What’s holding up the best?
We know that prices have been falling in Victoria as rates have risen this year, but what type of properties have held up the best? Commuter towns in the lower mainland and outside of Toronto have fallen more than the city cores, but that’s a pattern that wasn’t previously evident in our market. However it’s worth checking again by price and region to see if any new patterns are emerging.
Below I compared the median sales price to assessed value ratio in the last 30 days to the peak of the market in February and March. That gives us a good indication of price drops since that time without having to use noisy median prices or the broken benchmarks. For most categories there are enough sales that we can be quite confident in the values plus or minus a percent or two, however there aren’t that many recent townhouse sales or sales of properties with an assessment over $1.5M, so the variability is somewhat higher.
To me there’s a few takeaways here:
- Almost everything has dropped in value since February. That’s no surprise, but it should dispel the myth that this is a localized drop in demand or that median prices are down just due to a shift in sales mix.
- Detached properties have generally declined more than condos. Again not a great surprise since the condo market has been lagging the detached market throughout the pandemic, and condo affordability was not as poor as detached from a historical standpoint.
- There isn’t any clear commuter penalty. Westshore condos seem a bit weaker than in the core, but core detached might be a bit weaker than the outer areas. Duncan is down more, but most of that market is unlikely to be Victoria commuters.
- There’s no clear difference in declines between condo sizes. A substantial weakness in smaller condos could point to investors bailing, but that doesn’t seem to be the case.
- The luxury market has held up very well. Keeping in mind low sales numbers, recent higher end sales are actually going for a bit more relative to their assessed value than they were in the spring. It makes some sense given those buyers are less sensitive to interest rate hikes, but it will be very interesting to review the second quarter buyer origin data to see if out of town buyers remain elevated. That should be available within a few weeks.
What are you noticing in the market recently?
Also the weekly numbers courtesy of the VREB.
July 2022 |
July
2021
|
||||
---|---|---|---|---|---|
Wk 1 | Wk 2 | Wk 3 | Wk 4 | ||
Sales | 147 | 285 | 398 | 835 | |
New Listings | 346 | 631 | 870 | 971 | |
Active Listings | 2090 | 2141 | 2164 | 1270 | |
Sales to New Listings | 42% | 45% | 46% | 86% | |
Sales YoY Change | -36% | -31% | -32% | ||
Months of Inventory | 1.5 |
Sales have been stable in July at just over 30% behind the pace of last year. Meanwhile new lists are normal in relation to a slow July a year ago.
Last week was a relatively sluggish week for new listings, and inventory gains are starting to flatten out, with just 23 additional listings on the market today compared to last Monday. That’s normal for this time of year (in fact inventory usually tops out in June), but if any existing owners are spooked due to payment shock on their mortgages, it certainly hasn’t convinced an unusual number of them to sell.
I also extended the running average for the sales to list ratio to 4 weeks which shows the current trend more clearly. Though the ratio has stabilized this month, a year ago it was increasing which is normal for the time of year. That would indicate that despite the flat ratio the market is probably still weakening, but the pace remains quite gradual.
There’s a few murmurs of increased showing activity in Vancouver and Toronto. It’s not translated into sales yet and I doubt we have drained enough risk to get to recovery already, but as always it’s worth paying attention since those markets have led our by a couple months recently. The bond market has stabilized which has stopped the relentless increase in fixed mortgage rates for the time being. Though the Bank of Canada will certainly raise again at the next meeting, it’s also clear the market currently believes the job of fighting inflation won’t require drastically higher rates than we already have. Though national forecasts are increasingly bearish, I think a relatively soft landing is still within the realm of possibility for Victoria. Whether they can pull it off depends on how stable existing owners are, and whether we will see significant distress before the central bank is done their tightening cycle.
New post: https://househuntvictoria.ca/2022/08/02/july-sluggish-sales-and-price-slides-continue
Well so far the high end has held up the best, in fact it may not have declined at all. Not great if you’re trying to upgrade to that $2M house and your $1.3M house is now worth $1.1M. Of course different price segments can’t go in opposite directions for long. Either the lower end will firm up or the higher end will weaken. Law of substitution means everything is connected by rubber bands.
Or you keep your 1ml home, rent it out to take advantage of rising rents and take out a HELOC, buy your new home for 1.2m, and sell your 1m when prices rise again. Then pay off your HELOC.
In a few years, let’s hope so! Also to clarify further, my example below applies when you are limited by down payment. That is, you have more than enough income for a bigger mortgage.
Yes, good points. And the equity gains are also a big psychological factor in people upgrading – using the “free money” to buy a bigger house.
Of course we’ve had the rising gains already, so there’s lots of equity built up. So most homeowners would still have lots of equity after a 20% price fall, and the more expensive homes are more reachable.
I’d expect in a down market a lot of the buyers will be people with lots of equity moving up. For example, if a waterfront home falls within range, lots of people would stretch to snap it up.
Patrick, this makes sense for those with no mortgage. But for those starting on the property ladder a rising market helps. Yes it makes the higher next property more expensive, but more importantly you’ve gained equity on the first property which can help you get to 20% down payment on the next. Really hard to do from income saving alone.
Example – buy first property for 500k with 5% down. Value rises to 700k and you now have 225k equity. Can buy a place for 1.125M with 20% down (ignoring fees). Not sure of today’s limit on high ratio mortgages but used to be well under this. In a falling market stuck in first property!
Good point! I had never realized that.
They’re likely getting a big part of the cash from selling a home.
But the good part for people moving up, is that If homes fall in price, it’s easier to move up, not harder.
For example, if homes drop 20%.
If you want to move from a $1m home (owned with no mortgage) to a $1.5m home, you sell for $1m and it costs you $500k extra cash.
If homes fall 20%, you instead have $800k to buy a home that now costs $1.2m, so you sell for $800k and it costs you less to move up, only $400k cash.
I think it was just Frank.
Do you have a link? I don’t recall this being said by m/any on this forum.
Your point being what? With a paid off mortgage you can sell and rebuy in a falling or static market pretty easily.
Where are they getting the cash from? You’ve given a big hint.
Yes that is what I am referencing to, sales at 20 year lows prices dropping over10% despite all these supposed vultures waiting on the sidelines ready to pounce on any weakness.
Totoro:
I believe VicRE was refencing that ealrier this year many on the forum said a drop can’t happen due to rich foreign buyers and cash holders. That HAS been dispelled since there has been a drop already. Demand at peak prices is not infinite as we are seeing now.
When you look at the income it’s tied to, they won’t be giving out too many rebates.
Why are we giving rebates on cars you have to wait for a year or more to receive? Let the market do its thing and right now demand > supply.
No new Tesla would qualify for any rebates, regardless of income of the purchaser. (Model 3 is >$62k cad, model y is >$82k). That’s fine with me.
Nissan Leaf starts at $39k CAD, so that would qualify, and it’s nice to see income testing. I give the government thumbs up on this.
Nothing has been dispelled.
All the current market conditions do not point to an uptick in the next bit and, most likely, consumer confidence will drop further which will impact prices potentially.
Someone with cash and a desire to buy will likely be waiting for the fall or winter when the market usually is better for buyers.
And there will always be cash buyers. 40% of Canadian homeowners have no mortgage, and my recollection is that 25% of homes in BC are purchased with cash.
No, it was just as slow for the 2011 census – they didn’t release housing and much of it until September 2012. That was was prior to the Harper cuts that took effect in 2013 . statCan still gets $519 million per year, which is enough for them to tabulate the online census forms faster than 18 months. https://www12.statcan.gc.ca/census-recensement/2011/rt-td/rt-td-eng.cfm
https://twitter.com/RobShaw_BC/status/1554559053098930176
Still hilariously laggy.
VREB HPI starting to figure it out – “The benchmark value for the same home in July 2022 increased by 19 per cent to $1,433,800 but was down 2.1 percent from June’s value of $1,464,400.”
Also of note this months Median for SFH is 1,087,000 up from July of last year where it was 1,050,000. However if we stay steady or drop again this month then we will be down year over year as August last year was median price of 1,094,000.
https://www.vreb.org/current-statistics#gsc.tab=0
Thanks Leo, well that is a pretty telling chart. Any myths about wealthy foreigners coming in to buy or the hordes of people waiting on the sidelines with cash ready to jump in at any market weakness can be dispelled for now. More people in Victoria and still setting new 20 year lows on sales.
See chart.
Let’s see how citified spins those july numbers
Considering the 2 year is still over 3% I think we’re pretty screwed.
“Why does StatCan take so long to release census data? It’s now 15 months past the census, and they still haven’t released much of the data.”
If I had to guess, it would be because the Harper government gutted the agency and they still haven’t recovered. Don’t know that StatCan will ever be the same.
Should be an interesting post along with the final July numbers.
I am curious of the detached sales over the 20 years given the supply of those hasn’t changed as much as the supply of condos and townhouses. Should provide a more apples to apples comparison on trend.
Your not implying that Victoria lags Toronto when it comes to house price changes are you??
I might have to take the under on that, credit spreads will have to really balloon out for that to happen given the 5 year GOC topped out at 3.5% a month ago.
Calgary sprawls into open fields around it, while existing areas are closed off to change
https://www.cbc.ca/news/canada/calgary/calgary-sprawl-existing-neighbourhoods-missing-middle-1.6536724
https://twitter.com/daniel_foch/status/1554089625865670657
Major development proposed for Lantzville fails on tie vote
https://www.timescolonist.com/business/major-development-proposed-for-lantzville-fails-on-tie-vote-5647592
If I had to guess, and it is nothing more than a guess, I think Leo is right and price declines will be over in a relatively short period of maybe another two years. I suspect that rates will climb to around 6% for a five year fixed, or more before staying there.
Why does StatCan take so long to release census data? It’s now 15 months past the census, and they still haven’t released much of the data.
By the time they release simple data points like “homeownership rate”, it’s going to be at least 15 months old, and by some will be considered “out of date”. Lots has happened already since the May 2021 census… we had another big runup (+20% in Victoria), rate increases and now (for some) the housing sky is falling. Why doesn’t statCan release the data as soon as available, even in preliminary “estimate” form? It seems to me they’re holding it to make infographics, interpretations and press releases rather than just releasing the data tables.
July sales: 510 (down 39%)
New lists: 1101 (up 13%)
Inventory: 2162 (up 70%)
20 year perspective. Full post tonight.
Let us hope that the only rocks which Barrister was lured to, by these Sirens, were covered with Scotch whiskey(?).
That's good for a healthier market. Not so good if you want to invest during the low ebb.
No crystal ball but personally I expect declines to be over relatively quick (within 12-18 months of the peak) but then be pretty stable for a long time as some measure of affordability returns via income gains + rate reductions.
Any theories on how long the real estate price downturn will last? Can we expect prices to increase relatively quickly afterwards?
I don’t think it’s hit the starts yet but definitely lots of projects being delayed in the pipeline, especially rentals. Will be interesting to see if they shift to condos or just wait and see where the market stabilizes.
It seemed to me that the nights this weekend were filled with sirens.
Back from hiking the juan de fuca trail. We live in a lovely part of the world. Hope everyone had a good long weekend.
No worries, we can replace climate hysteria with nuclear holocaust doomism again.
https://www.ctvnews.ca/world/un-chief-warns-world-is-one-step-from-nuclear-annihilation-1.6010008
Not the best climate change outlook though.
https://australian.museum/learn/climate-change/climate-change-impacts/
Honestly Frank, as someone who’s spent a decent amount of time in both Australia and Hawaii, I’d pick Australia over Hawaii every time.
https://www.cbc.ca/news/canada/british-columbia/duncan-bc-rvs-housing-solutions-1.6531909
From the person that lives in Winnipeg?
Wherever people live happy and contented lives, it is human nature to believe that others wish to live where and how they live: be it Spain, Portugal, Argentina, Ireland, New Zealand, the Caribbean, Italy, Croatia, Germany, Japan, China, Egypt, U.S. or even Victoria BC, (to name just a few) not to forget Australia!
A large of the world would be happy to live in Australia.
Why would anyone want to live in Australia?
From: https://www.reuters.com/world/asia-pacific/australia-home-prices-slide-sydney-suffers-worse-month-40-years-2022-07-31/
Fractures starting to show in the other once thought bullet proof housing market in another Commonwealth country . Best is the reference back to the early 1980s……
Any way you cut it (could not resist) wood is damn expensive.
There seems to be more choices for building lots in the Core and the Westshore these days. I wonder if this is due to contractors holding back from starting new projects?
Personally, I find vacant building lots the hardest to track, as not all land developers put their lots up for sale on the real estate board’s data system. This is especially true when the market is red hot. Only when the developers private sales of land begin to slow do developers see the economic benefit of enlisting the services of a real estate agent.
This could just be the shadow inventory of private listings now being reported on the real estate board’s system or are construction starts slowing down?.
Anyone have any thoughts?
https://www.macrotrends.net/2637/lumber-prices-historical-chart-data
It’s historically barely made it over $400 ever. Over the last 3 decades, avg price is usually between 250-300. Before 2018, $527 would have been an all time high, by a fairly large margin.
Not double. Looks like USD$400 just before the pandemic.
https://fortune.com/2022/05/27/lumber-prices-nosedive-what-to-expect-next/
Isn’t 527 still like double what it normally is?
Cost of building is still insanely high. As soon as they pass the missing middle labour is going to hard to find again while everyone is busy tearing down half the houses in the city for the next five years.
But it is good to see materials coming down at the moment.
I did see 7/16 OSB at home depot yesterday for $25. Lumber futures were over 1300 on the Nasdaq in March. Now at 527. Now if every other material that doubled can come down. Might be a perfect time for somebody to build their dream home. With most builders putting a stop to any future spec homes, just a matter of time before the trades have to be competitive.
Have a great weekend, the weather seems to be perfect. We are off to Elk lake for the morning. Price of everything seems to be up which might be a bit of a hit for some summer fun for people.
On the radio: Gas prices meant to drop 15 cents/liter next week. In my neck of the woods that’s $1.65. A lot more like it for summer pricing, maybe 25 cents too high from the normal. Hopefully prairie crops come in near normal, lots of fields are flooded. Food inflation could get worse.
5 year Canada bond yield = 2.58% https://www.marketwatch.com/investing/bond/tmbmkca-05y?countrycode=bx
5 year GIC (CDIC) = 5.0% https://www.ratehub.ca/gics/gic-rates/non-registered/5-year
Inflation (CPI, YOY) = 8%
BOC overnight rate = 2.5%
Who is buying these 2.58% yielding 5 year bonds? In March 2020, there were few buyers other than the BOC.
In the US, price drops are biggest in the suburbs/surrounding towns, less in the core. That partially reverses the Covid trend.
Maybe for Victoria that will mean “up island” will see bigger drops than core Victoria.
I have sort of been following the 2 to 4mil market. While sales seem slow I have not been seeing a lot in the way of price reductions. Is that what others out there are seeing?
https://www.timescolonist.com/real-estate/greater-victoria-real-estate-continues-cooling-trend-4669634
Yes you are right, those purchased at the beginning of the year would be fine.
SFH prices were up 13% in 2017, 6% in 2018 and down 3% in 2019 so not sure how someone who bought in 2017 would “most likely” be down in 2019.
What does this mean?
I never asked anyone to follow my analysis. Also did you notice how I used the term “most likely”? I never said it was definitive.
Lol don’t stress it will be ok 🙂
Someone shares their actual situation (I trust most posts here) and you literally tell them their wrong because “you followed the market pretty closely” back then? Smartest person in the room strikes again…
It’s obvious you really couldn’t have been following the market very closely, or maybe you were watching the wrong area (likely), as I also bought a Westshore SFH rental in 2017 that was not a preconstruction and its done nothing but increase in value and has grown farther and farther away from being underwater each year.
So, I would imagine Dr. Seuss is in the same situation and the fact that they literally shared that with everyone would IMO confirm that, so maybe you’ll excuse us all if we don’t necessarily follow your so called “analysis”.
Umm really I think u nailed it this will drag on for a while yet let’s see if inflation tops 10 points yet
Depends on the type of recession and the sectors affected. Could be bullish for housing.
From: https://financialpost.com/news/economy/if-u-s-recession-is-at-hand-history-suggests-canada-wont-be-far-behind
Doesn’t bode well for a quick real estate turnaround or for the correction to only be a short term occurrence. As well, the public servants might want to lock in those raises and contract offers now, a 0% mandate and work force adjustments are likely coming quicker then they think. BC tends to look down it’s nose at Albertas budget problems when oil revenues sink, but how big will the hole be in the BC budget be when there isn’t windfall land transfer tax revenue? Then combine that with a slowing construction sector…
You don’t think the news influences people’s decisions?
Why would anyone care? I’ve been telling it like it is on the news for 12 yrs now. Whatever I say does not change the outcome of the market.
Oh nice looks like another 100k grinded down, last I heard the accepted offer was $2M.
Those “trees” are nothing but horribly overgrown cedar or leylandi hedges. When do hedges become technically trees I wonder? I love genuinely forested lots but that is garbage foliage. You could at least trim them by like 75% for a refreshed look.
I see… maybe a rezoning was granted? In that case I would agree that the value increases!
2822 and 2828 Dufferin was exactly the same 100X120 ft lot that splitted by two 50X120 in 2016/2017, there is no reason why 2757 Dufferin can’t do the same.
Their neighbor 2741 Dufferin sold $1.64 in earlier 2020 and that lot doesn’t have any potential for rezoning.
For Barrister – 1021 St. Charles
Sold $1.9 mil
All in all, a pretty sweet reduction off the original $2.25 mil they were looking for on the property. The others in that area for sale probably don’t like their latest comp too much.
Dufferin is zoned RS4 and the minimum lot size is 10,204 square feet. It cannot be subdivided, nor can those trees be taken out unless they are proven a hazard – which one day they all will be and will cost about 40-90k to remove. And then 40 new trees have to be replanted on the lot under the bylaw. Not sure how it is a “smoking deal”?
Also, I don’t believe it would have sold for 1.6 in 2020 but it would probably have sold for 1.8-2.1 this year without those trees.
Marko, you alright? Hope you didn’t get kidnapped by other realtors for going to the press about the downturn in Victoria RE.
2757 Dufferin: Completely out dated, needs kitchen and bathrooms renovated. The forest looks interesting though.
Not talk about tomorrow’s market, even back to 2020 it would still sold the similar price. Keep in mind this property will be easily rezoned two 6k sq ft lot, after the paper work each lot will be just slightly over $1m, I don’t see anything wrong with this smoking deal.
$1.6 million
That’s what happened in 2008/9. Canada was actually the only economy to see house prices go up during the recession, thanks to the BoC’s rate cuts and Harper’s juicing of the mortgage market.
But there isn’t any way rates are going back to where they were a year ago, never mind lower than that.
The concept that a possible recession is a bullish catalyst for house prices because mortgage rates are lower is very interesting. This implies that those who are not affected by the recession out number those who are and are able to take advantage of the lower rates.
5 year bond yield at 2.65 right now – down about 1.0% from the peak. Ron the Mortgage guy saying could see insured mortgage rates at 3.99% after this week. wonder if it starts supporting prices here soon.
Absolutely. Remember you can’t realize the land value in a strata duplex- and note this property is mostly land value – without getting the other owner on side.
Not sure why anyone would want to pay that for a half duplex when you are likely to get this for the same price. I am coming from an investment/cashflow perspective though.
https://www.realtor.ca/real-estate/24639389/4016-morningside-close-saanich-lambrick-park
Who said increasing interest rates would fix food shortages other than you?
Now it’s fixed.
They don’t actually create more food, they create less money.
More money and lower exchange rates, less stuff = higher prices. Less money and higher exchange rates, less stuff = lower prices than the previous scenario.
What did it sell for?
This house has a veritable forest (like forty 50-foot trees) surrounding it on a city lot. The trees have been trimmed half-way up and are super ugly. Under the OB Bylaw I don’t think they can be cut down. I would pass for this reason.
I’d like to know that too. Didn’t change anything
I don’t like this change. The quotation mark is obscuring the text.
I’d like to know why, this morning, all the quotation marks are suddenly slammed into the text:
Leo, have you been tinkering with the settings?
I’d like to know how increasing interest rates fix a food shortage. Can anyone explain this, lots of experts out there.
After 2757 Dufferin ave sales last night, I doubt about that.
You wouldn’t? Sure looks like one. And yes the other half has a different street address, namely 4720 LOCHSIDE DR but BFD.
Not really, because food prices are up everywhere but inflation isn’t 79% everywhere. The reason inflation is so high in Turkey is that the president has been interfering in central bank policies and is refusing to let them take effective measures.
https://www.thebeaverton.com/2022/07/only-consolation-for-homeowners-who-lost-thousands-from-housing-market-cooling-is-the-millions-theyve-already-made/?fbclid=IwAR2Y2BuZl7hcSGoat721zhM5Mxm3EATGeJEEkELIqSrF4wBwG_3r-f-tUz4
“It’s tough. It’s really tough,” said Martin Sheed. “Two months ago we could have sold our home for 1.6 million. But today we only got 1.4 million dollars for a home we bought 15 years ago for 350k.”
To make ends meet, the family will be renting out a bedroom in their new 8 bedroom, 4 bath mansion that they bought entirely with the money they made from their old home’s equity.
On a note about mis-judging prices, 4805 sea ridge has had multiple price drops and open houses almost every weekend. I think they started around 1.3 mil asking and have dropped 3 or 4 times since then. Currently sitting at 1,140,000… prime for a lowball unconditional? If you’re into duplex ownership.
Are you actually serious? Lmao, you literally compared the inflation and interest rate situation in turkey with that in Canada and said we shouldn’t complain.
Go read what your wrote again.
I fail to see where I was making any comparison. I was merely stating a fact. Don’t read more into a statement than is necessary.
Lol comparing Canada with Turkey now?
Current Turkish inflation rate: 79%, interest rate: 14%. We shouldn’t complain. Primarily driven by food prices.
Oops forgot the link:
https://beta.ctvnews.ca/local/vancouver-island/2022/7/27/1_6005123.amp.html
…
The fact that you have identified this risk and is willing to take action means you are more prepared than most people in your situation. I think you will be just fine 🙂
Wow Marko, going on record in the media about the house price correction in victoria! You think this going to be frowned upon by your fellow realtors?
All these follow up comments have been so nice to read, y’all are a great group. And those charts with historical returns you pulled up are awesome Leo! Love all this data.
Cadboro- Have you found renters yet?
Cadborosaurus has the right attitude
Good to hear!
Historical returns for various holding periods in Victoria.
From: https://househuntvictoria.ca/2019/04/23/mitigate-risk-by-holding/
R, we bought at our max in summer 2021. Not stressing at all, we’re locked in for another 4 years and who on earth can predict that far ahead? Things could double in value, or we could have a major earthquake. I think either carries the same probability, and reality will be in between.
Our monthly daycare costs get halved shortly from 2k down to 1k because one kid is off to school. Hoping to invest a bit of the savings to prepare for a future mortgage renewal in case it’s scary. OR buy the things we’ve been missing out on during this past grind like kids shoes, repairs or a babysitter for a night out.
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If it was a pre construction purchase then I can see that. But if you bought something existing in 2017 then you most likely would have been down by early 2019. I was following the market pretty closely then and that’s what I had seen. The stress test really pumped the brakes on prices here.
Nah, I only brag about the calls I made that turn out to be right lol
I dont think it will be a disaster this time around. Suspect that we will not see price drops of much more than 30% which only takes us back to prices a couple of years back. So much depends on what the international interest landscape looks like. I am aware that this means a lot of pain for some people especially recent first time buyers who will be watching all their down payments evaporate. And what I described is the soft landing scenario. Lets hope that it does not turn into crash and burn.
“Dr. Seuss was also likely underwater by ~$50-$100k in 2019”
The price went up $100k before we even moved in and then prices held steady for 2 years so we were never under water. Disappointing, I know because you seem like you enjoy feeling right and smarter than others.
Ouch
But that’s only apparent in retrospect, isn’t it? You don’t know it’s a peak until it’s passed. Wouldn’t you know though, in fact there was a downturn of about 15% nominal in Vancouver after a price peak about 1995, lasting until about 2000. I didn’t know that at the time, as I wasn’t following the market.
Getting back to what Frank said, I’m surprised anyone would have called buying “crazy” in 1994. We had all seen real crazy in the previous decade. It took 25 years for inflation adjusted prices to get back to the 1981 peak, and of course that was after an unprecedented decline in interest rates.
I was only referring to Victoria. But in reply to your question, there were major areas of Canada where RE prices were lower after 10 years. For example, Toronto bust of 1989 – prices didn’t return to that level for 13 years (2002)
Never claimed I was, I am just not worried about you outbidding me on rental that’s all lol.
1994 was a bad time to buy, prices stagnated for 8 years before any appreciation occurred. I thought I was crazy.
Most likely there will be embodied carbon / pollution tracking requirements. Step codes require you to hit specific quantitative performance requirements, but say nothing about how you get there. No problem to hit step 5 with full ICF construction (concrete, steel, foam), but from a carbon/pollution perspective, that’s far from ideal.
Currently, there are some areas of buildings where it’s very difficult/expensive to get away from carbon-intensive products (concrete, foams, etc.). Will be interesting to see what products become available as alternatives.
Given you have no idea about my employment income, how much equity I have spread over multiple properties (sure, this will go down with the market), or how many cashflow positive rentals I have you’re sure confident about your hot takes eh? Imagine going through life thinking you’re always the smartest person in the room…
Now that Leo has agreed (with me lol) Victoria is slow to the party compared to Toronto and Vancouver, I have seen some examples of a few places in Toronto selling for 2019 prices recently.
lol isn’t that the case with RE in most places?
Most recently it would be you Patriotz, telling him that 1994 would be a bad time to buy. Because 1994 was a peak unaffordability, and you lectured us earlier today about that being a bad time to buy (at least for lousy returns).
Patriotz: “As has been illustrated here, affordability is a very good predictor of price downturns or at least stagnant prices in RE.” https://househuntvictoria.ca/2022/07/25/whats-holding-up-the-best/#comment-91660
As it turned out, Victoria prices were flat for 7 years, and then took off, and are now 4X what they were in 1994.
If you look at Victoria house prices, any time was good to buy, as long as you held more than 10 years.
It’s not a gain unless you cash out. Dr. Seuss was also likely underwater by ~$50-$100k in 2019. Can’t count on your capital gains until you actually sell which is why I like cash-flow.
Joy, finally, got an actual estimated delivery time for my roof slate, twenty to twenty four months (I am hopeful that this is the actual time line but I doubt it.)
Who and where? I don’t recall such talk in Vancouver at the time.
Who can argue with Dr. Seuss. I agree with most of what he had to say. People thought I was crazy when I bought in 1994. The big unknown is the war in Europe. Putin is a madman and will pound Ukraine into submission, he has the tools. Things will be uncertain until that plays out, no one is rushing to the aid of Ukraine, it is going to be a prolonged event. Ukrainians are stubborn, who can blame them.
That would bring the BoC overnight rate to 4.5%, too much in my opinion.
“I’m like one of those people everyone on Reddit gloats about getting screwed but doesn’t feel so good in my shoes”
The world feels like an unstable place right now. Lots of volatility! It’s easy to feel scared, especially with the know-it-all attitudes of some people who comment on this blog. In my opinion, things will stabilize fairly quickly, then destabilize again. And this stabilizing/destabilizing cycle will happen over and over until a new period ushers in of more certainty. People thought Covid would cause a deep recession and it didn’t, interest rates may come down as fast as they went up, who knows!? But you bought a house based on good decision-making with the knowledge you had at the time. When we bought on the \Westshore in 2017, people thought we were crazy buying something there in the 600s, now it’s worth $1.3M give or take 100-200k. What a gain!? And some people on this blog are still shocked that the Westshore is retaining value because they still think of it as low class and low value. If you’re screwed at all, it will only be temporary and people will LOVE telling you otherwise. Stay strong, you did the right thing buying a house for your family at the time you were ready to do it!
VicRE: You might be right but I am guessing two move .75 and one more .50 for the next three hikes. Todays Fed increase will likely be mirrored by us.
Step code related article.
https://www.capitaldaily.ca/news/new-construction-climate-goals-victoria
I think another 1.25% to 1.50% by EOY
Any source on the step code 5 implementation, I did not think they CoV had finished the engagement phase. Fascinating to see they rammed down the throats faster than expected. When some PMs from GCs were asked to give input the city was not very receptive to the reality of increased building costs and slower development.
I am guessing that we will be up another two points before the end of year.
Federal Reserve Rate up .75, as expected
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blockquote>Not gonna lie, I’m feeling stressed. We bought late 2020, got rock bottom rates for 5 year fixed. If rates stay high and house values plummet, I’ll be pretty bummed about our high debt / high payments on a house that’s now worth less.
You would have been paying rent to live elsewhere, will you really be worse-off at the end of your term?
In case someone isn’t familiar with BC step codes…
“ Step 5 indicates the home has been constructed as net-zero energy ready (NZER), meaning it produces as much energy as it consumes.”
https://betterhomesbc.ca/faqs/energy-step-code/
Right. Prices are still “frothy” – about 15% above July 2021 values for assessment. I’d expect that froth to be blown off before we are done.
One of the things I wish I had learned earlier was not to spend too much time worrying about things I can’t control. Plan for the worst, but then let it go. Your life is time limited and gratitude for what you have has way better ROI.
Late 2020 should give you quite a bit of buffer for price drops.
Wow, hand de-construction and now this just since the New Year. What is next?
Instead of focusing their time on turning around a permit in 1 to 2 weeks instead of 6 to 9 months they just pile on more crap to make things more unafforadable. Makes sense.
If one is worried about interest rates and impeding doom and gloom still plenty of time to prepare. TSX is now just 4% down over 6 months and 6% over 12 months not even factoring in dividends. Used cars still selling well so you could always offload a car if a have a multi-car family, etc.
I feel like my comment sounded whiner/more self pitying than I intended because the emoji I used was stripped! You’re right, there are plenty of people in much worse shape, and I am absolutely the worry wart personality type. But it’s still a slightly nerve wracking time to be a recent buyer.
max 75bps.
75BPS hike what does BOC do next?
On another note the city of Victoria released today that all new buildings will have to hit step code 5 the highest step code rating by 2025. 7 years earlier than the step code calls for. COV just doesn’t wany any new housing built.
Sounds like we need a Tinder tax
You are still going to be paying rock bottom interest for the next 3 years. Who knows what the rates will be 3 years from now. There is no point in stressing about what could happen in 3 years. Also you bought in late 2020, a year and a half before the peak.
The people that might be “screwed” are the ones that bought Feb/Mar 2022, maxed out what they could buy and chose to go variable.
That “story” Marco was talking about re: the couple having now to rent out a room in their new house.
Could anyone actually “feel” for this silly couple? The run down:
Bobby & Nat bought their original home in 2015, a SFH with 4 beds, 3 baths for $350K. It wasn’t quite big enough for the four of them, so they luckily had the money at that point to add square footage and finished off the basement. Wow, then they added a fence, a nice new deck, patio and the coveted brand new Stainless Steel appliances. Still not quite satisfied, a few years later, and because life had been so good to them, they found their dream “forever” home and decided to jump into the market again. After all, all the neighbours were doing it.
And now, because of their bright idea, they have to rent out a room in their new forever home just to make ends meet. They had more money than brains. Incredible.
Lol this is the most far out prediction I’ve seen on here so far, I’ll believe it when I see it.
Not gonna lie, I’m feeling stressed. We bought late 2020, got rock bottom rates for 5 year fixed. If rates stay high and house values plummet, I’ll be pretty bummed about our high debt / high payments on a house that’s now worth less. Should be fine as long as we stay employed, as we’re planning on staying here permanently… and we’re doing what we can now to mitigate by saving aggressively for a lump sum at renewal, but even so! Those charts of house values rocketing throughout the 2000s makes me worry the crash could be bigger than most current predictions. I’m like one of those people everyone on Reddit gloats about getting screwed but doesn’t feel so good in my shoes
One major factor in the housing shortage is marriage failure. I’m not 100% certain but I believe most of my current tenants are going through a breakup. Suddenly one family unit needs two residences. More people are choosing to remain single and some modern relationships consist of weekend hookups. Less complicated, less financial risk, no messy separations. Internet “dating” sites offer unlimited opportunities and people are taking advantage of it and each other. I’d bet the government is looking into taxing people more for being single.
Top to bottom, a very ominous article:
Real estate market storm clouds are gathering
https://docdro.id/xY81LSG
https://www.theglobeandmail.com/real-estate/toronto/article-real-estate-market-storm-clouds-are-gathering/
Only 13.3% of Canadians live in condos – that’s a small factor. https://www150.statcan.gc.ca/n1/daily-quotidien/171025/dq171025c-eng.htm
And it’s accounted for , because In 1971, 80% of middle class households were two parents + children. In 2006 it was much lower 55%.
Households without children don’t require single detached houses. Same for a single parent/ single child household. Many prefer a condo in the core of a city to a detached home outside the city.
As I’ve pointed out before, there were no condos back then. People who lived in multi-unit dwellings rented, and such rental dwellings were a much bigger % of the housing stock.
What’s the rate of ownership of detached houses between then and now?
Why would I as a developer do this? I need to hit certain return metrics or else I wouldn’t build period. Unless the government kicks in money to lower my cost basis and make me whole.
75bps
As I see it, there’s no problem with middle class homeownership in Canada. It’s much better than the “good old days”.
For middle class, homeownership rates have risen dramatically since 1971.
This applies to all family types (couples, single, +/- children).
For example, age 35-54, middle quintile income, home ownership rate rose from 78% (1971) to 90% (2006) for families with children. (Note: This is statcan data from 2006. Overall homeownership has risen since then https://www150.statcan.gc.ca/n1/pub/11f0019m/2010325/t012-eng.htm ).
Similarity, one adult household homeownership (middle quintile income, age 35-54) has risen from 50% (1971) to 65% (2006)
Here are homeownership rates by income quintile, for age 35-54 families with children in 2006.
Lowest income quintile: 63% homeownership rate
Middle income quintiles , 81, 90, 94%
Highest income quintile 97%
As I see it, there’s no problem with middle class homeownership in Canada. Rates of 81-94% for middle class age 35-54 for families with children seem good enough. There is a problem for low income people (lowest quintile). Homeownership for lowest quintile age 35-54 with children, has fallen (72% 1971, 63% 2006). The government should focus on the low income people. The middle and upper class are doing great on their own
Any guesses as to the Feds rate increase?
The likely drop in house prices over the next year due to increasing interest rates may make a lot of younger buyers feel poorer. For some it might actually mean negative equity in their house.
Absolutely – this is where the public lands and public funds need to go. The middle class have options that those who qualify for social housing do not. And a massive investment in social housing will start to relieve some rental pressure in the market.
I also agree that that the province needs to step in on zoning in some manner to promote and encourage SFH alternatives for market housing. The fastest and most affordable way forward is to allow a SFH to be divided into two or more units. My recollection based on studies was that buying, demolishing and rebuilding multifamily on SFH lots did not make sense for developers in most situations and that garden suites, while good options for some, are way more expensive and time consuming than suiting an existing structure.
Families used to buy houses with one income at a time when real wages were lower. You’re on to something though, which is that rising house prices have made the middle class appear richer (i.e. have higher net worth) while the real purchasing power of their wages has been declining (since the 1980’s).
Pricing of housing is very different from consumer goods though, not the least because the former is an asset that the buyer expects to get a future return on and is able to borrow large sums of money to buy.
A convenient name for non-market housing could be: commune.
I suspect that the real problem is that the Canadian middle class is actually poorer overall than it has been in the past. It is not just an issue of housing but rather overall purchasing power. Housing is perhaps the most obvious metric but far from the only one.
But you’re giving examples of recession forecasting which is a complicated macro issue. As has been illustrated here, affordability is a very good predictor of price downturns or at least stagnant prices in RE.
Yes, build enough housing and some of it has to be affordable to the middle class because there is nobody else to buy it.
But still there is a case for building more non-market housing. It’s always going to create more affordablility per unit because the commoditization is absent. Non-market does not necessarily mean subsidized though, it just means there’s no owner paying more today for expected gains down the road.
Even though I believe RE is headed for a slight/moderate correction; beware of the pundits.
https://theconversation.com/economic-forecasting-why-it-matters-and-why-its-so-often-wrong-53829
Studies reveal the inability of forecasters to correctly or timeously predict outcomes. Based on a sample of 63 industrial and developing countries, a study by Prakash Loungani at the International Monetary Fund is revealing. It showed that private sector forecasters were only able to predict two of the 60 recessions that occurred over the sample while the majority remained undetected.
Professor Philip Tetlock also spent many years researching the accuracy of forecasts – specifically in a political realm. After collecting and analysing 28 000 predictions from 284 experts, he found that the average expert’s forecasts were only slightly more accurate than random guessing.
Thanks! I figured it was small statistics..
My definition of middle class housing is: Regina.
Why? Middle class should not need subsidized housing. The fact that many do right now is a policy failure
Whatever the definition of middle class housing, it sounds like it will be below market price so would need to be subsidized by government regardless.
Just saying there isn’t enough money to make a dent in the housing needs for the middle class. Given we have limited funds for affordable housing let’s focus on housing the 200,000 people on wait lists for social housing right now. There’s no reason the market can’t build middle class housing if we let it
I am not following? I don’t think it’s hard for government to get contractors to build townhouses and apartments, probably be able to get some good cost savings too if they are all cookie cutter.
Given you previously said about taking out a heloc to buy another rental if the market crashes I don’t think you will be in the picture come winter.
https://househuntvictoria.ca/2022/05/16/new-and-active-listings-what-happened-during-the-crash-of-81/#comment-88683
I looked at the peninsula but there were few sales so I didn’t include it as I wasn’t confident in the numbers.
However, for detached on the peninsula:
Feb/Mar sales: 58. Median Sales/Assesed: 122%
Last 30 days sales: 21. Median sales/assessed: 108%
Difference: -14%
A bit concerned about that messaging actually. 3% of us living non-market housing. There’s a good argument to be made that we have drastically underinvested in housing and maybe with some historic investments in social housing we can boost that to 10%, but if we can’t figure out how to get the market to build middle class housing we are totally hooped.
Pulling them manually. Search pending sales for the time period -> View ratios -> sort by S/A -> take the median. I exclude new construction.
If only higher interest rates would limit government spending, what do they care? We’re the ones paying the interest. Wish I had that luxury, spend money like it grows on trees and get someone else to pay the interest. Should have went into politics.
If it’s really rising by another 1.5% then that means basically everyone that took a variable last year. Majority can absorb the payments no doubt but unclear to me how many wouldn’t be able to. Biggest risk to market right now IMO
+1.
Although you seem to have this me vs. you narrative in your head (rent free I might add again) and whatever happens happens. You’re going after Maplewood as you just stated and I’m looking to add more rental properties if they’re cash flow neutral/positive wherever they may come available. So, I don’t find you and I competing in any way other than on this anonymous blog as you love to say and keep naming me in. Unless I decide to get really spiteful and out bid you on your Maplewood property of course, then you could truly take it personally.
Also, you’ll appreciate that I timed renting on the AirBnB market very well too as Sprout Lake is perfect during this heat wave, hope you have a heat pump or air conditioning VREa
😉
I suspect that BMO is right and we are probably looking at another two points. My best guess is that prices will drop another fifteen percent (total about 25 to 30%)from the highs and possibly more. But just a guess. Might leave a number of first time buyers with negative equity.
Something seems to be the talk of the town now…
From: https://financialpost.com/news/economy/brace-for-three-more-rate-hikes-this-year-says-bmo-chief-economist
I was thinking at least 2, but why not go for 3…
Since rates are likely to be up by at least 1.5% more by end of year one has to wonder how many more will be triggered?
Triggered
Maybe, going from $400k ahead to dropping it all into basically the same house in the same location (I know those Ottawa burbs, there isn’t much sperating the cookie cutters from each other, even if it’s their “forever home”) and then needing to rent out a room to support it. That financial decision will impact them for a decade or two.
Lots of earnings misses in the stock market, many of them lost a potential 300 million customers in Russia and Ukraine. Who wouldn’t miss earnings when you shut down business in Eastern Europe. Microsoft’s miss was very small, it held up exceptionally well. This is a buying opportunity for the stock, the world runs on it.
Must have been quite the miss given it is up a smidge and aftermarket trading.
I’ve seen those lower priced listings for detached, and the trend seems to be discounts on what must have been investment properties. I’m talking realtor taking photos from the street, 2 bd 1 bath knockdowns. Livable detached properties with rental suites seem more resilient.
Some of these hardship stories….https://www.cbc.ca/news/canada/ottawa/ottawa-family-home-sale-price-market-1.6531055
Having to rent out a room in their new home…like that is the end of the world?
looks like MSFT just missed earnings.
Thing is in a slow market if you are able to sell you shouldn’t have too much of an issue finding one to buy unless you are super picky.
Isn’t the advantage that you end up owning one home that you want to buy? Instead of two, or none if you sell first and then don’t find one you want to buy? If you’d be happy staying in the home you’re selling, the strategy makes sense to me.
That may change if Eby is serious about using government funds to build middle class housing. That museum money can build a lot of units, especially if they are all cookie cutter and use modular construction.
Same here, hence I am looking in the winter, glad to see BoC corporate so far lol.
Vicreanalyst ya I’m not very motivated I spend all my time working on my chipping game lol
What would help inventory is if we did not have zero vacancy. For example, right now I have a condo listing my client is going to cancel after 40 days on market and no offers. She was renting it for $3000/month with tenant moving out end of August. She put it up a few days ago for $3500/month with a lot of inquiries/great candidates so will continue renting.
If it wasn’t so ridiculously difficult to build and we had a bunch of rental towers coming online guess what she wouldn’t be getting $3,500/month for a 950 sqft condo and would be more motivated to sell.
Build more is a solution for a lot of problems imo, but it just won’t happen.
TC just dropped an article citing ferry employee shortages on lack of houses….guess what build more solves that problem.
Thanks Leo! Informative as always.
Out of curiosity where is the Peninsula sitting in your “price change from peak” graph?
Hey Leo, just curious, where are you getting the median sales price to assessed value ratio? Are you tracking the numbers yourself?
I was surprised to see Westshore homes holding up on par or better compared to the core so far per Leo’s post. Lets see how this plays out through winter or else I might have to apologize to Up and Coming.
In a slow market personally I would sell first (the difficult part) with a long completion and then go lowball everyone with clean offers on the purchase but than again great deal takes precedent over convenience for me.
If you have a townhome in the core subject to might work, but on the Westshore the inventory of townhomes has just exploded in the last 30 days and probably about to get worse. People trying to dump and assign pre-sale townhomes they bought, etc.
I’ve also never really totally understood what you achieve with a subject to. The seller can bump you with a time clause if they receive another offer and if they aren’t bumping you probably means you overpaid as they aren’t receiving any other offers or they are receiving offers but a lot lower than your accepted subject to sale.
+1
That is too long of a time frame to predict, I would not hold out that long to time the bottom. If you see something good this winter and want a new house then don’t get too cute.
When we “house up” in the next 6-12 months, we will have condition to sale of our townhouse. We have always had this condition on the property’s we have sold in the past.
160 acres in the Shuswap should fetch a pretty penny.
Maybe 30-40? More common 2011-2014 when market was slow/stable but not that much uncertainty out there (other than HHV, where the comments were always predicting a big crash). Right now we have a slow market + uncertainty so subject to sale is a little tougher.
I don’t think there’s a rush to buy if looking for a deal maybe 2 years out for the bottom
Marko- How many offers with condition the buyer needs to sell their house have you presented or accepted in the last 10 years?
2022 average forecast for overnight rate from 66 people: 0.76%
Current overnight rate: 2.5%
We’re just about as bad at forecasting as the Bank of Canada.
They’re moving to town. Anyone want to buy 160 acres in Salmon Arm?
If buying a rental, as long as you are cashflow neutral or better then it shouldn’t really matter that much.
About the timeframe my parents are looking to buy and I think that will be a decent time as well even if prices don’t do much for a few more years
They will but the seller will go into it with half ass motivation and will not want to negotiate the price much.
“We can’t sell our house what makes the buyer think they can sell their place in this crap market but whatever will accept but only at asking price” is the typical mentality.
Versus if you hit them with a lowball, but unconditional, seller will think twice about countering it. If they counter the original offer is immediately null void.
Given the flak BoC has been taking for not acting soon enough, I think chances are they will overshoot the rate hikes rather than vice versa. I think the only thing that will make them stop for the rest of this year is unemployment going up significantly.
10% layoffs for shopify announced.
That is for the market to say, not you.
Hey that’s my plan for Maplewood! I am narrowing it down to around Feb as the time frame.
Nobody is going to accept an offer with the precondition of the buyers selling their house. It’s a waste of time. The market isn’t that desperate.
I’ve had clients try a few conditional to the sale of their place offers in the last month and one seller came back with put your home on the market first then we can talk other one came back asking full price and a non-refundable deposit (if subject to didn’t sell) but was willing to give four months for it to sell.
In a slow market subject to sale acceptance by seller chances increase but if you really want a deal you lowball a desperate seller unconditionally (verify no buried oil tank, check title beforehand, etc.).
That is what I am waiting for personally. 6 months on market, finally seller gets accepted offer, it collapses, you go in with unconditional lowball subsequently. I think there could be opportunities November to March.
The crappiest one bed condos (older with poor depreciation reports, restrictive bylaws, not the most attractive locations, etc.) are holding in the best of any market segment from what I can tell with my eyeball test. The condo average this month with take a beating with so many of these low end sales.
I guess it comes down the affordability? Even thought I don’t see the value in the bottom of the barrell condo segment.
With inflation appearing to be leveling off, the BoC may pause the hikes after the September meeting. I would be keen to hear DebtMonster’s thoughts moving forward. Perhaps his/her calculus has changed.
Conditional on both sale of house and financing used to be the norm for many decades and I expect the market to go back to these terms without any real impact. And, frankly, I think it is a good thing overall.
I am not surprised that the westshore detached have held value in line with the core. I would find it interesting to see how CofV has done in comparison with either Oak Bay or West Shore or for that matter North Saanich.
In terms of price declines I suspect we might be at the beginning of the process and a couple of more interest rate hikes will push matters along. If pressed I would guess we are looking at 20 to 30% price declines from peak before it really flattens out. Additional interest rate hikes will have a larger progressive effect both on some sellers as well as buyers.
I have few acquaintances that bought pre-pandemic that want to do the property ladder thing. The issue they are having now is that they are seeing the listings they want, but they need to sell to utilize all their equity to afford the new place. As well, they are having to constantly adjust their spending power with the increase in interest rates and the possible decline of their eventual sale price. This overall, is making them hesitant to place offers, if they do, the offers will definitely be conditional on sale of their property first.