New and active listings: what happened during the crash of ’81?
I recently found some more data on active listings in Victoria, bringing us back to 1990 for active residential listings data. It doesn’t change the picture too much though, with the average inventory remaining at 2500 listings. Again we can see that inventory usually builds quite slowly during normal corrections. Marked on the chart are some of the most rapid builds of inventory we’ve seen, and it’s generally not that quick. If we matched the absolute fastest gain in inventory from 1994 now, it would still take until the end of 2023 just to get back to average levels. At more typical rates of inventory growth we are into 2025 or beyond.
However that’s not to say that inventory always has to behave this way. I’ve previously written about what happened with prices and sales during the 1981 crash. Take a look at the article for the full discussion, but in short prices crashed about 35% after more than doubling in two years, followed by a long period of flat prices as inflation reduced their real value. Nominal prices didn’t regain the peak until 7 years later, and inflation adjusted it took 10.
However at the time I wrote that article I didn’t have any data on active or new listings for that period. To fill in some of the gaps, I’ve been trolling through archives of the Times Colonist, trying to find reports from the Victoria Real Estate Board which were periodically published in the paper. Though we can’t fill in every month, there is enough there to paint a striking picture of how quickly the inventory piled on. Between February 1981 and 1982, more than 2400 listings were added to inventory, bringing the market from way below average to above average in just a year.
Inventory decreased a bit towards the end of 1982, while a sales recovery brought hope to the real estate industry and projections of a return to price gains. However a continued high rate of new listings drove inventory back up, staying high and peaking over 4000 as prices continued to slowly drop to the bottom in 1984.
Why did inventory pile on so quickly back then? The major reason was a collapse in sales. From May 1980 to April 1981 there were 3035 residential sales in the region, despite record low inventory levels that made it difficult to find property to buy. In the following 12 months there were only 1733 sales, a drop of 43% despite an explosion of selection for buyers. As the real estate board president reflected in the paper: “You could almost pinpoint the time to the minute when the collapse occurred. It was on an afternoon in May of 1981”. Just days before buyers stepped back the paper puzzled over why activity was still as high as it was given the high mortgage rates and prices. FOMO kept the party going longer than seemed reasonable, but it couldn’t go on forever.
Another reason for the rapid inventory build was an increase in new listings. Speculators were forced out by rising rates, and some owners lost their homes from the grinding stress of high rates and job losses. That didn’t happen until after sales dropped, and in fact new listings were very depressed in the two years leading up to the crash as sellers held out for a better price later. Data is very spotty here, but in 1978 new listings were pretty unremarkable, then dropped extremely low for much of 1979, 1980, and the start of 1981 before rising strongly when prices started falling. For example in June 1981 there were 983 new listings, an increase of 80% from the 545 new listings the year before. The following June there were still 847 new listings, well above the pre-crash rate.
The question is, could this be repeated today? Overall I doubt it, but it all depends on the trajectory of rates. Firstly we need to appreciate how extreme that runup in prices really was. Though the average house is close to that level of unaffordability today, back then it was a much bigger departure from where it started. We can see this on the yearly affordability chart, where the carrying cost of an average house went from a relatively affordable 30% of the average income in 1978 to over 70% in just 3 years. Our recent 3 year price increase has only driven the same measure up by about 18 percentage points. Of course that’s before rising rates really started to bite so it’s too early to draw any conclusions there.
On the monthly chart of average payments we can also see how quickly payments for the average new house increased: tripling in 2 years. We’re nowhere close to that with “only” a 57% increase in the last two years, but again we also haven’t had a lot of rate increases yet. The fact that our market is slowing after just a few increases seems to indicate we may be more sensitive to rates now, or we burned out most of the FOMO and are out of irrational exuberance to drive the market along as far as it went back then. Interestingly enough, before the crash BC and Victoria also saw an influx of Canadians coming to the province but it didn’t stop the listings from appearing.
Having seen how quickly things can change, I think there is a reasonable chance that we could build inventory faster than we have seen in recent market cooling cycles back to the 90s. I don’t think it will happen as quickly as it did during our 80s crash, but it’s possible that relief for buyers might come faster than many think. It all hinges on the path for interest rates, which is what really pushed the situation in 1981 from a more gradual correction (prices were simply too high) to a true crash. Based on my estimates we would need another 3% rise in interest rates to get to a similar impact today.
Also the weekly numbers courtesy of the VREB.
| May 2022 |
May
2021
|
||||
|---|---|---|---|---|---|
| Wk 1 | Wk 2 | Wk 3 | Wk 4 | ||
| Sales | 176 | 364 | 1049 | ||
| New Listings | 351 | 752 | 1333 | ||
| Active Listings | 1451 | 1584 | 1450 | ||
| Sales to New Listings | 50% | 48% | 79% | ||
| Sales YoY Change | -24% | -27% | |||
| Months of Inventory | 1.4 | ||||
Strong week for new listings and after what seemed like endless months of record low inventory we finally exceeded the year ago inventory levels. New listings month to date are up 12% from the pace of a year ago, while inventory is up 5% from the same week last year.
It would take about a 12% increase in new listings for the month to get back to the level of new listings that we saw pre-covid, so we may be getting back to at least normal levels in May.
Despite the increased listings and stagnant sales, there was no change in the percent of properties going over ask, remaining at around 45%. It’s inevitable that this will keep drifting down, but again we need a sustained 2 months of inventory or higher to really bring it down.
So far the slowdown has been orderly and gradual, driving much of the froth out of the market without really bringing us out of what remains a very tight market. That’s a striking difference from what has happened in Toronto, where activity has subsided a lot faster with seemingly more sellers caught in difficult situations and driving down prices somewhat from the peak in February. We’ve seen a few of those transactions in Victoria but not yet a flood. Agents, lawyers, buyers, and sellers will want to be extra careful with what they say and their due diligence in times like these. A rising market hides nearly any amount of incompetence, but when the market turns the lawsuits come out.
New post: https://househuntvictoria.ca/2022/05/24/regions-and-property-types-whats-doing-the-best/
A mass murder I believe is 3 or more victims. The U.S. averages more than one a day
Mr monster don’t leave things are just getting started us bears need a voice
Still doesn’t stop almost all immigrants trying to use Canada as a stepping stone to get to the USA.
No, wrong, its 14 little kids and one teacher.
Another mass shooting in the states…in Texas. 10 children killed at elementary school and one teacher.
Man, you can have that country.
Go down to your local fire department and see if anyone there own an EV. The process to put out an EV fire effectively is enormous. Most of them, hopefully, have undergone training to deal with these mini- Chernobyl’s. If you want an educated opinion, ask a fire specialist.
I believe most people take out extra medical insurance here before travelling to Mexico. Anyone can visit a doctor though. You pay so much per visit. I believe it is pretty reasonable. Maybe $50? If you run out of some meds while you are there such as metformin or Lipitor, you can pick them up cheap at any of their many, many pharmacies. Others you would need a doctor’s prescription. Some will fill it if you happen to have the correct bottle with you, or even your own doctor’s prescription.
Lol no. The only real problem the EV industry has for the next 5 years is figuring out how to build enough EVs to meet demand.
However this fact has exactly zero bearing on the stock price of any of the EV makers.
Bad week for the EV industry. Several Tesla’s went up in flames across North America. Vancouver, California, Illinois and a Miami dealership. I’d sell any Tesla shares, Elon could soon go from the richest person in the world to flat broke. We’re just one Hindenburg event (a ferry going up in flames) before the technology is deemed too dangerous. I’ve heard all the stats that EVs have the lowest percentage of fires compared to gas and hybrid vehicles, so don’t bother repeating them. I would never set foot in an EV, it’s comparable to swimming off the coast of Australia, it’s just too potentially dangerous.
This place used to be a middle class paradise before 2005.
I wonder what the family doctor situation in those other places are? is it better than in Victoria?
A quick check of realtor.ca shows that “homes” includes condos. Edmonton is full of sketchy condos that are conversions from PBR. There are indeed a few SFH under $200K but they are essentially teardowns. For example:
https://www.realtor.ca/real-estate/24424822/11149-97-st-nw-edmonton-alberta-avenue
“I wouldn’t care if I was happy or miserable if I was in Hawaii. Probably happy most of the time.”
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Frank, you may be joking but if you’re miserable in Winnipeg it won’t take you long until you’re miserable in Hawaii, unhappiness has a way of following you, that’s the way mental health works. That’s what I was getting at earlier when I said Victoria is one of the most unhappy places in Canada despite the weather and pleasant scenery.
Here is something from Yahoo Canada:
List of Homes in Canada that you can still buy for less than $200K
Cape Breton 44.2 % of homes less than $200K
REGINA 36.5%
St. John N.B. 26.72%
LETHBRIDGE 26.1%
EDMONTON 24.63 %
SASKATOON 23.47%
Winnipeg 23.45%
Red Deer 22.8%
St. Johns Nfld 13.46% &
Quebec City 9.85%
With these savings, and if I were in a different boat, I would seriously consider moving to a few of these places,
live there is the summer “with air conditioning”, rent it out in the winter months, and buy a condo in Puerto Vallarta to live in from October through to April each year. Maybe.
I have actually heard recently that immigrants are now leaving Victoria/Vancouver due to the cost of living. As for the wealthy immigrants, you have to understand that capital is mobile and people will try to seek out the best risk adjusted returns on their investment. If you got $5M cash, would you want to plunge that down on Victoria Real estate right now?
Actually no, you are sounding like that Bill guy who runs that Vancouver Housing Collapse fb group. That guy has been dead wrong for 5 years and everyone who followed his advice is now most likely priced out. I do actually think prices will correct by 20%-30% depending on interest rates but it’s too soon to start calling people out on that.
If you want to be credible then put your money where your mouth is and buy $25k of HCG puts expiring later this year and put up the screenshots.
Thank goodness Debt Meister was around to warn me . Guess I’ll toss out my renters, sell my properties, pay a ton of capital gains taxes and invest what’s left into some GIC. Heaven forbid my 1.89% mortgage for the next 2 years doesn’t sink me. No thanks, I’ll ride things out and let the demographics do their own thing. Wealthy baby boomers are aging well, their children, if well educated are making 6 figure salaries and they both want their own place to live. Add to that record high immigration levels, our real estate market will have a hiccup or two, but the carnage some are predicting simply won’t happen. No matter how bad things get there are always people with money. I just worry if they’re happy.
For those of you who are interested, I see CWB is now offering a 27 Month GIC @4.25%. One can get paid interest annually as well @ the same rate. It will most likely go up again 1st of June.
VicREanalyst, you’re right, my friend. It’s very apparent that I’ve touched a few nerves here. Nobody likes to have financial mistakes rubbed in their faces.
There’s a point where “warning” turns into “I told you so” and I already stated that I’m not going to do that. Quite frankly, if you’re in trouble already or you know that you’re going to be in trouble as the market starts to crumble, then you should have listed by now. The market visibly shifts in June.
Leo, Marco, Patriotz, James and Local Fool (despite his protestations) know where this market is headed. Leo and Marco are professionals and diplomatic enough not to write it down (yet) but, at least, read between the lines. It’s not really that difficult.
Frank, Patrick and Up-and-coming, you might have a small window between the rate increases to help yourself.
This is my last post. Thank you all for welcoming me to this blog. It has been engaging and fun. Take care and good luck.
Debt Monster
Patrick- At least someone doesn’t take everything seriously. I wouldn’t care if I was happy or miserable if I was in Hawaii. Probably happy most of the time.
Debt Monster, why don’t you just chill out on the doom and gloom for 2 months until there is hard data available for Victoria supporting your thesis. You can then come back and give Frank a run for his money.
Monday:
Sales: 568 (down 25% same week last year)
New listings: 1117 (up 18%)
Inventory: 1664 (up 14%)
New post tonight.
I think it was a joke, not a “truly bizarre statement”. And it’s funny, typical Yiddish style humour.
Similar to these two…
“ I’d rather be happy than rich, but I definitely wouldn’t mind being both!”
“Rich or poor, it’s always nice to have money”
Honestly, if you have kids (especially if you have more than 4 people in your family), it’s better because the kids get a room with a door(can go to sleep at a decent hour). If you have more than 2 kids you usually have to book 2 hotel rooms, right away it makes way more sense.
A couple of the reasons are that they are way better and cheaper for people travelling in a group, or people travelling for extended periods of time. Renting a hotel without facilities for a month gets old fast. I have stayed in Japan with six people in a four bedroom house with laundry for $2500/month – a hotel would have been min. $9000 with two per cramped room and no kitchen/laundry. Plus hotels in north America are always carpeted, which seems unsanitary with the traffic they get.
Why don’t you post some October, November, December, January, February, March nightly rates.
Haven’t used Airbnb in Canada but elsewhere usually cheaper than hotels. I get to meet someone local that may or may not give me free dinner and I hate the annoyance of room service at hotels.
From: https://www.cbc.ca/news/canada/canadian-military-habitat-for-humanity-suggestion-1.6463424
The military getting in on the housing prognostication in Canada now..
Del .
This is a truly bizarre statement.
I think you’re out of date with your Airbnb rates. More like $250-300/night. I really don’t know why people bother with renting these though. I’d rather stay in a hotel and it’s cheaper.
As for valuing your own time I think you have to consider that most people have no way to make money in their spare time. An activity that pays $30/hr or whatever that they can do on top of their job is attractive. I can definitely see why people do it. I think the other munis should copy Victoria’s AirBnB restrictions and the province should step in and force AirBnB to cooperate with municipalities. Crazy that Victoria needs to pay full time staff to chase AirBnB when it should be as simple as uploading a list of licensed units and the platform should refuse to host anything that’s not licensed/
I’d rather be miserable in Hawaii than happy in Winnipeg, especially after this last winter.
How do you know how happy your clients are?
From: https://www.forbes.com/sites/ywang/2022/05/12/billionaire-sun-hongbins-sunac-defaults-on-dollar-bond-payments/?sh=393c8d127258
Victoria will never be more expensive that Vancouver so yes if Vancouver tanks we are tanking here as well.
It will remain relatively expensive for a city its size. However, if you think Victoria will remain unaffected if prices fall in Vancouver or across Canada, I disagree.
One of the best places to live and happiness are different things imo. You could have a 15 million south facing waterfront property in Oak Bay and still be unhappy.
I spend a lot of time in Croatia with a cousin that works at a warehouse for $480 euros per month with a networth of $0 to $480 depending on time of month and he is way happier than all of my clients with a networth in the millions.
“Victoria has to be one of the best places in the world to live and work in“
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Well you wouldn’t know it by the happiness index which had Victoria near the very bottom of 33 cities in Canada when done a few years ago. My theory is that people move to Victoria but they may leave their friends and families and end up unhappy here despite the nice scenery. Some of the happiest places are some of the poorest, like smaller cities in Quebec and Nfld where family is more important then money. I have worked with lots of clients who moved here from other places in Canada and after a few years quite a few of them end up moving elsewhere.
“To me it seems more a side gig for retired people, part time employees.”
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Many people don’t think about the value of their time and or perhaps as you mentioned they have nothing better to do.
“ Victoria has to be one of the best places in the world to live and work in” Well put Marko, and that is why you and the majority of the people posting here have relocated over the last few decades. That’s why I bought property on the Island almost 30 years ago. If all of us had not, prices wouldn’t be so high. We all helped caused the high prices we constantly complain about. So either move to a less desirable city or stop complaining. The influx of people thinking the same way will not stop either. Victoria is simply an expensive place for housing and nothing is going to change that. I doubt many home owners want to see any change.
I don’t understand the Airbnb business model personally. I looked into it once with one of my units at the Era (allows airbnb) but when I factored in using my assistant at the time to run it for me and her per hour wage it made no sense.
A one bedroom with parking at Era you can rent for $2000 a month or $67/day 365 days a year. That is zero work involved. Zero licencing/airbnb/etc fees involved. 0% vacancy. Etc.
Even if you are pulling in $150/night on a one bed airbnb I don’t see how it makes sense, if you place a value on your time of $30/hour, for example.
To me it seems more a side gig for retired people, part time employeed, or you have a suite (outside of COV) that you need for family members visiting so you airbnb it inbetween.
If anyone had some real life numbers to post I would be interested to see! I just don’t see much upside versus long term rental.
It’s an incredibly beautiful country but 2x doctor salaries cannot afford SFH (in a desirable place even like Zagreb which is non-tourist area).
That is what makes Victoria so special as a package in my opinion. I’ve travelled to more beautiful places and other superior attributes but in Victoria when you combine mild climate, low natural disaster risk, within one of the best countries in the world, plenty of water, no smog, above average natural beauty, you can buy a place on 2x professional incomes, etc., it has to be one of the best places in the world to live and work in.
Looks like those that entered into a 5 year term in 2016/early 2017 would have been the most exposed to a large increases in interest rates, but they have already re-financed.
The next 18 months of refinancing coming up those owners had rates on purchase that were trending up (mid 2017 to end of 2018) so owners will be looking at refinancing from 2.6 to 3.2% to 4.2% +/-.
Those with 1.5% mortgages (early 2021) +/- won’t be re-financing until early 2026. I agree, they could be in trouble if refinancing at 4.5% but they have 4 years to get their crap together. Maybe sell the SUV and get a used Honda Fit, etc.
I commented a lot on this similar topic in HHV in 2013/2014 when the crash was around the corner any day. The 2007 peak purchase buyers had already re-financed in 2012 at much lower rates and paid down principal. I didn’t feel that many people out there were in “trouble” unless bad luck (health, etc.) or just dumb with money.
QT
Yes, I was there, but the real point of that chart was the $790 increase in mortgage payments that happened over the last 6 months and it’s just going to get worse. People just don’t budget for that kind of thing when they bought 5 yrs ago when you could get mortgage rates for 3% and under. It also takes demand out of the market as evidenced by the drop in sales and sales/new listing.
They couldn’t except prices won’t be that high.
Very unlikely to happen with oil, commodities and food going for today’s historically high prices. If they crash it’s the early 1980’s over again.
The very highest 5 year rate in 1983 (January) was 14.05%. Take a $100K house with $5K down, your payments would have been $1,163 a month. The only way you could have paid $2K was with unconventional (ahem) financing. Mortgage calculator says 25%.
In any case, the crash had already been underway for almost 2 years at the start of 1983, and the province was already into a severe recession.
I’m sorry but $3000 in 2022 is not thing near what my parents, and many others has to endured during the 80s. My parents mortgage payment was $2000/month in 1983 on our modest 3bed/2bath home here in Victoria.
So it is highly unlikely that we see a repeat of the 80s crash so that you and the bears can buy a home at 30-35% off in the core.
And, what make you think the bears can afford a $850K house next year when they couldn’t afford it 3 years ago at much lower than 6% rates?
Meanwhile, this chart, gives you a very good idea of the train coming down the tracks.
twitter.com/BenRabidoux/status/1528768057178476544
There is also an extreme shortage in qualified workers willing to work. Is nobody paying attention to the news? Everything is in short supply. This inflation is caused by high energy prices, just like in 1980. Only difference now is our energy shortage was self inflicted.
Wage adjustment did happen in a few isolated sectors, but most were wage freeze with no overtime during the 80s crash. So, worst case it would be like the 80s and the CAD drop to 2/3 of the USD, and during that time lumber price didn’t really drop even those fuel price drop significantly.
House price did drop on the Island in the 80s, because of population out flow, and places like Port Alberni, Duncan, Sidney, Sooke, Coolwood, Langford, Esquimalt, Fernwood, Fairfield, etc… fall into dilapidation because noone could afford lumber/paint to keep up their homes.
Absolutely, but warehouses are not going to import products to sell at a lost, and unlike government private companies would cut production and layoff employees instead of running a deficit.
Hence automation and send manufacturing overseas. A win win for the manufacture and a death sentence for Canadian workers.
If new developments are no longer feasible, then that puts more demand on existing housing, driving prices higher. We need more products at cheaper prices to bring down inflation. Just had a conversation with a neighbor at the cottage. Where he works, what used to cost $5000 for a container is now $20,000. Higher interest rates aren’t going to fix that. Higher interest rates are only making things more expensive. Our economy has suffered enough with the pandemic lockdowns (that helped create these shortages), to inflict more pain could be catastrophic to our economy. Then there’s the war in Europe.
SFH Hunter
Well, it would appear that Victoria is following Toronto’s lead regarding sales. Interestingly, it was the perimeter areas of Toronto that started to drop first. Signs of things to come.
https://www.movesmartly.com/monthly-report-may-2022
But this year, the opposite is happening.
Home sales in the Toronto area were down 26% in April over last month and lower than sales in February as well.”
If the CAD rise against the USD, but the CAD could find it self worth $0.65 USD or less like the late 90s to early 2K.
That’s the thing about inflation being an economic killer. The costs escalate past what the market will bear. Then the wages and material cost is not economically feasible. Then the wage and material needs to adjust accordingly. So, if that high wage worker needs a paycheck, they need to consider working for a lower rate, if they don’t and want to hold on to the high wage, the work will not be there and they are sitting at home (maybe doing cash jobs, but still lower). Same with materials, if those imported materials are simply gathering in a warehouse, the value of that material decreases. The owners of that material need to recover costs and they start selling at a discount. The manufacturers of that material then need to find a way to lower the cost of that product if they want to keep operating.
If the RE market slows down in the US, which is where our material prices are really determined (whether imported or not), the prices will go down.
https://time.com/6178366/house-prices-us/
https://twitter.com/i/status/1528746046582673408
I don’t think there will be a downward pressure on costs, because employers are jacking up wages to keep employees and minimum wage is rising. And, materials prices are not going to drop because most are imported.
Neither.
IMO, it is over priced to begin with, because of poor location (right next to busy North Dairy Rd.) and possibly a dozer bait.
That’s the fun part of economics. That costly developments that are no longer economically feasible that have been completed simply go into receivership. Followed by a slow down in construction leading to surplus labour and materials (putting downard pressure on costs). However, there is still demand for new construction and housing at a lower cost and there is an ability to cater to that with delcining costs and increased competition for the less available funds (thus driving down costs). It simply comes down to the cost the market will bear.
Lol. It seems I’ve struck a chord. Also, Jack Daniels is a boomer drink, so it sounds like you’re projecting on the boozing and posting and that would explain how you would think this response is somehow clever and not completely childish. Hope you have a better day today, cheers.
With rising interest rates, large mortgage payments are a new hurdle for homebuyers
Note “late 2021”. The affordability measure cited appears to be a Canada-wide average, hence the peak in 1990 which reflects the outsized contribution of the Toronto market.
we were in Croatia a couple of years ago and it was beautiful, whether up in Rovijn, driving through the countryside, in Dubrovnik, or on the islands (like Hvar). Just beautiful. Super good roads in the countryside, too, as I imagine many of them had to be upgraded. But when driving in the countryside, you still see the outward effects of the war, the occasional burnt-out or shot-up building, so it’s sort of “there” as one might expect. And people talk about it if you engage.
As many or most houses in Dubrovnik had to be rebuilt, the airbnb’s there seem to be a super-cool mix of old and new, beautiful old exterior walls and some very modern interiors, very attractive. If it weren’t for the long flight, it would be tempting to buy an airbnb there, even at current prices I’ll bet it’s a good investment.
And to bring it back to Victoria, the legit airbnbs in the core also can be a pretty good investment even at current prices, I don’t think the cash flow on these is going to dry up any time soon, even in some measure of downturn. Which I do believe is coming for real estate everywhere, probably more muted effect in Victoria, but still coming. You simply can’t go from central banks inflating everything like crazy & all assets including real estate popping, to removing all that stimulus and not expecting a reaction, even if it’s just a muted reversion to the mean.
Every claim you made is spot on! My parents weren’t part of the communist party so no free condo for them. As a naval architect (lead of an entire department at a shipyard) and an accountant at Renault Croatia they couldn’t afford to purchase a one bedroom condo after the collapse. That is literally the only reason we ended up in Canada. If they had the means to buy a one bed we would have never left. Other than that life was pretty good in terms of health care (free dental work etc.), education (free including university), food, etc. A lot of new immigrants from Croatia are increasingly more disappointed with Canada. Real estate prices being the main reason as that is kind of why you come here. You certainly don’t come for the health care these days.
As far as people sending money back home absolutely correct as well. A lot of people work in Germany and send money or buy property back in Croatia. I also have a friend in Victoria who is a family physician that works in a small northern community as he makes 2-3x what he would running a family practice in Victoria. Owns a 2.5 mill +/- home in Victoria so that is a practice that occurs here too. May see more of it again if the oil sands fire up investment again.
That being said I have two cousins in Nancy, France. One of them owns a car dealership and is a business person in general. When I get the numbers out of him on how much he pays his employees and what the rents/real estate prices are in Nancy it is another situation that is far worse than Victoria.
patriotz- Huh? It appears there is no shortage of money out there, unless you tank the stock markets making people poorer. What a great idea, let’s make everyone poorer, thanks a lot. I can’t see a government whose policies are making people poorer sticking around for long. Just because Justie and Jaggie formed an alliance from hell, doesn’t mean a citizens revolt couldn’t take them down. All that has to happen is all the truckers park their rigs for one week and our economy collapses. Maybe we should form a Truckers Party and have them run the country. They’d probably do a better job. At least they have real life experience, not like the privileged brat we have now.
It works because if you decrease the supply of money things get cheaper. It’s the money supply that’s the metric that matters, higher interest rates are just a result of lower money supply.
I suppose the rationale in raising interest rates is to decrease demand thereby causing prices to fall. I don’t see how that will work in an environment of extreme shortages of materials, energy (in Europe), housing, food, computer chips, you name it. Higher rates are only making things worse. In the early 80’s, high inflation was created by a supposed energy crisis and the concept of peak oil, causing gas prices to soar. Today we have self- imposed high gas prices by the carbon taxes and strangling of the oil sands due to pipeline shortages. High energy costs affect the prices of everything. Today’s high prices are the result of tripling of shipping costs and transportation of goods. High interest rates won’t decrease demand in a market of shortages, we still need more housing to accommodate all our newcomers. This inflationary environment has been created by escalating energy prices and can only be resolved with lower energy costs. Take your pick: global warming ( which I don’t deny, just don’t think our carbon taxes are going to make any difference) or a severe depression that will starve millions of people. We created this problem, I don’t think high interest rates are the solution.
But it’s close to “the new upcoming Wallmart store”. Who could resist that? Just the thing to add a few extra walls.
Last I heard housing starts were still at an all time high. That’s a pretty long way from freezing up.
I think you’d find that in the carnage of Vancouver circa 1984 or Toronto 1992 there were still starts. Even in the legendary US bust they didn’t go al the way to zero. Having said that I think the condo sector would be more affected by a downturn due to the more complicated nature of the projects and financing. You’d see a bigger proportion of work on smaller properties, suites, etc. People have to work.
Wonder what happens when the cost of building a new condo exceeds the markets ability to buy a unit because of mortgage costs. Obviously, the developers stop building so my real question is roughly at what point in higher mortgage rates does the building sector freeze up.
I know that there is no magic number but are we close to the thresshold?
From: https://bc.ctvnews.ca/average-detached-home-prices-in-surrey-langley-seeing-double-digit-drop-1.5914648
I guess for an Island context, this doesn’t bode well for those that spent a million to live in Sooke or Coble Hill in the last year or so. It has to bite a bit to have a down payment wiped out especially if it was borrowed off a family member’s HELOC. Hopefully, the plan wasn’t to pay back the gift down payments from equity growth when it could be drawn from a HELOC on the new property.
Well, I’m starting to understand your name … up-and-cumming. You’re a dick.
Tell you what, put away the Jack Daniels, step away from the keyboard and tomorrow come back and try again.
This place dropped their price $100k – interesting! A sign of things to come or just a one off??
https://www.rew.ca/properties/4095301/3202-kenya-place-saanich-bc?search_params%5Bquery%5D=Cedar+Hill%2C+Saanich%2C+BC&searchable_id=846&searchable_type=Geography
Actually for years it’s been a place where people come to discuss the local RE market and learn from others. The title is literally called House Hunt Victoria, which would indicate people come here for analysis and market trends in order to help them navigate the purchase of a property in Victoria. The fact that you think you can swoop in from Vancouver or whatever rock you live under and respond to “bull rhetoric” on a blog just shows how ignorant you are about Victoria RE, how miserable you are in your current situation and how desperate you are to be paid attention to.
Thanks introvert – I did mean bulls – I’ve updated my post. Cheers.
Monster I for one can see your very wise I enjoy your posts cheers
I’ve always been pretty bullish on Victoria RE. Maybe less obnoxiously so, lately.
I just got back from Lake Louise and spent a delightful half hour catching up on HHV. I love reading about competing crystal balls.
Keep it coming Debt Monster. It used to be Introvert and Patrick were two of the only bulls on the forum and personally I liked having their posts as it brought a balance. It has been very bearish lately and I agree it’s nice having some bulls here.
But interest rates aren’t following the previous pattern. Try to convince us that doesn’t matter.
Yes that’s true, I think it’s around 30%. It’s also been true for every bust.
I won’t make a specific claim about Croatia, but I know that it was commonplace in East European countries for tenants to be given their rental apartments after the end of Communism. Combine that with a static or declining population and apartments passed on within families.
I do know that since Croatia is now a member of the EU a lot of its citizens work in higher wage countries and send money back home. In fact that was common even back in the days of Yugoslavia.
If Debt Monster follows the pattern set by previous HHV super-bears, he will be around for quite a while (years).
Just until it was too late.
Lolol, I’ll be letting Patrick take over for me at the end of July.
Patrick
This must have been quite the echo chamber of backslapping and high fives prior to last month. You will note, of course, that I don’t start these conversations. I simply respond to “bull” rhetoric trying to convince each other that everything is going to be okay.
Leo S
April 25, 2022 9:07 am
I’m just happy a true bear is back in the comments.
19
omg Mr. Monster, what will you do with your time not spent obsessively posting comments and links on this blog come summer? While it occurs to me to ask, what did you do with your time before your discovered HHV? And are you obsessively posting and sharing all your original advise to Ontarians? Is there a blog there you are on sharing all your prophesy and advice?
I do enjoy a balanced view on things including some of the contents of your posts.
But, hmmm, yeah, maybe take breather? Its a bit much.
I’m already looking forward to it and Patrick is also doing a fine job of picking apart your posts, so maybe take a break? Take your boomer ass outside and maybe go for a walk? You could go take some photos with your iPad.
Believe me, up-and-coming, you will not be looking forward to that time.
Yes, I certainly do appreciate that, Patrick and I’m not concerned for the average Canadian. Only those Canadians that reside in Ontario and B.C.
You also understand “that with a price crash some people’s equity would be negative or well below 46%. Mainly recent FTB, and hopefully many of them have locked in low 5 year rates.”
Well, that’s where the rubber hits the road, isn’t it, because when sales do happen and they always do, new price points will develop and a lot of that equity is going to dissolve quickly.
At least you’re giving us something to look forward to
Great. You’re now back-on-the-rails posting things that are correct, and not “hiding behind headlines that you didn’t write”. Yes, Victoria residents have some of the highest mortgages in the country, as one would expect in any city with expensive houses. They also have some of the highest home equity and non-RE assets in the country. And 43% of Canadian homeowners have no mortgage at all,
Moreover, the average Canadian homeowner has 73% equity in their home, with 27% mortgage. https://cba.ca/household-borrowing-in-canada
This means, if prices fell by half (50%), Canadian homeowners would still have average equity of 46%. (Because their mortgage owing is now 27%/0.50= 54%, leaving 46% equity. Eg. $1m house with $730k equity, $270k owing… becomes a $500k house with $270k owing and $230k equity, and 230/500=46%
And yes, I know that with a price crash some people’s equity would be negative or well below 46%. Mainly recent FTB, and hopefully many of them have locked in low 5 year rates. But someone who calls himself “Debt Monster” should appreciate that a starting average position for Canada homeowners of 73% equity and 27% mortgage in a house is a great position to start if there is going to be a crash.
Patrick, okay, what I meant to say was I didn’t write the headline. Sheesh.
The facts speak for themselves and for those “mortgaged” Victoria residents, they carry some of the highest mortgages in the country..
I presumed that it would be self evident that they were writing about residents with mortgages but ….
As the Prairies slowly crawl out of the worst winter in decades, more people have decided to retire and look for milder climes. May has even been frigid and very wet. Hopefully farmers will get a crop in, or we’ll all be paying dearly for food. I’m sure some have been exploring the Island to relocate to, prices of property and cottages have also risen considerably but fall well short of B.C. prices. Might as well spend your kids’ inheritance and enjoy your golden years without the harsh winters. Migration to the Island should remain steady for a few more years at least.
Excuse me, but it is “your headline”. You posted the same thing a month ago, and I pointed out how it was nonsense back then too, which you acknowledged. https://househuntvictoria.ca/2022/04/19/april-19th-market-update/#comment-87376
So then you post the same nonsense today as fact. You should spend more time reading the whole article, and only post articles here that you consider to be factual because they make sense. And that would stop you reposting the same news that you knew was false from last month.
I’ve posted articles here with facts that people have pointed out were false. But I learned something from that, felt a “little stupid”, and didn’t repost the same nonsense. You should do the same.
https://www.sookenewsmirror.com/news/average-greater-victoria-homeowner-holds-500000-in-debt/
Not my headline, Patrick, but it doesn’t change the fact that for every mortgage in Victoria under $200,000 there is one over $700,000. That’s just the way averages work.
Debt Monster,
No, the average Victoria homeowner doesn’t have $477,128 mortgage debt. That data you posted is only for homeowners with mortgages and excludes homeowners over age 69 and homeowners with no mortgage. The average mortgage debt of all homeowners is much less, because 43% of Canadian homeowners have no mortgage. (2016 census) https://www150.statcan.gc.ca/n1/pub/75-006-x/2019001/article/00012-eng.htm
https://borrowell.com/blog/costs-of-living-canada-homeowners-vs-non-homeowners
“Report findings are based on credit report data of 874,111 Borrowell members in Canada between the ages of 20 and 69 for August 2021. For this study, homeowners are considered to be consumers with active mortgages on their credit reports. For this study, homeowners do not include consumers who have fully paid off their mortgages. “
The ‘froth’ in house prices since July 2021 assessments could easily disappear (within 6 months). That’s a drop of about 20%, and gets prices back to where they were 11 months ago. That would mean a HPI benchmark SFH would fall from $1.18m (April 2022) to $978k (July 1, 2021). The 20% down buyer won’t see much improvement in affordabiiity ( monthly mortgage payment) because they’ll be signing up at higher mortgage rates (@ 6% rate), but they are borrowing less which is important. The all-cash buyer would “save” 20% in that case. Typically sales numbers would be very low during a crash like that, so I’d expect a greater proportion of cash buyers (including wealthy out-of-towners). If rates stay there (6%) I wouldn’t expect price drops to worsen unless there’s an economic downturn as well.
Fraser Valley
up-and-coming
Actually, my friend, after this summer I will have no reason to post anymore. This is all about warning people. Once the Bank of Canada raises rates the next 2 times it will be too late to sound the alarm any further.
Escalating prices on food seem like nothing compared to the price increases I’ve been getting on materials in the construction industry. A few union companies in town are paying above the agreed wages just to keep guys. Fire private contractors it’s getting hard to keep guys on the bottom.
There have been periodic shortages of a lot of things over the past year. And sharply escalating prices on a lot of food items. I have very large gardens, but they have never made sense financially. Maybe this is the year.
It’s nice that you lay out timelines for your ridiculous claims so we have something to reference when you’re wrong. Although you’ll probably have some sort of excuse or just kick your prediction further down the road hoping one day you’ll eventually be right.
DM
For gods sake will you give it a rest. Put the computer away and go outside. Do something else. Anything. Please. You are getting me depressed. I’m sure that’s what gives you pleasure. But take a break.
Marco
Bingo!! That has been the biggest problem! Everyone can service that debt when mortgage rates are under 3%.
These kids bought as much house as they could “afford “ with super low rates and the assurances of realtors, mortgage brokers and the BOC governor that those rates would be around for a long time.
Now, mix in those new “investors” using their HELOCS to purchase more properties at those emergency rates. I believe in the States they call them “teaser” rates because they renewed in just 5 years.
By the end of Summer you’ll be able to count the “bulls” on this blog on one hand.
I had a hard time finding soap at Wal-Mart today. Soap. The shelves were almost empty.
Frank
Consensus is a little off the mark. Just 11 more sleeps and you will see 6%+ rates.
Posted Rate
Scotia Ultimate Variable Rate Mortgage-Closed 3 Year Term 4.100%1
Scotia Flex Value Mortgage-Closed 5 Year Term 3.400%2
Scotia Flex Value Mortgage-Open 5 Year Term 6.500%3
Closed Term Fixed Rate Mortgages
Term Rate
1 year 3.840%
2 years 4.490%
3 years 4.590%
4 years 4.790%
5 years 4.990%
7 years 5.490%
10 years 5.890%
Of course poor countries are hit first in that scenario. It is just a condridiction to think food security will become a thing at the same time having interest rate growth somehow restricted. Unless Canada is going on a steak and grain diet, in a food security circumstance, the country will need to maintain a strong currency so that we can starve those poorer parts of the world by buying up their food. Hence the increasing interest rate to support the currency against the competition for food supplies. Not saying that the food security thing will happen, it just doesn’t support a low inflation scenario. Your fresh fruit and veg during the majority of the year does come from those poorer countries.
The poorer nations are going to face food insecurity long before us, and we are a long way away from pensioners that have to eat pet foods for survival in the 80s. And it possible that we will see higher than 5-6% rates, but at the moment it doesn’t look like so.
Crazy price for an 1800 sqf 3br house.
$1,135,000
If food security becomes an issue then inflation will continue to escalate and there goes your stop at 5% – 6% for interest rates.
How much did 724 Bondi Close sold for?
Thanks
There are people that are down sizing and that makes it easier for them to buy all cash. They aren’t the ones that are going to have problems with a higher interest rate. It’s those buying that are putting every nickel and dime into their mortgage payments that are going to feel the brunt of an interest rate hike at renewal time or having their suite go vacant for a month or two or three. They can put 50% down but if they are only just making the payments they are in the same situation as someone that went high ratio. And isn’t just the vacancy rate either. Tenants can skip out on you without paying their rent which increases your bad debts.
If you own an apartment block then you will likely have to carry a much higher vacancy rate than a home owner with a suite. Once you lower the rent on one of your suites, the other tenants in the building are going to want a reduction too or you will experience an increase in the turn over rate of tenants which will add to your expenses of cleaning and painting the suite before the next tenant moves in.
Apartment buildings in Victoria are selling in the range of 21 to 23 times there gross income assuming that the rents are at current market rates. That’s really quite high by historical standards. I’ve seen that rate drop to 10 to 12 in bad real estate markets.
Interest rates are going up, from historically low levels (in some cases negative interest) but I think consensus sees rates going no further than 5-6%. That will hurt some people, benefit others. I don’t think rates are going through the roof . I would worry more about food security in the next year instead.
That poor schmuck could own 2 rental properties worth over 2 mil and have $6000 rent coming in every month. The $700,000 mortgage is making him rich.
Wouldn’t the ability to service the debt be more important than the actual debt? I would think on average someone buying a house in Winnipeg would be more likely to buy close to their max qualification than someone in Victoria where 25% of our transactions are cash and <25% are high ratio.
Yes, that has been the mantra, right up until this year.
Debt is never your friend when interest rates are going up!!
Problem is they are in places no one wants to live/buy and owners don’t want to sell them for next to nothing so they let them go vacant.
As for construction, very difficult. Croatia is part of the EU so hardworking tradespeople just go work in Germany so you end up with a labor shortage. We have more and more workers from Nepal, etc. Even in a poor country people don’t want to work anymore so you bring in people from a really poor country.
Frank
Frank, you are making my argument for me. You’re right, it is an average. Therefore, if your mortgage is only $250,000, then some other poor schmuck will be carrying a mortgage over $700,000.
That $700,000 mortgage at 1.89% could be coming up for renewal at vastly higher rates.
You’re looking at an amber light. It will be turning red by the end of summer.
A good way of looking at the demand for housing is the days-on-market (DoM). The lower the DoM the greater the demand. In this way it is possible to determine which segments of the market are weaker or stronger by looking at the different DoMs for each segment. It should be a fairly easy thing to create a scatter graph showing sale price against DoM.
As for reaching a 5% vacancy rate. All that has to happen is for the economy to go into a prolonged recession. That would put construction companies out of work, the trades, and all those that have jobs that support the construction industry.
The difference between the early 1980’s and today is that a lot of the trades are now subcontractors and not salaried. As a subcontractor they have the option of paying into employment insurance but I suspect most do not. Without that social safety net those trades have to find lesser paid jobs immediately or leave Victoria for employment in places like the tar sands.
What will never happen is that you can build enough rental housing to increase the vacancy rates. Contractors will just stop building rental properties when the vacancy rate increases. As isn’t economically feasible to construct rentals when the vacancy rate is just a few percentages higher and coupled with soft rental rates.
And it doesn’t matter how many multi-millionaires live in Victoria. Market prices are set by those buying and those selling. If you are neither one of them then you have absolutely no influence on prices. You are not part of the marketplace.
DM- How many homeowners have no mortgage debt? Not every owner is carrying debt. I don’t know what percentage they represent. My property was fully paid for in the 1990’s. I’ve had a mortgage on it since 2002 when I bought a dump in Langford, which I financed to by a Hawthorne equivalent in Ladysmith, and so on. I’m currently carrying a $250,000 mortgage (of a $350,000 line of credit) at 1.89%. I’m paying (at least my renters are paying) almost $700 a week to pay down the principal so when I need more credit it’s there. How many other homeowners have mortgaged their property to buy additional properties? How much revenue are they getting from that mortgage? They’re not paying the mortgage, someone else is. That’s the beautiful thing about real estate, debt is your friend, it allows you to acquire more assets. Maybe you missed out on that opportunity, having someone else paying off money you borrowed from someone else, at ridiculously low rates. Hope you can follow that.
Frank
The Island has some of the highest mortgage debt in the country.
What is it about that problem that you don’t see?
https://www.sookenewsmirror.com/news/average-greater-victoria-homeowner-holds-500000-in-debt/
Well there ya go. It’s like the opposite of Georgism
“There were two recent properties on Dewdney sold well above asking and assessment value, but now 3020 Devon stuck on the market for over two weeks. Even compared to 2777 Dover sold last year, it sounds Devon’s asking is reasonable. Although there were some blow out sales but I would say the market is cooling down, at least for the $2M+ market.”
3020 Devon is much closer to Uplands proper than Dewdney which clearly is not even Uplands border. Devon and Dover are clearly Uplands border whereas Dewdney is not. Devon is not Uplands proper but getting close. Devon, therefore, is the superior location to Dewdney.
In terms of the high end market, there is a very good selection of rather stunning Ten Mile Point waterfront properties available right now. In fact, it’s the highest I have seen for inventory in perhaps 10 years for Ten Mile Point waterfront. The only catch is the cheapest property is priced at just under $4,000,000 and the most expensive is $10,000,000.
Doesn’t explain the capital Zagreb where 25% of the population of the country lives. No one buys a vacation property in Zagreb. You buy that in Dubrovnik, etc.
A ton of vacant properties as there is no property tax in Croatia so when people inherit they often don’t sell and just let it sit.
The thing is the vacant properties aren’t where people want to live. We sold my grandfather’s farm on 10 acres private pond/lake with house and barn for 35,000 euros and that was an exceptional sale as the neighbor bought it otherwise would have probably sold for 20,000 euros. Thing is people don’t want to live in smaller towns/cities, at least in Croatia.
Everyone wants to be in the attractive cities and not 60 minutes away, at least in Croatia.
Yes, seriously. Industries that were world leaders are now worthless. Look at GE, a fraction of what it was worth. The entire banking industry almost collapsed in 2008. Target looses 25% in one day. Sears is gone, the list is endless. Skyrocketing shipping costs could destroy Wal-Mart and other major retailers. High gas prices are killing Uber, Lyft, skip the dishes and any business relying on delivery, including Amazon. There are no guarantees. People have to live somewhere.
Frank
>” Those were paper gains, crypto is an illusion, stocks had the greatest run in history. That’s what you bail out of at the peak,”
Seriously????
You’re reaching here, Frank
Those were paper gains, crypto is an illusion, stocks had the greatest run in history. That’s what you bail out of at the peak, and hold tangible assets that don’t evaporate on bad news. Houses can’t be dumped in a few minutes, not while people are living in them. When you go to the bank for financing, the only assets they are interested in taking for collateral are primary residences. Or any other property that is rented in desirable areas. They know how stable real estate is compared to paper assets. Probably the most stable asset in the developed world. Especially if your neighbor is the most powerful country in the world. Canada is in a sweet spot and people around the world know it.
I think almost everyone living in Greater Victoria SFH is now living in a $1m+ home
Frank
Uh huh
https://stevesaretsky.com/the-rout-is-on/
Debt Monster- You’re dreaming if you believe rising interest rates are going to tank the housing market on the Island. Financially secure seniors and professionals across the country and overseas can easily support current and escalating prices. This is not 1980, trillions of dollars of wealth has been created in the last 40 years. Some people didn’t benefit from the opportunities that were available over the last 40 years, they should have applied themselves more. Most people who diligently worked their way up the ladder now enjoy the fruits of their labor. I know some of my friends that only got a high school education are living in $1-2 million homes. Opportunities were endless, you just had to work hard and not waste your money.
Patrick
…. or they could simply sit on the sidelines and watch as prices deteriorate.
Apparently, the Spring market is a bust. Let’s see what the next best market time will bring.
September should be inspiring.
Right, though ownership is 90% in Singapore as well, but it’s more like leaseholds of public housing. Sounds like Croatia hasa different system but also has a pretty extensive system of subsidized loans that allows people to buy even if they otherwise wouldn’t have.
Sounds like they need to put in some demand measures. If population is declining but there’s still so little supply that prices are being bid up then there must be lots of empty places. One article says 10% of purchases are foreign buyers. Perhaps lots of empty vacation homes? Not sure if they can crack down on that if they’re in the EU.
Wonder what the construction costs are. With low wages must be pretty cheap, so again why aren’t they building anything?
Looking forward to it.
Home ownership is over 90% -> https://www.croatiaweek.com/croatia-second-highest-homeownership-rate-in-europe-despite-global-decline/
Population
1995 – $4,620,000
2022 – 3,888,529
Population decline (many who have no hope of every buying anything leave the country). Economy sucks. Wages sucks. Higher interest rates. Literally every single housing metric is poor, prices continue to go upwards.
This summer I am going to do a YouTube series interviewing my cousins across Europe that have kids and their living accomodation (as the common arguement in Canada is you can’t have kids in a condo). I’ll do a quick video tour of their condo and then I’ll sit down with them for an interview in English. Some pretty crazy living setups!
For example, this is one of my cousins I’ll interview -> https://www.linkedin.com/in/jure-murgic-03b89097/?originalSubdomain=hr
As you can see quite the extensive oncology resume including Princess Margaret Cancer Centre in Toronto. Wife also a doctor + PHD. They live in a 1000 sq/ft condo (that is like 50 yrs old) with 5 kids and one euro style minivan. The 10+ yrs old kids already speak three languages, accomplished in sports, etc. You don’t need a SFH for kids to thrive and be successful. Our standard of living in Canada in incredibly high and now it is pulling back unfortunately and this has many upset.
Ciena
The media drives the herd. Similarly, as prices were skyrocketing, the odd bear may have pointed out a sale under asking. It doesn’t matter.
If the media says sentiment is changing and prices are dropping then the herd will respond accordingly. Just wait for the June headlines.
By the way, this hasn’t been gradual.
February Market Summary
BY LEO S · MARCH 1, 2022
The market in February continued on much the same trajectory as January, with a frantic sales pace constrained by low inventory, rising prices in every property type, and an extremely high proportion of sales going in bidding wars. Inventory remained at record lows for the time of year, down another 36% from last February’s already very low level, while sales remained 20% above the 10 year average.
Condos are available everywhere. So that’s why numbeo.com uses a standard condo, making their data comparable in any country.
You seem fixed on the idea of measuring affordability by comparing to the “good old days”, when typical families could afford Victoria SFH. And ignoring what is happening with worsening affordability around the world. With your belief that a “Victoria SFH affordability cycle” will “save the day”, and return us to decent affordability. I just don’t think that’s ever going to happen, and data from other countries supports my belief. I don’t see a future of improved SFH affordability in Victoria. I see affordability worsening, approaching what Marko describes in Croatia. It’s important for a HHer to recognize this trend, before they get pushed out further from their dream of home ownership.
The important thing to remember is that the CREA states very clearly that national home prices are skewed by over $130,000 by home prices in Toronto and Vancouver.
Therefore, as national home prices start to drop, those minimal declines nationwide will be much bigger declines regionally …. B.C and Ontario.
So far, nationally, the average price has dropped by just over $70,000 but as noted by our resident bulls “not in my Victoria “.
The brunt of the decline is obviously in parts of Ontario and the mainland of B.C.
You better build a bigger moat. June is approaching.
Gee, I don’t know, Patrick. It does look somewhat worrisome.
Bad analogy. Teslas and Camrys are both similar other than price. But population density in different cities make different housing forms impossible. You don’t get a townhouse in Singapore no matter what you pay.
You’ve told that story a few times but there must be more to it. Clearly no one earning $16k is buying a $500k condo. So there must be something else at play such as a much more prevalent social housing system or something else. For example, Singapore prices are sky high but 80% of the population lives in public housing on fixed leases. The price of a market house is basically immaterial to the average person.
There were two recent properties on Dewdney sold well above asking and assessment value, but now 3020 Devon stuck on the market for over two weeks. Even compared to 2777 Dover sold last year, it sounds Devon’s asking is reasonable. Although there were some blow out sales but I would say the market is cooling down, at least for the $2M+ market.
I am with Patrick on this topic. Whether I am visiting family in various countries in Europe or friends in Taiwan I try to figure out what the salary is for staple professions (nurse, engineer, teacher, etc) and then I look at the price of real estate somewhere attractive where would want to live, not 60 minutes away from where I would want to live.
For example, nurse here makes $90k/year and decent condo can be purchased in the core for 700k CND in Victoria. In Croatia nurse makes $16k/year and the same decent condo in the core of cities I would want to live in in Croatia is $500k CND and interest rates are way higher.
Situation here is bad but at least there is hope on two professional salaries. In most countries zero hope. That is why people have immigrate here. Few very immigrants are hungry in their respective countries.
The fact that the norm here is SFHs just means we have a way higher standard of living.
Listed Thursday, so probably holding offers off until Tuesday (if they’re sticking to the formula) So, it would Wednesday or Thursday next week when a deposit cheque would most likely be in hand (if it sells). Then the pending price is usually available and posted.
Instead of homes, use an analogy of cars…
If most people in San Fransisco drives $100K teslas, the “norm” is $100k car prices.
And if most people in Winnipeg drives $30K Toyota Camry, the “norm” price for cars in Winnipeg is $30k.
By your logic (median car prices) we would conclude that car prices are cheaper in Winnipeg than San Francisco.
But I would claim that the car prices are identical. And so would numbeo.com using their standardized methodology that you reject.
Because the dealers actually sell the cars for the same price in both cities. People in San Fransisco could buy Camrys, but are rich enough to buy more expensive Teslas..
Similarly, if people in Hong Kong live in 700 sq foot apartments, if we want to compare prices, we should compare that to the price of someone in Victoria buying a 700 sq foot apartment. Not to the 2,000 sq ft SFH that people in Victoria think they deserve.
If you don’t standardize on home size/type, you’ll be comparing SFH (“Teslas”)with condos (“Camrys”) in different countries. On a “condo to condo” comparison, Canada homes are more affordable than most countries.
Whenever bidding wars are involved, highly leveraged buyers can only bid up to the amount they have been pre-approved for. Banks require appraisals to validate the property is actually worth what the buyer offered. That’s difficult to do in hot markets when no one can predict the value of a property. That’s why most highly leveraged buyers have probably not been significant participants in the recent escalation in prices. Therefore, higher interest rates won’t affect Victoria and other areas of the Island for a while. B.C.=Bring Cash.
Disagree. Norms are different between countries and cities. We can say that a 2000sqft detached house is cheap here compared to Hongkong. Apples to apples and 100% meaningless
If a 500 sq ft Vancouver condo sells for less than a 1,500 sq foot condo in Langford, it doesn’t mean that home prices are cheaper in Vancouver than Langford. Because we need to standardize to a benchmark home of similar size. So you can’t use median prices when comparing countries (as you did comparing Seoul to Victoria), because you may be comparing apples to oranges in terms of home size and type (SFH vs condo)
The numbeo site standardizes the home type (condo), size (1,000 sq ft) and location (city center, and city suburb). This allows a valid comparison, which would work for Langford vs Vancouver as well as it works for your example of Victoria vs Seoul South Korea.
The most important point of the story was not the data. It was the perils of unconditional offers combined with long closing periods that led to a bunch of knobs not having the cash to complete transactions exposing them to breach of contract liabilities. Not to mention, to close they might need to use higher risk lenders, that would also up their costs.
Has 3809 Ascot sold yet?
Generally the HPI is pretty good, but during fast market swings it seems to get out of whack. It was way understating the increase for quite some time on the way up. Not saying that’s the case now, just pointing out that no measure is perfect.
Initial proposal in 2013 I believe? Only took 9 years 🙂
Still confused why people think we can get meaningful price declines with 1.x months of inventory. We can’t. Maybe we’ll be at 2 months of inventory in May which should be enough to kill most of the bidding wars. Yes there are temporary swings in sentiment but true buyers markets are over 6 months of inventory.
Shawinigan Lake appreciation is wild. Shows how much money is sloshing around in the system as I would think most people don’t spend 2-3 million on Shawnigan for a primary residence but rather for 2-3 months of use.
Home sold this morning for $2,680,000
Previous sale on the home $1,300,000 in 2019
Previous to that advertised and expired after 363 days in 2014 (then purchased privately off market in 2017 for 860,000).
So 2017 to 2022 $860,000 to $2,680,000.
They approved Doral Forest park, which was outside the village and less walkable. I’ll be calling in to support if this makes it to PH.
You really glossed over the key part there which is that these figures are based on condos only. Not sensible to compare just the condo market in a country with 100x our population density IMO.
Also not convinced about the accuracy of Numbeo’s data, they have a lot of low-effort stuff. Seems like in Seoul the house price is 12 times the average income (http://www.koreaherald.com/view.php?ud=20200803000755). Pretty much the same as in Victoria (2022 median price is 11 times median family income assuming some pretty strong income gains the last two years)
Debt Monster,
You’re getting fooled (again) by average prices, by thinking that if average prices fall 6.26%, this means a typical home would have seen its value fall by 6.26%. The Home Price Index tracked by CREA actually fell only 0.6% in April, which would mean that a typical homes value would have fallen 0.6%.
https://creastats.crea.ca/en-CA/
“MLS® Home Price Index (HPI) edged down 0.6% month-over-month [March to April 2022] but was still up 23.8% year-over-year.”
Frank, I don’t have a tiger to sell, but I can sell you my rock that keeps tigers away for $1.8 million (it might keep them in the wild as well).
Whenever properties, no matter how many, sell for hundreds of thousands over list, it indicates supply does not meet demand. Weak demand would never produce these sales results. Tigers are my favourite, I’d like to own a couple but would rather they live in the wild.
Too funny, showing singular data points on properties selling over or for high prices is just about as valid as showing singular data points of properties selling under or for low prices. Reminds me when some folks here would post the one or two listings of Langford townhomes for around $750k and argue there were still ample affordable options. I have a rock that keeps tigers away, because whenever I hold that particular rock, I have never seen a tiger.
I wonder what part of the Island they’re moving to? Anywhere they want.
Proposal in Saanich -> https://www.timescolonist.com/local-news/developer-proposes-19-storey-mainly-residential-tower-on-med-grill-site-5394892
Kind of a perfect location for this type of density. Right next to transit, amenities including groceries a couple of minute walk. No need for a car essentially.
Classic NIMBY opposition comments online, doubt it gets approved.
“Terrible idea… that is way to high- will be an eyesore to the area. We need to keep Med Grill as there are not many restaurants in this area. Please reconsider”
And so on! I like when something isn’t convenient for people the housing crisis, environmental crisis and everything else gets thrown out the window.
21 yr old house on a 33′ wide lot for 4.2 million.
Ciena- Thank you, finally some real world examples. 200k-400k over ask for top end of the market properties. Obviously interest rates are not an issue for some. Yes, number of offers has decreased, even over ask percentage has also decreased. That’s because first time buyers with 10-20% down can no longer afford anything out there because a slight increase in mortgage rates has lowered what they can borrow. Other than pumping up the number of offers coming in (making the market look hotter) they probably weren’t big buyers. In B.C., if you haven’t acquired substantial equity in a property, you probably will never afford a mortgage with minimum down payment. That’s the reality out there. Prices will not adjust to accommodate people requiring a large mortgage that few can afford to carry. Unfortunately, housing is getting out of reach for more and more people. It’s like that in many countries around the world and is now a Canadian problem. Why? One reason is our high immigration rate. Population growth through immigration instead of child birth rate isn’t natural and creates imbalances in our society.
My main point is it doesn’t feel like Armageddon as the media would have you believe. Its not clear to me prices are on the decline in a meaningful way. I see some softening, but I also see competition and aggressive buyers.
There is quite a bit of doom and gloom here but as someone closely watching key Victoria & Vancouver markets, still seeing some blow out sales last 2 weeks. While I know sales have slowed still seeing most over ask or close. Some examples:
Victoria
5671 Batu
Listed 4.99M, sold 5.4M
851 hampshire rd
Listed 2.199; Sold 2.424M
4521 Cheeseman
Listed 1.625; Sold 2.1M
Vancouver
Listed 2.199;sold 2.447M
https://www.bccondosandhomes.com/listing/r2683251-1050-w-19th-street
Listed 3.9; Sold 4.2m
https://www.bccondosandhomes.com/listing/r2685283-3016-w-19th-avenue
Listed 1.99M; Sold 2.225M
https://www.bccondosandhomes.com/listing/r2687323-3664-mcewen-avenue
Really? This is false.
Ask Marko and Leo how long they think it would realistically take Victoria to build enough rental stock or housing to reach a 5% vacancy rate given the current stories they’ve shared around restrictive zoning and sidewalks that cost tens of thousands of dollars.
But, but, but that was only a 1/4% interest rate hike until the middle of April.
How can that be?
“It’s only a flesh wound.”
From: https://www.ctvnews.ca/business/what-to-do-when-your-home-appraisal-falls-short-as-the-housing-market-cools-1.5912304
THIS IS SPARTA!!!!
I believe that the rate of inflation in Canada is less than in America but that will not stop the Bank of Canada from raising interest rates. We have to have slightly higher interest rates in Canada relative to America to attract foreign investment.
If a recession happens what you may find is that the bank will want an appraisal performed on your property (s) to reset your home equity limit. Access to equity, if you have any left, will be a problem for people.
And you just might hear your lender saying that you own too much real estate and are now considered to be a high risk. Contractors and real estate agents that depend on real estate to make their living will find difficulty in getting loans in a recession as they are at higher risk of default. They may also cut back on the percentage of income from your investment housing that can be used to qualify for the loan.
A 10 percent drop in the value of one property is far less risky to a bank, than a 10 percent drop over 5 or 10 homes that you might own. And if the vacancy rate goes to 5% and your investment properties start to go vacant then you’re going to have to sell some off to cover your negative cash flow.
During a recession, it’s the bean counters that make policy.
No one was talking about average prices paid. The price to income chart I posted was in reply to Ted’s post comparing prices to income in Canada vs USA. Ted’s chart was all indexed to 100 so had no info regarding average prices paid either.
That numbeo chart has many tabs. One of them is mortgage payment to income, which is the exact metric you use for your affordabiiity chart. Click on that numbeo link , and you’ll see Canada has 19th most affordable housing out of 112 countries. For example, South Korea affordabiiity is very bad at 200%, compared to Canada at 50% (for a 1,000 sq ft condo). Croatia 100%, Portugal 75%, UK 60% also have much worse affordability than Canada. Affordability in these countries isn’t bounded by the same lines you use to imply extremes of Victoria “affordability cycles”.. https://www.numbeo.com/property-investment/rankings_by_country.jsp
These numbers are basically worthless. Has nothing to do with average prices paid
$1.15M
What did 4391 elnido sell for? That one you can actually reno into something decent for ~$100k.
Don’t forget credit spread.
A buyers market would be great for me to tap into my HELOC and buy another property so I guess I’ll just wait until this summer and make it happen, thanks for the heads up DM.
lol what is this BC Ferries or core government?
Question for the realtors in this forum: Have you seen successful offers that have financing conditions attached happening a little more these last few weeks?
Marco Juras
Only for those that are actually paying attention.
The interesting thing is that nobody pays attention until they have to face it. Perhaps, they want to combine some other credit products into their mortgage, perhaps renewal is coming up, maybe you want to take money out of your heloc.
The crunch is coming.
newhomeowner
Perhaps, my friend, you haven’t been paying attention to Leo’s charts. After a 1/4% and 1/2% rate increase :
Wk1. Wk2
Sales to New Listings 50% 48%
Sales YoY Change -24% -27%
The next 2 rate increases will effectively freeze the Victoria housing market or, more subtly, turn it into a buyers market. Lol
Both you and Marco, boots on the ground, have demonstrated via employment opportunities and consumer spending why the BOC will continue hiking rates.
The falling home prices in Ontario and B.C. Will simply bring them in line with the national average and Macklem will continue his rate hikes past September.
My opinion is that we will not see a significant decline in prices until the vacancy rate increases. It’s when basement suites become vacant and the home owner is not able to lease them for the same rent things start to get ugly. A higher vacancy rate has an immediate impact on house prices as the home owners are not able to make their mortgage payments.
Higher interest rates take longer to impact home owners and only become a problem at renewal time. If they are just making the payments today when it comes time to renew they have to either pay down the mortgage or sell. If they are under water by $500 a month a month then they would have to pay down the mortgage by some $100,000 to lower their mortgage payment by $500. I don’t think many people will be able to do that.
If vacancy rates are rising and their suite goes vacant then they will have to the same in just a few months and not at renewal time in a couple of years. A higher vacancy rate impacts everyone that overly relies on that suite income at the same time. That could cause a market crash as a ton of listings hit the market at the same time.
This is a problem for Victoria. Rents are atrociously high. The market place can rapidly change If more people start to leave Victoria or not move here due to the high cost of buying and renting. Especially when you consider that rents in Victoria are higher than in Vancouver while incomes in Victoria, for doing the same job in Vancouver are lower, and the cost of living on an island are higher.
I would keep an eye on the vacancy rate in the city. Simply watching for an increase in the number of “for rent” signs in apartment buildings would give you an indication of where our market may be going.
On BNN – We haven’t had 8 weeks in a row of losses in the stock market since 1929.
haha, a 30% drop in all categories in housing in Victoria. Is the debt monster the reincarnation of our former housing bear that lived at the oak bay hotel?
I struggle to see any drop, not to mention a 30% drop. Unemployment is non existent, vacancy is below 1%, most people own their own homes. A 1% increase in the overnight rate will bring adjustable mortgages to a whopping 3.5%? And that’s what will cripple the housing market?
My guess is recessionary risk will crimp BoC policies and we’re likely to see interest rates cap soon. 5 year bonds have been all over the place this week, but are finishing lower then they started.
The real risk is that the price of oil collapses and takes the CAD with it. If the CAD drops back to 70c inflation will again shoot through the roof and then we will see the pain. But even then inflation means prices go up, not collapse. a 30% collapse in housing would start filtering down to renters and would easily wipe out these feared inflation rates.
On another note. Are people actually scared for the economy or their livelihood? Need a job? I have dozens of vacancies starting at around $25/hour. That’s union work with a defined benefit pension plan. Just email me. The reason I can’t fill them is because my organization actually has hundreds of vacancies that also have defined benefit pension plans but pay way more. No experience or education needed.
In Canada you don’t have to take risks to get ahead really, but to leapfrog ahead you sure do. My guess is that you and your parents have ended up in the top 1% net worth wise – and you in a relatively short period of time. Pretty good for immigrants to Canada!
In 2012 my father and I bought a rancher in Sunnymead for $583,000. Renovated it extensively (new windows, roof, garage doors, plus everything inside). The receipts alone (without all our work, carrying costs, transactions costs, etc.) were over $110,000. We had it on the market for 330 days and eventually after many price drops sold it for $685,000 taking a large loss and not getting paid anything for our work.
That is life, took away many good lessons from the project and moved on. Day we completed on the house we made an unconditional offer on a building lot in Gordon Head. Just kept building. You have to take some risk and failure in life to get ahead.
https://www.numbeo.com/property-investment/rankings_by_country.jsp
See charts. But I’m not particularly convinced this is a sensible way to look at prices. Affordability is better.
No one knows what will happen, but if I was a gambler I would place my bet on the above scenario.
Umm:
https://economics.bmo.com/en/publications/detail/5b2b71c9-dfb6-4d2d-927e-25edf11e4f52/
In the early 1980’s there were 14 billionaires and 500,000 millionaires in the US. Today there are 700 billionaires and 20 million millionaires. Just shows the amount of wealth has been created and why prices are so high. This definitely isn’t the 1980’s.
Just heard on BNN that Toronto residents are moving to southwest communities in Ontario. Toronto may be slowing but other regions are booming. It’s not like people are evacuating Canada, they are just “shuffling “ around. The real estate money isn’t leaving the country, more might shuffle to the Island.
Watching the news and reading this blog you would think the world is coming to an end and it is time to buckle down.
Then you go out into the real world, and you can’t find a seat at a restaurant even thought everything on the menu that was $16 last year is $24 now. Driving in-between showings not sure I’ve ever seen worse traffic in the middle of the day, even thought we are at $2.30 gas. Rental properties still receiving a ton of rental applications. Talking to one friend that is a window salesperson this morning and he was noting his is on track to beat his best year in terms of income by 50%. Another friend just got a federal government promotion from 116 to 160k/year as an additional regional office opened in his line work, even thought everything was functioning fine under the previous regional office. All my friends from my days at the hospital complaining about lack of staffing, as much overtime as you want. 800 sq/ft cottage listed a few days ago on Shawnigan Lake for $1,385,000 sells in 1 day for $1,705,000.
I couldn’t even get a job at Thrifty Foods back in 2003.
Better dwelling isn’t the best source, but they are citing BMO here… Just wondering if anyone has access to the actual BMO Captial Markets note that this came from?
From: https://betterdwelling.com/canadian-real-estate-prices-38-overvalued-largest-trend-deviation-in-40-years-bmo/
I think it might interesting to see the information without the paraphrasing and context around the quotes..
All I remember about Toronto real estate, being very young in the 80’s, was my dad telling me about all the people losing their homes in the early 80’s and then people again losing their homes in the late 80’s and early 90’s . I also remember a wise trader on the floor of the stock exchange telling me ” once every generation you get a great chance to buy a house at rock bottom prices and that time is right now” (1994).
80 is higher than 85.
http://4.bp.blogspot.com/-3E41ov9u1KI/UTEpGJY9CMI/AAAAAAAAAhI/2AalQeNuk8E/s1600/GTA+average+house+price+inflation+adjusted.jpg
Today: “Dow is on pace for longest weekly loss since 1923”
Well of course the huge drop in the US post-2006 compared to Canada. Except for BC, Canada had not seen a runup comparable to the US at the time. Prices did start declining in Vancouver and Toronto in 2008, but intervention from the Harper government and the BoC reversed the decline after less than a year.
Not only did this establish a higher base for subsequent price growth, I think it contributed to a mentality in Canada that we are special and cannot experience a serious decline in RE prices.
I’m not saying that this is the only reason but that it’s significant.
You mean when you said, “Toronto prices tripled during the 1980s.”?
In any case what I said was correct, as you’ve just conceded.
Incredible chart. Leo, what’s your perspective on it? Is there something that skews it?
No dispute that Toronto price gains were higher in the second half of the 1980s. But we were talking about the first half (1980-85), where the housing gains in Toronto were +44%, which was above inflation (+43%). Which was remarkable, given the huge interest rates, mortgages above 10% and peaking above 20% during that period.
Thanks for the discussion.
You’re denying that the substantial gains in Toronto were in the second half of the 1980’s?
Decent thread looking at inflation over the longer term: https://twitter.com/acoyne/status/1527632484158013441?s=20&t=rTCjzcrRpi3NHneHf77Dsw
Here’s a prediction: high YOY inflation numbers will stick around for a bit longer. Interest rates will get increased to neutral-ish ranges and then inevitabily come back down when the next crisis hits. Very few (who don’t already have substantial existing wealth) will benefit financially from this. Once inflation numbers decrease, populists will find some new “issue of the day” to get people fired up over while also conveniently ignoring, or actively fighting against, policies which may actually improve the financial well-being of the middle-classes and below.
——
Sorry James and Patriotz, but you’re both wrong. Toronto prices rose above inflation, even using your selected period of the first half of the 1980s decade. CPI was +43%, and prices were +44%, so a +1% real gain. Despite the huge interest rates.
you forgot about the local 100k a year government worker boogeyman with substantial home equity.
No, but just as with the “Chinese buying our house” boogeyman, when Toronto drops, we lose Barristers “wealthy Toronto bankers/lawyers/other sycophants retiring and buying up our houses” boogeyman.
And for the first half of the decade they fell in real terms, but you know that already, so I don’t know what the hell you’re arguing about.
Agreed. When I come here, above the comment box is the information I take seriously and reflect how it could impact my situation. Leo provides some of the most balanced, accurate and well thought out analysis of what’s happening without jumping to conclusions or being overly emotional and we’re all lucky to have him running this blog. Below the comment box is not completely a lost cause, but I look more for on the ground info, some eye rolls, past life experiences, a few laughs and of course some differences of opinion, which always make for interesting back and forths whether I’m part of them or just reading them.
Happy long weekend house hunting to everyone except Debt Monster 😉
Wonder how many people are still eager to do a HELOC takeout at a 5%+ rate?
If we’re being pedantic, it started in 1932.
The RE market was stagnant because of a lack of household formation. To find out the reason for that, drop by a Legion some time. By the way WWII started in 1939.
Seriously?
Give it a break. How many posts are you ignoring about the huge price runup in the second half on the 1980’s? That’s where the substantial gains of the decade came from.
I would like to compare today to 1940, the beginning of WW 2, and see what housing in Canada did while there was a war in Europe. I think that might be more representative of what to expect.
Yep.
Leo has the best grasp of stats/trends imo and is very careful with predictions as those of us who have been following the market know that even the most informed RE people can’t make accurate long term predictions – only general trends based on current conditions. You just have to look at the annual predictions that are done here each year to see how far off most people are and how accuracy appears to be based on luck rather than skill a lot off the time.
The most interesting comments on the current market for me are the on the ground reports from Marko. He sees what sales and sentiments are like interacting with buyers on a day to day basis. I wonder if the fact that he had a buyer pay 10% under peak for a condo (while others paying higher than peak) might be indicative of where we are headed in the short term overall.
As far as TO goes, we are not TO. Our market does not move in lockstep with this market. Some of the same variables, like interest rates, will apply to both markets but I wouldn’t say what happens there happens here.
Toronto prices tripled during the 1980s. Well above inflation.
Just a huge inflating bubble. Didn’t stop the crash in the early 90s.
They fell in real terms. Inflation was pretty high in the early 80s, if you didn’t know.
If demand stays high there will be no housing crash. A tautology
But demand = people * credit
We’re seeing the impacts of a reduction in credit. Arguably as a country we won’t be short of people if the immigration rate stays high, but Canada is a big country, and just as has happened before we will certainly see a swing between provinces in migration. Can’t predict that kind of thing.
If migration to BC numbers stay high, there will be no housing crash here. Just like there was no crash in Toronto in the 1980s.
Patrick
Doesn’t that make sense to you, Patrick. They migrated in during the good years and bailed out for the bad years.
So when you referred to massive migration to BC in the 1980s, you now rephrase that as “ massive migration to BC in the boom years up to and including 1981”. Which now makes it an accurate statement.
Facts remain. BC RE downturn was from 1981 to 1985, which was AFTER the migration boom. Migration to BC peaked in 1980, and fell from 1981-85, the same period of the the downturn. Toronto saw solid population growth >2% per year throughout the 1980s, and didn’t see prices fall. https://www.macrotrends.net/cities/20402/toronto/population
Yep Leo has a good take on the stats and I think we will see sooner than later where real estate is headed
Irrelevant. That was after the biggest price declines.
Like I said there was massive migration to BC in the boom years up to and including 1981 when we had a price crash in Victoria and Vancouver. What happens after is immaterial to the question of “can prices crash with strong in-migration” to which the answer is a clear yes. Just because we have strong in-migration this year doesn’t mean we will next year
HHVers have been fooled in the past, by searching the world for falling house prices, with expectation that these would soon come to Victoria. Except prices didn’t fall here. I recall one post a few years ago (2018?) where someone found a single condo building in Hong Kong where prices dropped 20%, and so of course we were to expect to see that here soon. The next day, it would be posts about early signs of crash in Australia or Greece. Then they discovered parts of the BC Mainland, and we’d read breathless reports about a rancher in Chilliwack selling under-ask.
The point being, we have LeoS on the case, monitoring every possible RE metric for early signs of the downturn in Victoria. He will let us know when prices start falling, but so far he reports latest data showing sales over ask “remaining at 45%” and it remains a “very tight market”.
Thurston
…. and that, my friends is the best example of market sentiment. Prices drop, media picks up on it, buyers expect more drops …
Frank
You can’t take the bottom out of the pyramid and not expect it to collapse. Buyers with established equity do need someone to buy their property.
Patrick
…. and, as you can see by your chart, Toronto didn’t have the same kind of price growth as B.C.. Home prices in large parts of Vancouver/Lower Mainland increased by 30 – 40% within 1.5 years in 1979 – 81.
In Toronto, there wasn’t any real price escalation until the late 80’s leading to the bust of the 90’s.
That will be the same story this time as B.C. and Ontario crash but the rest of Canada doesn’t really feel the pain of those higher rates.
Leo S
Oops!!
Patrick I’m already reading about prices coming off in Toronto and the Fraser valley and those stats themselves are already 3 weeks dated So I’m guessing I’m already seeing the future
For those HHVers convinced that high rates mean lower house prices, and use BC in the 1980s as their example…
In the 1980s, the Toronto housing market faced the same high interest rates that BC did in the 1980s. But there was no Toronto price bust. There wasn’t even a single year with prices falling, and prices tripled over the 1980s decade.
(A footnote, the Toronto price bust finally happened during 1990-96, which was a period of falling interest rates. https://www.ratehub.ca/5-year-fixed-mortgage-rate-history )
Here’s Toronto house prices during the 1980s. https://trreb.ca/files/market-stats/market-watch/historic.pdf
This is incorrect. There wasn’t “massive migration to BC” – in fact there was a bust with almost no net migration from 1982-86. And this was one reason that BC prices fell more than other places in Canada (like Toronto, where prices didn’t fall at all in the 1980s)
http://www.wminfomatics.com/wmanalytics/articles/120406/popbc2011a.html
Here’s a chart of StatCan data from the 1980s showing net interprovincial migration to BC. You can see the bust in the migration to BC from 82-86, the same as the “BC house price bust” period.
patriotz-Apparently people aren’t always selling, isn’t that why inventory is so low. The decline in activity, I believe, is the first time, highly leveraged buyers have been completely priced out of the market by increased interest rates reducing the amount they can afford. That leaves buyers that have substantial equity from their own property and cash buyers. Gone are the first timers that have been running around putting in dozens of offers in the hope that they luck out. What we’re left with are buyers with established equity. Is that going to cause prices to collapse, I doubt it.
.
Unless the walls on Hawthorne are completely rotted out, I don’t see a great need for any lumber. Yes drywall is more expensive, kitchen cabinets and vanities aren’t made out of wood, toilets and showers haven’t gone up 5x’s. Fixtures, cabinets, flooring (also fake wood), drywall, toilets, showers, etc…, if you don’t go overboard and take the advice of an interior decorator, all in 25-30 grand for materials. This isn’t Trudeau’s residence we’re doing on an inflated government budget. This is the real world. You don’t have to buy a $2500 toilet, they’re out there for under $300. I’m sure some people can’t live without a $70,000 custom kitchen, but I can.
I just had a 3 piece bath completely redone, all by tradespeople that included $4400 mold remediation, a plumber and electrician. The total cost was $14,000. Nothing fancy, but all new and modern. Without the remediation, a couple guys could have done it for well under $5000. My property manager had no problem getting tradespeople, he has his connections and provides them steady work if they’re reliable. I guess too many people have been taken to the cleaners by greedy contractors that quote stupidly inflated estimates. That’s why I like to retain a property manager for my properties, I’ve never felt ripped off for any work I’ve had done. You’re getting robbed people.
People are always selling, mainly for lifestyle reasons in the case of owner-occupiers. And it appears you don’t understand that a sold property gets occupied by somebody – it’s not like it disappears form the housing stock. So it’s a matter of the same number of households and same number of dwellings, just shuffled a tiny bit.
Most owner-occupiers who sell are buying another property. Both of the purchasers on either end are going to be subject to higher interest rates. So what does that mean for prices?
I may not be a 1000lb grizzly like Debt Monster, but call me a baby VI black bear. I anticipate a correction for sure and believe the next rate hikes will be a turnaround. Just because there is a housing shortage and people need a place to live doesn’t mean sentiment can’t turn. All it takes for prices to drop are for buyers to lose willingness to pay current prices. Longterm prices rise once again. Would be nice just to see more inventory even if prices do in fact hold short term.
Frank
Frank
So which is it? Either way Hawthorne is way over 100k to fix up even doing the work all yourself. Building materials are just so expensive now.
up-and-coming
… or was this a sound chamber for bulls congratulating themselves and trying to convince each other of eternal price jumps.
lol I am pretty sure even a month ago most people here were talking about lack of supply caused by people immigrating to the Island etc and prices will keep going up. Then the 50bps hike came and that particular rhetoric started to disappear. Now its turned to how prices won’t ever come down because construction costs are so high, so lets see if that rhetoric goes the same path with the June and July hikes.
“Sure, some over extended recent buyers will be under pressure if they didn’t take out a 5 year fixed rate. That was a huge mistake that only a novice would make.”
Anyone have a variable rate mortgage where the payment increases or decreases with the prime rate?
And the same house in the opposite market:
1993: Advertised for $179k
1997: Advertised for $179k, expired
1999: Advertised for $169k, expired
2002: Sold for $171k.
This is why I’ve been writing about the 80s. Not because I think we will exactly repeat that situation but to show that it can and has happened. Massive demand, massive migration to BC, zero rental vacancy, and people still sold in large numbers and inventory ballooned
Up and Comers take on the Monster….yep agreed.
This reads like some sort of weird real estate superhero role you’ve created for yourself and if it’s so important why are you wasting your time here where most are competent and paying attention to the market?
With close to zero vacancy rate, and the fact that people have to live somewhere, where are these sellers going to live? I don’t see any good reason for that many people to sell. Sure, some over extended recent buyers will be under pressure if they didn’t take out a 5 year fixed rate. That was a huge mistake that only a novice would make.
In March of 2008 I sold my home in Rockheights for exactly $700K. The purchaser took possession 3 months later in June.
The house had just went up for sale, and my realtor hadn’t even put the sign up yet when I saw a man and his wife walking around the yard. Their realtor had told them about the house just going up and they rushed over to see it. I let them come in to look at the inside. They fell in love with it. They had missed out on two houses and were “desperate” to get something. They wanted the house like “right now”. I asked them if they needed to sell his home first and he replied no, it’ll go fast. It was in East Sooke and he had hoped to get around $1M for it. I remember him saying to me “you can’t own too much property” Their house didn’t sell. “It was all their realtor’s fault. He only had one showing in the entire first week…..and on and on he went.” I didn’t re-purchase at the time as I moved into a rental duplex I owned. And no, I didn’t boot my renters out. They had given notice and that is when I made the decision to sell.
The couple never did move into the house. They owned two other homes, the one in Sooke and the other was single building of sorts having multiple suites. Apparently they did need to sell one of them after all in order to purchase mine.
So they put mine up for sale. They had to borrow funds in the mean time. Prices were dropping pretty fast. After four months in the following October they finally sold the house for $585K. Man, I felt for them. I liked the house a lot and after a few months of it not selling, I honestly was thinking of buying it back as the prices had dropped so much, but they would have been so humiliated and I would have come across as being greedy. … It has one of the best views in the entire area. The people who did get the real deal are still there.
“Given the turmoil in the world today, I don’t think rates will be high for long. I don’t foresee any scenario that would cause a 30% decline. Stocks are a different story, that could get ugly, it already has.“
–
The stock market is a leading indicator, so are new home starts, both are down. Median house prices are lagging indicator, these will follow the leading indicator . I said in March/April that house prices have peaked and its obvious that’s what’s happening,. Interest rates will go higher and stay higher longer then people think until inflation is under control as central banks are now taking it serious . How far house prices fall is anyones guess but I would start with 50% of the run up since Covid started.
You work for Zillow Frank?
Stick a fork in it?
What happened to interest rates at that time?
lol dont’ be scared of the rate hikes.
Back in late 2008 at the start of the Great Recession, MOI was 15 months, I couldn’t find a tenant for my property in Ladysmith, banks were going bust around the world, not sure what rates were, but did I bail then? No, I stuck it out, why sell into a weak market. I also held on to Microsoft even though it had lost half its value. I’ll ride out this storm also, I have excellent tenants, a line of credit I can tap into on one of my properties, and MOI is 1.4. If property across the country gained 50% in the last 2 years during a pandemic, I think we’ll survive nicely with higher interest rates. Given the turmoil in the world today, I don’t think rates will be high for long. I don’t foresee any scenario that would cause a 30% decline. Stocks are a different story, that could get ugly, it already has.
Why don’t I put in an offer of 1.5? I don’t want to waste someone’s time.
That, my friend, comes with the territory. I only have so much time to let people understand where this market is going before we actually get there. These next 2 rate hikes are going to cause havoc in this real estate market.
There’s no sense in warning people when things are already happening. Now, they can take some sort of action to protect themselves. Sell that anchor, hold off buying, lock in a reasonable mortgage while you can, etc.
Really enjoying househunt these days lots of differing of opinions on where we are at and where we are going cheers
Well you should put an offer in for $1.5M and flip it for $1.8M then.
3809 Ascot- I say 1.8mil. That’s a lot of house and a lot of land.
That is exactly the issue. Such a large share of the economy taken up by RE just isn’t sustainable. In the end it doesn’t matter what the BoC or government does, that ball isn’t going to stay in the air indefinitely. Just how things will return to sustainability is what we don’t know.
The Debt Monster started off somewhat reasonable, but is now on full tilt it would appear.
lol I am pretty sure even a month ago most people here were talking about lack of supply caused by people immigrating to the Island etc and prices will keep going up. Then the 50bps hike came and that particular rhetoric started to disappear. Now its turned to how prices won’t ever come down because construction costs are so high, so lets see if that rhetoric goes the same path with the June and July hikes.
Don’t know but seems about right, $1.5M would put it at $75k over asking. 3 bedroom basement suite does make it attractive for amature landlords wanting to get in the game so maybe $1.55M?
VicRE- 3809 Ascot, very nice place, but what is it going to sell for. I think it’s underpriced.
VicREanalyst
. . . and that’s why I try to dumb it down a little bit, but most of the commenters seem to be fairly intelligent. They recognize that there is a correlation between the interest rate hike and mortgage rates without the tedium of explaining bond yields.
The bond market will have already priced in the next 1/2% hike, so it’s the next hike in July that should push yields up to a point where mortgage rates will top 6%+.
I think if it was done right with some flashy high end items then you can get $1.5M for it today. But at $1.5M IMO there are some more attractive options currently such as this one: https://www.realtor.ca/real-estate/24427216/3809-ascot-dr-saanich-cedar-hill
Yeah it’s a real laugh Debt Monster, because we all know no one ever makes money in real estate
Lol another typical armchair expert who has zero idea on how fixed/variable mortgage rates work. Also Victoria people are slow, they are typically 2 month late to the party, what we are currently experiencing is what GTA experienced in mid March. However, this makes it a great market to speculate as you are able to get in and out faster before most.
Market is just all over the place sale to sale. I’ve seen a few buildings, for example, hit record highs on condo sales this week, but then I just did a deal yesterday in a building where I think my client ended up at approx 10% below peak.
Zero rhyme or reason to many sales.
Not the inspectors problem. Recently had a plumbing inspector hold up occupancy for two weeks because the ensuite toilet (bought at Lowe’s) didn’t have the upc c sticker on it even thought it was on the box it came in. In the end had to go buy the same toilet at Lowe’s, drag it up to the ensuite and place the box next to the installed toilet for him to come back and look at it as he wouldn’t accepted photos/invoice etc.
You can add more than 20% once the inspectors are involved.
To do it right it’s going to be 500 grand plus and that’s in and out nicely updated calling in trades which means u would permits and all the b.s that entails so all in finished break even would be about 1.5. Now if u had a upward market it would probably go back on for about 1.8 and deal from there.But I think those days are probably gone. aA clean up and paint just won’t put enough money in your pocket and if u do everything yourself working weekends u probably will never finish it
Doubled in 3 years.
958 Lovat sold May 2019 for $630k
Sold again today for $1.25M.
1061 square feet, 2 bed 1 bath.
I doubt one would need a permit to thoroughly clean the mess, bleach moldy cement floors, tear out carpet, change a couple toilets, to make the place less offensive. Then get the inspector in and discuss your plans, preferably present them with a detailed written list of objectives. Not all inspectors are a-holes if you approach them professionally. The region does need more housing.
Oh for sure, happy to let you know when you’re just regurgitating the same garbage from FB posts if you’re “too cool” for FB. Also, I saw you said you thought I’d enjoy that one, which is really cute that you’re posting just for me and I’m flattered, but not interested.
That’s not how it works Frank. I wish it were.
Yes, I do enjoy Frank’s optimism. I think he may be the bull to Debt Monster’s bear.
“An inspector should welcome the individual who takes on a neglected property and do everything in his power to facilitate its restoration. I believe that should be his primary objective, instead of putting up roadblocks”
but how can an average DIYer knowing all these building codes, requirements for demolition waste removal?
Saanich permits requirements fyi:
https://www.saanich.ca/EN/main/local-government/inspections-bylaw-services/residential-permits.html
Local Fool
You do understand that you are projecting your emotional certainty on lower interest rates despite the recent inflation numbers. When used cars are added to the CPI basket this month you can expect an even higher inflation rate. There will be 2 rate increase of a minimum 1/2%.
It may very well be a large metric in Canadian GDP but, as previously stated, there are only 2 provinces in which their housing markets are going to be crippled by 7.5% rates. The third largest housing market is Quebec and their average home price is under $500,000. The rest of Canadian housing will plod along.
I did say minimum, my friend. You can expect the GTA, Vancouver and Lower Mainland, and Victoria to fare considerably worse.
Bless you Frank and your dewy eyed optimism, I had a sensible chuckle.
An inspector should welcome the individual who takes on a neglected property and do everything in his power to facilitate its restoration. I believe that should be his primary objective, instead of putting up roadblocks.
Re Hawthorne
In addition, keep in mind this will be a fairly large flip, the chance be reported by neighbors without a permit is high. Once Saanich inspector involved, there will be at least additional 20% on top of the lowest estimate in below comments and two to three months delay on permit/inspections.
It just can’t be legally flipped for less than $150K regardless DIY (factor in the interest payment and time) or hire the cheapest contractors in town.
This is straight-up fortune telling. You may have emotional certainty, but you simply don’t know what’s to happen next no matter how you phrase it, rebut it, or repeat it. I continue to believe that you do not adequately appreciate the extent to which housing “is” the economy in Canada – and yes sir, that’s a nationwide metric.
They’re not going to get away with 7.5% 5YR/F without a completely shattered economy, and I don’t just mean housing. If the 5 year yield starts threatening financial “stability” (ie debt wobbles) they can artificially pull it right back down again through more QE. From a central banker’s perspective, it’s a choice between two increasingly impossible evils…
I actually think that is reasonable, whether probable or not. Even with a 30% fall from peak, homes would still be very unaffordable. Keep in mind, when the average home a few years ago was 800k, interest rates were about 2.5 to 3%, quite a bit lower than today. A 30% haircut, at least in the detached segment would still represent worse affordability today than then. And, at that time, affordability was already a huge issue.
I actually physically went and looked at the place. Mask were needed (not for COVID, but for risk of inhaling mold). On top of the mold, the wet walls and some of the floors definitely had rot issues. Bushes and trees were overgrown next to the foundation and the place had electrical issues. I was only considering it as a lot after I saw it and once it had multiple offers, I had no interest. Saved me from having to email Marko for his owner-builder exam package.
It would look very suspicious and also obvious frank if their tax returns fully disclose what they are doing. Great to know your friends are of such outstanding moral fibre and strong character
Leo S
Fortunately Leo, you won’t have to wait that long to see that transpire – 55 more days for both rate increases.
In my view this would rates at +3% from where they are now, so fixed at 7.5%. I don’t think we’ll get there
oh debt monster. All properties down by minimum 30%! quite the prediction…
Marko Juras
Let’s see, currently, the 5 yr posted mortgage rate at Scotia and BMO is 4.99% and this is prior to the two big interest rate increases coming up in June and July. That will push mortgage rates up to 6%+ and drive buyers away even more so. Market sentiment will be completely negative by this year end and prices will be correcting within that time frame.
By the end of next year, all properties will be down by a minimum of 30%.
I can’t put a market value on this property because it will be in foreclosure but Frank should be able to pick it up under $500,000.
I have a friend who is an electrician, wanna know what him and his wife do? Flip houses. He doesn’t take on any outside work. That’s one reason why you can’t find any tradespeople, they’re all working on their own projects. And profits get taxed as capital gains, not income. I know you can only get away with that for so long. Put one property in her name, the next in his, and it doesn’t look so suspicious.
Major renovations always take longer and cost more than you’d think. You still need a BP/EP/PP and all the relevant inspections, plus any remediation before you start. Any structural change can incur engineering (which can then snowball quickly).
I’ve done drain tile work with my father on new houses. It is really simple (it is literally pipe and making sure you have the grade correct) so if you broke it down to renting a mini excavator and then having a problem come in to lay the pipe and backfilling you can get it done for a fraction of the cost compared to calling a full service drain tile company. There are many things one could do themselves and save a ton such as drainage, fencing, etc.
Those before pictures suggest chemical or bio hazard. That may not actually be the case, but first impressions matter.
My wild guess was $100-150K for Hawthorne if a person did most of the work themselves. I think Frank may be underestimating the amount of work required, and there is always the potential for nasty surprises behind finished walls, etc. Also, could be problems with drainage by the looks of it. Maybe you get lucky and the drain tile can be cleared. Or maybe not, and you’re spending another $25-30,000.
I wouldn’t touch that place with a 10 foot pole.
What do you predict the market value will be in 17 months?
Once plumbing, electrical and furnace is done, the rest is grunt work. Any experienced flipper can do the majority of the improvements. Your windows and doors get done in a day. An experienced tiler is also good to know. Flooring is not rocket science, but an installer is recommended. I bought a small 4 room shack in Langford in 2002. With the help of a friend we made it liveable for $5000. It was always rented for 15 years. Experienced flippers have their contacts, and know how to get things done.
Introvert
….. and take a pic and frame it. Within 17 months it will be leaving a very bad taste in everyone’s mouth.
It is incredibly difficult to find tradespeople right now even for cash and I think 100k is way too low but you are right this type of property is for someone who is going to work on the house themselves after work/weekends. They will hire a drywaller that works at a large local company that takes cash jobs in the evenings and on weekends/etc.
Let’s take a step back and reflect on the fact that, one of the nastiest Victoria properties we’ve ever come across, sold for a bit less than ONE MILLION DOLLARS.
If I was tackling Hawthorne, I’d take before and after pictures and show them to any prospective buyer. I’d also take pics while upgrades such as plumbing and electrical are roughed in so you have proof of the work done. People appreciate that amount of disclosure and would feel comfortable buying the place. I never hide anything in my business dealing.
just that juxtaposition of words is completely ridiculous
Ya don’t think Hawthorne is money maker can’t see it being flipped
There’s lots of tradespeople available if you pay cash. Most flippers do most of the hard work themselves. A clipboard flipper trying to get tradespeople would have a difficult time. You have to be willing to get your hands dirty and have some basic skills. Only Martha Stewart would spend $250,000 on this place.
They took the risk they see the reward. My first sale in Royal Bay from GableCraft was $519,900. People were paying substantially more for similar homes in the Westhills for years.
Lol I love how Frank on the one hand complains how prices are sky high for all construction materials but on the other hand thinks this is a 100k reno flip.
If this is a quick flip I look at this as a 250k reno and back on the market after the June and July BoC interest rate announcements. But most likely a tear down now as too much publicity, lmao who would want to be the one buying this post reno after all the youtube and tik tok videos?
Those with the land (like Gablecraft) will benefit
There WAS a lot of room as a result of insane market run up during construction. Problem is once again secondary due to NIYMBs, environmental and other regulations even with the recent boom there are very few building lots available. Not enough to flood the market and cause a dramatic decline in prices. When you look at the very few lots currently available, the prices on those lots and then apply record high construction costs and if you factor in a 5 to 10% drop in market during your 12 to 16 month project you are lining yourself up for zero profit.
Keep in mind lots don’t appear out of no where as there is a lot of infrastructure/servicing involved and teardowns first time buyers will set the floor price.
The theory that lot prices will simply drop to the point where projects are profitable would be an okay theory if there were actually lots out there.
Context
1611 Hawthorne: $908,000 for a gut job
1585 Hawthorne: $1,335,000 for a decent place on the same size lot, similar house sold a month ago
What you’re saying though is the % margin is lower. Not sure about that. How much room is there beneath a $1.6M Royal Bay sale price to get to costs? Quite a bit I think.
100% agree.
Many people will think problem solved if we get a correction and more inventory, but absolutely none of the chronic problems have been solved
Possible, that is the risk you take in life. I would think a back-up plan would be renting the house out.
That is politics, a start. However, beauracy won’t change and even for smaller players it will be difficult in a downturn when they need to shell out 100k for a sidewalk on a fourplex.
Real life for some of these things is like an engineer for a sidewalk you can’t hire a recent grad from UBC for cheap. There are a small handful of engineers in Victoria that know the COV staff and how things work. Then there are a very small handful of contractors (like less than 5) that are bonded properly and willing to work with COV/engineers to frame a sidewalk, etc. My point is in a recession you aren’t getting that sidewalk down for half price.
Can’t blame engineering firms, contractors, or other consultants for exploiting the situation nicely setup by city staff.
The fixed costs in construction are much higher; therefore, projects become unprofitable sooner in a downturn in my opinion.
For example, last year you did not need to hand deconstruct a home in the COV. Now you have to deconstruct a home in the COV and that regulation is here to stay forever.
Even if labour dropped 30% in cost you still have to deconstruct; whereas, you didn’t before.
I guess what I am trying to say is BS regulations piled on in the last 20 years will exacerbate a slowdown in housing starts which within 5 years will put us in a inventory crisis yet again.
Frank
I think that you’re being “flippant” with this statement but clearly understand that the “quick flip” market is gone and this “flipper” will quickly understand that when he can’t get “available tradesmen” and the prices start slipping further into the summer months.
He will list within 3 months with no renovations and more likely than not he will follow the market down.
I don’t really follow. Yes construction is a lot more expensive now, but we’ve also got 10x the prices. I don’t know if that factor would be relevant.
I’d say we’re more dependent on condo construction now to add net units, and big developers may pull back more than small ones due to higher risk.
That’s why we need to upzone into a recession to keep things moving with smaller players.
I think the slam now would be harder after the current backlog of construction is finished. Way more regulation, less tradespeople, etc. In the 80s you just had to buy land cheaper and find cheaper trades. You didn’t need 10 consultants.
Some things might help like CHMC financing for rentals which can be had around 1%-2% versus 5-8% for a condo. It could swing construction closer to 100% rental inventory in this interest rate environment.
I showed the house there is a good reason(s) why it sold under assessed.
And then everyone will complain how flippers are the problem even thought no one wanted to take the risk and put in the work of fixing up the house.
Debt Monster- I fail to see why people can’t see beyond a filthy interior. One day gutting the kitchen and bathrooms, ripping out the flooring and you’ve got a blank canvas to work with. Update the mechanicals, $20,000, install tasteful cabinets and countertops, $20,000 with new appliances, 2 new bathrooms, 30,000, and as far as I can see the rest is cosmetics. Depending on the condition of the roof, I didn’t see any collapsing ceilings or holes in the walls. New windows and doors, they are installed in one day. This is a classic quick flip and demonstrates the important role flippers play in the market. In 6 months it will be back on the market and the flippers will pocket a 200k profit. The house had some character, for a mid 70’s build. If the renovations are properly done the house is good for another 60-70 years.
up-and-coming
I really haven’t been on this blog long enough to figure out all of the characters or their personalities, but I do like your sense of humour.
960 cowichan just sold
For under assessed. Now that’s a bargain!!!
I thought you would enjoy that one. Since I don’t have a FB account or see a reason for having one, I really have to defer to your expertise and indepth knowledge of the content and going ons of FB pages.
When you do the math, that’s only around $65,000 per floor stain. Seems like a bargain.
I don’t imagine this is the type of property a first time homebuyer panicked and made an offer on and now has remorse. It’s most likely someone that knows exactly what they’re getting into and exactly what they’re doing and will renovate it for a nice profit.
Lol, this is straight off the “every market in North America is going to crash” Facebook page(s)
Possible banking crisis starting to brew in the world’s second largest economy.
From: https://www.reuters.com/markets/asia/chinese-depositors-left-dark-three-local-banks-freeze-deposits-2022-05-18/
Oh ya, let’s not forget that Evergrande things still unraveling.
From: https://www.asiamarkets.com/dire-evergrande-warning-amid-fears-of-brutal-collapse/
I believe there has been talk that it would take an economic shock to really derail the real estate market in Canada. It looks like the global economy might still be working on some shock items.
Starts in the 80s got slammed shortly after the resale market collapsed. Pretty interesting how quickly sales recovered though. 1983 onwards was a great time for the real estate industry. Tons of sales, tons of selection, stable prices.
Thank you. You agree with me. Of course supply of new housing will vary with price, just like supply of anything else.
lol, to play devil’s advocate lets see if the buyer actually closes.
Umm- We’ll have to see what it sells for. I bought Target shares instead yesterday, and lost 25% today (not).
Frank, you should have got in on that. Your $1.1 mil would have taken it.
I agree the definition in the assessment act is vague and seems like it might apply to strata properties used as STVRs. But I called the spec tax info line and they confirmed that spec tax would be due for someone operating a STVR in a condo (unless they put together 6 months of 30+ day stays in the year). The strata hotel exemption is for fractional ownership properties.
Of course this is not tax advice. Anyone buying a property for Airbnb should verify this themselves
1611 Hawthorne pending at 908000
Very few condos built in Victoria 1996-2003. When I bought my place at the 834 in 2009, I think it may have been the only residential building under construction downtown, so there are periods where very little is built due to no or poor profit margin.
Secondly, the baseline regulations/bureaucracy increase every year. I gave you my example of a 2011 vs 2022 sidewalk where just the new required consultants were substantially more expensive than the entire project in 2011. This is just one of many things. For example, hand deconstruction isn’t going away with a market downturn. Asbestos abatement isn’t going anywhere, etc., etc.
In 2008 you called an excavator and you torn down the home and you started construction. Now you have multiple extra steps required before you teardown the house and even if the cost of those multiple steps drop, they aren’t drop to half or zero.
Just a super long list…blower tests, etc., are some of the many things introduced just in the last few years. These are all invoices a builder has to pay that you can’t get around.
Note that AirBnb’s term of “whole home” includes self-contained suite inside a home, which is not permitted by the city for short term rental (“except for when a renter rents it out on occasion with owner’s permission”). So the owner of these suites can’t get sort term rental licenses for them but the spec taxes wont apply to them either.
Again, you may have information to the contrary but the Assessment Act states:
So to me this means there would need to be a case by case assessment based on actual use and number of strata lots in the complex.
it does not. That is for actual “strata accomodation” or strata hotel buildings like 500 Oswego.
A licensed operator of a primary residence can still rent out their whole home. This can happen if, ex. they go on vacation.
Not 100% sure about whether transient zoned fits the strata hotel exemption or another exemption and don’t have time to track that down. Seems like there should be an exemption for this if it is a legal zoning use but the number of eligible properties for this zoning and licensing in Victoria is really small as the strata also has to agree. For sure the non transient zoned Victoria licences are only available for primary residences which are already exempt from spec taxes.
A few things to keep in mind.
As far as I can tell the city is doing everything right and there are very few gains left in cracking down harder. Next step is for the province to step in and force AirBnb to cooperate, and the other munis to adopt similar regs. Really Airbnb should simply get a list of licensed units from the city and refuse to list anything without a valid license. Then we wouldn’t need all this active enforcement.
How do you figure? Does it say that somewhere? Seems to me that someone holding a valid STVR license for a condo in a transient zoned building would still be liable for the spec tax unless they have 6 months worth of 30+ day stays for the year.
Those who are issued licenses for Airbnbs would not be legally liable to pay a speculation tax if operating according to the terms of the licence. How many people commit fraud is a different question. Given that there are regular audits of the spec tax program and significant penalties it doesn’t seem like a wise move to do this imo.
You’re saying that nobody built anything until prices got back to 1981 levels? Or 2006 levels south of the border?
That’s not what happened. Now figure that out.
Leo S
You’re absolutely right, Leo. This is where “investors” are going to be “reviewing” their portfolios of properties as the market sentiment drops considerably.
These investors will be looking at the “Set For LIfe” lottery game. Do I take the monthly (if in the positive … which most recent “investors” aren’t and are counting on appreciation) or do I take the big score. It was easy to sit back and watch the properties appreciate over the last several years.
So far, most have looked like geniuses to their respective spouses. They know that will change considerably when the market tanks. What to do? House is paid off but I’m making $4000/monthly or just sell for $1.4 million. Or, I have $300,000 equity right now and I’m not cash positive on this investment, yet. Take the money or …
Right, a lot of inventory will be piling up in the next couple months.
This is true. But of course this only applies to homes under construction, and so it doesn’t last long . No one starts building new homes unless they can sell it for $x +1.
LOL. With Vancouver west end land prices selling as high as $164 million per acre in 2018…. The lesson you want us to remember from that is that Vancouver west end land prices took a “ beating” https://www.vancouverisawesome.com/courier-archive/real-estate/metro-vancouver-residential-land-prices-may-have-already-peaked-3095421
Huge backlog of construction projects + absolute shortage of trades people = long time before labour prices correct, if any.
I’ve talked to builders in the last week and trade quotes are all coming in all time highs. Tradespeople do not react to stock market or real estate market adjustments. Either there is work or there isn’t and trades that know what they are doing can keep busy servicing existing inventory if new construction slows. 10 years ago I was complaing on HHV how there weren’t enough people going into trades and it was difficult to find tradespeople. That was in a market of 5000 active listings and 500 sales.
I would think going forward land and labour will adjust downwards to reflect a souring market
Target stock closed down 25% today. That’s scary.
That’s Jody’s room.
Don’t scare Jody.
The Amityville Hawthorne
Bet there is a redroom somewhere in there and swarms of flies…
I agree but land owners aren’t necessarily going to drop their prices to the point where the numbers work for the developers. Development land in urban areas usually has other utility as well even if it is simply a surface pay parking lot.
Same concept with residential lots. If construction prices are at record highers and re-sale prices drop it doesn’t mean that teardowns drop down in value to make the numbers work because the teardown also has a first time buyer market which will likely set the floor price before it makes sense for a builder.
This is what people don’t understand. Just because it costs $x to build a house doesn’t mean someone will pay $x+1 for it, when you don’t have any buyers at $x+1 while your carrying costs are stacking up then you may have to sell at $x-1 or less to stop the bleeding. People that haven’t been through a full cycle do not appreciate this reality.
Land can’t sell for more than someone is willing to pay for it. Remember the beating land prices took in Vancouver West Side a few years back. And they weren’t making any more of it.
You could leave Hawthorne the way it is and rent it out as a horror movie set. Just add a little ketchup.
I guess that situation is going to be putting a lot of people out of work and company’s out of business. The one good thing, despite prices, may be that individual homeowners will at least be able to find someone to do necessary repairs etc to their homes.
The real head scratcher is why someone paid for a 3D tour????
There won’t be anything to purchase pre-sale. Land prices at record highs, construction costs at record highs, development bureaucracy at all time high. Makert going forward uncertain. Developers won’t be rushing to pre-sell anything until some of those variables change.
I don’t think too many people are going to be purchasing pre construction condo’s for awhile.
I see the dow is down over 1000 points right now.
1611 Hawthorne is getting rave reviews from all corners.
https://www.tiktok.com/@bobbiecurtislee/video/7098036866133413166
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“lol and when exactly were you paying $3?”
In 2015, the venerable 2×4 stud could be had for under $3. Those were the days.
The annual tank in lumber prices seems to be underway now, so retail prices should start dropping if they haven’t already.
+1, I’ve posted the list many times on HHV but it isn’t may buildings.
https://www.cheknews.ca/worry-buyers-remorse-high-as-real-estate-market-slowdown-materializes-1032466/
There would be very few (likely none) counted towards this as to get a licence for AIrbnb in Victoria it has to (a) be your principal residence (vast majority) or (b) zoned for transient accommodation and permitted in the strata rules (very few qualify).
Principal residences are already exempt from the speculation tax, as are those who qualify as a “strata hotel” which seems to capture the transient zoned licensed Airbnbs.
lol and when exactly were you paying $3?
Does anyone know if people operating a licensed AirBnb in Victoria have to pay the speculation tax? Gov’t spec tax says “Short-term rentals for periods of less than one month do not count towards the six-month total.”
A 2×4 at Home Depot was $15, I remember paying $3. Sheets of OSB used to be $10, now, $45. Prices are up 4-5 times. Building a house must cost a fortune now.
“Frank, you must not be looking at market prices for lumber.”
Eh? Is Home Depot not market prices? where do you buy your lumber. the Chigaco Lumber Futures Market?
i was at Home Depot 2 days ago and was floored by the prices, and grateful that i didnt have any large projects ongoing.
Hard to compare when they use different baskets. USA, for example, has used cars in their metrics and we don’t. I had read that if you removed used cars from the US it would pull its inflation down 1% https://www.cnbc.com/2022/01/13/why-used-car-prices-are-pushing-inflation-higher.html) . As Leo said, used cars will be in ours starting this month so we could see ours jump 1% month to month just based on that depending on the weighting etc.
Frank, you must not be looking at market prices for lumber.
The real issue here is how weak the CAD dollar is with the current high commodity prices. If these ever come off, the CAD may weaken another 5-10 cents to the USD and the impact on inflation if that happens will be significant. I don’t think this is something most people appreciate, not even the BoC.
Patrick
and yet …
munknee.com/canadian-residential-real-estate-prices-growing-the-fastest-in-the-g7/
0.5% rate hike secured
May figures will include used cars so quite likely even higher
Canada inflation is about the middle of the pack compared to the G7 countries.
US 8.3%
Spain 8.3%
Germany 7.4%
Canada 6.7%
Italy 6%
France 4.8%
Japan ~2%
See you June 1st.
https://www.cbc.ca/news/business/canada-inflation-april-1.6457520
Bluesman- After looking at the price of lumber, if a house is structurally sound, even if it is a hell hole, it is worth saving. A new build on the property could take years, incur huge permitting costs, and according to Marko the hassle is not worth it. I’m sure a qualified renovator looked past the squalor and saw a diamond in the rough. Should the seller have spent $1000 to have the layer of scum removed, definitely. There are still plenty of eager buyers and fewer “diamonds “ out there. It’ll be back on the market with a $300-400k premium in 6 months. A couple of experienced flippers can completely renovate that place for under 100k.
Up-and-coming
I should say that it was on purpose. Poor choice of words.
In terms of advice, I don’t need to know Victoria (although my wife was born there) to understand the market forces bearing down on an overpriced city in one of the 2 bubbliest provinces.
Inflation tomorrow = 7.2 + %
Interest rate move = 1/2 – 3/4% June 1st.
New listings – double again.
Sales to new listings – 42%
Frank 2 strikes on my take conceded lol. Only going by what I see in the last months sales. Ex. Bigger lot in maplewood 7600 sqft and a house 10x better (yeah that’s not saying much given that hell hole) no offers on offer night. Finally sells conditionally 3 weeks later. At asking of 1.25mill.
1 mill for 6000 sqft in GH? Someone might see value there. Many probablay would not but it only takes one.
@ 1611 Hawthorne
Love how they kept up the yard, despite the house!
Then why all the free advice? Unless your double negative was on purpose of course
I got 2 out of 4 right so far: sold unconditionally, on offer night. Just need the final price and number of offers. Bluesman- you got 2 wrong so far. Nice try, at least you participated. The land is probably worth a million.
Accepted unconditional offer pending deposit
Less talky more offery
Now THAT is disappointing. Lololol
Lol. That doesn’t change the idea. There are currently 53 “condos” under $500,000 listed in Victoria on Realtor.ca.
Not to mention the Annual Property Taxes of $222,014 !
https://www.realtor.ca/real-estate/24417052/310-647-michigan-st-victoria-james-bay
“ 310 647 Michigan St” is not a condo. It’s a leasehold. Hence the very high monthly fee
Four years ago. Probably worse now:
https://www.cbc.ca/news/business/canadians-retirement-debt-1.4547125
Frank
I don’t know squat about the Victoria market, Frank, but there are currently 18 listings for SFH in Victoria under $900,000 on Realtor.ca
When it comes to the months of inventory it doesn’t matter that the population is larger today than in 1981. The real estate market supply is not the entire universe of homes. The size of the real estate market is a fraction of that as only 1 to 3 percent of all homes are transacted at anytime. No need to adjust for a larger population as 97 percent or more of the housing stock is not for sale. The real estate market is made up of only willing buyers and willing sellers. If your home is not for sale it is not part of the supply and conversely if you are not an active prospective purchaser then you are not part of the demand for housing.
Frank
How about they sell their home for $1.4 million, buy this condo in James Bay, put $1,000,000 into a GIC and then pay the stupid strata fees (under $1000 per month.
http://www.realtor.ca/real-estate/24417052/310-647-michigan-st-victoria-james-bay
$389,000
310 647 Michigan St
Victoria, British Columbia V8V1S9
MLS® Number: 903318
2
Bedrooms
2
Bathrooms
Do we know that?
And on on the opposite side of the spectrum from Hawthorne we have this one: https://www.realtor.ca/real-estate/24414389/3444-caldera-crt-langford-bear-mountain
I get that South Point residents/realtors really wants to be part of Bear Mountain so does pricing these homes at Bear Mountain prices achieve that or are they still just Westhills north? Those highway views though
Because they thought the longer they waited the more they would get. We know there are a lot of seniors who have little retirement savings and are planning to sell or downsize to have a comfortable retirement. How many will sell how soon, we don’t know.
The Hawthorne will sell around the asking price if they are lucky. I just don’t see the reason why paying over $1M for that location when you can always find the similar conditions in Henderson Oak Bay between $1.0 to 1.2M.
1611 Hawthorne- What? None of you own a sledgehammer, crowbar or pressure washer? Put in a natural gas furnace, hot water tank and get the sewer line roto-rooted. Gut the place, new kitchen, and bathrooms, flooring, roof, windows and so on. If the place is structurally sound ( I can tell in 5 minutes) it should be easy. Oh yeah, completely new 200 amp electrical system. Paint the outside and make it cozy. I wouldn’t let a little toxic waste bother me. I’ve seen worse. Definitely going to be a fierce bidding war.
From what I heard on that one is that offers were due at 2pm today and at 1pm there were 3 offers . So, unless there was a big drive in the last hour, 20 won’t be achieved. If it remains at just 3 offers… Maybe get one offer under ask, one at ask and one at about $850k. So, either way, the sale price should be up in a day or two.
I think I’ll take a bet with you on that one Frank. I say hawthorne sells for $900K. Zero offers on offer night. Sits on market for a couple months. Yikes nasty
The great thing about that house is you could have any number of accidents in it and you don’t have to worry .
Can’t make it to the bathroom on time? No problem. Just go anywhere.
Spill 18 gallons of used, asbestos laden transmission fluid in the living room? No worries. It’ll even out the carpet color and mask that peculiar dead bodies /sour milk odor.
Grandma died in the kitchen and can’t afford to bury or cremate her? All good. Plenty of space to just keep her propped up in the refrigerator alcove. Amongst all the other deluxe fixtures in the room, she’d blend in just fine and, somewhere in that house, she’ll probably have company anyways.
Fretting about rats scratching the walls at night and keeping you awake? Don’t be – there’s plenty of thoughtfully placed holes in the walls and ceilings to ensure safe and quiet passage for your furry little friends! (Bonus – they will help keep your toenails nice and short).
Are you an aspiring scientist looking for insights into acute and chronic respiratory conditions and carcinogenic mold, but can’t afford a lab set-up due to high start up costs? Sweet! The bathroom is already set up for you. HAZMAT gear not included.
Worried about midnight incursions from crack addicts and homeless people? Sleep tight – none of them will come within 50 feet of this fine home. You’ll never pay for a home security system again!
Worried about costs of tearing down and rebuilding? You don’t need to be. Your environmental assessment will helpfully mandate the lot as constituting a new “zone of alienation”, so you won’t be able to build anyways. Don’t know what a zone of alienation is? Ask an old resident of the city of Pripyat, whom probably would consider this house a bit of a fixer-upper.
1611 Hawthorne will be an excellent test for the current state of the market. My prediction: 1.1 million with at least 20 offers and no conditions. What’s your prediction. It’s priced at $140,000 under assessment.
Debt Monster- Could you tell me where they are going to live? If their house was paid for long ago, and have no serious debts, their monthly costs to keep a roof over their head would be less than $1000 max. If there was an apartment for them to move into, it would be close to double that. Better to hold on as long as you can, your apartment isn’t going to increase in value for you but your rent definitely will. If they do need to sell, why didn’t they sell into a crazy market instead of waiting for things to slow. Doesn’t make sense.
Oh my goodness.
Frank
Well, new listings doubled so they are coming from somewhere. Let’s try this, let’s presume that you are a typical senior looking at retirement within 5 yrs. You have managed to save a couple hundred thousand in RRSPs and you don’t have a pension plan. All of sudden your primary home is worth over $1,000,000 and wow that could finance your retirement.
Whoops, the market is changing as you’re hoping for even more money, so you list quickly to try and catch a buyer and retire happily ever after.
Their kids will go to Oaklands elementary school… What is it actually Jubilee?
991 Lohbrunner pending at 2.4 million. Only one million over assessed value. Things are starting to look grim.
Maybe. Followed the market for too long to think I can predict this. A lot of people hesitate in a falling market, which is understandable. This can cause the market to fall further. Consumer sentiment is a powerful force.
I’d really like to know what this one ends up going for:
https://www.realtor.ca/real-estate/24389190/1611-hawthorne-st-saanich-gordon-head
My guess is the number one employer of the viewership of HHV is BC Government (higher positions, management), followed by other large institutions/arms of government, followed by IT, etc. A lot of people making 80-120k/year individual and 150k-240k/year family income are frustrated by the current situation if still renting which is fair. Therefore, the hope is the market plummets 50% while your union negotiates 5% increases for the next three years and you can get into your dream SFH.
I remember 10 years ago on HHV people were hoping building lots in Oak Bay would drop to 350k and tradespeople would be so desperate for work they would have their dream home built for another 350k and they would be into a new home for 700k.
Totoro
You will get that chance by the Fall, Totoro, but you would be an outlier regarding this position because most people would sit back and wait for further drops before they stepped into a declining market. You know how market sentiment can be. Why buy at 10% off when next month could be 15% off … etc.
Marko I don’t know how builders today don’t pull all they’re hair out
millenialhomeownerx2
Except you tried to differentiate your mortgage from a mortgage and a heloc suggesting that the mortgage and a heloc would be in a worse position in the event that the amount is much closer to current market value. Quite frankly, I believe that you are using due diligence regarding your finances but not all people are by any stretch of the imagination. OSFI is in the process of dealing with that this spring.
patriotz- Only if they are profitable and growing in value. That’s not easy to do today.
So do corporations.
My sidewalk saga in the Oaklands area has come to an end. Received the 24k bond from the City of Victoria today. The house is sold, young family moved in last week.
Still doing all the accounting but looks like the total cost for the sidewalk is going to land over 70k. Just the engineering (mandated by COV) was over 12k. Not to mention the other non-sense (arborist reports, etc).
We built a new house in the Oaklands area in 2011 and the sidewalk/driveway/curbs/apshalt repair was 8k all in. There was no engineering, arborist, etc. required at the time by the City of Victoria, simply a common sense inspection by the city engineer of the forms before the concrete pour. Just the cost of the consultants these days is substantially more than what is use to do the entire sidewalk project. Reality is the bureaucracy will only get worse as time goes on, not better; therefore, why I have zero faith in government to solve housing.
We may or may not get some price relief with interest rates going up in the short term but long term SFH in the core will not be attainable. It will come down to family money or top 1% (or higher) income earners.
But they’re not concerned about house prices per se (they are not part of CPI) but the effect of a price decline on aggregate demand and thus indirectly on CPI. I don’t think the softening in Toronto is enough to move the needle nationally. A double digit decline in all the major markets would be different.
I think tomorrow’s inflation announcement will be the first thing to watch. If we see inflation steady or higher then in theory 50 bps should be on the table for June 1. If that is the case and they only do 25 bps then i’d be inclined to believe they are starting to considering housing. If inflation is down any real amount then they could make a case for a slower increase in rates and 25 bps isn’t that absurd. So I’ll wait until tomorrow to take a shot at rate amounts.
Totally. In fact that is pretty much my mantra when I look at my massive holdings of Pets.com sitting in my brokerage account.
Agreed on Asquith, but it has an accepted offer. As for Kings, …east side of Shelbourne I don’t think anyone views that as Oaklands.
Just chatted with a realtor and they were involved in a transaction where the seller accepted a subject to sale condition. What madness could be next? A sale subject to an inspection or the insanity of being subject to financing? On a separate note, I was speaking with a person involved with home insurance and apparently they are dealing with a massive amount of fraudulent claims right now and they figure it’s being driven by the last 2 years of unconditional offers. It appears that many folks out there purchased houses with big issues that they can’t afford to fix and they figure being a criminal is the way to get the money to fix it.
Interesting perspective. Mine is different. I view everything as net worth.
Shelter value is real but home equity is still part of net worth and if I have the net worth I can change or replace it or rent if that makes sense.
Leverage and the carrying costs are different so I do care if interest rates rise and I have a large mortgage and a variable rate.
Short-term I don’t care whether the housing or stock market crash and look at both as a potential buying opportunity. And market swings are totally outside of my locus of control so I don’t have a negative reaction when prices drop. I just make sure I can wait it out.
The difference is: your investment account could drop by 75%, or more, yet your house may go up in value because it’s a tangible asset that costs a fortune to replace and fills a need. High interest rates will destroy the stock markets, that’s what investors are liquidating. No one is selling their house to invest in the stock market.
Over half of Oaklands is on the North side of Hillside. There’s a property on Asquith, and 2 on Kings that people would probably say were in Oaklands even though officially they aren’t.
I sort of get what you’re saying, but here’s one way I personally look at it: say I wanted or had to move back to Calgary or any other lower-priced jurisdiction. Would I care what price my house here could fetch, knowing that the proceeds will dictate what I could buy elsewhere? Yes, I would care.
In fact, same goes for a potential move to a higher-priced jurisdiction.
I still would like to know where all these new listings are going to come from. Rental properties? Don’t tenants have rights and require long notices? I could see if there was a high vacancy rate, but I doubt anything has changed there. Homeowners looking to downsize? I just don’t see where hundreds of new listings are going to come from. Given the reluctance of owners to sell into a crazy market, what would motivate someone to sell into a downturn? Is the market that influenced by investors? At these levels, I doubt it, maybe I’m wrong. I also believe that this current apparent slowdown is due to the depressing events in Ukraine, it has put uncertainty into people’s minds and they have put plans on hold. Escalating prices for everything has also created uncertainty. There can’t be that many properties waiting to sell into a downturn.
Agree 100%
The difference is I wouldn’t blink an eye if our house dropped 50% back to its original purchase price or lower. It would make literally no difference to anything. The value of the house remains the same in terms of it as shelter, and in fact the value has increased relative to us buying a better one because the differential has shrunk. Meanwhile I’d be pissed if the investment account was suddenly down by the same
Ciena sometimes I think all they care about is Toronto and that market is getting whacked so yes I think June will be telling
Near as makes no difference zero chance of that. The only debate is if it’ll be 0.25%, 0.5%, or 0.75% increase.
$2.48M
“https://househuntvictoria.ca/2022/05/16/new-and-active-listings-what-happened-during-the-crash-of-81/#comment-88435”
I don’t think there is a chance of rates not going up June 1 … it’s just a matter of by how much. I know deputy gov made some comments about considering the housing market in their decisions but I interpreted that as something they will be keeping an eye on over the next hikes.
What does everything else think about June 1 … what are chances of rate not going up?
I’m old no money no job but I’m a buyer
I’m in the similar situation and waiting for BOC Jun announcement. If interest rate will not going up, I will buy a SFH investment property on at least 7000 sq ft lot close to Uvic, south Oak Bay or within Langford’s CC1 zoning, otherwise wait for few months pending on the market conditions.
OK well if the gain was 700K last year and is now 600K this year…I would argue that the 100K less of a gain is meaningless because it was only ever on paper. Thus I do not consider it a loss.
Of course those who bought at the peak may indeed have an actual 100K or more loss if prices decline, and yes that would be an issue for some who did not plan to hold for long term.
I’m in a similar situation as millenialhomeownerx2 with lots of options having equity in multiple properties, cash flow positive and HELOC room if the right property with some added value comes up. While it would also be a calculated risk and I won’t be basing it off the comment section of a housing blog, I’m still looking forward to Debt Monster’s free advice on my financial situation.
Again, home equity and stocks are not different in terms of counting as assets that always have a current market value that is useful in terms of planning, credit availability, and net worth calculations in general.
A stock has greater liquidity but you can sell real estate and transaction costs are taken off equity.
I don’t get upset with stock or RE fluctuations and I view them as similar: both as long-term investments that I don’t make unless I’m comfortable I won’t need to sell for at least seven years. If I would like to use the asset to, ex. leverage, then the current number is countable and the banks will do a a market assessment and review your portfolio.
Gains and losses are absolutely real and always count, they just are not actualized until sale and you need to protect yourself from a forced sale at a loss because, particularly with mortgage leverage, the loss can be large in the short term.
Thinking about the gain/loss as “meaningless” if not actualized is both misleading and naïve imo.
Anyone know the pending sale price for 991 Lohbrunner Rd W (MLS 901782)? Thanks in advance
In real estate, usually the last ones to go up in value are the first ones to go down in value. So yes, I wouldn’t be surprised if Royal Bay prices do deteriorate faster than most areas in a downturn.
LF “I’m curious. Either by show of comments or upvotes – are there many readers here that are sitting on substantial capital at the moment, waiting to buy should the prices drop?”
yep. been looking for a 1-bedroom condo in the south for a while. james Bay / Fairfield / Oak Bay for my mother. wont consider DT or leasehold. cash. max ~$450k. almost nothing available for the last year. walked away from one bidding war. too many buyers. not enough sellers. ludicrous asking prices currently. i can wait.
I am pretty sure I know the details of my mortgage better than you Debt Monster.
We have a 90K heloc that is at a fixed interest rate being paid down by our tenants rent… and yes both principal and interest is being paid down at 1.93%. You have to take risk to get ahead in life sometimes and this was a calculated risk and a no brainer in my opinion.
The remaining 60K available to us if we used it I would also ‘lock in’ so that principal is paid down. AND this is on a rental property — so the interest paid is tax deductible. We are both high income so this is advantageous to us otherwise the net income from our rental property is taxed at our marginal tax brackets.
It sounds like you have a readvanceable mortgage. Different name same result.
http://www.canada.ca/en/financial-consumer-agency/news/2017/06/fcac_report_homeequitylinesofcreditmayputconsumersatrisk.html
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blockquote>
What is true is that you should not crystalize losses in downturns of equity on stocks or homes if you can avoid it. One way of avoiding this is by acknowledging that the losses/gains are not actualized until sold.
Is that not what I just said? Acknowledging that the losses/gains are not actualized until sold….paper gains and losses are meaningless until you sell. I was referring to real estate only, for sure if you look at your stock portfolio and see the red % down you are that is not meaningless and has psychological effects on people. Unless you bought RE at the peak or near the peak, or are a pure speculator, then your ‘losses’ should be manageable.
Nothing normal about this Spring Market.
Sales to New Listings 50% 48%
Sales YoY Change -24% -27%
Well I included our HELOC in our mortgage amount. SO mortgage = 550K + 90K HELOC with additional 60K available if we wanted more. and the home is worth 1.2….I am not too concerned. It is also an investment property to interest is tax deductible since we use it for investment purposes.
I do agree that if someone has a mortgage and then a HELOC and the amount is much closer to current market value then yes you are in a risky position.
If prices drop more than 10% and the competition eases we will buy again.
This is an incorrect and trite assessment in my view. Equity in a home or stock portfolio exists whether you cash out or not. Think of it like credit – you only have so much and it really matters when you want to get a mortgage or loan. Or like retirement savings. Equity, at any point and time, is assessable based on market conditions less access costs and you can use this number to plan or assess options.
What is true is that you should not crystalize losses in downturns of equity on stocks or homes if you can avoid it. One way of avoiding this is by acknowledging that the losses/gains are not actualized until sold.
Meh, In my opinion nothing will happen other than possibly a very slow decline until both prime and fixed goes up another 150bps within 6 month from where they are now. I think once that additional 150bps is reached then it will be like a light switch where things will go south pretty fast.
All correct in theory, but much harder to adhere to in practice. Especially true when you are up alot, throw in a couple bad tenants and it will add to the motivation.
Not if you have a HELOC or plan to have one. Which includes you.
you sure its not just the normal spring market? My guess is that after the June hike is when listings will pick up. I don’t think most realtors in Victoria actually understand the impact of interest rate hikes or what drives variable vs fixed rates or even what the BoC does, much less the policy announcement date. They are more interested posting on houses on IG with some club music with comments like “sold over ask”, “multiple offers” etc.
Local Fool
My family and I probably fall into that category. We have capital ready to go. We aren’t waiting for a crash necessarily. But we wanted to wait until buying conditions improved (unconditional offers, blind bidding wars etc…)
Our 1st choice is a SFH. 2nd choice would be a Townhouse. 3rd choice would be a Duplex. Obviously with rising interest rates, what we can afford is changing. We shall see how it pans out in the coming months.
Actually we would definitely not sell in a downturn…one is our home that we live in which we have a 545K mortgage on and 17 years left on amort, so not that crazy. And the other as I mentioned is a rental property that’s cash flow positive and has a 650K mortgage with 23 years left on amortization. We have a fixed rate locked in for another 4 years. If rates were much much higher in 4 years and it was not a good time to sell we would just extend out the amortization to keep it cash flow neutral at least. Let er ride and have our asset continue to be payed off for us.
There are plenty of options.
Also, paper losses are just the same as paper gains. Meaningless until you sell.
VicREanalyst
Well, considering new listings doubled in a week, some realtors are ahead of the curve. Sort of, kinda, in a way.
Could be a lot more than that, as they can get sued for the difference and that is almost a certain judgement if it was a firm sale, so probably another $100k on top of the deposit.
I guess you never been in a situation where you are up a lot on paper but the asset is on a declining trend and find yourself in a dilemma on whether or not you should cash out. I will almost guarantee that if prices start to decline on a significant pace, you will sell some of those properties instead of buying more.
Are any realtors trying to convince potential clients to list prior to the almost certain 50bps hike in June? Or are Victoria folks typically slow to the party once again?
I also know my mother in law and her beau each sold houses in Richmond for 2 million each. One 2 months ago (just before/at the time of sentiment change), and the other summer 2021. They are to purchase a 3 bdrm luxury condo/penthouse in Steveston, but are in no rush as they are living in a 2 bedroom condo they own outright. They sure timed it well.
Thanks.
I will volunteer our own personal example.
We have 200+K in TFSAs, 60K in an easy access HELOC from an investment property which I’m not scared to use as we have tons of equity and are very cash flow positive, and 40K cash from a tax return we just received.
We also own 2 homes, one in which we live. There are lots of potential moves we could make, but not in a rush. One of those moves includes paying down our own mortgage if rates go insane, although we have incomes that could pay a lot higher of a mortgage rate, but if financially it makes sense to pay down the mortgage then we will do so. Or we could buy another property if prices drop enough and rent out our current home. OR if prices drop more in rural/recreational areas we would look into buying a lake/vacation cabin for ourselves.
Local Fool
…. or are there any upcoming retirees wanting to try and cash out on a once in a lifetime real estate bonanza to finance their retirements?
PPS I still cannot figure out the quoting perfectly
Interesting! SO the original buyers left their deposit on the table?
Well, that was quick.
https://globalnews.ca/news/8841434/gta-real-estate-buyers-market/
Greater Toronto Area real estate approaching ‘buyer’s market’: BMO
In contrast, he said that number has been around 70 per cent over the past year, making for a “firmly seller’s market.””
I’m curious. Either by show of comments or upvotes – are there many readers here that are sitting on substantial capital at the moment, waiting to buy should the prices drop?
Hey all. Bit off topic, but I completed a Land Title search and confirmed the listing at 997 Amblewood never did complete. In other words, the original
$2,000,000 sale fell through.
I linked to the previous article where I include prices. However I added the price chart to this one as a summary.
On the ground houses around a million still seeing a lot of activity. Looking at a lot of 2 bed 1 bath homes with clients right now and unless on a busy road or unlivable most are going in multiples.
One bedrooms condos selling well. Two beds slowing down.
It is also my impression that core is performing a bit better than Westshore/Sidney at the moment. Royal Bay has finally stopped flying off the shelf. Would not be shocked to see a 100 to 200k pullback in Royal Bay.
May new listings over 20 years look flat to me and so far even with interest rates going up it appears to be more flat. Once again if you exclude Westshore wonder what new listings in the core look like over 20 years. One step further, isolate for new listings over 20 years SFH core areas.
It would be interesting to adjust for inventory Victoria Core (Westshore excluded) only. Inventory has crept up and will continue to do so but many areas there is literally nothing. Oaklands there are two SFHs listings. One is on Hillside and the other one is on the North side of Hillside Ave which isn’t really what people view as Oaklands. For all intensive purposes not a single listing yet inventory is coming up.
Thank you for this article. Very interesting. I get a report each month from https://bchome.ai/ and this is the first time in a long time the market trend shows a drop (2-8%) both here and up island – up island at the higher end.
Great article Leo.
btw) I wish you’d include prices in the various charts. I realize it’s an article about listings, but you include graphs of various related metrics (inventory, affordability, mortgage payment) Price does seem a relevant metric to an article about listings during a crash., because most people think of it as a price crash.
The ”crash” (defined as a >20% drop from purchase price) could have only affected a small number of Victoria households (1,690) . These would be the 1,690 unlucky”peak” buyers that bought in 1981, as shown below, and they only sold at lower prices if they sold within 6 years of buying.
Here are Victoria prices during the period. No one else would have seen prices “crash” (defined as a >20% drop) from where they bought them. For example, a 1982 buyer ($105k) would at worst have seen prices fall 12% (in 1985), but that’s less than 20% fall so not a ”crash”
///======== Victoria SFH prices 1978-88 ========
—Overall, prices doubled during 1978-1988.
—There was one outlier year (1981) where prices boomed +37%.
—The subsequent price decline was slow ( 4 years) , and only blew off the “price froth” of that one year.
—Prices never fell below 1980 levels.
—The only people that would have got burned were those buying in 1981, There were only 1,690 SFH sales in 1981. So that’s not that many unlucky buyers. And they just had to wait 7 years for prices to get back to what they paid.
https://www.vreb.org/media/attachments/view/doc/3_2021_historic_summary_of_single_family_detached_sales_by_year/pdf/3_2021_historic_summary_of_single_family_detached_sales_by_year.pdf
SFH price in Victoria by year
$64k. 1978
$67k. 1979
$92k. 1980
Prices +37% to —> $126k. 1981 (1,690 unlucky buyers in 1981)
$105k. 1982
$101k. 1983
$95k. 1984
$93k. 1985. (back to 1980 prices – “froth” of 1981 blown off)
$102k. 1986
$110k. 1987
$127k. 1988. (Prices now all time high and would double over next 6 years)
Like Vancouver perhaps. Which had an even bigger crash.
https://www.theglobeandmail.com/business/article-pandemic-housing-boom-winding-down-as-canadian-home-prices-drop-for/
The pandemic housing boom is winding down. Economists forecast a 10-20% price correction
The national home price index, which adjusts for pricing volatility, fell 0.6 per cent to $866,700 from March to April on a seasonally adjusted basis, according to the Canadian Real Estate Association, or CREA. That was the first drop since April, 2020, when homeowners struggled to sell their properties amid the pandemic economic lockdown.
Mortgage rates are expected to climb again as the Bank of Canada aggressively hikes interest rates to deal with runaway inflation. Economists expect higher borrowing costs will lead to a significant price drop in some of the hottest markets.
Toronto-Dominion Bank economist Rishi Sondhi forecasts a double-digit percentage decline in the national average home price over the March to December period this year. Bank of Montreal senior economist Robert Kavcic predicts a 10-per-cent to 20-per-cent drop in the home price index in certain regions.
Even if home prices drop by 20 per cent over the latter half of this year, values will still be higher than before the start of the pandemic. Since January, 2020, the national home price index is up 52.2 per cent.
In 1980, baby boomers were in their prime, many of them finishing university and looking to advance their careers. I’m sure many of them left sleepy Victoria, moving to greener pastures. The steady trickle of retirees probably did not offset the outflow of boomers. This would have decreased demand, creating an oversupply of property. The demographics and behaviour today is nothing like 1980.
Have to be careful just looking at number of dwellings. A dwelling is not the same as a property. In 1981 you had far fewer condos and consequently purpose built rentals accounted for a much larger % of multi unit dwellings. As well there were fewer suites in detached houses.
One thing you can say for sure is that detached houses were a much bigger % of properties on the market than they are today.
Let me try again: in 1981, there were about 95,000 private dwellings in greater Victoria. In 2016, there were about 173,000 or 1.8x more (couldn’t find dwelling counts for 2021, yet).
The total dwelling universe is bigger now, so the impact of 2500 units of inventory for sale then was more significant then compared to now.
Not sure how to account for it, other than to say that based on that, it was notionally worse then, compared to now. Right?
Any other ideas come to mind?
Thanks,
Sources:
https://publications.gc.ca/collections/collection_2017/statcan/CS95-938-1981.pdf
https://www12.statcan.gc.ca/census-recensement/2016/dp-pd/prof/details/page.cfm?Lang=E&Geo1=CMACA&Code1=935&Geo2=PR&Code2=59&Data=Count&SearchText=victoria&SearchType=Begins&SearchPR=01&B1=All&TABID=1
Yes, we should have more inventory now with a lot bigger housing stock but in fact we have less. Not just because we are at the bottom of the cycle but also the last three troughs were all lower than the one before. Possibly the impact of chronic long term undersupply due to inelastic supply response.
Fascinating analytics, as always. Thank you, Leo.
You calculated the average inventory level over all that time to be about 2500, but shouldn’t you somehow account for the much smaller population and number of homes in the late 70s and early 80s?
The impact of that much inventory then would have been much more significant as it was probably a larger portion of the universe, no?