The not-so runaway strata fees
Many people are worried about strata fees when they buy into a condo development. In recent years that’s been about the rise in insurance premiums, but even outside of that there is concern that strata fees will increase substantially as the building ages and requires more repairs.
However is that true? To examine this question I looked at 2000 sales of 1 bedroom condos, about 500 each in 2022, 2012, 2002, and 1992, and computed strata fees per square foot for each. Surprisingly, none of the years showed any sustained increase in the strata fees for older condos compared to newer ones.
The variability in fees is pretty large depending on the building and this doesn’t take into account special assessments that become more common with age, but it appears that you shouldn’t expect older buildings to necessarily cost more on a monthly basis. There’s two ways to interpret that: either strata corps in general are being prudent and setting strata fees high enough when the building is newer to cover expenses as it ages, or they are kicking the can down the road and will pay for big repairs with special assessments instead. Without data on the amount and frequency of special assessments it’s not possible to say which represents the typical situation.
That’s not to say that strata fees don’t go up. Clearly from the chart above there is no stability in fees over time, it’s just that they all tend to go up together. In fact strata fees increased more quickly in the last two decades despite generally low levels of inflation. On average, condo owners have experienced about a 3% increase in strata fees after inflation in the last few decades.
That’s something to consider when buying a condo to hold for the long term as those strata fees will likely keep growing ahead of the rate of inflation. Of course operational expenses aren’t unique to strata properties and apply to detached properties as well. One advantage to freehold is that you have additional flexibility to insource the work to save money, but in general maintenance expenses will be substantially lumpier with large costs interspersed in long periods of low expenses. If they’re not paid up front, the same costs will accumulate in terms of deferred maintenance and (roughly) proportionately come out of the resale value. That’s especially true when the market is more in balance and buyers have options.
Also the weekly numbers.
|Wk 1||Wk 2||Wk 3||Wk 4|
|Sales to New Listings||36%||43%||68%|
|Sales YoY Change||-45%||-47%|
|Months of Inventory||1.5|
New listings remain sluggish like they were in February which is putting a damper on inventory growth, but at the same time sales are also nothing to write home about. Whether it’s a lack of inventory, stubborn sellers, continued miserable affordability, or a rise in fixed rates again after a dip in early February (now potentially reversing), sales have remained lacklustre.
Don’t get me wrong, this is no buyers market but I also don’t see any signs that we’re heating up to go to the moon again. The same picture is evident in the over-ask numbers which have settled back around 10% again after briefly touching 15%. That’s higher than it was in the fall, but it’s also not showing a lot of momentum. Likely it will continue to bounce around these levels through the spring market. I’m still of the opinion that a sharp pencil on pricing is in the interest of sellers right now and some will take advantage. There’s enough buyers and low enough inventory out there that sellers will get market value even if the list price errs on the low side, while at the same time avoiding long times on market from overly optimistic asks.
Meanwhile the financial world is in turmoil due to the collapse of SVB and Signature bank, which has tanked yields and immediately caused analysts to do a 180 and call for rate cuts (laughably as a “near certainty”) instead of hikes. My bet is this will be a nothingburger. Regulators have already intervened and the only ones that will be crushed are stock holders. Meanwhile yields are down to where they were 1 month ago. And 2 months before that. And 4 months before that. In fact the 5 year has been in the same range for 10 months now. We might see a few more minor US banks collapse in the aftermath, but I suspect in 2 weeks this will all be forgotten.
What it is a reminder of is that like most mortgage holders that haven’t felt the sting of higher rates yet, the effects are also working their way through the rest of the economy and will likely be felt in unexpected ways. More surprises ahead.
Hired before 1st offer, delivered before final (more accurate) offer.
New post: https://househuntvictoria.ca/2023/03/20/under-ask/
Cause of fire still unknown. Not clear if a long term owner, tenant, or Airbnb guest died. An Airbnb in the building (no necessarily where the fire started or anything else) was being run by a tenant, not a landlord, which I am assuming the landlord has trouble removing due to tenancy laws.
I read this story as a fire happened in a very old building and unfortunately someone died tragically. Of course the big bad corporation is at fault for everything.
I worked at the Jubilee in emergency that night the two uvic students died in a fire in 2007. I helped intubate the two that survived….will never forgot that, absolutely brutal. People died in fires before Airbnb.
Introvert found bank receipts proving otherwise.
I am not in the financial industry but how many money managers would recommend 100s of thousands in deposits to their clients? Wouldn’t they try to roll them into various investment vehicles?
You pretty much nailed it. Just being smart with your ICBC and home insurance deductibles can be a ton of money over the course of a lifetime. Avoiding MERs probably the number one component of financial literacy in terms of getting ahead, but based on just all the brick and mortar operations such as investors group financial literacy is very poor. In my eyes it is kind of sad. Unlike myself some people work very hard real jobs to get to their money and then they give some salesperson who takes 2% of it every year and it is basically a coin flip whether they mutual fund performs or under performs the market.
+1, I somehow missed that post a few years ago but that is excellent!! Unfortunately, what we get on HHV is a commission discussion every few months about what a ripoff commissions are where no one absorbs anything and then posts how they just sold or bought and you know they are paying 40k on the sale and not receiving any cashback on the purchase, despite a ton of really good advice over the years on how to save on fees. Then they exert their energy on the CDIC. It is quite amusing.
Curious about the appraised market value, did you have an appraiser go in before the unconditional offer, during the back and forth or are you referring to assessment?
The property I had my eye on was pulled last fall, but being ignorant of accepted protocols I cold-called with a low-ball offer.
Today, four days after an unconditional offer and two counters (the last one at appraised market value) we both signed off on the sale. Possession on the 31st.
Thank you Leo & crew
Subject to an appraisal and subject to financing are NOT the same thing.
If you are going to put a clause such as subject to a satisfactory appraisal, then you should be hiring your own appraiser and NOT using the bank’s appraiser. The bank appraiser is working ONLY for the bank and they are testing the market to determined if your offer is fair, equitable, reliable and reasonable for bank financing.
When you hire your own appraiser, then they are expressly working for you. And you can give the appraiser specific instructions that both of you can agree to.
For example, you may tell the appraiser not to make inquiries about your presented offer. What you want is their opinion of the property’s fair market value without being influenced by the presented offer. That’s the way I work. I don’t want to know your offer. The appraiser can then estimate a low and high end of the range for the property as well as give their supported opinion as the most probable value. You’ll get a 20 page report and you will get to talk with them about their conclusions and analysis.
That’s not going to happen with the bank’s appraiser. Rarely can you speak directly to them and you are not going to see their report. Bank appraisals are cheap and quick, and are the lowest end of the services provided by an appraisal firm. Doing mortgage appraisals is where candidate appraisers are trained and learn skills by inspecting a lot of different types of properties usually with quick turn around times. Similar to law firms that have articling students that do a lot of the work. It’s not uncommon for a designated appraiser to have four student candidates working for them. And that designated/accredited appraiser spends a good portion of their time mentoring and reviewing candidates reports.
The 7 day cooling off period, is working out well for appraisers. It’s now possible to put an offer in subject to a satisfactory appraisal as the 7 days allows the appraiser the time to inspect the property and write up a report to assist the buyer in formulating an offer to purchase. Something that could not be done when their were 48 hour clauses. If you are going to go this route, find an appraiser first and interview them to see if your personalities match and if they are willing to do this type of work. Don’t assume that all appraisers will take on this type of assignment and don’t assume the appraiser the bank sends out is looking out for your interests.
Like when has someone posted on HHV, “I used a mere posting service and saved 20k selling my house.”
There have been a few folks posting here that they have sold places themselves over the years.
I posted my experience helping elderly relatives sell a condo in Vancouver a few years back:
1) Did online market research to get a sense of value
2) Contacted two different real estate agents and got their valuation/listing strategy. Also asked both if they could reduce their commission. Neither willing.
3) Hire an appraiser and got an appraisal done (a bit over $400)
4) Emailed almost all the owners in the building and asked if anyone was interested in the unit
5) One couple responded to (4) and we ended up selling the unit to them for near the upper end of the appraisal range
6) If there hadn’t been any bites from within the building I probably would have gone with a full service agent as neither relatives nor I could be in Vancouver to arrange showings
7) Notary public to do the transfer – about $850 IIRC
The reason I thought asking within the building was because it was one of the two nicest units in a small condo complex that seemed well managed and had very low turnover (according to my relatives). My own guesstimate, the two agents and the appraiser were all quite in line on valuation which gave me comfort. Market was hot but not scorching.
1) Very low effort on my part. Traveled to Vancouver once to let the two RE agents and the appraiser have a look. Did nothing other than some obvious cleaning. Friend with a key let the neighbours in twice to look it over.
2) Saved my relatives commission – approx 24000
3) They were happy about who bought the place
1) Lingering “what if”. “What if” they could have gotten more money by fully exposing this to the market? Although I had no emotional attachment to the unit I did feel it was kind of a unique funky place that someone might fall in love with and pay more than strictly logical market value for.
2) I’ll admit it – – a bit scary assisting in this big financial decision with no one to hold my hand – don’t want to betray my relative’s trust
Why I don’t like Airbnb:
Thanks to CDIC and various provincial programs the average Canadian should spend near zero time worrying about bank failures. After all most of us don’t have multiple hundreds of thousands just sitting in bank accounts earning several percent less than inflation (pre-tax to boot!)
You’ll lose way more money in your life from buying insurance you don’t need, paying people to provide mediocre money management, joining too many subscription services …..and yes – paying stupidly high real estate commissions.
Marko seems to be providing prudent advice and reasoning, however I wonder how many of the 1,600 realtors in town has this level of experience and expertise? That could be why there are irrational situations which some of the posters are describing. After all, it takes just two courses and an exam to become a realtor.
It sounds like you only manage your own money. If you’re also responsible for managing other people’s money, you might find it within your fiduciary responsibility to research this”bank deposit thing”, namely what type of insurance is provided on bank deposits you’re recommending to them.
It’s easy to accept risks for yourself, but not easy to expect others to assume those same risks.
This bank deposit thing….love how people spend all this energy and time on researching something that has an extremely small probability of occurring, as Leo noted equivalent of zombie apocalypse but can’t do the simple of basics of doing a bit of research and doing something smart like saving 20k on the sale of their home. Like when has someone posted on HHV, “I used a mere posting service and saved 20k selling my house.”
This happens a lot more often than one would think. An extremely common feedback response to a showing from the buyer’s agent is “interest from my client, please keep me posted if you receive any offers.” You would shocked how many of these write an offer when you send out an email blast to all the agents that have showed the property “we’ve received an offer, let me know if any interest?”
Which makes no sense to me…you are interested in the property, don’t write in a non-competing situation, but then want to participate in a competing situation. Super odd, but that is the way it is. I see it all the time.
Something doesn’t really add up to be honest, how do you know you were beaten out by a “hair?” If they put in inspection it isn’t much better than financing. The only difference is if they get cold feet to cover themselves they need to spend $500 on inspection as it could be awkward walking away on a contract only subject to inspection without actually doing an inspection. Once the inspection is done there is no need to justify the results if walking away, the way the standard inspection clause is written in BC (can be different in other provinces).
All things equal 5 days financing beats out 7 days inspection. Even at 5 days vs 5 days, as a listing agent I would most likely favour financing depending on a bunch of factors (buyer’s agent I’ve worked with many times before, or not, are they putting $200k down on acceptance or after condition removal, etc., etc.). Reason being is inspection could actually bring up issues with the property.
If you know financing will come through and everything is sorted out you could always go unconditional (with a clause that seller will grant access for an appraisal). This gives you three business days minimum plus the time in the day the offer is accepted. For example, if offer accepted at 10 am you have almost four business days. On the last rescission day you call your bank or mortgage broker to assess the situation. Either financing is approved or they can tell you it looks 99% good or similar. If there is a hiccup you pay the 0.025% rescission fee and collapse the unconditional offer.
Your balance at PayPal et al is just an unsecured debt, you know. They’re not banks.
This is a tough one for sure. Have you tried Mullin Demeo? I would maybe also try Daniel Mildenberger, a very knowledgeable real estate litigation lawyer that might have some experience with this.
That all being said this is really a matter of trust and reputation. There is no way any sort of contract can address every possible scenario in an owner and builder relationship. So so many grey areas, like who is responsible for cleaning and organizing the site regularly? Owner might think the builder should do it in his or her fee(s) and the builder might feel this is something they contract out and invoice the owner accordingly. 100x scenarios where you need to hope that the other party will act reasonably in good faith, but it is difficult. The vast majority of owner and builder relationships do not end with the builder being invited over for dinner. If the owner and builder are on talking terms after the project is finished that is above average, from my experiences. I can count on one hand the number of times someone has told me “we were happy with out builder.” Even if they are happy with the product they aren’t happy with going over budget, etc.
I wonder if we have any idea how much foreign money is sitting in our banks. As far as I know, I can set up multiple bank accounts in the U.S. Having a PayPal account is essentially a U.S. account. Using different email addresses within eBay and Etsy accounts, one could safely stash a lot of cash, I think. Just don’t forget your passwords.
That’s interesting, thanks Patrick.
Alexandra, PS, not sure if you were addressing your comments to me, but you can believe me when I say I know how to properly look after my own finances, and would not take anything anyone says here as actionable gospel. But like other such forums, it can provide an interesting starting-point, and by reading for a while, you do get a sense of who knows what they’re talking about on a particular topic vs. who is a blowhard or whatever. It’s interesting and useful.
And just so you know why I didn’t fully understand/appreciate this CDIC insurance point before, well it’s simply because it doesn’t much matter to me, as the assets exceed in multiples any possible available insurance no matter how many multiple accounts I would think about creating. So in this regard, risk management for me is mostly a matter of diversification and dealing only with the big banks.
it’s been quite a while since I purchased but I remember the subject to finance clause we used for a couple of offers was a totally “get out of jail free card” if you had second thoughts about the purchase. Since it basically said the finance had to be to our liking (don’t remember exact wording). Such a broad “out” has to devalue the offer a bit.
Our final successful offer on the house we now live in had no finance condition and a very short inspection window. In theory that might make the offer worth a bit more. According to our RE agent we won out of multiple offers** and were not the highest offer (We were modestly below asking). (Fall of 2008 when the financial end of the world was coming)
** The multiple offer thing is a pet peeve of mine. Other than trusting the agent I had no way to know if there were even multiple offers let alone whether ours was higher or lower than the others. Obviously in the recent past hot markets offers have been coming in multiples. However I have been suspicious in the past when houses have sat for months in a flat market and then suddenly there is are multiple offers. Seems like an open door for an agent to BS to add pressure and maybe boos the offer?
Yes I agree for the average person, it makes no difference. For an institution using this for short-term cashflow management investment purposes involving large sums it does makes a difference.
Could be worse depending on how it’s worded. Some specify appraisal must be at least the purchase price, which is stricter criteria than subject to financing, which you can secure even if appraisal comes in a little low.
If you are fully confident in financing coming in, then why not go in unconditional?
What do y’all think of putting subject to appraisal instead of finance. We just lost out by a hair on our dream property. Our only condition was subject to finance with a 5 business day subject removal period (no not that long). We know the financing will come through and are pre-approved so it is so frustrating! Also the offer we lost out on to apparently had ‘better’ conditions but 2 day longer subject removal. I am betting they put subject to inspection or anything but still will be pursuing financing and can duck out if needed for a variety of reasons if their financing doesn’t come through. We are now the backup offer and not expecting any miracles.
I think a run on our banks is possible and equally devastating as the events in the U.S. With today’s technology, it can be done overnight, unless there are limits to moving large sums online. Good thing I buried those coffee cans of cash in the backyard. If only I remembered where.
The dilemma facing the banks is that any attempt by them to address liquidity issues (prior to recent government support) will result in solvency issues. Now with the government support, they can pretend that there is no solvency issue. However, the price they are paying for this government protection is high since they have to pay the discount rate, which is much higher than the rates paid to depositors. This will continue to shrink their NIM and their stock prices will keep going down for a while.
Yes, it is “true”, and yes there indeed is a “different ordering system” as you call it. In short, in the event if a bank failure, the un-insured deposits get screwed, and only get any leftovers after all the insured deposits (and admin fees, and secured debtors) get paid. Likely nothing for them in many cases, Even if the un-insured do get something, it’s only after (probably) years of waiting for the bankruptcy process to proceed.
These are the FDIC rules, enacted into law. CDIC is the same. You can see the different ordering system, the hierarchy of claims against the assets of the bank. And insured deposits are one rung above un-insured deposits, meaning the un-insured depositors only get any leftover assets.
For example. A bank with $100 billion deposits. $96b fdic insured and $4b uninsured. Assume the bank fails and has $95b assets. The FDIC immediately pays out $96b to all of the insured depositors up to $250k. The un-insured deposits get no money, just a bankruptcy claim which will take years. Years later, the bankruptcy claims are all filed, and the $95b assets are sold and available to the claims. Well, the fdic has $96b in claims that will get paid first and there’s only $95b available. So the uninsured people wait years, but get nothing.
WHO WILL GET PAID FIRST?
The Federal Deposit Insurance Act requires that insured deposits be paid “as soon as possible”, and also specifies the order in which claims will be paid under the receivership as follows:
1. Secured claims
2. Administrative expenses of the FDIC as receiver
3. Insured deposits (the standard insurance amount is $250,000 per depositor, for each account ownership category)
4. Uninsured deposits
5. General/senior liabilities
6. Subordinated debt and similar liabilities
7. Shareholders of bank
Can anyone recommend a Real Estate Lawyer that can review a customer home builder contract to build a new single family home. I called a couple of lawyers, but neither had anyone with experience to do it.
Thanks in advance.
Yes it is “true”. Here are the rules for the FDIC (enacted as law), I assume the CDIC is the same. As you can see, there is a hierarchy (“different ordering system” as you call it), with any money going to the uninsured deposits getting paid AFTER the insured deposits have been paid (and after things like secured claims, admin expenses).
So for example, if a bank has $100 billion deposits, with $96 billion insured deposits, and $4billion of uninsured, and has $95 billion in assets, then the FDIC gets all the $94 billion assets and the uninsured deposits get nothing.
This means that deposits over the limit are about as risky as bonds in the bank, and may well get wiped out in a failure.
WHO WILL GET PAID FIRST?
The Federal Deposit Insurance Act requires that insured deposits be paid “as soon as possible”, and also specifies the order in which claims will be paid under the receivership as follows:
—-Administrative expenses of the FDIC as receiver
—-Insured deposits (the standard insurance amount is $250,000 per depositor, for each account ownership category)
—-Subordinated debt and similar liabilities
—-Shareholders of SVB and its parent, SVB Financial
Man, anyone reading these financial comments on here and do not fully understand their own various investments in terms of security, insurance, allowable contributions , capital games and much more , should read with interest but for heaven sakes take some time and see a respected financial advisor and or accountant. People can really get themselves in a mess and “I didn’t know” or “Henry on hhv said” just won’t cut it.
This is only correct for provincially regulated BC (and some smaller provinces) credit unions,. In BC, since the 2008 crisis they have protection until CUDIC runs out of money.
It isn’t correct for these credit unions:
—- some Credit unions present in BC, like “ Coast Capital Savings” (aka Coast Capital Savings Federal Credit Union)” are federal and subject to $100,000 limit. https://www.coastcapitalsavings.com/help/managing-your-account/cdic
—- Other provinces credit unions have different limits. For example:
———-Ontario credit unions have a $250,000 limit. e.g. Meridian $250,000 https://www.meridiancu.ca/about-meridian/meridian-s-response-to-covid-19/frequently-asked-questions
———- Quebec limit is $100,000 https://lautorite.qc.ca/en/general-public/compensation-and-deposit-protection/deposit-protection
—- )) ——
Some other smaller provinces’ credit unions (prairies, maritimes) have unlimited coverage like BC https://www.cdic.ca/about-us/organizational-structure/partners/provincial-deposit-insurers/
I don’t think there is any appreciable difference though. CUDIC insures the credit unions, CUDIC is overseen by BCFSA, a crown corp. So it would take failures leading to CUDIC being overwhelmed, then all their alternative sources of liquidity failing, then the province deciding to screw their own citizens and companies for what is a temporary liquidity crunch. If that happens it’s the zombie apocalypse and we all have bigger problems.
“In the unlikely event of a credit union failure, CUDIC holds sufficient resources to cover immediate payout requirements. However, should CUDIC funds be insufficient, CUDIC can require payment from credit unions either through special assessments or debentures. Additionally, CUDIC can arrange for alternative standby funding from other sources, using the assets of a credit union as security.”
“Section 271 of the Financial Institutions Act provides that the Provincial Government may provide financial support to the CUDIC Fund if the CUDIC Fund is impaired (see the CUDIC Fund Target Policy for further details about the CUDIC Fund).”
Is that true, or does everyone get treated the same ie. everyone gets 95 cents on the dollar from the bank assets and then the insured depositors get another 5 cents from CDIC ie. taxpayers? I mean, I don’t know the answer, just asking, but it seems pretty strange if the whole concept of CDIC involves no real ‘insurance’ and instead just amounts to a different ordering system in how failed bank assets are distributed
No, it was the bank run (liquidity) that caused SVB to fail.
“ Why did Silicon Valley Bank collapse?This was simply an old-school liquidity crisis. SVB’s underlying investments haven’t failed. They’re prices have just gone down.” https://www.forbes.com/sites/qai/2023/03/12/investors-wiped-out-as-bank-run-causes-collapse-of-silicon-valley-bank/?sh=523279383e95
Not technically correct, there is no legal provincial backstop should there be a run on the credit unions and CUDIC (Credit Union Deposit Insurance Corporation) runs out of money. I know it is advertised as such, but if you pay a lawyer to look into the actual legislation you will get a different answer. That’s not to say the province won’t step in should this happen, but they don’t have the legal obligation to.
“The Provincial Government does not guarantee or otherwise backstop CUDIC’s deposit insurance guarantee nor does the Provincial Government provide a separate deposit insurance guarantee. CUDIC maintains a fund (CUDIC Fund) to provide the deposit insurance guarantee. CUDIC may seek Provincial Government support if required. Section 271 of the Financial Institutions Act provides that the Provincial Government may provide financial support to the CUDIC Fund if the CUDIC Fund is impaired (see the CUDIC Fund Target Policy for further details about the CUDIC Fund).”
Ahh yes, forgot about that.
Makes no sense. Deposit insurance is unlimited for credit unions, $100k per account type in federally regulated big banks.
In practice no risk difference. The small credit unions have the backing of the province, the big banks are too big to fail.
Yeah more new listings and more sales. Used to have the prediction in the weekly table for the month end sales but it was basically useless, just swings back and forth based on how any given week went.
And of course buy more ammo.
I am increasing my prediction for the month to 630 sales.
Best to also buy an acreage up island and start growing your own produce as well.
That’s good info, thanks. Of course no one should count on the kindness of strangers (the government) bailing out their large deposits in a small bank. Better to quickly move them to a safer institution, especially when there is little or no reward for keeping them in the riskier small bank.
You have to draw a distinction between liquidity and solvency problems. If a bank’s business model is sound and its only problem is a run on deposits, the BoC can simply lend it money to replace the deposits, or persuade other banks to lend it money.
A bank has a solvency problem when its liabilities (which include deposits) exceed its assets (which include loans). That is what caused SVB to fail. The increase in interest rates hit the value of its assets, which were largely long bonds.
The last domestic Canadian bank failures were Alberta-based Northland and Canadian Commercial Bank in the 1980’s. The government of the day covered uninsured depositors, against some objections. As well the Bank of BC was on the brink of failure but was taken over by HSBC.
I believe the last failure of a foreign bank authorized to take deposits in Canada was BCCI (aka Bank of Crooks and Criminals) in 1991. I recall people protesting against the government not covering uninsured deposits but I don’t know the ultimate resolution.
Right. And part of that game, is “plan B” where you rush and transfer your >$100,000 excess to a different bank before it fails. Which leads to the bank failure in the first place. A single tweet like “credit union xyz looks to be in trouble” could result in an instant cash run, and possible failure of xyz, with large depositors losing their cash. I expect this exact scenario to happen.
A big6 bank like RBC is declared systemically important (SIB) and likely will get more favorable treatment (bailouts of big depositors and likely the bank too) than a little bank.
Rules are very bad for the little (regional) banks, and favour the big (SIB) banks. Hence the run on regional bank deposits and stocks.
Agreed. But nothing has changed there, so that strategy is still advisable. SVB bailout of large depositors was only because it was decided that SVB was “systemically important bank (SIB)” so that all depositors would be made whole. It doesn’t necessarily apply to the next bank that fails (though I wish it would).
Note that this term (SIB) is an official status declared by the government, and provides different rules for the too-big-to-fail banks. Canada’s 6 banks have been declared D-SIB (domestic sib) and also G-SIB (global SIB). This means they get special treatment and don’t have the same bankruptcy rules (and likely are bailed out and kept running by the government). https://www.cdic.ca/what-happens-in-a-failure/resolution-of-large-banks/large-banks-d-sibs/
Activity to date:
Sales: 319 (down 36% vs same time last year)
New lists: 648 (down 8%)
Inventory: 1913 (up 94%)
New post tonight.
A family that has a lot of cash deposits for whatever reason can easily make that coverage effectively 300,000 at one institution.
Spouse 1 account – $100,000
Spouse 2 account – $100,000
Joint Spouse 1 and 2 account – $100,000
Absolutely. Anyone with a large deposit (>$100,000 CDIC limit ) who is concerned about their Canadian bank failing should move the excess to a safer bank.
Any cash over CDIC limit ($100,000) is at risk if in on deposit in a Canadian bank that fails. If the regulators that take over the bank end up selling the assets and getting 95 cents on the dollar for depositors, and only 4% of the money in the bank was from depositors with over $100,000, then you’d get NOTHING for amounts over $100,000 (since all of the assets are first allocated to depositors with less than $100,000 and paid to CDIC, and only remaining assets would go to large deposits over $100,000).
We have falling money supply (M2) in the system. Quantitative tightening by central banks sells assets (adding bonds) and removes money. This is usually followed by bank failures.
Makes sense to me. Never really made sense that $1M spread over several banks is insured but $1M at one bank isn’t
Just the latter. The depositors were made whole, but those banks did fail. Next thing to failure for Credit Suisse with shareholders getting next to nothing.
Maybe. Or maybe regulators have sent the message that all banks are too big to fail and depositors will be made whole
Our banks are fine, but if you have your cash in an over leveraged and heavily regionally exposed credit union like VanCity, you might want to have second thoughts on that….
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The new banking crisis has again shaken people’s confidence in the banking system around the world. Where do you put your money? Gold and cryptocurrency are rising steadily, will real estate follow? Businesses are especially vulnerable as they rely on access to their deposits to pay bills and salaries. To maintain a substantial business requires substantial bank holdings (well above the insured level), any interruption could be devastating. Let’s hope this is short lived and doesn’t spread to our banks/credit unions.
Make up your mind Marko. 🙂
Actually that’s exactly what happened in Canada. Canada was the only major economy where household debt rose during the financial crisis. Where was the money going – housing of course.
The higher up you go in price point the higher the % off asking in any market.
What % of properties between 750k and 1250k sold for $100+ less than asking last fall to now?
8% of properties $1.5-2M sold for $200k+ less than last ask last fall to now. Not that uncommon in a weak market
Not in a major city thought.
My parents sold last fall for about $200k under ask. Didn’t make sense to keep the house empty over the winter and the asking price was pretty aggressive so I think selling price was fair in the end.
Plenty of people need to sell and in a slow market that’s the way to do it. Sure you could drop your price first and test again but then people are just going to lowball that
We bought 3% off ask in a very slow market, 7% off original ask, 14% off the original original ask (previous listing). Always surprises me how willing people are to drag sales on. Granted if the market is appreciating it does pay off but only if you’re leaving for a cheaper market
A lot of buyers I start working with always drop lines like “my colleague bought 10% of asking” and them I am like ohhhh yea what’s the address and 99% of the time it is off original, not current.
People also like to brag how to got their house because they wrote a letter and a bunch of other non-sense. My experience with letters is like 1 in 500 success and that only one was situational (my buyers were the tenants for 7 years in the property they offered on that went into multiples, seller gave it to them for 7k less as they were great tenants for last 7 years).
I can tell you personally I only write unconditional offers for myself. If I need to do any due diligence, for example, like scanning for an oil tank I’ll explain to listing agent why I would like to scan prior to an offer.
My strategy is not something I recommend to my clients, don’t want to lose my licence 🙂 and most people don’t have the cash/flexibility.
What’s the difference between the hottest market and slowest market in terms of average % off asking price?
I am not sure why someone would take a major lowball rather than just doing a big drop in price first. I imagine there might be circumstances but none come to mind.
Of course but the biggest factor by far is still the market. You can tweak offer attractiveness but no one will care if they think they can sell for more.
“The one frustrating thing is buyers buy 2% of current asking price then tell their friends and colleagues they bought their home 10% of asking price, but fail to mention that is 10% of ORIGINAL asking price, not CURRENT.”
Do people actually brag about this? As far as I can tell everyone comes to the housewarming, politely avoids asking how much they paid and then rushes to BC Assessment on Jan 1 to find out the purchase price.
Your comment would also imply that most sellers initially list 10% above what they would accept. Thanks again.
Thanks for the insight Marko. I asked the question so I wouldn’t waste anyone’s time and I appreciate the feedback. I’m in a strong position as I could make that unconditional offer so I wouldn’t be wasting anyone’s time with multiple showings and long closing dates. Based on my flexibility I wondered if that had any extra appeal as I could close in 2 weeks, 6 months or whatever the seller required. And even though it’s in your best interest as a real estate agent to promote unconditional offers/sales I will agree they are effective as I’ve made several. Again, I appreciate the time it took for people to reply.
Umm ya Monday mornings are getting alittle more interesting Never know when a black swan might land never c it coming
Nothing quite like getting folks to work on a Sunday to issue measures and messages of calm and confidence before a Monday of chaos. If all is good, then you really don’t need to make these Sunday announcements? Lol…. Should be a sporting week in the financial world.
The best part is, some folks are pitching the financial system turmoil as the savour of the housing market because of how long term bond yields are being affected and the belief that central banks will need to open the taps. Unfortunately, I think they are reading the tea leaves wrong of the impact of an economic crisis by equating it to the COVID real estate boom where idle people and idle cash was dumped into real estate. If you look back to 2008 and 2009, the economic crisis didn’t spur more masses of people into spiking their debt levels. Especially, the uncertainty is likely to bring on a recession which isn’t really housing market friendly.
If you are making a low ball with long conditions you aren’t giving the seller a sale, but rather a hope of a sale. That is why you can typically secure a better price unconditional. With an unconditional offer seller also questions countering as the minute the counter the original offer is off the table (they cannot go back and accept it once countered).
Back in the early 1990’s, the market was slow (dinosaurs roamed the earth), and I was not getting any action on a rental property in Langley. Had over 100 showings, price was around $220,000. Finally got an offer of $188,000 on New Years Eve, my agent wasn’t even going to present it to me, but did. We countered back and forth, and settled on $208,000 plus $1000 from each agent’s commission for a final price of $210,000. The buyer was from Taiwan. There are times when any offer is better than no offer, at today’s insane valuations, I wouldn’t blame someone for offering $200,000 less. The buyer’s agent is responsible for negotiating the best possible price for their client, not hold their hand while they sign their life away. In a bidding war, you have little negotiating room, that’s why lowball pricing should not be allowed. Maybe if sellers who try this tactic were obligated to take an offer that matches their asking price when no other bids come in, this practice would end. Instead they are allowed to remove the listing and re-list at a higher price. I put the blame on unprofessional realtors who have no training in ethical business practices, and no ethical policies set out to follow. Most professions have such policies.
Haha… whateverIwanttocallmyself….. I’ll vote with my feet.
I happen to believe that our world is much too complicated.
There is a huge cost to regulation and high taxes. We all pay for that. (Of course…there are some advantages as well)
I am quite sure that our country could not be built from scratch today based on the heavy regulations and demand for total perfection at every detail. (One can’t just bang up a wooden sign and charge five bucks for a bath as they could in the gold rush days!)
That explains a lot.
It’s why we can’t build a toaster, never mind a house, without it being outrageously expensive.
I believe our system is unsustainable and not realistic and it’s “one” of the many reasons we see people on our streets who have turned to drugs and given up because they have no chance to ever find a place in the system.
The USA is about to be knocked off it’s perch as world leader. This will not happen without a devastating war.
China, Russia, India, etc etc , are forming their own trading system. (Trading in their own currencies between themselves.)
This is a huge change and Canada should be preparing itself but I don’t see that happening.
Instead I see a digging in mentality…… trying to prop up the old world order, despite all the obvious hypocrisy.
Real estate and everything else is about to be tested.
Yes but the biggest factor by far is the market conditions. When the market sucks what you’re giving the seller is a sale when those are few and far between.
Definitely people successfully lowballing in the fall. Not as much anymore that’s for sure
Regarding low ball offers my thoughts as a real estate agent.
Listing side; a lot of my sellers get annoyed or offended and do not want to counter a low ball despite my advice to go back at full asking price. I like the idea of countering a low ball at full asking so at least the buyer(s) know the other terms of the offer (dates, conditions, etc.) are acceptable, or not. Going back with a counter also shows you are not offended or annoyed and willing to work with them, for the right price. It also only takes a few minutes for the seller to Docusign back a counter.
Buying side; I don’t have an issue with my buyer’s writing efficient common sense low balls, but that is rare unfortunately. Buyers writing low balls are most often a pain to work with. By efficient, I mean there isn’t a need to go look at the property three times for an hour, over analyze it to death, ask a million questions, and then submit a low ball with a very low probability. Submit the low probability low ball first and then by some miracle if it is accepted use the conditional period to go view the property again and over analyze, you can always bail on the conditions.
In terms of common sense you have to give the seller something if low balling. Low balling subject to the sale of your home that is not on the market and a bunch of other non-sense is just a waste of everyone’s times. Also, if it is disclosed by listing agent, for example, that the seller has not even countered two offers at $1.5 million, for example, offering $1.4 million probably a waste of time. My favorite is also when buyers submit a low ball long conditions offer and leave it open for like 2 hours thinking it is some sort of pressure tactic that has a chance of working when it just annoys everyone. Market has never been so bad in my career for this strategy to have any sort of traction.
I personally made a few unsuccessful low balls offers (like 10-11% below asking) on missing middle properties in November and these were the terms I went in with
$200k deposit upon acceptance
10 business days for completion
Open for two or three business days (allowing the listing agent and seller to shop around to try and secure something better). Thought here is if they can’t secure something better in the prolonged open period then they will be more motivated to work with the low ball offer. If the seller can secure something better by shopping the offer around, who cares, I just move onto the next property as the buyer.
In general the reason low ball offers don’t work well is the vast majority of sellers would prefer to lower the price versus take a huge % off the asking price. For example, if the property is listed at $1.6 million most sellers would prefer to drop to $1.5 before taking $1.4 million. Sometimes it makes sense to submit an offer right after a price drop as then the spread isn’t as large in the sellers head.
Leo can confirm but this is why even in the worst markets the % off CURRENT asking price is only 2-3%. Not to be confused of ORIGINAL asking. The one frustrating thing is buyers buy 2% of current asking price then tell their friends and colleagues they bought their home 10% of asking price, but fail to mention that is 10% of ORIGINAL asking price, not CURRENT.
Strange, I’ve seen the seller(s) offended 100s of times in my career. The toughest aspect of residential real estate is people get emotional and often throw logic and common sense out the window.
Not a simple comparison. For example, in Croatia VAT is 25% but highest income tax tier is 36% and there is no annual property taxes, etc.
Sorry if this has already been mentioned, but the CBC recently covered some attempted title fraud in Ontario.
Deryk who you going to vote for then? The Liberals may bring in new taxation, but the Conservatives or the NDP won’t take it out. Oh they say they will in order to appeal to a larger base, but like the GST they won’t.
You took a risk on real estate and you are still going to reap the rewards, just not the windfall profit you were imagining. Single family housing should never have been commoditized the way it has been for the last two decades. There is a difference between building a new home and buying an existing one. In the first case you are adding to the supply of housing. In the latter you are removing an existing home from the supply and not replacing it with another home. If your desire was to own rental properties then you should have been buying apartment buildings and not single family houses and condos.
Housing is like cans of soup on the shelf at a grocery store. If you want to manage the supply then limit the sale of soup to two cans per person.
They can’t take the property with them though. Which is the point.
If the government wants to increase taxes then go ahead.
Let’s see how many people vote with their feet and sell everything and go somewhere else with their money.
I don’t know of a time when we ever bought a house without being told that we were crazy…that it was “overpriced”, “the housing market was going to crash”, Don’t you know that there is going to be a depression” …. etc etc.
We are what’s called on House Hunt Victoria as one of the dreaded Mom and Pop operations:)
We believe in charging below rental market price because we believe it’s good business in the long run …for both parties.
Every time we bought an investment property, we placed ourselves at risk. (No one has a crystal ball.)
We built accommodation where none existed before and people were happy that they had a place to live.
My point is….the governments can increase taxes all they want, but it will likely give them the opposite effect they are looking for.
Money moves easily.
You’re entitled to your opinion, but the fact is that Canada’s total taxation is about the middle of the G20. It’s also a fact that BC’s taxes are among the lowest in Canada – lowest income taxes of any province for middle income earners for example.
Look at Europe if you want to see real taxation. Even the UK, which has fairly low taxes by European standards, has a VAT (GST+PST, or HST) of 20%.
That said, It can be argued that we tax production too much and consumption too little. Taxing land more and income less would reduce opportunities for tax evasion, and encourage productive activity. And, it would motivate more housing supply.
So how likely is a low ball offer to succeed? In February we had 2.8 months of single family home inventory in the Victoria Core which is low. The average days on market was 33 which is reasonable and the Sales to New Listings ratio was 37 percent which means we were adding 1.74 new listing for every house that sold which is just in the range of being good for buyers.
That’s a market that is for the most part balanced and neither strongly favoring buyers or sellers. Not the best market to try a low ball offer in as the seller only has to wait for the next person to make an offer. And there will be another person ready to make an offer.
It might work on the ugly duckling properties such as the older, smaller houses in the less desirable areas or along busy streets or need immediate repairs but little chance in the mainstream properties as found in Gordon Head.
If the idea is to reduce demand and increase supply then a place to start is the Capital Gains exemption on multiple single family zoned homes that are owned per person. Your principle home would be exempt. Your second home would have 50% of the gains taxed and three or more would be fully taxable.
If you want to own lots of rentals – go buy an apartment building instead of a half dozen or more condos and houses.
If the government announced a change to the tax in the Federal budget, giving owners a year to come into effect, let’s see what happens.
I have a feeling that changes to the Capital Gains tax might appear in this year budget. There is a lot of untapped wealth there that the government can’t ignore. Our home prices skyrocketed due to the governments low interest rate policy maybe the government feels we owe them a bigger piece of the pie than they have been getting.
A 100,000 deposit, depending on the terms and conditions, seems reasonable to me as it covers the agent’s commission.
I have never known anyone that was offended by getting a low offer. Often they dont want to take it but I have never know anyone who felt insulted. I am sure that over all of history it has happened but why bother to care if it does.
What amazes me is that any real estate agent would say this, to me it is a sign that you need a different agent.
Thanks for the comments, info and the chart about recent offer prices. I’m not interested in paying more than the offer just to get the place, there’s little to no emotion in the situation. And caveat emptor that’s a creative approach and not a bad idea.
Dad is correct. The First Nations do not own the land in the same manner as those that live off a reserve own land. But through the creation of leasehold improvements they do have a leasehold interest. The native band can charge rents or sell off the sub leasehold interest with a 99 year lease to a non-native user.
In a freehold agreement, you fully own the property and land. It is the most common form of ownership in Canada. In a leasehold agreement, you own the property on top of the land but not the land.
However, the Canada Land Company does not charge a ground lease to the Native band. That’s why the First Nations can build housing quicker than private enterprise as they are less constrained by land costs for the project to be economically viable.
We could do the same, if the government purchased and retained the land and then charged a nominal ground rent to the end user which would be included in the monthly condominium fee.
On a 3 million offer what is a reasonable deposit? 100k?
The idea is it would be in place of income taxes and other less efficient taxes like land transfer.
No. We already pay annual property tax. Not to mention property transfer tax upon purchasing. Canadians already pay insanely high taxes across the board – increasing homeowner’s tax burden is not going to help affordability.
Can you get friends to put in the -200K offer? Then you come in as a white knight offer at -160K?
I shouldn’t have been so hard on Justin earlier, just saw on the news that he was busy celebrating Nowruz today. He sure has his priorities straight.
Government workers don’t work 9-5 if they have flex days.
They generally do not. Reserve land is held by Canada for the use and benefit of the Band. If the Band wants to develop a part of the reserve, they enter into a 99 year head lease with Canada, and then sublease it to a developer.
This is why you see leasehold developments on reserve lands. Historically, it’s been the only way for a band to develop market housing on reserve.
And there is no incentive for them to operate efficiently, as long as they are breaking even.
My frustration in finding suitable zoned land is that the cost of buying the land and building shortly afterwards usually results in the project being economically not feasible as the profit margin, if any, is marginal. It’s makes more sense to find a property that has some rental income to pay the property taxes and maintenance for a couple of years until prices for the end product increases and then the project becomes economically viable. This is called land banking.
If I were to buy a lot for say $2,000,000 today and then build for 4 to 4.5 million and my gross selling price not including interest charges and real estate commissions would be around 6.5 million. It doesn’t make economic sense to build immediately as the profit margin, if any, is really small. It’s better to buy and hold the property for two or three years until gross selling prices on the finished product rises and then build.
I don’t know how these incentives are going to get around the economics to fast track new housing. My experience with government subsidies and incentives is that they get incorporated into the project’s plans allowing other investors to compete for the land at higher amounts. And that puts us right back to where we are now to holding the land for several years.
Because the land has increased, it sometimes makes better sense just to sell the land to another developer and take the profit from the land appreciation rather than take on the risk of building. Then the next developer will once again have to land bank the property until the end prices increase once more.
This is the free market system, if there is an opportunity to make a windfall profit through government incentives becomes available then that opportunity will be filled by someone along the supply chain either in the land or building component. For example in the past the government gave a $2,000 rebate to a home owners to switch their furnace to natural gas. All that happened was the cost of the gas furnaces went from $4,500 to $6,500.
I suppose the government could buy down the interest rates on construction mortgages than run about 6 or 7 percent to one or two percent. But what they give with one hand they taketh away with the other. So they would put restrictions on the interest rate buy down that may be too difficult for most developers and home owners to meet.
The heart of the problem with building affordable housing (whatever that means) is the way we build housing in a free market system. Even the verbiage of non-profit groups involved with construction is questionable. The expectation that non-profit groups are altruistic and are therefore willing to let profit slip away I find to be nonsense. They will just charge more for expenses such as management in order to zero their net profit.
There may be a way to build affordable housing but it won’t be using the traditional free market construction method that we use today. As one example only. It may be better for the government to buy the land and lease it back to the project for 99 years at say 4 percent of the land value annually. Those lease rates would be incorporated into the strata fees of the units and by adjusting this ground rental rate the government can maintain control over affordability. Charge too high of a rate and the unit declines in price. Charge too little of a rate and the unit increases in price. This is the idea behind Native Land groups building leasehold housing. They already own the land rights so they can build a 4.5 million dollar project and be profitable immediately as they don’t have the cost of the land. They still charge the same market rents found in the marketplace but instead of being on 6.5 million they only have to get a return on the 4.5 million in construction costs. They can build immediately while the free market has to wait a few years.
Doesn’t tell you anything about value levels, just that in general sellers are still having to compromise somewhat off list prices. But average sales to list price ratio was about 105% at peak and dropped to about 96% in the fall and now up a bit around 97%
True. Majority of the land where people seem to want to live. Not opposed to new cities either though
Ahem. As you know, the majority of our land is undeveloped.
Zero family zoning, if you will.
Thanks. Hard to know what this means exactly as I’m not sure if listing prices have adjusted down a bit?
Perhaps we can turn all real estate agents into government workers. 9-5. No overtime + flex days. But no bonuses. No commissions. No profit. A decent salary but a focus on actually helping people/society?
Maybe not on his Twitter feed. He won’t talk numbers, but the following doesn’t sound like a decrease to me:
It greatly disincents holding under utilized properties. This should increase supply, both in the form of densification and downsizing.
Average sold price discount off list for properties listed for $1.5-$2M sold since January 1 is $88k
I support a land value tax, but this doesn’t actually solve any problems. Drastically higher operating costs means prices will be crushed, but affordability doesn’t change at all.
I wouldn’t be worried about insulting them unless you’re dead set for that particular house and actually prepared to pay a lot more. Either they’re willing to negotiate or they aren’t. Their emotional reaction is their problem.
That said the time to throw out $200k under asks was probably in the fall. Doubt you will find a lot of success currently but some people might be willing to use it as a starting point to negotiate. Properties sold that were listed between $1.5M and $2M from September to now, about 8% sold for $200k or more less than the last list price so it does happen.
You are correct Frank! The answer to the housing crisis is to decrease demand. But not by reduced immigration Leo. It is time to start restricting and taxing home ownership. How about a 20% tax on the assessed value of your home every year. Fck the real estate industry.
Because that would be dramatically less effective in terms of long term change to housing production.
Let’s say $4B to affordable housing at say $250k per unit is only 16,000 units. A drop in the bucket. Victoria alone could probably absorb that number.
But ending single family zoning which is the majority of our land, allowing non profits to build by right, identifying unused land, allowing higher density near transit, ending parking minimums, removing negotiated CACs, streamlining permitting, etc has the potential to totally transform the system for only $20k per incentivized unit.
Proof is in the pudding whether cities will create versions of these policies that are actually workable for the money, but if they do (and some certainly will) we know that these reforms produce a lot more housing.
That doesn’t mean govt shouldn’t directly fund affordable housing, but that’s a different pot of money
The right level of immigration is a convo worth having. I don’t know what the answer is that balances the needs of the economy with short term pressures. Honestly surprised it has not been mentioned once by Pierre. But even if we scale back immigration by 50% that doesn’t change anything about the need to fix the supply side. Immigration was only recently increased, but I think everyone will agree the housing market wasn’t perfectly fine a few years ago.
If they can’t increase the supply, maybe they should decrease demand.
The feds are putting money directly into affordable housing. The problem is you can’t build affordable housing if the local governments won’t let you. Thus the incentive program to get local governments to speed up permitting and increase density. Would be nice if this wasn’t required, but clearly something is.
Why don’t we ask AI for a solution to the housing crisis? It could be very insightful.
I don’t understand why $4 billion can’t go directly into the construction of affordable housing/rental units instead of some incentive program. Find the land, we have the materials and put new immigrants directly to work. I guess that’s just too simple, a plan that lacks bureaucracy. Explains why I could never make it in government.
Governments are elected to perform their constitutional responsibilities. Health is actually a provincial responsibility, although as you may have noticed the provinces are always asking the feds for more money to pay for it. Most infrastructure is also a provincial responsibility.
The feds aren’t constitutionally responsible for housing, but they are responsible for banking regulation and income taxation, both of which inevitably have a major impact on housing markets. And immigration. There’s also the aforementioned CMHC, which is not a constitutional responsibility, but which nobody wants to get rid of, including those who like to complain about big government by the feds.
So you see it really isn’t that simple.
Absolutely nothing with housing or gender, and focus on what they are elected to do such as infrastructure, health, economy/jobs, and security.
Avocado toast… our house was listed similar to your price range and I wasn’t insulted by the lowball offer someone wanted to write along the way. People have all kinds of reasons for making the lowball offer, have at it. We told our realtor to suggest to them that it was a waste of their realtor’s time to write it.
You don’t have to look far back into the history of rule under the Liberal govt to see that this actually the point.
I’m not very political, but basic politics isn’t very hard to figure out so fwiw the reason the NDP are struggling to deliver on their promises is because they had too long to make them. They were in opposition for 16 years and at one point in 2001 they had two elected MLAs and fought back to relevance to eventually form government. 16 years is a long time to get upset at the government in power, attack specific policies and make a bunch of promises to do better. The problem is, once they got into power they are now bound to deliver these over-promised policies and deliverables under the same or similar circumstances and regulations that the previous government was and that’s when reality sets in and they start to understand the circumstances they can and can’t operate under.
Again I’m not very political, but the circumstances outlined above should strike fear into anyone paying attention if the Green Party ever started to gain relevance and could potentially form government.
But back to housing. On a scale of 1-10 how insulting would people here consider a -$200k offer on a $1.7m to 1.5m (so $1.5m for the $1.7m and $1.3m on the $1.5m) in the current real estate sales environment? My limit is $1.75 but I don’t want to max out for obvious reasons and most properties seem listed on the high side of things and I don’t blame sellers for that.
Sign me up. West end is quite dense and quite lovely.
Here’s a concept: There is no answer to the housing crisis. There simply is more demand than land available. Unless you want to stop eating.
And people are worried about AI making things up when humans are perfectly capable of doing it themselves.
Correct. And that’s not the narrative that was presented on HHV when the BC liberals were in power. HHVers were told that we needed to elect the ndp to solve the housing crisis by ridding ourselves of liberal supported money launderers, foreigners, satellite family and greedy developers. Recall the heavy coverage here on HHV of the money laundering investigations, spec taxes, foreigner taxes and the other great things to come now that the ndp were in charge. Bogus money laundering government reports were defended here because they promised hearings in two more years. All amounting to nothing to help housing.
All that’s missing from your “Fixing housing is not a partisan issue” statement above is an apology for the multi-year false HHV narrative that fixing housing was a partisan issue.
You mean get rid of CMHC?
What I would recommend is that the Feds stay in their own lane and out of housing policies. They have an uncanny ability to screw things up.
I would recommend not letting politics corrupt your critical thinking ability. Much of what they are talking about here is what Piere Poilievre has been talking about for some time.
Fixing housing is not a partisan issue.
I would recommend anything other than what came out of Trudeau’s brain.
What would you recommend, given that the feds have no power to make the municipalities do anything?
I don’t mind the idea of simplifying character and design guidelines, but would 100% oppose eliminating setbacks or height restrictions carte blanche. I used to be anti-setback, but walking through a canyon of tall buildings built out to the sidewalk sucks.
The West End is a good example of how to do high density while still allowing for greenery and sunlight. Probably the best local example we have of a high density neighbourhood.
Thanks Leo S, that’s what I was looking for when I spoke about a vision statement.
Trudeau’s housing accelerator $4 billion plan sounds like a waste of money to be pocketed by unscrupulous bureaucrats. Typical.
So lots of development possible around the University & in Langford? Do we have any other transit stations?
Some municipalities will opt in and get $20k per incented unit that the initiative is expected to bring online.
If they don’t they may be forced to do it anyway by the province and get no money.
Note though that cities need to select at least 7 initiatives they will work on to get this funding.
Awfully nice of the feds to chip in like this, but won’t the province still need to force municipalities to implement these reforms?
The long promised housing accelerator fund has been announced. Very promising list of reforms that they are willing to pay cities for.(highlights mine for what I think are most impactful)
Alexandracdn, meant to say – the purchasers love the renovation and the location. It’s a great street, for sure. We are going to move into our rental property a couple of blocks away and hang out there for a while. It needs a huge renovation so maybe we’ll figure out what a good approach is, and take that on.
We have a BC box house that was built in the early 90s with two bedrooms up and two bedrooms down in the suite. I could see immediately when we first looked at the house where the third bedroom had been planned to be but walls were left out and the window was made wider. We had a choice to make – leave it as two bedroom, or reduce the window/add the walls to create the 3rd bedroom. Problem was, the rest of the floorplan was weak. There was no space for a normal dining room, master bedroom was too big, stairs were awkward. Maybe we should have taken out all the walls and reworked the floorplan entirely, stairs too, but that seemed like a losing idea, cost wise. So we did what worked for us, left it as two bedrooms but created a much better kitchen and dining area. Most people want 3 bedrooms up.. the two overask offers this week on the same day was unexpected, based on previous input about the floor plan. I guess they are empty nesters like we are. And our buyers have two little ones but they don’t care about the 2 bedrooms ♀️ they bought it with a time subject the first weekend it was listed in February.
Yes. Another factor might be the low sales not providing enough data. Teranet postponed data specifically because of low data numbers from BC
Teranet (feb 24): “ As valued subscribers, we want to update you on the temporary postponement of the February Teranet-National Bank House Price Index™.
The February data continues to be postponed due to insufficient information from our British Columbia data providers. As a result, we are unable to produce the February release at the moment.
We are working very closely with our data partners to rectify the situation as soon as possible and hope to have an update early next week so we can publish the complete set of February data including the Composite 11. As soon as a new release date is confirmed, we will notify you. We apologize for any inconvenience this delay has caused.”
Will be back at the end of March. It’s just at the beginning of the year it’s a mess with a lot of places being listed relative to their old assessment instead of the new one. Short of manually entering the new assessments in there is no way to correct that (would be nice if BCA published their assessment data as open data, but instead they prefer to lock it up and sell it to the real estate industry).
However the new sales/assessed value chart will be for 2023 only, just like the last one was for 2022. Won’t be useful to determine drop from peak. I would probably just use 3 to 6 month rolling medians at this point
However as for why the Teranet HPI is different when computing drop from peak, there’s a few reasons:
1. Theirs is a mix of all property types, whereas I separate them out. Condos had dropped somewhat less than detached (may be changing now with detached moving up a bit)
2. The peak of the market was pretty sharp. Teranet uses a rolling average, so it will flatten the peak and decrease the drop.
3. Teranet discards outliers, I just take the median. There were a lot of pretty bizarre outlier sales in March of 2022 that in my opinion went for above market value (I mean who even knew what market value was back then). I don’t know it for a fact but I wouldn’t be surprised to hear that they discarded more than usual.
Teranet February shows Victoria +2.79% MOM. Down -8.46% from the peak (May 2022). Down -1.40% YOY.
Accounting for the 2-3 month lag, still a huge/unexplained diversion from what we’re seeing with stats like saleprice-over-assessment.
Anyway, a curious data point.
Maybe others here can explain it.
Hopefully Leo can get the sales-to-assessment chart updated again , as we haven’t seen it in awhile.
If you feel comfortable sharing, what issue did most buyers have with your floorplan?
Hi Gardener. Interesting about your floor plan. What were some of the issues and what did your new buyers love about it?
Congratulations!! Now what are you moving on to?
People need to sell and people want to buy. Prices still need to adjust more for the interest rate impact but I think we are slowly getting there.
We had many more showings, for sure, in the spring. And the over-ask offers were closer to the fall pricing. Still, there are fewer people looking than there have been in recent spring markets. We had a floorplan problem, based on all the feedback. Interesting though that the purchaser’s family situation means that they should care about that but they don’t – they just love the house. Really nice ending for us, when people are super enthusiastic.
Tons of new listings on yesterday and today!
Definitely an increase in buyers out there. Have seen a few listings sold that didn’t sell in the fall for the same price.
On BNN- First Republic Bank executives sold $12 million in stock in the last 2 months leading up to its crash. I wonder how many politicians did the same. Should be life in prison for these criminals.
We listed for the first time in September, took Dec and Jan off, put it back on in February. I’ve blocked the fall experience out though. Was tough going. Nice words from whateverIwanttocallmyself on here last fall were greatly appreciated from this normally silent reader. When we put it back on in February, there were 5 offers in the first couple of days. Big change from the fall- with a lower list price but our floorplan isn’t for everyone.
Maybe this will be the thing that drives buyer away from Victoria. This fair city on the west coast ranked 26th! To increase your potential to survive you gotta get to those prairie citys. Is it worth living, if you need to live in the prairies?
Well, I guess it was the crime, safety, access to medicine along with walking, jogging and cycling scores that killed us in the end.
5 weeks is a dream. I know someone going on more than 5 months. The original listing has Halloween decorations in it. Also Congrats!
Thank you! Glad to be done. Now have to pack.
Our sojourn through selling a house in this market is over… ended with drama. A weird period of 5 weeks living in a perfectly clean museum and using one chair, one mug and one plate, with a time subject accepted offer, numerous showings with many realtors but no other offers. Two unconditional over-ask offers yesterday afternoon and the Accepted Offer people waived with 20 minutes to go in the 24 hour time period. I’m busy making a mess in my house and leaving my laundry strewn all over the place.
That analogy was more to suggest that today’s optimistic guesses about the future usefulness and uptake of AI may, in a number of years’ time, look somewhat foolish.
How about those who are expected to be on the receiving end of these chatGPT generated so called “professional communications”.
Is anyone expecting them to spend their day reading all this? We may find that people don’t read them as much (if at all), because they’re too generic, and lack the personal insights that they expected from the actual author.
For example, now thousands of articles about stocks are written every day by AI. All full of data turned into words but a complete waste of time to read.
And then we’ll have AI summarize the prolix prose. At some point we’ll just skip a step.
There’s a similar issue with AI for self-driving cars. Of course tesla has the FSD full self driving $20k add on that’s amazing, but not at all full self driving. Drives fine most of the time, but requires supervision with hands always near the wheel ready to take over.
Much of what chatGPT does is amazing, but also requires supervision/review to achieve professional quality results.
I often prefer print books myself, but I’m not sure this is the right analogy. Now it seems clear people will at some point have low or no-cost access to logic and super-fast information gathering and synthesizing, with good end product output, so way ahead of a google search plus person.
I can’t picture myself preferring to draft some professional communication from scratch when I can be creative and specific in setting the parameters, have AI do the first go, and work with what it produces – maybe even work with AI to direct the real-time modification of the document. Going to be so much faster and therefore less expensive so there will be many commercial applications.
A better analogy might be choosing to use a typewriter instead of a computer, except way more of a leap.
Sidekick Ya inspectors have been all over trades when it comes to poly In about 2007 we started to do rainscreen very little to no guidance just had to do a mock up for the city but there was no inspection We where just winging it with sticks and mesh don’t think it was my best work lol
Barrister…just noticed your comment…. Comparing to the Romans…. you cheeky man!
Also: Glad to hear about the earthquake requirements. Thanks.
Yes, that is the purpose of poly. However, it has to be detailed perfectly (which it never is), with all plumbing/wiring/other penetrations perfectly sealed (they never are). “Air tight” plug boxes, switches, recessed lights are most definitely not air-tight. And no one has ever poked holes in their drywall (which means holes in the poly) for hanging art, or renovating, or fixing a pipe etc. Poly is a super-crappy air/vapour barrier as it doesn’t perform well in reality. It just ends up trapping moisture in the walls.
Can you provide an example?
Reminds me of this chart. In 30 years of the S&P500 returns, if you missed the best 20 days of returns, you would not have beaten inflation (note, chart does not include dividends).
Conversely if you were able to escape the worst days you would do a lot better, but no one knows how to predict those consistently
It would not be great in its current state. I asked it for article ideas for the blog and it generated a fairly generic list of topics that you would find on a real estate blog. I could get it to write those articles but it wouldn’t have a lot of value. What’s missing is connection to the data. However if I ask it specific questions like that I’m writing a whitepaper on seniors-only condo values and ask it what kind of data I should look at, it gives good answers, detailing exactly which factors are likely to correlate with values and which data should be downloaded to conduct this analysis and how it should be done. Then it can walk you through how to actually write the code to do this analysis.
The value of it is not to replace anyone in particular yet, it’s to make people with expertise more efficient in doing the work (you need the expertise to spot when it starts bullshitting). Maybe when it advances it will allow people that don’t have that expertise to do the work as if they did. That’s when it really becomes revolutionary.
That’s not at all unique to bank stocks. And a big negative surprise would typically erase capital that is more than just 1 year of dividends. Honestly if you find the thought of a stock dropping by 5% (approx 1 year of dividends) scary then DON’T invest in the stock market.
I asked the same question in Google “School by Nirvana lyrics” and took a screen capture.
Thanks for that. Actual real improvement.
I asked GPT4 for you : “What are the lyrics to School by Nirvana? All lyrics should be included, and none of the lines or words should be omitted or skipped, even if they are repetitive.” It missed some versus, but it mostly got it.
“School” by Nirvana is a song from their debut album, Bleach (1989). Here are the complete lyrics:
Won’t you believe it
It’s just my luck
Won’t you believe it
It’s just my luck
Won’t you believe it
It’s just my luck
Won’t you believe it
It’s just my luck
You’re in high school again
You’re in high school again
You’re in high school again
You’re in high school again
That’s pretty different from answering what are the lyrics to “A red, red rose” with a writing an Ode to your neighbourhood in the Burns dialect.
It’ll be interesting to see whether doing well in exams will translate to doing well in actual jobs. In my experience it hasn’t really correlated.
Leo, just for fun, I think it’s time to let ChatGPT-4 write the next HHV blog post verbatim — no cheating! And the topic should be very specific, something that you yourself were planning on investigating and doing a post on. No general-question softballs such as this: https://twitter.com/LeoSpalteholz/status/1636222480712073218
For Robbie Burns’ night I had it write an Ode to our neighborhood in the Burns dialect and it totally nailed it.
Humans aren’t great at visualizing exponential growth. The jump from 3.5 to 4 in just a few months is already astounding. Your gov job is probably safe, but for tech and education I’m pretty sure that you’re either going to have to learn how to use it to your advantage, or fall far behind.
I don’t personally know anyone that will make up 10 verses and a chorus for a song that only has 7 words in it rather than saying “I don’t know”, but I’m not an expert.
Without doubt, aspects of AI will make their way into school curricula going forward. (I know of teachers who are already incorporating it in some lesson plans.) However, I tend to think that you’re overestimating the level of disruption to education AI will pose.
It reminds me a little bit of how, 10-15 years ago, many people were certain that e-books would render physical books obsolete and dominate future sales. Fast-forward to today: print books are not only still around but have, by most measures, prevailed.
More akeen to be slightly better search engine than Google instead of the over blown human behaviour/intelligent.
The limiting factor is that it is only as good as the input data set, so the old adage of garbage in garbage out still apply.
“A simple “I don’t know” would be better than confidently saying the wrong answer.”
So ChatGPT really is mimicking human behavior
I wouldn’t. For starters, look at the huge amount of mortgage lending at floating rates or short term. No counterpart south of the border.
It wasn’t, mistake on my part, until I’ve had a chance to try it out, I won’t pay the $20 since I saw the same “look what it can do” with cherry picked results when v3 was released. Your output is not that different from the one I got with the free GTP3. They just removed the Northern Lights from the list. Victoria/Vancouver Island still didn’t make the cut though, so we know it hasn’t got any better 😉 (mine had the extra text above & below, I just cut it out).
We’ve already had an AI that won at Jeopardy, this seems like the reverse. Main test for me right now w/r to bullshit is if I can spit out the lyrics to a song I know. I picked School by Nirvana because it’s short, and ChatGTP likes long answers, so it tends to just make up verses instead of stopping. A simple “I don’t know” would be better than confidently saying the wrong answer.
US banks have more than $500B unrealized losses on their balance sheets. If they have to raise capital to make up the losses and to avoid a ratings downgrade, their stocks would become worthless. This is what happened to SVB. Due to the backstop by the government agencies, they can pretend that they are healthy, for now. I would assume the same for Canadian banks – ~50B in unrealized losses. Until their balance sheets are repaired, which may take 1-2 years, I expect the mortgage activity to be very slow.
Buying bank stocks for their dividends is like picking up nickels and dimes in front of a steamroller. Any surprise on a single day will wipe out an year’s worth of dividends.
Are you sure it was V4? In the paid version there’s a selection dropdown menu in the chat window that defaults to 3.5 and you have to select 4 in every chat to enable it.
Here’s the output I just got for the same question:
There are countless beautiful and awe-inspiring places on Earth, so it’s challenging to list just 25. However, here are 25 spots, in no particular order, that are known for their natural beauty, historical significance, or cultural importance:
Great Barrier Reef, Australia
Serengeti National Park, Tanzania
Grand Canyon, United States
Iguazu Falls, Argentina/Brazil
Salar de Uyuni, Bolivia
Angkor Wat, Cambodia
Great Wall of China, China
Machu Picchu, Peru
Yellowstone National Park, United States
Galápagos Islands, Ecuador
Taj Mahal, India
Plitvice Lakes National Park, Croatia
Great Ocean Road, Australia
Banff National Park, Canada
Bora Bora, French Polynesia
Fiordland National Park, New Zealand
Victoria Falls, Zambia/Zimbabwe
Amalfi Coast, Italy
The Great Pyramids of Giza, Egypt
It’s important to note that this list is subjective, and different people might have different top spots based on their personal preferences and experiences. There are many other wonderful places on Earth to explore and appreciate.
So they say. But it’s already better than 90% of law students at taking the bar exam. GPT4 seems to have a much better grasp of logic than the last version, and people are working on integrations with Wolfram Alpha which is based on logic and physics, so presumably at a certain point the output will be indistinguishable from a human, regardless of how it got there.
It feels like the point where computers were in the 90s where they could beat the average chess players, but not the best. It wasn’t long before Gary Kasparov didn’t stand a chance.
With respect, you don’t know anything about my education, experience or even what industry I’m in. So please stick to the content of posts and skip the ad hominem approach. I will offer the same courtesy to you.
For the record, I know several programming languages and written lots of code. I also have had bleak experiences with language translators like others here. They all have been completely useless, so even chatGPT doing a mostly correct conversion would be a step up. But that needs to work on a big projects not just the easy stuff
I’ve already said chatGPT is an amazing tool, but I’m just not ready to go farther than that at this stage, because of all the bs that it puts out as fact. If they’ve fixed that, great. We will see
That’s the part that I disagree with.
It’s all just statistics, there’s no knowledge or inferring what-so-ever.
I used GPT 4 yesterday to rewrite an extremely technical document. I specified it should be written in the first person and at a level that a recent engineering graduate could understand. It absolutely nailed it.
My feeling as an educator is that the technology will 100% change the game. I feel like if I don’t get on board I’ll be left behind.
It’s already acing lots of exams and the rate of improvement is staggering. At the moment it’s at a level where it can help boost productivity, but the output still needs oversight/review from a competent person. I’m not confident that the review part will be required for long.
Loss aversion bias. Even when they bought long ago and there is no real loss. They are banking on prices catching up to their asking price, which is a strategy that has worked quite well in the past.
I remember talking to some folks in Vancouver that wanted to sell in 2016 and move to Victoria but when the Vancouver market turned over they changed their plan. Nevermind they bought 30 years ago so they would have walked away with a lottery win either way.
Why are people seemingly reluctant to drop their house prices after weeks on the market?
Yup. I’ve tried to use those tools before they are crap. Not saying the AI is perfect, I’ve just had an idle curiosity about switching some of my R code to Python but never bothered to actually do it before. Nothing rocket science, just retrieving data from on online source, some basic processing, seasonal adjustment, and generating various charts. It happened to work great. Not saying that generalizes to any other codebase, but it’s still very impressive. I don’t know Python well so it would have taken me a couple hours and lots of stackoverflow searching for sure.
The result is not correct. The individual lines are correct, but not repeated like in the song.
Switching from one framework to another within the same language is a lot of work. Even switching from one portlet container to another is a lot of work just porting the code. Programming language translation has been nearly useless for a long time.
Programming language translation has been around for a long time, in fact ever since compilers were invented. Java and .NET are based on it. It really doesn’t have anything to do with AI. Syntax and semantics have hard definitions. It’s not at all like composing English that sounds like it came from a human.
I use Python but am not familiar with R so I really can’t comment on that specific case. But it sounds fishy to me.
At the same time liquidity drys up and banks keep more money on hand, meaning less loans being issued.
Leo has told you his opinion and experience. You have had a lot of interactions with Leo over the years, and he is not prone to exaggeration or making false claims as far as I can tell. He’s also told you he is now using ChatGPT version 4, which requires a paid subscription.
You appear to know very little about this topic yourself, but want to discount his opinion referencing your first google return and a rando guy from the internet who is not using version 4.
At some point the current situation with 5 year bonds being much lower than overnight rates has to be resolved. Either the central bank cuts which only happens if we’re in or about to hit recession, or bond market realizes we’re staying higher for longer and those rates go up.
Doesn’t make any sense to have such a big gap for long.
The recent banking crisis and economic developments could be very bad for house prices.
An ongoing result of tighter bank lending standards from:
—- the regional bank/ credit suisse etc. problems
—- M2 money supply falling from Fed/central bank actions (each time that’s happened previously has resulted in a depression)
That’s obviously bad for sellers, but also for many first time buyers, as they won’t be able to qualify even at the lower price. Or have high interest mortgages. This happened in Ireland in the 2008-11 crash., where only buyers with very high incomes and rock solid jobs could get mortgages, and paid high interest rates. More of the sales will go to “gentrification” ( people with existing capital, generational wealth) instead of local buyers.
Regarding your specific claim about how good the chatGPT “R to python converter” is, here is the first google link on the topic “converting r code to python using chatgpt”. In each case, the tester found the chatGPT conversion didn’t work. Or generated code with incorrect results. Since this tester knew both languages, they were able to spot the errors.
A novice wouldn’t notice this, and would just continue boasting to others about how great chatGPT is. To me, this is another warning of chatGPT frequently being a “bs artist”.
“While ChatGPT can be a helpful tool when optimizing or extending existing code, in this specific example of converting the code from R to Python, it did not prove to be helpful. Most of the given answers were not correct and resulted in errors, ignoring the output of ChatGPT and just looking up the required functions would have proved to be quicker for this case
I wonder how this dynamic of the softens in the stock market/banking worries plays out in the local real estate market. On one side you have uncertainty which isn’t good for the market; however, mortgage rates should drop which is good for real estate transactions.
Yes. I’ve watched demos of many of those. But I notice your reply didn’t address the question I asked, namely…
“Could you provide an example of how you’ve used it like that in your [HHV] work?”.
This would be something relevant to the HHV topics, that chatGPT has helped you with. If there’s nothing, fine, and I’ll stop asking. For example, you wrote a great white paper, did chatGPT help with that? How about the current “strata fees” article above?
Absolutely, a great tool. But that’s different than replacing you, by making your job obsolete, as some articles have suggested.
They do need to fix the “b.s. artist” problem, so I’ll be eager to check out the new version. An employee wouldn’t last long in a job if 1% (or more) of their output was nonsense, and the same would apply to a chatGPT application.
I talked to chek news today about the market I said I’m not calling the bottom but I’m calling the boring. I think both bulls and bears will be disappointed.
I will see if I can leverage AI to make some improvements to the interactive charts though to at least get roughly back to topic
Fascinating but can we go back to housing.
says the adult
Yeah, I’m just saying that writing without an AI assist will be like choosing to walk when you could use a bike and only those who can bike really well get ahead. It is not going to be about leaving the cell phones behind, it is going to be about demonstrating what you can do with the tech.
There will obviously need to be foundational skills, but my thought is that by middle/high school AI is going to be integrated into the curriculum and testing. I don’t know how fast that will happen, but without integration, the school system will quickly become irrelevant. I wouldn’t have patience with a system that didn’t evolve to incorporate AI if I was young – I’d opt for home or distributed learning with a social component.
I thought they changed that, but must have read a headline somewhere and misinterpreted it. When I try to ask ChatGTP which version it’s at, it won’t give a straight answer. Can you do a test for me? Can you ask it what they lyrics to the song “School” by Nirvana are?
To evaluate comprehension and writing skills, teachers can always have students leave their cellphones at the front of the classroom on test day.
Yes, but I’ve used it and I can see applications for my profession quite easily. I can also picture it replacing a lot of the effort that goes into professional communications. Instead of having to generate a response letter, for example, you will just need to tweak the AI text. I can also see that it will be able to proofread and edit well.
I can also see that education is going to have to change. I’m not even sure that plagiarism is a controllable thing, or should be controlled, when you can leverage AI to write an essay. There is going to have to be a new approach to demonstrating comprehension and writing skills, and perhaps new goals for higher learning.
No. Programming language conversion is difficult. I’m not talking about hello world here I’m talking about code that leverages frameworks that don’t exist in the other language so the conversion has to adapt the code to different libraries that provide similar functionality.
Right now it allows people with the knowledge to be a lot more effective. Maybe the senior programmer uses the AI instead of hiring a junior programmer. Maybe later the business team does away with all the programmers. And does the business team need those marketing and communications grunts?
Other examples. Writing letters in response to a simple prompt that include various job specific insight. Creating curriculum interactively, discussing appropriate assessments and creating them, providing direction about how to implement them in specific tools and providing rubrics and marking examples.
Writing an iphone app: https://twitter.com/mortenjust/status/1636001311417319426?s=20
Trying to make money online: https://twitter.com/jacksonfall/status/1636107218859745286?s=20
Identifying CC transactions: https://twitter.com/Shpigford/status/1635748608879337472?s=20
One-click lawsuits: https://twitter.com/jbrowder1/status/1635720431091974157?s=20
Describing and reasoning from images: https://twitter.com/nytimes/status/1635756530095259649?s=20 Huge for people with disabilities.
OK, but your friend understands programming. That’s different than you using it knowing nothing about programming. And generating something that is at a professional level, where someone would hire you instead of your friend.
There’s no doubt that chatGPT is amazing, the question I have is how amazing? Replacing a white collar worker – not convinced of that yet.
My friend who develops video games is using it for coding. I am not in this field and don’t understand it really, but he says it is revolutionary because it is so fast and accurate.
Only accessible to paid accounts at the moment. The free version is still 3. In my experience it bullshits a lot less and is a lot more capable. Just used it to convert some code from R to Python which it did flawlessly. Used it for some other work tasks which would have taken a few hours it did in minutes. Sure it’s not perfect but already very useful
Could you provide an example of how you’ve used it like that in your work? Update: I saw your post about r to python conversion. That’s something, but converters have existed for that for a long time. Since you’re telling us that it’s going to be much bigger than that, I’m looking for something more amazing than a r-to-python converter. Note that I’m not denying anything you’re saying about it, I just want to be hear some real world examples that have led you to your statement I quoted above.
Currently I see it as a great tool to assist people already familiar with something (e.g. like you knowing R and python), but less convinced that it would be as useful for a colleague of yours who knows nothing about either of those (R or python).
But if someone was posting here about victoria housing, and secretly used chatGPT to generate the posts, I think they’d get laughed off the forum. And that’s not authoring the forum, it’s just making posts.
Yes. Going to speed up the pace of change in a lot of professions.
Also, as you may know, some profs/experts have now moved into podcasting. Game changing way to get insight on the latest research and I can’t help but think that free resources like this may combat some of the junk science that surrounds us – online especially – and change the way a lot of people live. If you are interested in health, nutrition, and neuroscience type stuff I highly recommend this site: https://hubermanlab.com/
And now, back to stucco.
That is bullshit!
Just tried v.4 . Still a massive bullshit artist, and based on how these things actually work, I don’t think that’ll change.
Introvert, here’s ChatGTP’s list of the top 25 spots on earth:
Aurora Borealis in Norway, Finland, and Iceland
Grand Canyon in the United States
Great Barrier Reef in Australia
Victoria Falls in Zambia and Zimbabwe
Machu Picchu in Peru
Mount Everest in Nepal
Iguazu Falls in Argentina and Brazil
Salar de Uyuni in Bolivia
Angkor Wat in Cambodia
Serengeti National Park in Tanzania
Halong Bay in Vietnam
Yellowstone National Park in the United States
The Himalayas in Nepal, Bhutan, and Tibet
The Amazon Rainforest in Brazil, Peru, and Ecuador
The Galapagos Islands in Ecuador
Uluru (Ayers Rock) in Australia
Torres del Paine National Park in Chile
Wulingyuan Scenic Area in China
Banff National Park in Canada
Plitvice Lakes National Park in Croatia
Santorini Island in Greece
Neuschwanstein Castle in Germany
Petra in Jordan
Lake Como in Italy
The Northern Lights in Canada and Alaska
Love that the Northern lights gets on their twice in both the top spot and the 25th spot, even though it’s not a place. Apparently they’re much better in Europe than Canada/US. Russian Northern lights are the worst.
It will take some time to transform jobs, especially in the public sector. But the career path for our kids is going to be wild.
Leo I’m glad I’m old and make money the old fashion way I don’t know how u young folk do it all foreign to me
New version of ChatGPT is majorly improved. I think any white collar worker not leveraging AI in their work will find themselves obsolete
I am guessing that my house was built without any poly.
The new houses are like living in a plastic bag Not too sure about the furring strips they can be a shit show to nail to and seal around windows and openings
Vapour barrier keeps moisture from the interior of the house from condensing inside the walls. I don’t see how walls would be better off without it.
+1. This has been fairly well studied, and it’s moisture trapped in walls which causes damage. Older walls without insulation or poly/VB will effectively last forever as the long term moisture content stays below the threshold for mold/rot.
Poly is almost never your friend and more often than not, it causes more problems than it solves.
The Romans do quality work in concrete. You can still wander around the Pantheon under an unsupported concrete dome that is 43 meters across. It is a sprightly 1900 years old and remains the largest unsupported concrete dome ever made.
CNN ranks Vancouver Island as one of the world’s most beautiful places
You’ll be happy to learn that the new seismic code takes effect in the fall and requirements go up 40% for many areas. So you’ll see a lot thicker walls and supports in many areas. Not great for construction costs of course.
Deryk, are you comparing to watching the Romans build?
I have to admit that I am getting old and that I know very little about concrete.
One thing that stands out for me though is that when I look at the skeleton of a new concrete buildings going up, I’m always (((startled))) by how different they look today than when I was younger.
Everything looks smaller and thinner. Everything.
I can’t believe that that is a good thing.
It feels like the engineers are figuring out how big a support post needs to be and building it at the minimum, instead of adding a bit more just for good measure.
No question everything looks less robust.
Just an observation.
It’ll be interesting to see whether the Canadian banks fair as well this time around, especially TD & Royal bank. Since the 2008 crisis, they’ve really expanded outside of Canada, and I wonder how much those subsidiaries have to abide by the same rules.
I’ve only owned one condo, bought when new, now it’s been in the family for 30 years. The only special assessments we’ve had were when the building was only a few years old to fix the defects due to crooked builder (These days we might have got some coverage from New Home Warranty program?) and to fund legal action against crooked home-builder. In the end we got some money back from legal action – enough to pay legal bills and a bit more.
Reasonable strata fees and proactive maintenance have covered everything since. Decent contingency but not huge. I expect substantial future special assessments 10 years or so from now but I am fine with that. Would rather just pay when it comes up rather than have Strata Council managing a huge sum of money for multiple years in an attempt to completely pre-save.
Thank you for the actual numbers Leo
They can formulate it to last longer, they don’t because they want it to set quicker. Main reason that the current ones are failing is the steel in the middle is rusting. Don’t have that problem with Roman structures.
I guess unless you’re buying into a newly built condo, it’s a crap shoot. At least when you put improvements into a house, you might add some extra value or make the house more saleable. I would never invest in a condo, too many cooks in the kitchen. No thanks.
I would too. The last time we lived in a condo, it was about a 12-year old well-built concrete & steel building. The owners voted to forego the depreciation report. Instead, they spent money on getting a detailed actual inspection of everything and then went about doing proactive maintenance. I thought that was a great move. However, one owner kept insisting we should be getting the report & actually threatened to “sue” the strata if we didn’t. Obviously, she was out to lunch, but it does show you how if you’re not careful or lucky to be in with the right group of people, you end up being beholden to the lowest common denominator. That’s probably one way strata fees keep going up.
The BTFP program by the Fed/Treasury/FDIC will create zombie banks similar to Japanese banks in the 90s. They can’t sell their assets as that will create losses and damage the balance sheet and they can’t lend as they don’t have the money to lend. This overhang will likely last for many years.
As for Canada, the banks will be under heavy scrutiny by the OSFI for the next few months. It will be an uphill task to get a mortgage from the banks.
6 sales so far in March vs 25 all of last March. Probably end up around 15 or so. Definitely slowing down but roughly the rate that it has been since end of 2021.
They’ve already got a way to avoid that, set up a sister corporation that deals with the stratas & then have an investment management corporation that does the investments. Or they could just use BCI.
edit: Ahh i see Leo had that idea originally. No one complains that their pension investments went down one year because in reality they make way more on the money they have invested than what you end up getting paid out. So much that it funds all of BC Pensions and BCI + more.
I generally follow the 2 to 4 million market and I might be imagining it but sales seem to have really slowed down the last two weeks. This should be the beginning of the strong spring market?
Older SFHs generally came with sizeable overhangs. If the walls never get wet they won’t fail. Look at traditional Swiss farmhouses. Massive overhangs. Lots of buildings with exposed 200 year old wood in great shape because water has never touched it.
Older houses are also less airtight so any moisture ingress may have a chance to dry.
Materials perhaps more durable too. Sheathing of rough cut old growth Douglas fir boards vs sheathing of spruce/balsam plywood.
Great idea in theory. In practice people would get angry at the government if there was one down year. “The government is losing us money!!”
Only barely. I resent paying thousands for a bunch of autogenerated text.
The “BTFP” (bank term funding program) , now in place, would have prevented the collapse of the SVB bank, and related carnage in the regional us banks. It would provide cash loans to the banks for bonds and similar quality debt. And they would value them at par, not market price. We shouldn’t see similar bank collapses. Because now, if the large depositors panic from a twitter post, the bank could come up with the cash.
Large homes with expansive wall space, like condos, are susceptible to water infiltration problems. Stucco gets wet and soaked, while wood siding sheds water. You replace wood decks more often than siding because decks have a horizontal surface that allows water to pond.
The longer water is in contact with the sheathing, the greater the chances are that the sheathing will deteriorate. Once the paper barrier on the sheathing is gone, then the wood starts to rot. If you have a large wall area that retains water and does not get enough sun to dry then you may have a problem. In the 80’s and 90’s all that was protecting the building was 11 millimeters of tar paper. Today, we have a lot better materials to prevent this from happening.
In the old days, the stucco was hung on wire. That created air pockets that would allow the stucco to dry. It was called knuckling. When acrylic stucco was permitted to be applied without the wire mesh then the water was in contact with the paper and sheathing longer and the sheathing deteriorated quickly.
You can also see this happen with roofs in older buildings. Poor or no roof venting allows moisture to build up in the attic and the roof begins to sag and the shingles to curl. You can see this along the ridge pole of the roof as it is no longer strait.
PS If you see this then don’t buy the house unless your contract states that the seller has to install a new roof that comes with a warrantee. It’s shocking how much a roof costs to replace today. No wonder the owners of roofing companies now live in Uplands.
Thanks Marko, good explanation.
Buildings receive a lot more weather exposure on the envelope. Why did 1990s stucco condos leak while 1990s stucco houses did not, or at least at the same rate? The issues start when water gets trapped between the outside finish of the building, such as the stucco, and the plywood sheathing. When you have driving rain hitting four stories with water pressure building going down the stucco this is much more likely to happen versus a two story SFH with some roof overhangs.
Same with newer buildings, just a lot more weather exposure. I can’t even use my balcony 60% of the time as the wind is so intense being higher up.
I’m debt adverse. I wouldn’t want to be paying forced interest payments on my property because 1/3rd of the strata I belong to did not have the funds for upgrades or necessary repairs.
Hmmmm not the worst idea I’ve heard, +1.
Or, change the Strata Act so that the Strata can obtain bank financing for the repairs secured by a portion of the monthly strata fees paid.
Or, If you’re building a condo complex, have some retained by the Strata Council. These rental units can then be used at a later date to obtain bank financing to pay the Special Assessments as needed. Until then just bank the monthly rents.
Yes, but that’s not the case for many people. I’ve talked to strata councils that were agonizing over repairs because they knew the special assessment would push residents out of their homes.
I think the province should offer an investment pool for strata corps. Add it to BC Pension’s assets so they can invest the funds while it builds up
Barrister, it depends on the materials used, maintenance , repairs, and how exposed to the elements it is.
My house envelope is over a hundred years old and still has not failed. Why do new building fair less well?
We don’t use Roman concrete because that method was lost for centuries. I think they have just figured out how the Romans made theirs recently. It’s probably on YouTube somewhere. Portland Cement that’s what we have been using for the last century or more. And it’s failing now. Lots of bridges in the USA have to be replaced.
Only because we build them that way, Roman concrete structures still exist.
If the envelope is starting to fail there should be some tell tale signs around areas that are more susceptible to water ingress. Windows, decks, brick accents, etc. You can google earth the building and look at the roof and see how much patching has been done or poorly done flashing. There should be signs of staining and the owners of some of units will have reported mold in their units. The exterior walls can be moisture tested.
You should read the strata minutes.
No building will last forever. All of them will have to be replaced at some time. Concrete and steel have a finite life span. What will happen in say 150 years is that the value of the building will form less and less of the price of the condo while the land the building rests on will continue to increase. At some time in the future it will become economically viable to tear down the building, sell the land and divide any money left in the reserve among the owners. So the idea of fully funding replacement might not be financially wise.
This is what is starting to happen with some of the pre 1984 2 X4 constructed four storey condos and apartment buildings. The vacant land that may now be rezoned to hi-rise. The land as if vacant and available is worth more than the value of all of the condos combined. If the building envelope were to fail prematurely then this would just accelerate the re-development of the site. There are exceptions and I’m probably thinking of the same hi-rise Marko might be referring to. I believe this is the first building in Victoria that was identified as a “leaky” condo and had to be remediated back in the 1990’s . Remediating buildings was in its infancy at that time ie Rainscreen technology. And some strata councils opted for less expensive options. The Barret Commission looking into the “leaky condo syndrome” was a joke and just punted the problem down the road.
Buildings with brick and acrylic stucco exteriors and small or no roof overhangs are more susceptible to water penetration problems. But not all of them. The BC building code was changed in 1984 and that allowed builders to apply the acrylic stucco in a different manner directly onto the building, which in hind sight wasn’t a good idea. But that’s what happens when the BC government in an effort to reduce costs simply adopts a building code from a different area than pay engineers to develop one for our climate. In BC’s case they adopted the building code from Arizona.
What could possibly go wrong with that?
I just had clients buy into a building where the depreciation report noted approx 32 years of life left in envelope when it doesn’t take a genius to conclude, imo, there is no way there is 32 years left….stucco, poor overhangs, already showings signs of wear-deterioration.
Depreciation reports are better than nothing but you have to remember everyone is in the business of making money. The template is ready to go, engineer goes out with a camera and take some photos, plugs in some numbers based on some industry projected life standards and sends a 6k invoice to the strata.
Physical inspection is a basic requirement of depreciation reports. Of course expertise of the people conducting them varies. Not the same as having a specialist take a look at every single component.
I can’t think of one strata corporation that has been able to fund a full EXPECTED (age related) envelope replacement.
It makes sense, I rather invest my own money and pay a special assessment when needed rather than have the strata place it in a GIC or similar for decades.
Of course a brand new building is not going to have any special assessments, for the most part, in the first 10 years +/-. Roof unlikely to fail, elevator should last 25 years +/-, envelope has a 5 year warranty in a new building, etc.
You also have to keep in mind the a depreciation report isn’t actually an inspection of that component, but rather a projection. A roofer does not come inspect the roof for the purposes of the depreciation report projections.
As I said, lots of common sense and big picture required.
I don’t think it’s reasonable to redefine fully funded as being capitalized to handle any conceivable problem. It usually means being on track to have the funds to handle the projected expenditures identified in the depreciation report. Of course if an envelope fails unexpectedly most buildings will need a special assessment.
Maybe I’ll reach out to condoclear or the Eli report folks to see if they have any stats on this they could share
This is where common sense and being able to read the entire picture is so much more important than the numbers. For example, one building has 700k in contingency and is well or adequately funded and one has 150k in contingency and is poorly funded.
Let’s say both have 100 units; therefore, the difference in value for well funded vs poorly funded is only $5.5k which is kind of a small figure when you are looking at 400k to 800k purchase price.
No building in Victoria is fully funded for all intents purposes. There are less than five strata corporations that have more than a million in contingency. Even those with more than a million, like Shoal Point, the contingency would cover very little in terms of serious work.
For example, just look at the Shoal Point envelope and how complicated it is. A couple of million would essentially achieve very little.
There is another building in Victoria that has a few million in contingency but will need a new envelope. I’ve heard professionals praise this strata complex on how diligent they’ve been in saving; however, they are missing the big picture. While they’ve saved a few million in the years of saving the cost of the envelope has increased by a few million so really it hasn’t been a smart move versus just having issued a special assessment years ago.
You can’t ignore purchase price.
You can’t ignore unit entitlement (special assessments also paid in relation to size of unit)
A lot of depreciation reports and reserve fund studies are already dated because of inflation and cost of construction.
Don’t ignore a bunch of other metrics. For example, a building with 50 units and 1 elevator vs 12 units vs 1 elevator. Obviously elevator replacement is going to be less per unit on the 50 unit building vs 12 units. Underground parking vs surface (cheap to maintain), etc. etc.
Really you have to be able to wrap your head around the entire picture to make a wise purchase and this would include strata fees (high or low per square foot), contingency amount (high or low), upcoming work, upcoming special assessments, purchase price, etc.
People usually get fixated on one factor such as strata fees too high or contingency too low and miss the big picture.
Same with special assessments. Seems to me like the average buyer would rather buy into a building at 500k with no proposed special assessments coming up versus 420k with 40k worth of special assessment comings up because special assessments are bad news. Everything makes sense for the right price….back to look at the entire picture.
I can hire someone that has received the qualifications to determine the adequacy. But , I’m designated under residential so I can not do reserve fund studies until I take the additional courses and article with someone with the qualifications.
Generally, residential mortgage appraisals are priced in the $300 to $500 range. To determine the adequacy of a reserve, that’s $5,000. However, part of the residential process is to review historical sales in the same complex and comment if the monthly strata fees are typical of similar condominiums. If I note anything outside of the norms in price or strata fees, then I will bring it to your attention. Then you can decide to continue with a RSF study. But I can not state if the strata fee is adequate or not without investigating the buildings maintenance records and what has or has not been replaced.
It’s similar to the difference between a house appraisal and a home inspection.
So how much do you want to spend?
Do you factor in the adequacy of the reserve fund into your appraisal of the value of a condo? Let’s say two identical condos in different buildings nominally valued at $500k, one with an adequate reserve fund and one with substantial underfunding. Will the appraisals come out differently, and if so how much impact on appraised value?
Sorry, my comment should have read 30K for the windows (not 3k).
Good Article Leo S
Since its publication, the Appraisal Institute of Canada (AIC), has developed strict Reporting Standards that have to be met in all Reserve Fund Studies performed by appraisers. However, you don’t need to be a member of the AIC to perform these reports. So there still remains quite a bit of difference in reports done by those that are not members of the AIC.
The typical cost for a Reserve Fund Study in Victoria is around $5,500. And they are usually performed once every three years.
Marko Well that’s good news helps to take the steam out of the economy every bit helps
The overall state of stratas depends on who you ask.
2023: “People living in stratas deserve to have peace of mind that their strata corporation has appropriate reserves to do routine maintenance and keep strata insurance costs down,” said Ravi Kahlon, Minister of Housing. “The overwhelming majority of stratas are doing just that, but a small number of strata corporations that are underfunding their contingency funds and putting owners at risk of surprise fee hikes and higher insurance costs”
2016: “Bramwell estimates that fewer than two per cent of his clients meet even a basic standard of having a reserve or contingency fund that is deemed just 35 per cent adequate. Which means 98 per have reserve funds that are less adequate than that.”
Some of the older condos that required a new building envelope cost many individual strata units in the $50k – $90k range…. And that was maybe 7 to 10 years ago when the unit may have only sold at $270k pre special assessment
Rental market is continuing to soften from what I see which sucks as I have a vacancy coming up.
Depends entirely on whether the contingency fund is properly funded. Generally I would expect a prudently run strata to increase fees over time to fund increased expected maintenance.
I would push back on the statement that the vast majority of work is funded through special assessments. Take a strata during its useful life, you really think more money will come from special assessments than regular strata fees?
Sales definitively suck (it feels a bit busier on the ground but numbers don’t lie). It looked like things were bouncing back in early February and then the sales pace never picked up like it does in the spring. Individual sales all over the places and different market segments can be very different right now. For example, seeing good value in newer one bedroom condos right now, but older 2 bed 2 bath condos kind of crazy. A 1990 build 2 bed 2 bath on Shelbourne went 45k over ask this morning.
As for houses same thing. Entry level homes not flying off the shelf whatsoever, while other product seems to be holding in there. Maybe the entry level first time home buyer just can’t qualify?
One this is for sure it is going to be a brutal year for real estate agents. I think it will be the worst year on record for number of sales dividend by number or realtors? Leo make you could do a graph for this if you have time.
Fair enough, have removed the conclusion on how that reflects on strata planning. Perhaps there’s some data on special assessments out there.
Not sure what to make of this analysis Leo. The vast majority of work will be paid through special assessments; therefore, one would expect the monthly costs not to be too much higher than a newer builder?
Sure both are $500/month but one has a high risk of a $10,000 to $100,000 special assessment (per unit) and the other one doesn’t. Of course this is reflected in the purchase price of newer buildings.
Depositors look pretty frothy to me, e.g. ROBLOX, crypto. Not my kind of tech.
It certainly isn’t a nothingburger for the tech industry at large. There’s a reason all these people banked at SVB.
I agree with DuranDuran. I don’t see how you can conclude strata corporations are doing a good job with maintenance without considering special assessments. My one nightmare strata experience had artificially low fees specifically because they let the place go to hell.
Leo I think you need to consider special assessments in this equation. It’s pretty obvious that older buildings do require more maintenance than new ones, and the difference is made up by the SAs. It doesn’t mean much to have a steady strata fee only to be hit by a $20k SA after a few years. Compare annual strata + SA over 10 years, eg.
I am wondering what the strata stats look like after special assessments. This was a while back (and I dont know the truth of it) but one person total me that they got a special assessment of almost 3k to replace windows in their building. They also said that they got hit with a large special assessment for their elevators. Sounded like they where not managing their reserves right to me but I guess you could say that whenever there is a special assessment.