do with them.
As I said, I would give unrepresented offers a go personally, but I would mind my own business and the let the situation play out on its own behind the scenes.
i/ Either the agent has already agreed to a discount in the listing contract or he or she will agree to a discount once the offer is received.
ii/ The agent won’t agree to a discount but will see $ in front of their eyes and will convince the seller to take a lower offer so he or she can earn a larger commission.
Or as Annie smartly did try to find a cash back agent.
This makes sense both in theory and real life in my opinion, +1.
“Were you already provided with scans for oil tanks, etc., or you just rolled the dice?”
If the asking price were $200K less, I may roll my dice.
“Everyone is bidding blind 99% of the time”
Again, I was the 1% in this situation. I offered on another house in OB, bid out by just $3K. After my 2nd offer submitted, the winner agent submitted the 3rd offer with conditions to fully refund his commission back to the seller……..Do I need explain more?
When I purchased my rental property back in 2014, I did not have an agent but had everything lined up to make an unconditional offer (rolled the dice, as Marko said). I had to negotiate hard to get the realtor to give me $5,000 of the ‘buyers’ realtor’s commission’ as part of my offer and she kept the rest. But hey, I was happy with the transaction.
I’m going to ask a dumb question. As a buyer, why go unrepresented? Isn’t it basically “free” to use a realtor when buying (because the seller pays both the listing agent and the buyer’s agent)?
.
879 Dooley Rd
Sold 2013 for $3M
New house built.
Listed December for $5.95M
Sold $6.15M
There is a reason to advise for representation – there are objectively some people who do not have the skill set to represent themselves and they could be disadvantaged by this. The obligation on government is to advise for representation, not require it where someone refuses once advised.
It’s coming from the council (government), not the board.
Subject to the agreement of the listing realtor assigning the buyer’s agent’s commission as a deduction from the purchase price.
You don’t.
This is between the agent and the seller. I would assume that the board has come up with a term that is favourable to realtors in the “new contract” – not something that the seller has specifically negotiated.
Things go sideways whether people are represented or not. The forms for realtors dealing with unrepresented parties are very comprehensive and do an adequate job imo.
Of course the board wants all parties represented, they represent and are paid for by realtors. This would force all purchasers to use a realtor and pay a commission, but not all sellers because realtors don’t have control over those. Are they moving to prohibit realtors from representing sellers in making an offer on a fsbo? Probably not despite there being the same issue.
Except when they do which definitely happens. And every open house I’ve attended I’ve been pursued by the listing realtor as a prospective client once they found out I was not working with a realtor – which was one of the first questions if not the first.
Yes, looking at the DOM looks like you went unconditional. Were you already provided with scans for oil tanks, etc., or you just rolled the dice?
Not sure if the sealed envelope (I don’t quite understand how that would help, I’ve never seen it in my career other than court foreclosures) or “good faith” had much to do with it. I deal with a number of multiple offer situations every week and it isn’t practice to disclose the offers to other parties. Everyone is bidding blind 99% of the time, that is why the process sucks imo. Most likely you had the highest net offer (adjusting for commission) so that was the really smart play on your part.
Fair point, but I would also never allow for an open house if selling my own property. We had record breaking sales 6 months in a row. January was only second highest to 1990 and that would have been the 7th record breaking month in a row. Very few/no open houses due to covid. Doesn’t take genius logic to conclude homes don’t sell at open houses.
We were NOT advertising the suite because of the area (had 1 kitchen, no photos of suite).
It isn’t a huge issue to be honest as 95% of unrepresented showing requests don’t return the unrepresented forms (aka they are not serious buyers). I already have a video I send out with the forms, etc. -> https://www.youtube.com/watch?v=j6WUgS33NeM
Just curious, how would you word this in an offer? How would you know what the listing contract (confidential between listing agent and seller) looks like? The new listings contracts ALREADY address an unrepresented party commission scenario so the listing agent and seller have agreed on what to do with the commission if an unrepresented buyer comes along BEFORE the property goes on market.
The big thing right now is the council is seeking to make examples of realtors doing unrepresented transactions and something going sideways as really it is very clear cut that they want all parties represented. The forms literally read “The BC Real Estate Council strong advises you to seek your own representation.”
Open houses are standard practice in the industry. Hard to see that unrestricted but supervised access is encouraged in an open house but discouraged because it is some kind of different threat in booked single appointment situations? If there really was some issue with it then the board would be doing away with open houses.
This doesn’t require an interior visit. A listing that shows two kitchens, of which there are many, would lead to the same result. An overly vigilant neighbour who wants to complain will do so.
Totally agree this is within your right to do and the listing agent needs to follow these instructions. Very different from the listing realtor refusing to show without these instructions or the board changing the rules to prohibit offers from unrepresented parties even if the owner does not request this.
Make it part of the offer if you are unrepresented. This needs to be presented to the seller and if the realtor refuses to assign part of the commission they will need to explain why to the seller.
Funny how realtors were happy to act for both parties back when it was permitted and double-end the commission despite the conflict of interest but now that it is no longer permitted the unrepresented buyer is some sort of threat and pita.
“I stand by my comment as it looks like there is only one unrepresented above ask sale in Oak Bay for all of 2020 which must be you. Just curious, were you familiar with the house, have a business background or just figured you would have a better chance at securing the home being unrepresented?”
I wasn’t familiar with that particular house, but have some limited business background. The true advantage for me was the seller agent agreed to only take his part of commission which made my clean offer very competitive. Plus, I sealed my offer in an envelop so no one knew what I offered (this is a lesson learned from a sneaky seller agent). The most important, the seller agent had good faith, didn’t disclose my information to other agents.
As being an unrepresentative buyer, I wouldn’t recommend others do the same thing especially in a multiple offer situation unless you have strong negotiation skills (not you think) and willing to take the risk for overpaid.
You are correct….the hope is that the listing agent might compromise if the buyer is unrepresented, but it isn’t a guarantee.
I thought that in the standard listing contract the seller pays the same commission whether the buyer has an agent or not.
http://www.garbuttdumas.ca/wp-content/uploads/Multiple-Listing-Contract.pdf
So today I get home to find a family has placed a letter in my door asking me if I’m interested in selling my house. To me this seems like people fishing for a deal below market value. I’ve never experienced something like that before but heard it happening in Vancouver .
When I sold my personal house, I hired a friend in my brokerage and told him absolutely no unrepresented parties in the house even thought in theory it would have saved me 25k. Two brand new houses I sold last year @ Juras Construction had a ton of people approach me unrepresented and I politely ask them to seek their own representation (while offering a smaller cooperating commission).
I’ve had so many complete ****shows with unrepresented parties over the years. Where do I start. Once we were not advertising an illegal suite. Unrepresented party (turned out to be neighbour) booked a showing through realtor.ca with the true motive to assess the interior of the home and then reported the illegal suite to the municipality and we had to take the home off the market to deal with the bylaw infraction. Yes, they could have done the same by engaging a realtor to represent them, but it would have been an extra step to jump which they may not have undertaken.
I understand your point completely, but based on what I see on a day-to-day basis if I am the seller I am instructing my agent not to bring through anyone unrepresented. From my experience the one benefit (potentially netting more) doesn’t outweigh all the negatives I’ve seen over the years. All someone has to do is click “book a showing,” on realtor.ca and you are totally fine with this individual coming through your house?
If I weren’t a licenced agent would I consider buying unrepresented? Of course, that would probably be my strategy, but I would be smart about it like provide proof of funds, explain that I am willing to make unconditional offers, etc., so the list agent knows I am serious sophisticated buyer not a tire kicker.
the owner will never find out if there was /were unrepresented offers… some of the agents are just bad…. unfortunately.
I hate to beat up on real estate agents but it seems clear to me that an agent has a duty to both show and bring an offer by an unrepresented buyer to the owner. The real estate agent has a fiduciary duty to the owner to obtain the best offer possible. Sometimes real estate agents seem to forget that the house is not theirs and they have been hired to do a job for the owner. They certainly do not get to select which offers they want to present to the owners or which potential buyers get to see the house.
There should be no issue with listing agents showing to unrepresented buyers. That is why there are the forms for this situation. IMO the reason that listing realtors don’t want to show to unrepresented buyers appears to be largely because they have mutual referral networks and unrepresented buyers remove 50% of the commission from the realtor network and in a market like this one there is no shortage of represented buyers.
“people who can only afford $1.1″…..
The new Canadian underclass emerges.
What is driving me nuts right now is agents underpricing homes by 200k and then in the middle of Covid you have a massive number of showings. A $1.25 million home will get listed for $1 million and then you have people who can only afford $1.1 looking at it.
Seemed like a number of unrepresented buyers in the luxury end (+$2M). Different thing as those weren’t above ask but seemed unusual to me
I stand by my comment as it looks like there is only one unrepresented above ask sale in Oak Bay for all of 2020 which must be you. Just curious, were you familiar with the house, have a business background or just figured you would have a better chance at securing the home being unrepresented?
There can be an advantage to going unrepresented it is just becoming more and more difficult to get the listing agent to agree to it.
Maybe Leo can figure out how to search above asking price SFHs and unrepresented buyer but it is going to be less than 1%.
Seems like a no brainer next step to address bidding war transparency for the real estate council. But now that they’ve worked through most of the ideas of the panel they seem to be out of new ideas
“Incredibly rare and almost unheard of in multiple offer situations.”
I made an unrepresentative offer last year for a SFH in Estevan OB under a biding war situation and luckily the offer be accepted 🙂
Excellent decision, going from high yield funds to low yield bonds in an ultra low rates environment (just about as smart as holding cash).
If these so call educated people have any sense, they would buys bank stocks as Marko has suggested in the past for 4-5% dividend yield, or telecommunications for 4-6% dividend yield, and save some money on MER at the same time.
Incredibly rare and almost unheard of in multiple offer situations. I took a zoom course the other day and many listing agents are going towards not even showing properties to unrepresented parties, let alone writing up an offer. Lots of fear from real estate council and the council is pretty clear that they want both parties represented.
Not that common right now as it is very difficult to come up with a fair price for both parties. Most sellers want to go to market to test it out. I think private sales a lot easier in slow market. “you haven’t been able to sell your house for 500k for 6 months. Take 20k off, another 20k offer for no commission and let’s do a private deal at 460k”.
+1
About 20% of the market does not show up on MLS. However that is mostly new builds as far as I know. https://househuntvictoria.ca/2017/11/10/dark-sales/
Of course private sellers can list on MLS for a few hundred $. Given the exposure that gets you, I think you’d be silly not to.
Oak Bay phasing out gas-powered leaf blowers used by municipal staff
https://www.timescolonist.com/news/local/oak-bay-phasing-out-gas-powered-leaf-blowers-used-by-municipal-staff-1.24276589
I’m still hoping to see divestment of its long-term endowment, but this is great news nonetheless:
After years of pressure, UVic drops fossil-fuel investments
https://www.timescolonist.com/news/local/after-years-of-pressure-uvic-drops-fossil-fuel-investments-1.24276252
News item in case no one has seen this.
https://www.cheknews.ca/greater-victoria-home-price-new-record-1-2-million-740643/
Are there any stats on how many houses are being sold privately? I’m sure a lot of people are trying to avoid paying real estate fees and a lot of properties being sold by word of mouth. I purchased a small house in Langford in 2002 through friends of mine. Sold it in 2017, the top of the market back then.
Introvert, you are hilarious… that comment cracked me up real good. Has anyone tried to buy a truck lately, it is almost as bad as housing prices. Just gnarly, low inventory and minimal selection. Commodities are up, housing is up, and wages stagnation rolls on in Victoria. Can a blue collar guy get a break?
Up for sale again. Not a thing done. Only six months later and, what, 550k more?
This type of market is extremely difficult for some real estate agents to make a decent living. Some are probably starving, running around making offers for their clients only to get beat out time after time. And with little inventory, desperate buyers might not be as loyal to their agent, opting to make offers directly to the selling agent. Hot markets probably lose more agents than in slower markets with less competition and more normal conditions.
QT: I can think of a hundred “schemes” that would produce better results than what we are doing now to solve the homeless issue.
On average, it costs the taxpayers over fifty thousand dollars a year for every person living on the street.
I’m baffled why taxpayers and our political leaders are ok with that because they refuse to consider other options. Clam shell dinners and a motel room with no cooking facilities is the best we can do apparently.
That fifty thousand dollar figure does not include the cost to the families that end up in court battles with car companies that sell a new car to someone who is experiencing an obvious mental break . Very common for someone having a mental break to order and buy a whole list of very expensive items on line, destroying the families credit and the husband or wife having to cope with the financial disaster and fear of losing their home. One of the biggest car companies in Victoria refused to take a car back. You probably can guess the dealership. I was shocked at that one. But not surprised.
So. Keep doing what we are doing or make major changes. There is going to be a revolution by our young people because people don’t get it.
https://bc.ctvnews.ca/one-homeless-person-costs-171-000-a-year-1.365403
Correction: ̶o̶r̶ ̶r̶e̶a̶d̶y̶ already
Do you have any schemes to suggests?
We have created our bed and now we must lay in it.
We created our own doomsday fears of climate catastrophe, so we shut down all that is deemed to be harmful to the environment while cheers on when fishing, farming, mining, logging, manufacturing, and as far as essential development are shutdown with job lost in the ten of thousands or more. Therefore, it is impossible for young people to eke out a living in smaller community.
Don’t worry Trudeau or ready got it figured out. He legalized marijuana to keep the pot smoking millennials doped up so that they can’t rage against the system.
The market would run out of control if the government implement 50+ amortization, and CMHC would end up holding the bag when a correction happen.
For brief period a decade ago we had 40% amortization, and many people jumped on on it and refinance or open a line of credit at 95% (in some case 100%) of the their house value, and spends like there were no tomorrow. Hence, the refinance rule changed to maximum of 80% and 25 year amortization.
Some readers won’t believe this isn’t hyperbole, but this hits the nail on the head. Young people are feeling increasingly hopeless.
One problem driving home prices through the roof is the fact that the only collateral banks want is a residential property. Ever try to get a business loan, commercial real estate loan, or whatever, without a residence to put up for collateral, they won’t even look at you and if they do, the rates are extremely high. The cheapest rates are reserved for residential real estate because it is a commodity that can easily be sold. Therefore, it’s the banks that have commoditized real estate, not investors.
Paragraphs, my friend. Try them.
If I were the boss, I would create a massive Federal building program across Canada to increase supply of units. (Through very generous tax incentives to encourage the private sector or direct building by a government agency. Hopefully private incentives….but the main thing would be to massively increase supply.)
I would also create special schemes to encourage young people to move out to smaller communities where towns are crumbling because of closures to mines or mills. (Make sure those places had support as well such as huge incentives for creative small businesses.) There are such places in BC and I’d make it so attractive tax wise that young people could really get excited at the idea of ownership of a home. They are doing this in Italy for example where they are giving away houses and paying for the restoration etc. We need to have a new approach to injecting life into some of these types of towns….which would take the strain off of cities.
We need to cut red tape. Make it easier to renovate an older place without having to bring it up to some magical level of brilliance. There are many places that could be brought into good function in a simple way in order to squeeze forty more years out of them. What’s the point of perfection if the whole area is going to be re zoned and torn down anyway in a few more short years. In the meantime…these places could be housing people.
Some would say, oh…that would cost a fortune…but it would be cheaper than having our young people starting a revolution and opting out of society as many are starting to do now because they haven’t a hope of ever participating or dreaming of having a secure place to call theirs and to raise a family. It’s a choice of paying taxes to support such a scheme or pay the dollars to police the mayhem that is about to only get worse.
i don’t like extending amortizations – it just kicks the can down the road and then prices are even higher. Maybe if they reduce AMS it would bring down prices. Problem is when over half of Canadians own homes its hard to implement policies that will reduce home values without risking voters.
Commoditization of housing, due in large part to government policies which encourage people to value housing for its future sale proceeds rather than shelter.
Pretty much every knowledgeable party, including the RE industry, knows what the solutions are. The obstacle is that existing homeowners have bought into the problem.
I like the Portland model. Okay with providing an incentive to increase occupancy, but not a penalty for homes that are “underoccupied”. I think regulation on this can go too far quickly. We probably also need some tax reform on capital gains to fund more rent geared to income housing for those in the greatest need. Without additional taxation if you extend mortgages to 50 years prices will probably rise more significantly to the new monthly affordability. If mortgage rates rise a lot extending mortgage terms may be the only way to prevent a crises for new homeowners though.
It seems nearly unanimous – the cost of housing is too damn high. What do you think is the cause of the problem, and what are your viable solutions to it?
I think inefficient distribution of housing and the ‘stickiness’ of zoning/land use laws is a big factor. Because of our aging pop’n and 1950s zoning bylaws, there are lots of 2500+ sqft homes on 1/4acre lots being occupied by 1 or 2 people. I think govt should incentivize municipalities to relax/repeal restrictive zoning bylaws- like Portland’s model, and look at policies designed to incentivize turnover of under-occupied (ie. seniors) housing stock.
I agree with Marko that we’re moving toward SFDs becoming inter-generational family assets, so perhaps it’s also time for mortgage regulators to consider loans with 50+ year periods. I know this is unheard of in Canada, but desperate times…?
No question it’s shitty out there for buyers: buy today in a mad feeding frenzy of low listings with prices at x (where x is already 20% higher than last year), or hope to buy at some indeterminate point in the future when the frenzy has died down, listings are more plentiful, but prices are now at x+5% or x+10% or more, while also keeping in mind Victoria’s 40-year run of stubborn price-stickiness, during which nominal prices have never dropped more than ~5%.
Amen. Digging a hole and filling it in.
You can’t really. I was thinking less so overpaying the market value, more so overpaying your own capacity to pay although of course overshooting market value is a risk if you end up not holding as long as you planned to.
Looking back at the definition of market value, there’s a few things that make current conditions not conducive to finding actual market value. Buyers don’t have knowledge of other bids, there isn’t sufficient exposure to the market, and there’s not sufficient time for due diligence in many cases.
“The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale”
Remember when we chatted last spring and you said you were looking forward to a slower market post covid?
🙁
Symptom of the blind bids I think. Normally you have a reference point of the asking price so you get offers relatively clustered. Who knows what the true market value of the big over ask sales really is. Impossible to tell in the current market
“Your” realtor only gets a commission if you are the high bid. Also the higher the bid the bigger the commission, but that’s a secondary consideration. Making the sale is primary.
Problem is the individual sales are all over the place. Sometimes my honest opinion is way off, it is not that I am trying to get my clients to bid as high as possible, but as I see how it could be perceived as such.
Two examples where I errored a huge amount in both directions.
i/ Teardown in Fairfield listed for $780k. I told my client 850k unconditional has a solid chance and no way it goes over 900k, in my opinion. My client bids in the 800s and the property sells for $950k unconditionally.
ii/ Really nice home in Lakehill area listed for 850k. I tell my clients they have a chance 975k unconditional, but my gut feel is that it might sell for $1 million so my clients don’t put in an offer. Place sells for 925k unconditionally yesterday which to me seems like a “deal” when I review all the sales from the last 7 days. I honestly thought it could stretch to a million.
The process of buying a house right now sucks and if you aren’t comfortable with the blind bids an options is always to sit on the sidelines until things cool off.
My experience with the mental health act has been that the system is one of complete failure and needs to be re thought.
For example: A man with more than twenty years of mental illness turned the gas on in the house.(Shared ownership house)
The police would not enter the building because the smell of gas was so strong. They shut down the whole block because they feared for everyone’s safety.
Because of his mental illness he was not charged (Which I actually agree with) No help was given to him to treat his mental illness. It was next to impossible to get him the help he needed. Two month wait to see a shrink about the dose of his meds.
A few short years later, he cut the gas lines in another house. Same thing. Absolutely zero help. I had to phone 911 over and over and over again until we could have him picked up by the police. He was finally picked up and taken into emergency where the staff then released him before the police even had the forms filled out. It’s a common story the police told us. The doctors said it was a marital problem and not a mental issue and they released him, even knowing his past history. He ended up in Vancouver wandering around, sleeping on skytrain etc etc until finally he was taken in. (Only because of family begging for help over and over again. Vancouver police picked him up and he was taken in for treatment for a few days. They escorted him back to Victoria psych ward where they released him almost immediately.
It has taken years of hard advocacy to get this poor man the help he needs. Most people don’t have the tenacity or skills necessary to fight the system and advocate for these people who need help so tragically. People with mental illness end up on the street as a result. I’ve compressed this story a lot because of the space but believe me, I swear, the system is f@#*ed in the head. The man I am talking about is now getting some help but only because of the people who stuck with him through this nightmare of fighting the system for over twenty years.
His sad story is one of thousands.
What you see out on our streets is only half of the problem. The mental and financial collateral damage to the families that struggle to cope in a failed system is (((massive)))).
That’s why I say that the money we are spending on the current “solutions” is a complete waste of time and money.
Placing people into motel rooms and bringing them a clamshell dinner twice a day where they continue doing drugs is not taking care of them. Nor is it a housing plan.
Bluesman – out of curiosity, which boxes are you trying to tick? We have a house in Saanich, Mt Tolmie area that we are planning to list in May or June.
Likely makes little difference for most of those paying very high % of their income on shelter. For example, someone making BC minimum wage and getting only standard credits pays 9% of their income in income tax.
The signals starting for that increase in borrowing costs.
https://financialpost.com/news/economy/canadians-should-brace-for-higher-rates-sooner-economists-warn
Yes. Limited scope and time frame and no tie to a requirement for supported housing upon release.
https://www.theglobeandmail.com/canada/british-columbia/article-mayor-wants-bc-to-institutionalize-severely-mental-ill-people-who/
Thanks for listening to that podcast, Leo.
Yeah, all your points and questions are good, and I don’t have ready answers for them either. Like you, I definitely have to read her book as I’m finding it quite difficult to piece together a cohesive and nuanced understanding of MMT from interviews, articles, and, yes, Wikipedia.
Marko, is that pre-tax income or after tax income spent on housing and does that include any other housing costs? Either way it is not a good number.
I don’t know much about it, but we do currently have this in B.C.:
The police have the authority, under Section 28 of the Mental Health Act, to bring a person to the hospital to be assessed/examined by a doctor if the police have reason to believe that the person who is suffering from a mental illness is likely to cause harm themselves/others or get worse if not treated.
https://www.fraserhealth.ca/health-topics-a-to-z/mental-health-and-substance-use/mental-health-act#:~:text=The%20police%20have%20the%20authority,get%20worse%20if%20not%20treated.
Inequality is part of many issues that contribute to the housing crisis. Wealth of Canadian in general are getting better and better over the last few decades. Plus more and more people are living alone in larger and higher quality homes than the past also add to the housing demand.
More Canadians live alone than ever before: StatsCan report — https://www.cbc.ca/news/business/canadians-living-alone-single-statistics-canada-1.5045116
Nice post, Leo. When you say, “with over-asks in the detached market in the high tens or even hundreds of thousands of dollars, be very careful not to overpay”, how can one even assess whether they are overpaying apart from hindsight? I put an offer in on a home mid January, $60,000 over ask. My realtor asked me if I could bid $120,000 over ask, more or less advising me to do so. The winning bid was $95,000 over ask. I appreciate that this is not a normal market, not by a damn sight. Its difficult to head your advice in that statement when you have your realtor, who you trust, advising you to bid as much as you possibly can. And I suspect there a many realtors advising their clients to do the same. If such is the case that is part of the problem. As a result, in a market such as this, it is very difficult to define what too much is. I could have bid more, but I really felt it was a reasonable offer. Maybe in a normal market it would have been so.
Tough out there. We’re still optimistic we’ll find something for the mid 900s that will tick most of our boxes.
Cheers all
I absolutely agree with Totoro on the changes to the mental health act. Without doing that, we are throwing taxpayers money at the problem without any hope of success. And yes….we need a national housing strategy on an epic scale…something like the Manhatten project. Otherwise…. complete and utter failure is guaranteed and the money spent is going into an abyss…… as we are witnessing every day on our streets today. Our leaders are letting society down by not grasping the nettle. It would also be cheaper to do it right and it would save more lives.
Good one. I’ve listened to a few interviews with Dr. Kelton but this one was more thorough than most.
I’m actually onboard with the basic premise that what really matters is inflation, not deficits per se.
I think my main hesitation on that front is whether the automatic stabilizers can be responsive enough and whether they would be tolerated. So inflation ticks up, and that triggers automatic spending reductions or tax increases as I understand it. But does that mean job losses from the reduced spending (and then what happens to the job guarantee) and would politicians have the backbone to leave the automated tax increases in place in the face of intense public pressure to stop them. If inflation is up and life is getting more expensive, an increase in taxes at the same time would be very unpopular.
However I could see that all working. What I don’t really understand is why we need to tie MMT to the jobs guarantee. That feels a lot shakier. She says we would have full employment, but then says we need some unemployment to keep a lid on inflation. How are the unlucky people going to feel that are unemployed in that society? Not only are they not competitive for jobs, they also aren’t allowed to have one of the jobs for the public good? Doesn’t compute but perhaps I’m misunderstanding something there.
Next step is to read the book I think.
Leo, when you have the time, give this podcast episode a listen. Afterward, I would love to hear your thoughts.
https://podcasts.apple.com/ca/podcast/whos-afraid-of-modern-monetary-theory/id1441042667?i=1000504388234
It makes sense because households, on average, spend about that much of their consumption on shelter. I’ve been spending less than that for a long time. You can only have one CPI. Even in Victoria, fewer than 30% of households spend more than 30% of their income on shelter.
Statscan Victoria
The problem is inequality.
Well, along some axes it literally is different here. Whether those are the most important axes is anyone’s guess.
The advantage of the blind Vickrey auction is that truthful bidding is the dominant strategy, and thus would mean on average people would bid close to what they value it at, which is arguably the true value of it at that point in time. That goes out the window if it’s not blind.
I feel when it comes to competitive bidding on a property, an online auction site should be the format of choice. There are several online auction sites available, or a new site can be developed for real estate. The property is posted for 7-14 days with active bidding available during that time. At the specified closing time, a soft close is employed whereby the auction is extended for 2 minutes to allow further bidding. Bidders would have to provide a predetermined deposit on a credit card to ensure serious buyers. The deposit ($20,000?) would be lost if the transaction was not completed and the previous 4-5 high bidders would be given the opportunity to bid on the property in a one day period. This method is currently beginning used by most auction houses since live audiences are not allowed. It is working fabulously and the auction house I deal with is never returning to live auctions. This would probably eliminate the need for real estate agents, another victim of technology. It would also probably drive prices higher.
It’s different here.™
It begins (again).
Agreed. The base cost of shelter used to calculate is not affordable in the cases I noted below – which is a lot.
I don’t know about manipulating the CPI – it seems like it is a Canada-wide measure which is standardized and not based on Victoria or Vancouver. Probably already is a better measure out there for high rent market affordability if you look.
I don’t think it is inflation via CPI measures but the high cost of housing in general and low vacancy rate which is not new that is causing hardship. Especially for the categories of households I noted.
If you are a single or a couple earning minimum wage full time you are making about 31k per year each and 27k net – 2250/month. A room can be rented by a single for 750/month inclusive and a private one bed for two double that. https://victoria.craigslist.org/apa/d/victoria-fern-street-apartments-bedroom/7271069909.html This is affordable.
However, permanent disability is about 1000/month total and the shelter allowance for a single person in BC on SA is 375/month. That is not affordable.
Good Reddit thread on bidding wars and the lack of transparency. All multiple offer sales in Canada should be Vickrey auctions by law.
https://www150.statcan.gc.ca/n1/pub/62f0014m/62f0014m2017001-eng.htm
The problem with CPI as a useful indicator of inflation is shown in the link above. A table on that page shows the way various costs within only the ‘shelter’ category are allocated to the CPI basket.
1st problem – the entire ‘shelter’ category accounts for only 26.8% of the total CPI basket. This doesn’t make sense when people here in victoria are spending near 50% of net income on shelter.
If rent is up +4.5%, and your rent is 50% of your take home pay, then CPI becomes a pretty meaningless measure… considering they account for your rent as being worth 6% of the CPI basket. It’s totally out of touch with reality.
It seems to me the CPI is something government can use to ensure we meet our 1-3% inflation target, regardless of true inflation, simply by manipulating allocations in the basket to ensure targets are met. As a real indicator of inflation- it’s useless.
So to clarify are you saying it is getting cheaper for low income people to live in Victoria or more expensive? Ignoring CPI, are these changes increasing a low income individuals cash flow, decreasing it or having no effect? I haven’t done any statistical analysis as of late, but those individuals I know on the low income side seem to be experiencing more financial hardship.
Those are only part of the numbers. The goal if I understand it correctly is to keep inflation overall between 1-3% per year, which it currently is. Other things like energy costs and consumer goods were down and I don’t think it can be counted as “out of control”.
Here are BC’s minimum wage increases:
September 15, 2017 – $11.35 per hour
June 1, 2018 – $12.65 per hour
June 1, 2019 – $13.85 per hour
June 1, 2020 – $14.60 per hour
June 1, 2021 – $15.20 per hour
As for rents, I’d say that inflation is less of an issue than the free market shelter start point being unaffordable for a median or lower income family looking for a suite with more than two bedrooms. More affordable for those renting rooms or a couple sharing a one bedroom imo. Extremely unaffordable for those on disability or income assistance without access to subsidized housing – a glaring need. And vacancy rates are low which makes things worse.
I’m concerned about what happens next if covid continues without enough vaccine supply and some new variants. The drag on the economy and potential for more permanent job loss for those in the lower paid service sector seems likely. There may be a lot of pent up demand for travel and dining but who knows how long this will play out.
CPI is very different then what a low income earner spends their money on. Although based on those numbers… Food +3.3%, Rent +4.5%, Public transport +6.1% seems well above any low income earners wage increase… that is if they even got one.
Doesn’t seem to be the case in the stats?
https://www2.gov.bc.ca/gov/content/data/statistics/infoline/infoline-2020/20-89-cpi#:~:text=British%20Columbia%27s%20consumer%20price%20index,were%20excluded%20from%20the%20index.
Inflation is already here, especially for low income earners (food/vehicles/rent) it is out of control. On another note, I was looking at some additional fleet vehicles and truck inventory in BC is brutal and the pricing has gone through the roof as of late.
I have been looking around the market for a Toronto friend and there is not a lot available. It is flying out this weekend and has just decided to bite the bullet and really up his budget. Even so, not sure that there is a really great selection out there.
Great article once again. I wish everything that I read was even half as objective and well informed. Thanks Leo you really are a prize.
I don’t think the current market is sustainable myself, nor desirable.
I was wrong when I thought that the market would be negatively impacted because of the pandemic, but maybe only in terms of timing? It seems like economists are concerned that pandemic spending and economic impacts will lead to inflation. I don’t know. What I do know for sure is that finding a secure and affordable place to rent or buy is much more difficult today to the point that it no longer makes sense for many young families to continue to search in our market. This is, imo, a significant issue that should be addressed with a task force on housing like it was in 1969 so that we can come up with some solutions that will work for Canadians who don’t currently own and for those who are homeless for any reason, including untreated mental illness/addictions.
Deinstitutionalization was well-intentioned at the outset but has clearly failed and I don’t know why we leave those who are so impaired by addiction/mental health issues to wander the streets putting themselves in harms way daily at a tremendous cost to the health system, criminal justice system, and municipalities. Someone with schizoaffective disorder may be incapable of voluntarily accepting treatment. Although it conjures up one flew over the cuckoo’s nest scenarios, it might be time to think about a system of involuntary treatment and appropriate supported shelter. This would require a Charter examination, but given how things have played out I’d suggest there is a way to do it and it might be time.
Excellent overview of the market Leo. Thank you.
I must say that I would feel comfortable with a median price for the inner core of Victoria house prices going for between One million and One and a half million. (Plus the exceptional luxury market going for anything possible.)
If house prices started to reach over “one and a half” million for a modest bungalow then I would advise my kids not to think about jumping in beyond that level of price.
But up to one and a half million for a modest bungalow, in the inner core of Victoria…… not a huge risk in my opinion…….. but getting there.
I do agree that everyone has to be careful as the prices step into ever higher prices. It depends on each person’s level of risk.
Victoria is not there yet.
I know someone who has a very modest bungalow on a small lot in Fernwood and would be very happy to get $800,00.00. (They bought it from the seller directly for $550,000.00 two years ago.)
Which is well under the one and a half million and so I believe it will take at least another year before we are into prices that even I would call “crazy”.
There must be more available in that price range? (Small lots, modest bungalows?)
It’s the island, folks- people from all over Canada either want to move here, or they are already here and want to remain. Everyone on our block bought their place to retire to (sooner or later) and have no intention of leaving ( as they say,” sell and go where?” ) Similarly, the young family that rents the second home on our property- though they are being outbid on every home they wish to buy- don’t want to leave despite that the average price of a home in the prairie cities is 1/3 of what it is here. That the island is a desirable place to live won’t change, nor the fact that there will always be people able to afford it.
I think you pretty much answered your own question previously. If you can meet the payments without a suite who wants one? On the other side of the coin if the rental market is reasonable who wants to live in a suite? Suites are also uncommon in Ottawa which has high incomes but moderate house prices.
Whoops, thanks Marko. Thats what I get for relying on what my automated tools spit out. The +72% is on a per business day basis.
7230 East Saanich Rd Central Saanich
Ask $975,000
Pending $999,000
Assessed $743,000 DOM 0
Can anyone explain this one to me? Sure it’s nicely updated, has a 2 bedroom mortgage helper, but it’s on a busy road. But I would’ve thought closer to $850-900k…
Hey Leo, I am getting 57%, but I did flunk out of calculus in Grade 12 @ Vic High 🙂
btw, amazing write up.